Random Thoughts – Randocity!

Can Bitcoin’s bubble burst the economy?

Posted in best practices, economy by commorancy on January 10, 2018

Yes! Let’s explore.

Housing Bubble

Back in 2007, what drove the home mortgage collapse was a combination of factors, but one of the biggest factors that tipped the scale was speculative home buying. That is, people who would double or triple mortgage their homes to pay for secondary homes. When the home mortgage market unraveled, all of those multiple homeowners lost everything. Not only did they lose their secondary homes, but they also lost their primary residence and they ended up bankrupted to boot. I’ve heard tales of people who had taken out 3 or even 4 different mortgages on their home to pay off secondary homes. When those ARMs came due, it all came tumbling down. I know one person who, at their height, owned up to 4 homes and ended up living out of an RV when the home mortgage collapse was over. Do you want to end up being that person?

Bitcoin and the Crypto Bubble

Behaviors don’t change. The fastest way to get a pile of cash is taking out a new mortgage on your home. Today, my belief is that what’s driving up Bitcoin and Ethereum is speculative buying from people who don’t have money to spend. People who are using credit cards and second or third mortgages to buy into these markets thinking they can make a quick buck. The real danger is, of course, when Bitcoin collapses and these folks cannot pay off those loans.

Will Bitcoin collapse? Upward rises on investment products at the unprecedented level that has come to Bitcoin is not sustainable. In fact, Bitcoin’s actual value is no where near the sky high prices that it’s currently seeing. There will be a correction. How deep that correction goes is up for debate. However, it doesn’t really matter how deep it ends up. It only needs to be deep enough to put speculators underwater on their loans forcing them to fail to repay their additional mortgage(s) they used to buy into the Bitcoin market.

It would only take a small correction to wipe out speculators using risky loan vehicles as money sources. It only takes a limited number of speculators to fail to start the dominoes falling.

Economic Danger

The red flags are here and they’re waving boldly. Yet, of course, no one is looking at them. If a Bitcoin correction begins to collapse those speculator’s second and third mortgages, it will take with it first mortgages and the home mortgage market may face yet another collapse. What tertiary triggers fail after that is unknown. Does AIG still sell derivatives? Do other insurance companies? Are there other risky investment vehicles tied to these second and third mortgages that could topple Wall Street yet again? Are there risky investments tied to Bitcoin?

We don’t know. What we do know is that Bitcoin (and the rise of the secondary crypto currencies) could easily knock over the first few dominoes after a correction and start the economic decline. The danger is here and it’s very real.

Word to Speculators

Unless you invested in Bitcoin back in 2011 or so, you’re too late for this party. If you’ve recently taken out loans (no matter the source) to fund a Bitcoin investment, you need to get out of it as rapidly as you possibly can and pay off that loan. Holding onto Bitcoin hoping for long term millions is most assuredly going to backfire on you and ruin your financial world.

My best guess is that you have about 5 months before the whole thing topples. Yes, it could take a little longer or it could be sooner. What starts that topple is anyone’s guess, but it will happen. Having Bitcoin go from $1700 to $17000 to $21000 in less than a year is insane. Anyone in their right mind knows that investments don’t grow that fast. Something nasty is afoot. Do you want to find out the hard way? If so, invest more, but don’t say I didn’t warn you when your world collapses.

Economy and Investment Ties

Unfortunately, economic markets are tied together in very loose, but established ways. When a collapse of any single investment vehicle begins, it takes with it all kinds of other unrelated investments and markets. This means that even your IRA which is investing in vehicles unrelated to Bitcoin will take a hit when Bitcoin collapses. Why? because institutional investors who’ve just lost a pile of cash on Bitcoin will sell out of their holdings in their other investments (which your IRA may be investing in) to make up for their Bitcoin losses and/or to pay off speculative loans they lost money on. This will drive down those unrelated markets and cause IRAs and other similar investment accounts to lose significant value.

If we could see into the future, it would be easy to tell you when to sell out of your holdings in your IRA and wait for the wrath to end. Unfortunately, there is no such crystal ball available. You will need to use your best judgement when you feel is the best time. No one can predict that for you.

There is simply no way to know just how deep this cut will go when the correction occurs. It all very much depends on where the money is coming from that’s driving up Bitcoin (and other crypto). Right now, that information is not transparent at all. But, it is nearly guaranteed that some of the money is coming from Wall Street institutional investors, investment funds and possibly even banks and insurance companies. And… this is the biggest danger to unrelated investment vehicles.

Even if you don’t have a single dime invested in Bitcoin, that won’t necessarily protect your finances and investments from exposure to a crypto bubble burst.

How do I protect my finances?

The short answer is, it’s not easy. Because the markets are so closely tied and there’s so much institutional investing made all over, you can’t know who’s exposed to Bitcoin. The only real way to protect your financial future is to sell out of the markets and wait it out. But, no one can tell you when is the best time to sell. You just need to watch Bitcoin and other cryptocurrencies closely and then wait to see what happens. However, by the time you realize that it’s time to sell, it may be too late. Earlier, in these cases, is always safer. However, too early also means you may lose gains you could have realized if you left your investments in place. So, it’s ultimately your call when to choose the best time to protect your financial future.

Advertisements

When Digital Art Works Infringe

Posted in 3D Renderings, art, best practices, computers, economy by commorancy on March 12, 2012

What is art?  Art is an image expression created by an individual using some type of media.  Traditional media typically includes acrylic paint, oil paint, watercolor, clay or porcelain sculpture, screen printing, metal etching and printing, screen printing or any of any other tangible type media.  Art can also be made from found objects such as bicycles, inner tubes, paper, trash, tires, urinals or anything else that can be found and incorporated.  Sometimes the objects are painted, sometimes not.  Art is the expression once it has been completed.

Digital Art

So, what’s different about digital art?  Nothing really.  Digital art is still based on using digital assets including software and 3D objects used to produce pixels in a 2D format that depicts an image.  Unlike traditional media, digital media is limited to flat 2D imagery when complete (unless printed and turned into a real world object.. which then becomes another form of ‘traditional found art media’ as listed above).

Copyrights

What are copyrights?  Copyrights are rights to copy a given specific likeness of something restricting usage to only those that have permission.  That is, an object or subject either real-world or digital-world has been created by someone and any likeness of that subject is considered copyright.  This has also extended to celebrities in that their likenesses can also be considered copyright by the celebrity.  That is, the likeness of a copyrighted subject is controlled strictly by the owner of the copyright.  Note that copyrights are born as soon as the object or person exists.  These are implicit copyrights.  These rights can be explicitly defined by submitting a form to the U.S. Copyright office or similar other agencies in other parts of the world.

Implicit or explicit, copyrights are there to restrict usage of that subject to those who wish to use it for their own gain.  Mickey Mouse is a good example of a copyrighted property.  Anyone who creates, for example, art containing a depiction of Mickey Mouse is infringing on Disney’s copyright if no permission was granted before usage.

Fair Use

What is fair use?  Fair use is supposed to be a way to use copyrighted works that allows for usage without permission.  Unfortunately, what’s considered fair use is pretty much left up to the copyright owner to decide.  If the copyright holder decides that a depiction is not considered fair use, it can be challenged in a court of law.  This pretty much means that any depiction of any copyrighted character, subject, item or thing can be challenged in a court of law by the copyright holder at any time.  In essence, fair use is a nice concept, but it doesn’t really exist in practice.  There are clear cases where a judge will decide that something is fair use, but only after ending up in court.  Basically, fair use should be defined so clearly and completely that, when something is used within those constraints, no court is required at all. Unfortunately, fair use isn’t defined that clearly.  Copyrights leave anyone attempting to use a copyrighted work at the mercy of the copyright holder in all cases except when permission is granted explicitly in writing.

Public Domain

Public domain is a type of copyright that says there is no copyright.  That is, the copyright no longer exists and the work can be freely used, given away, sold, copied or used in any way without permission to anyone.

3D Art Work

When computers first came into being with reasonable graphics, paint packages became common.  That is, a way to push pixels around on the screen to create an image.  At first, most of the usage of these packages were for utility (icons and video games).  Inevitably, this media evolved to mimic real world tools such as chalk, pastels, charcoal, ink, paint and other media.  But, these paint packages were still simply pushing pixels around on the screen in a flat way.

Enter 3D rendering.  These packages now mimic 3D objects in a 3D space.  These objects are placed into a 3D world and then effectively ‘photographed’.  So, 3D art has more in common with photography than it does painting.  But, the results can mimic painting through various rendering types.  Some renderers can simulate paint strokes, cartoon outlines, chalk and other real world media.  However, instead of just pushing pixels around with a paint package, you can load in 3D objects, place them and then ‘photograph’ them.

3D objects, Real World objects and Copyrights

All objects become copyrighted by the people who create them.  So, a 3D object may or may not need permission for usage (depending on how they were copyrighted).  However, when dealing with 3D objects, the permissions for usage of 3D objects are usually limited to copying and distribution of said objects.  Copyright does not generally cover creating a 3D rendered likeness of an object (unless, of course, the likeness happens to be Mickey Mouse) in which case it isn’t the object that’s copyrighted, but the subject matter. This is the gray area surrounding the use of 3D objects.  In the real world, you can run out and take a picture of your Lexus and post this on the web without any infringement.  In fact, you can sell your Lexus to someone else, because of the First Sale Doctrine, even though that object may be copyrighted.  You can also sell the photograph you took of your Lexus because it’s your photograph.

On the other hand, if you visit Disney World and take a picture of a costumed Mickey Mouse character, you don’t necessarily have the right to sell that photograph.  Why?  Because Mickey Mouse is a copyrighted character and Disney holds the ownership on all likenesses of that character.  You also took the photo inside the park which may have photographic restrictions (you have to read the ticket). Yes, it’s your photograph, but you don’t own the subject matter, Disney does.  Again, a gray area.  On the other hand, if you build a costume from scratch of Mickey Mouse and then photograph yourself in the costume outside the park, you still may not be able to sell the photograph.  You can likely post it to the web, but you likely can’t sell it due to the copyrighted character it contains.

In the digital world, these same ambiguous rules apply with even more exceptions.  If you use a 3D object of Mickey Mouse that you either created or obtained (it doesn’t really matter which because you’re not ultimately selling or giving away the 3D object) and you render that Mickey Mouse character in a rendering package, the resulting 2D image is still copyrighted by Disney because it contains a likeness of Mickey Mouse.  It’s the likeness that matters, not that you used an object of Mickey Mouse in the scene.

Basically, the resulting 2D image and the likeness it contains is what matters here.  If you happened to make the 3D object of Mickey Mouse from scratch (to create the 2D image), you’re still restricted.  You can’t sell that 3D object of Mickey Mouse either.  That’s still infringement.  You might be able to give it away, though, but Disney could still balk as it was unlicensed.

But, I bought a 3D model from Daz…

“am I not protected?” No, you’re not.  If you bought a 3D model of the likeness of a celebrity or of a copyrighted character, you are still infringing on that copyrighted property without permission.  Even if you use Daz’s own Genesis, M4 or other similar models, you could still be held liable for infringement even from the use of those models.  Daz grants usage of their base models in 2D images.  If you dress the model up to look like Snow White or Cruella DeVille from Disney’s films, these are Disney owned copyrighted characters.  If you dress them up to look like Superman, same story from Warner Brothers.  Daz’s protections only extend to the base figure they supply, but not once you dress and modify them.

The Bottom Line

If you are an artist and want to use any highly recognizable copyrighted characters like Mickey Mouse, Barbie, G.I. Joe, Spiderman, Batman or even current celebrity likenesses of Madonna, Angelina Jolie or Britney in any of your art, you could be held accountable for infringement as soon as the work is sold.  It may also be considered infringement if the subject is used in an inappropriate or inconsistent way with the character’s personality.  The days of Andy Warhol are over using celebrity likenesses in art (unless you explicitly commission a photograph of the subject and obtain permission to create the work).

It doesn’t really matter that you used a 3D character to simulate the likeness or who created that 3D object, what matters is that you produced a likeness of a copyrighted character in a 2D final image.  It’s that likeness that can cause issues.  If you intend to use copyrighted subject matter of others in your art, you should be extra careful with the final work as you could end up in court.

With art, it’s actually safer not to use recognizable copyrighted people, objects or characters in your work.  With art, it’s all about imagination anyway.  So, use your imagination to create your own copyrighted characters.  Don’t rely on the works of others to carry your artwork as profit motives are the whole point of contention with most copyright holders anyway.  However, don’t think you’re safe just because you gave the work away for free.

Are electric cars really good for our environment?

Posted in economy, fun in the sun, green energy by commorancy on January 8, 2011

On the surface, this question seems like it has a simple answer.  And that simple answer is ‘Yes’… or is it?  Let’s explore.

Green or Brown?

Electric cars seem like such a great idea until you realize that you have to plug it into the power grid to recharge the thing.  So, how is this car greener than, say, its gasoline counterparts?  On the one hand, the car itself runs clean.  No fossil fuels to burn so no emissions to speak of.  This is a good thing.  The bad thing is that it has to pull from fossil fuel derived electrical energy to recharge.  This ultimately means that while the electric car itself is no longer the gross polluter, that pollution has been pushed off onto the electrical suppliers.  So they, in turn, have to ramp up more fossil fuel production to handle the added load to charge these 240v batteries in electric cars.

So, how did that exactly save us anything?  Maybe it makes the buyer of the electric vehicle feel more environmentally conscious until we consider where and how the power was generated to recharge that electric vehicle.

I should point out here, though, that the tires, the plastic parts and the moving parts are all derived from or utilize fossil fuels.  For example, nearly all lubrication is almost always fossil fuel derived.

Alternative energy sources

As more and more electric vehicles are deployed onto the nation’s roads, the power grids will have to be enhanced to support the power generation needed to recharge these cars.  That means, ultimately, more fossil fuels being burned to create that energy to send it down the line to recharge your car to let you go to work.

We need to rethink this entire process.  We need to find a way to get clean power generation from nature. Unfortunately, energies derived from solar, wind or water are temperamental and, at times, impractical.  That is, we can’t rely on solar, wind and water derived energy to support the numbers of people who want to buy into electric vehicles let alone power the entirety of people living in the US.  So, the grid suppliers have to dip into fossil fuel derived energy generation to provide electricity across the board.  As more and more of these vehicles hit the road, the grid may eventually become overtaxed by the cars and we may, once again, end up in rolling blackouts.

So, we need more stable forms of energy that are renewable for a lot longer than fossil fuels.

Running out

It has already been predicted that we are on the downward slope of fossil fuel supplies on earth (i.e., peak fossil fuel supplies).  Those rich abundant supplies that were once everywhere are slowly drying up.  If we, as a society, don’t find more clean renewable power generation, our information age may come to a halt leaving us squarely back at a time without electric power or natural gas.  A time when there were no cell phones, no cars and no grocery stores.

If you think about the things that are all around you every day that derive their existence from fossil fuels, you begin to understand the scope of a society where fossil fuels have run out.  That means, no new plastic, no gasoline, no fossil fuel generated power, no oil for motors, no computers, no iPods and no cell phones.  In fact, there won’t be much of our present society left if the earth runs out of fossil fuels.  This also includes lack of medicine and all that that implies, but let’s stay focused on energy sources.

Clean burning, natural, renewable energy sources

Are there any?  Sure, if you count water, wind and solar.  But, as I said, these are temperamental.  What other power generation tools do we have?  Well, there’s also atomic energy that heats water to steam and turns turbines. Unfortunately, the safeguards necessary to prevent another Chernobyl are too prone to human error.  Atomic energy generation is just too risky. So, are there any others? Yes.

Thermal energy

Not just any thermal energy, the earth is home to lots of geothermal energy.  The difficulty with geothermal energy is getting to it and, secondarily, preventing the creation of accidental volcanoes and eruptions.  So, where could we utilize geothermal energy and maximize the energy generation?  In the ocean, of course.  There’s plenty of water to steam and turn turbines.  There are plenty of open geothermal pockets under the ocean that lead into the water.  So, we should be able to figure out a way to take advantage of these open pockets to turn ocean water to steam and generate electric power.  The trouble, of course, is getting the power from the ocean floor back to a distribution grid to send the power out.

Geothermal energy is about the only energy on the planet that can be easily harnessed, that exists on its own and that is completely renewable.  Unless the Earth dies, geothermal energy is about the only source that we can rely on as constant.  Just look at Old Faithful to see just how stable geothermal energy can be.  The only difficulty is in trying to find a reasonably consistent geothermal vent that can be reliably used to generate energy using steam turbines. However, once enough of these are found, these can be used to eventually replace burning of fossil fuels to generate heat to generate steam to to turn turbines to create energy.

Energy deficit

Fossil fuel sources should be considered as previously stored energy pockets.  Energy that was created by the sun. The sun first fostered the growth of plants and animals here and then these plants and animals died, decayed and converted into fossil fuels.  These fuels from many many years ago are now being used today to operate our economy.  The trouble is, these fossil fuels are finite and we are using them very rapidly.  In fact, we may have used more than half of all of what’s on Earth to operate our economy from day to day.  Consider when we drilled our first oil well vs how much fossil fuel we use today.  As a result and because these resources are finite, we will eventually run out of it.  Since we really have no idea how much more we have until it all ends, we should now consider that we are living in an energy deficit, and on borrowed time.  That is, we are using more energy now than we should in order to allow for support of future generations.

So, while people continue to have babies, they aren’t asking when these babies become adults will they have a future? And, what of these kid’s babies?  Where will they be?  This is why we are now living on borrowed time at the expense of our future generations who may find themselves looking back at us thinking how selfish we were.  And they will be living at a time when they may be burning candles, eating locally grown foods and doing subsistence farming just to keep food on the table.  They may have our technology, but no energy to run it.  What will become the currency of that day?  Perhaps seed.  Once the world ends up as local economies without contact to other remote economies, the government won’t be able to keep order.  So, the government as we know it will cease to exist.  Without cars, then there’s no need for driver’s licenses or car license tags or any other governmental taxes or fees as they won’t make sense in a local economy.

Without thinking ahead for renewable energy sources, our future generations may have no future.  At least, not the future we see today.  In fact, their future may not resemble anything of  our information society.  This is very likely where we will end up without finding a new fuel source for power generation.  This is the importance of finding clean renewable energy that is synergistic with the Earth.

Electricity is not a power source

Electricity generation is the end result of the work from some other device (i.e., burning fossil fuel turns turbines that generate power).  Electricity is not a power source itself, however.  But, electricity is what drives every part of our economy today.  Just think what the world would be without electric power.  Without locating and instituting a replacement for fossil fuel electric power generation,  the world’s economy will likely end as we know it when our fossil fuel supplies dry up.  Our dependence on fossil fuel power generation is nearly 70% of all power generation in the US as of 2009 (and it is likely similar if you look at the world overall).

Full circle

So, that electric car you buy today borrows against fossil fuel power generation (coal, natural gas & petroleum) to recharge your brand new electric car.  Obtaining power from the local power grid ensures that at least 70% of the energy placed into your electric vehicle was generated by coal or natural gas, both of these resources are finite and coal does not burn clean.  So, a renewable synergistic power generation source is a must for the Earth and the future of humanity, let alone the electric vehicle which is only truly green once we have this renewable power source.

In addition to regenerative braking, we also need to consider more car regenerative power sources to keep the car from requiring recharging nearly as often and to allow for farther traveling distances. For example, someone could invent a paint that acts as a huge solar panel. So, every inch of the external painted surface could double as a huge solar power generation panel while driving in the sun. Additionally, alternating polarity magnets could be placed below highways to generate current as you drive over them which continually recharges your car’s batteries as you drive.   Thus, drastically increasing the mileage of an electric vehicle with far less need to recharge as often.  Also, fans could be placed behind the grill of the vehicle to capture wind energy as you drive.  Again, all of these techniques add even more power generation to the vehicle that increases mileage while also keeping that car aesthetically pleasing.

Looking at today’s electric vehicles, these designs seem so infantile compared to what could be achieved with proper governmental infrastructure support of electric vehicles.  Right now, electric vehicles look green, but really aren’t. Once we harness truly clean renewable energy sources (like geothermal energy) combined with more extensive regenerative power sources, we might finally be able to call the electric vehicle green.

Film Review: The Warning – PBS / Frontline Documentary

Posted in bailout, banking, bankruptcy, botch, corruption, economy, insurance, scam, scams, tanking by commorancy on November 26, 2010

Rated: 4/5 stars.

PBS’ The Warning Documentary

The Warning is a PBS documentary discussing a warning from Brooksley Born, an attorney and a former Commodity Futures Trading Commission (CFTC) chairperson.  She explained that derivatives were extremely risky insurance vehicles and sent a warning that these vehicles needed regulation during her tenure as CFTC chairperson, but her warnings went unheeded.  She resigned in 1999 from the CFTC position after legislation was passed preventing her agency from regulating derivatives.

Vision of this Documentary

While I would like to rate The Warning higher, its take is pretty much tunnel vision on the derivatives markets.  While the derivatives markets did melt down and did, to a large degree, spur the meltdown onward, the meltdown was not started because of derivatives. The derivative meltdown was a casualty of and was exacerbated by the sub-prime mortgage meltdown.  Had the mortgage industry bubble not burst, the derivatives market might have gone unchecked for many more years. The warning was and should have been about placing regulations onto mortgage lending practices. The mortgage lending industry is the industry that failed and sent the economy into a tailspin, let’s make that perfectly clear.  The derivatives (insurance) market, which speculated on the mortgage industry, single-handedly sent Wall Street into a tailspin (along with several large insurance companies like AIG).

Derivatives and the Mortgage Meltdown

Anyone with half a brain in their head could see that using questionable lending vehicles like interest only loans for the first two years or adjustable rate mortgages were ticking time bombs.  When the actual monthly payments came due years later after rates went up to where they should have been, people couldn’t afford pay.  This was especially true when lenders were handing these loans to people who could barely afford the ‘introductory period’ payments.  So, loans came due, people defaulted and the rest is history.  The derivatives (insurance policies) that were issued also came due because of the en masse foreclosures. Insurance companies that issued derivative policies speculating people wouldn’t default en masse began to fail because their speculation was wrong.  So then, these insurance companies couldn’t pay off on the insurance claims. So, when consumers defaulted, so did the insurance companies offering derivatives.

It wasn’t as if warnings weren’t being issued regarding the inevitable mortgage meltdown, it’s just that Brooksley Born (the focus of this film) was not one of the people issuing the mortgage warning.  Her warning was strictly about the highly risky derivatives.  More specifically, the black box non-transparent nature of them. The danger, of course, is that derivatives can be placed on any speculative and risky investment as insurance.  The reason derivatives need to be regulated is to prevent companies the size of AIG from making stupid decisions about such risky vehicles.  However, from a consumer perspective, banks should never have gotten into the position of issuing such risky mortgages like water to people who couldn’t afford them. This was the single mistake that led to where we are today and that mistake has nothing to do with derivatives and everything to do with Government and the Federal Reserve making stupid decisions.

Overall, the movie is worth watching, but also understand its information’s place in the larger meltdown at work in our economy.

Tagged with: , , ,

Is Obama hostile towards big business?

To answer this question, we need to delve a little deeper. Note, I am neither condoning nor praising Obama’s handling of his regulatory efforts. However, I would like to point out certain corrections that do need to be made.

“The truth is that not even the Franklin Roosevelt administration was as hostile to and ignorant about free enterprise as this [Obama’s] administration is.”
–Steve Forbes.

But, is Obama really hostile towards business? Or, is he making needed corrections? There is a fine line here. This issue also points out a serious problem in politics today. That problem is, you guessed it, money. Without money, the world doesn’t work. Without money, candidates don’t get elected. Without money, businesses don’t sell things and make money. Back up the train.. Businesses make plenty of money without governmental help. The trouble is that businesses want to be able to make laws that enable their businesses to make more money and then have the government be lenient with them when issues arise.

The reality, though, is that like the separation of church and state, the government now needs separation of business and state. The two are oil and water, they don’t mix. Government needs to be able to make law without interference from any party. But, businesses have deep pockets and hefty lawyers. These two elements help elect officials and help sway these same officials into making good on promises they made towards these businesses during the election.

Obama’s corrections

While I don’t agree with every single thing Obama has done, I do agree that change is necessary. The change that he is making is intended to correct the issues that led to the economic downturn. The trouble comes with statements from people like Steve Forbes. Mr. Forbes believes that he is the end-all-be-all-know-it-all when it comes to all-things-business. The trouble is, he doesn’t. Yes, he runs a successful magazine, but that doesn’t make him an authority. That makes him a successful business owner.

Obama is walking that fine line. A fine line that shouldn’t even be necessary. But, there it is. The line that’s there to help Obama help the economy, help spur business and growth and reduce the chances of a repeated failure. At the same time, the line is there to show that government values business, but isn’t there to socialize it. The trouble is, this economic downturn was of our own making. By our, I mean Wall Street. The housing bubble was just that, a bubble. Bubbles eventually burst and this bubble was no exception. It’s not as if analysts and intelligent minded people couldn’t see the handwriting on the wall. When the mortgage interest rates got down to 1% and all of those ARM and specialty loans were being issued like water flowing down the Mississippi, trouble was inevitable. We just didn’t know that banks and insurance companies were tying their financial soundness to these extremely risky loans using credit default swaps.

Until the bubble burst, no one really knew just how deep the rabbit hole went. Then, everything came crashing down and all of the nasty subprime mortgage and credit default swap issues came into view in their all fugly detailed glory. The first evidence of that was Bear Stearns followed by AIG (and the subsequent governmental bailout). I still think they should have let AIG fold, I digress.

Government and Business

It’s high time that government distanced itself from corporate businesses. It’s high time congress made laws to separate government from business (including political support). It’s high time that government stopped being a pawn for corporate businesses. Forbes clearly seems to think that Free Enterprise requires socialism to function. Free Enterprise is not part of and does not need socialism. Free Enterprise means that businesses can do whatever they need to do (within the limits of the laws) to make their business succeed. Clearly, there have not been laws enabled that have dramatically impacted Free Enterprise. The laws that have been enacted have been placed there to prevent corporations from producing risky investment vehicles with a high likelyhood of crashing down again. If businesses are now floundering, it’s not because of laws. It’s because corporations have lost their way and are still expecting handouts. Well, you can keep your hand out, but don’t expect the government to be dropping any coin in it.

Corporations have relied, no… depended on the US Government for handouts. That time needs to end. Subsidies for business need to go away. Businesses need to fend for themselves just like Free Enterprise mandates. If a business can’t make it on its own, then let it fail. I’ll repeat, LET IT FAIL. Failure is also part of Free Enterprise. Businesses that will succeed, will succeed because they produce a good product or service. Businesses that fail, will fail because they don’t produce good products or services.

Lost our way

America, and specifically corporate enterprises, have lost their way. For far too long have big corporations depended on favorable governmental conditions (sounds like a weather report) to help them stay in business. Well, that train has left (and must leave). It should be solely up to you and your business practices alone to make or break your company. It is the quality of your products, services and support that makes people want to buy your products or invest in your company. Nothing has changed about this aspect of Free Enterprise.

We need to go back to a time when quality was the key. When providing a superior product was the answer to getting people to buy things. If that also means deflation, then so be it. Businesses need to find their way by learning how to do more with less. How to manage their staff better and stop over-hiring. At the same time, many of them need to stop under-hiring and also value the employees that they have right now.

The key to keeping your business flowing is by keeping your employees active, productive and happy. Morale is a big problem in companies during any downturn. Once fear sets in over the next reduction in force (RIF), then morale falls to all-time-lows. No, taking the employees on an outing doesn’t boost morale. The way to boost morale is to stop RIFing the staff out the door. Yes, I know it gives a temporary boost to the stock price and makes the shareholders happy, but that’s a temporary fix with limited effects. Once the dust settles, the employees who are left become disgruntled, unhappy and produce less. This is completely backwards thinking. Which is why business has lost its way.

Shareholder value vs quality products

I know, someone’s going to say that it is all about ‘shareholder value’. That may be the way things seem now, but it is wrong. Currently accepted actions that lead to improved shareholder value tend to undercut production, stifle innovation, reduce profit margins and lower productivity. Why would you intentionally do this to your business? So, while these measures may seem to help the stock price, it does nothing to help the company improve its quality of products and services. In fact, in the long run, these actions almost always negatively impact the bottom line. So, the fundamental question is, are you in business to make the shareholders happy or are you in business to sell quality products and services? This fundamental question must be answered.

The true answer to this question also shows that Free Enterprise priorities today are all wrong. It used to be that the customer is #1. Now, shareholders are #1 and customers are #2. This is both wrong and stupid. Until businesses go back to the idea that the customer is #1, corporations will continue to fail and need governmental subsidies. While shareholders are considered #1, there is really no such thing as Free Enterprise when it comes to multi-million dollar corporations… which is why they always need a handout from the government.

Job Hunting? Don’t be scammed.

Posted in economy, Employment by commorancy on July 16, 2010

As the economy is floundering and unemployment rates remain high, there are those people and companies who look to take advantage of job seekers. Some companies are legitimate, others aren’t so much. So, let’s investigate some ways you can avoid being taken during your job hunt.

Pay to play

Be extremely wary of so-called for-pay outplacement, consulting or career management companies that require up-front payments before you get a job. These companies will sometimes promise they will find you a job, but in the end you literally end up doing all of the work and you’ve paid them to let you do your own work! In fact, it’s work that you would have done without paying them anything! These companies may operate by taking a percentage of your expected salary. For example, if the job you are seeking has a $60,000 a year salary, they may expect $6,000 (10%) as your up-front fee.

Don’t be fooled by this practice. Yes, they may give you career advice or even write you a new resume, but is a new resume and some career counseling worth $6,000? You will find many resume creation sites (and software) on the Internet to makeover your resume that costs much less than $6,000.

These outplacement companies may also claim that they have ‘databases’ of jobs. The reality is that their database may be months old or non-existent. So, even though they have a database, what good does it do to apply for a job that was listed 6 months earlier? It doesn’t do any good and is definitely not worth $6,000.

Recruiters

While recruiting companies are not necessarily scams (although, the possibility always exists), most of them feel very slimy when you work with them. So, be cautious and here’s why. Recruiting firms supposedly have job databases and find candidates that fit various job roles. Unfortunately, the recruiting agents work on quotas. So, they must close a certain number of jobs over a period of time in order to 1) get their commission and 2) remain employed as a recruiter. After all, the commission from the candidate’s placement is what keeps the recruiting company in business. A recruiting position is both a sales position (has sales quotas to meet) and as a recruiter (help you find a job). Unfortunately, there’s just a little too much conflict of interest with recruiters. The trouble comes because the employer pays the percentage fee after candidate placement is complete. So, while it may appear that they are helping you, the candidate, they are really more partial to the employer because that’s where their bread is truly buttered. When unemployment is high, they can find many candidates, but they only have that one position open.

So, the recruiter will do everything to keep the employer happy and, in most cases, couldn’t care less about the job seeker other than to get them placed. After all, there’s plenty of job seekers from which to choose. That said, they will definitely appear to care about the candidate so long as the hiring company still takes an interest in the candidate. Once the hiring company no longer expresses interest in the candidate or fills the job, that’s when the recruiter calls stop, emails stop and you can no longer reach the recruiter at all.

One other tactic of recruiters is to obtain resumes. So, if you had an old resume on file at a recruiting firm, expect to be called periodically to update your resume. The recruiter who calls you may even imply there may be jobs open with your skill set. In many cases, you are just feeding their database with another resume. In fact, they very likely had no job opening. Again, the recruiters have their job performance tied to doing work. Having spoken with you and obtained your updated resume probably suffices for one in their quota. Be wary of this practice. You’re helping them keep their job, but they may have no intention of helping you at all. They’re just stringing you along.

One other recruiting tactic to watch for is the phantom job tactic. The recruiter will claim to officially represent the hiring company. They tell you a job is open and that they are requesting a resume to submit. They will even put up a front and tell you they have submitted your resume for the position. Then, you never hear back from them. Why? Because they lied. They had no position open. They didn’t have any official status to represent the hiring company. So, how does this happen? Again, this is a quota issue. They need to make quotas, so the recruiter will string you along hoping the hiring company will agree to use the recruiting firm and then pay the commission. Unfortunately, the recruiting firm has not officially contacted the company until after they had your resume in hand. The trouble is, they didn’t have the company’s permission nor blessing. So, the recruiter contacts the company and the company says, “We don’t work with recruiters, sorry”. End of discussion.. no more contact. There is no way to really ensure the legitimacy of what a recruiter tells you. But, it certainly is a waste of time.

In the case of a recruiter, you necessarily won’t be out any money, but it can certainly take away valuable time that you could otherwise be seeking direct opportunities, submitting resumes or even updating your resume. It’s easy to get bogged down in recruiter time suck activities. So, be wary when recruiters come knocking.

Craigslist and Classified ads

While classified boards like Craigslist are great places to find job opportunities, it’s also a place to get scammed. So, if you choose to look for jobs in classified ads, make sure that you verify the company you are contacting. That means, check the phone book or the Internet to ensure that the phone numbers and addresses actually match the hiring company’s office address. You don’t want to end up in some seedy dive on a fake interview or being taken for some amount of money. If any money is involved before you get a job, walk away. There are way too many sites that can help you find jobs without fees.

Fee Based Job Boards

Some well known web employment listing sites charge subscription fees to help you find jobs. While I understand this web business model, the job seeker is most probably out of a job when seeking new employment. So, while paying monthly subscription fees might seem worthwhile, you may end up having no better luck in finding a job than using free services like Hotjobs, Dice or Monster. So, be cautious when asked to supply a credit card number to get access to a bigger database or get access to employment ‘review’ services. If you want to spend money, that’s up to you, but I’d recommend exhausting all other free avenues (and believe me, there are plenty) long before you throw your money away on for-pay job boards.

If you are months into your search and still have no leads after trying all of the free sites, then and only then would I try a for-pay job board. Some of these boards offer one month subscription periods. I’d recommend trying these job boards by paying for only one month and see how well it works for you. One month should be well long enough to dig through their database, submit resumes and see if you get any nibbles. You may find that it does nothing. Also, make sure that after the one month payment ends there are no recurring subscriptions still active. You don’t want to get any surprise fees on your credit card statement the next month.

Avoid the scams

If something looks too good to be true, it probably is. When seeking a job, you want to avoid being scammed out of whatever money you have… especially when unemployed. So, be cautious if a web site asks you to load a credit card number into their registration page. In short, don’t do it. If they require a credit card number to sign you up, skip that site and move on. If you do decide to part with your credit card number to get access, be sure to fully read all of the sites disclosures to understand how they charge for their services. If you can’t find how they charge for services, skip the site.

Good luck in your job search.

73 AIG Execs get over $160 million in Bonus Payouts: Oversight?

Posted in bailout, bankruptcy, botch, corruption, economy, insurance, scam, scams by commorancy on March 18, 2009

Ok, so I know this story has been covered ad nauseaum in the press, but I also have some comments about this issue.  My question isn’t that they received these bonuses, it’s about the contracts they cling to that they MUST fulfill.

Contracts and Bonuses

As far as I know, unless AIG is just completely stupid at writing contracts, most bonuses written into contracts and, later, given to employees are issued based on performance.  That means, as long as you perform your duties properly, then the company will pay you at least part of the bonus.   And note that ‘properly’ could be intentionally left vague or it could be specifically defined through a set of criteria.    The criteria is the unknown factor in these employment contracts.  If it was intentionally left vague, though, even my argument still applies.  Further, to get paid the entire bonus, the employee and the company both have to perform in an outstanding way.  I don’t exactly consider bankruptcy outstanding.  Next in this debacle, why would you pay out 11 ex-employees?  Contracts usually terminate once employment ceases and this should include bonus clauses.  Again, stupidly written contract?  I don’t think so.  Clearly, there are flaws in AIG’s contract arguments.

Why would you pay out ANY performance bonuses to any executives in a company that came within millimeters of (and is still within) the brink of destruction?  Clearly, not one single executive performed properly.  Not one.  Based on the fact that the company is clearly bankrupt, that the government now owns an 80% stake in it and that it as been bailed out with Government (come Taxpayer) money, it is crystal clear that there is not one single executive in AIG who deserves a performance bonus.  Not one.

Check those contracts over

Since the government now owns an 80% stake in AIG, someone in the government needs to sequester their contracts and read them closely.  Seriously, why would checking the contracts over not have been the FIRST thing that was done when these bonuses were announced?  Someone needs to obtain a copy of each of these 73 employees’ contracts and read through the bonus section.  I cannot even fathom that AIG crafted the bonus contractual obligations as 100% payout no matter what happens.  If this is true, then AIG deserves to go out of business.  If they can’t even write employee contracts correctly, how can they POSSIBLY write insurance policies correctly?

AIG executives need to return the money

I am almost 98% sure that these bonuses were based on performance.   Someone would have to read their employment agreements to know for sure.. but, based on the assumption of a performance clause, these execs need to return this money.  AIG is clearly stepping beyond the bounds and this issue proves that the executives currently operating AIG need to be terminated.  Yes, every last one of them.  If nationalization is the key, then that’s what needs to happen.  Perhaps it needs temporary nationalization just long enough to clean house and then rehire the positions with executives who can actually run AIG properly.

If AIG did actually write employment contracts with mandatory bonus payouts, then this company is far beyond the help of a bailout.  This company has serious internal problems where the only resolution is termination of everyone involved.

Closing AIG and starting over…

 At this point, the only real hope is to force other solvent insurers to take exisiting insurance contracts away from AIG.   Move as many as possible.  For the ones that cannot be moved, force the closure of the contracts by a certain date.  For the credit default swaps, too bad.  These don’t need to be insured.  These are the things that cost AIG its livelyhood.  If another insurer is solvent enough and willing to take the risk to support the credit default swaps, those contracts can go there.

Once all of the insurance contracts have been moved, this company needs to be quietly wound down and closed so we can be done with AIG.  There have to be other insurance firms that can take the existing insurance contracts from AIG and honor them.  In fact, I’m quite sure there are plenty of other insurance groups that would be grateful to have the cash flow.  The American public needs to be done with AIG once and for all.

Bank executives still in power after meltdown

Posted in bailout, banking, bankruptcy, corruption, economy by commorancy on January 27, 2009

What’s wrong with corporate America?  This article discusses the exact reason why America’s corporations are and continue to be both problematic and emblematic of serious fundamental problems with free enterprise.

Free Enterprise

On the surface, this phrase embodies entrepreneur-ism, freedom to go into business and freedom to make money in the way you choose.   But, to each silver lining, there is also a dark cloud.  The dark cloud of free enterprise, then, is what’s rarely discussed but is always present in any business once it reaches a certain income level.  This black cloud tends to overreach any good that a company may do and, in many cases, stifles the business into oblivion through stupid decisions, inaction and through senior executive selfish actions.

Banks

We all know the story.  Banks doled out risky loans to individuals without checking credit histories and the whole banking industry nearly self-imploded.  But, what’s not widely known about this event is what happened to the bank’s senior executives.  The Associated Press did some research and found that the majority of the banks that doled out these risky loans, and nearly single-handedly killed the banking system, have the SAME senior exectives still in power today.  These are the same executives who presided over and actually ALLOWED their banks to issue (and continue to issue) risky loans until the meltdown.

As the banks continue to lay off thousands workers and, in some cases, shutter branches… incidentally, the layoffs likely include workers not responsible for the meltdown, the senior bank executives (CEO, CFO, CTO, etc) remain safely and comfortably employed (and likely making the same salary pre-meltdown). 

Car vs Bank Bailout

With the automotive industry bailout, very stringent conditions were placed on when and how these car companies could get and use the money.  Some of the conditions discussed even included ousting executives who couldn’t manage their businesses properly.  Not so with the banks.  There were no such executive conditions placed onto the bailout monies for the banks.  This leaves, in most cases, the same executives who presided over issuing of risky loans and the economic meltdown the task of trying to clean up this mess.  Can they?  Do we trust them?

Trust

Do we trust these executives to do the right thing?  That dark cloud I was speaking of, what is it? That dark cloud includes executive compensation, bonuses and other executive cash shuttling programs.  Once large companies get into the position of billions in revenue, the executives in power do not want to give up that cash cow no matter what.  Yet, here we are.  The banks (and their executives) have failed us and our economy and yet they remain in power?  Do we continue to trust that they know what they are doing?  Can they properly get not only their company, but our economy jump started?  Where is the accountability here?

Let’s hope that Congress wakes up to this issue and ultimately takes these bank executives to task for their inaction and inability to police their own companies during the meltdown times.  Surely, they can’t say, “We had no idea it would get that bad!”.  Sha-right.  The handwriting was on the wall when the risky loans began over 2 years ago.  Anyone in their right mind would know that handing out a loan to someone who hasn’t had their credit checked is a tremendous risk.  For executives to make that claim ensures they do not deserve to stay employed.

Shareholders: The other dark cloud

Once a company goes public, the shareholders become the ownership and power of the company… or so we are told.  So, whenever executives make decisions, it’s easy for them to claim it was ‘for the shareholders’.  That’s a catchall phrase to allow the executives to do things they ordinarily could not or should not do.  But, when is it good for the shareholders?  Who makes that decision?  Apparently, this decision is supposed to be the board of directors.  However, in many cases, the CEO is also the Board Chairman.  But, again, part of that same dark cloud.  The board of directors are supposed to steer the company into the right direction.  Again, when large sums of income become involved, people’s eyes get glazed over by $ signs.

When something is done for the good of the shareholders, you can pretty well guarantee they mean there is money involved (either obtaining, but usually spending it).  When and how that money is used is anyone’s guess.  The accounting books are supposed to tell the tale, but we know how that goes with all of the recent accounting scandals.

Corporate executives

Why is it then ok for these corporate executives to preside over and allow detrimental business practices, yet they continue to remain employed?  Why do they get reprieve from the unemployment line?  When are we supposed to hold executives accountable for their actions (or inactions) that lead to dire negative consequences?  These are questions that must be answered.

Does this imply more governmental regulation over corporations?  Perhaps.  It does imply that free enterprise is broken at a fundamental level.  It also implies that something must be done to fix it.  Whether that’s more regulation over businesses or more accountability, I don’t know.  Perhaps we just need stiffer laws that define corporate practices so that executives can be brought up on charges when these situations occur.  If there are legal statutes that prevent such problematic operations, then perhaps executives will think twice about their roles within large dollar companies.  After all, high dollar salaries shouldn’t come with little oversight and no strings attached.

It’s official, Obama is our 44th President

Posted in bailout, banking, bankruptcy, economy, presidential administration by commorancy on January 21, 2009

… and there’s definitely a lot of work to be done.  The state of the country is in severe economic disrepair, no thanks to our former president, George W. Bush.  President Obama definitely has his work cut out for him.

Bush era over

Bush’s errors have left a legacy of  his lack of doing ‘the right thing’ for the country by extreme spending on an unnecessary ‘war’  and economic packages which helped only the rich.  During Bush’s reign, we have seen favoritism towards big business at the expense of everything else.  Yes, I understand certain business lobby groups are very powerful (read give lots of money away) in order to get the things they want.  Under Bush’s watch, he ushered in one of the worst recessions in this nation in years!  This happened strictly because he was not focusing on the economy as a whole and instead focused on being overly friendly to his big business buddies.  But, what’s more important, making those greedy businesses happy or making the country prosper as a whole?   Clearly, catering to big business is both short sighted and part of why we are where we are today.  Instead of making these businesses more money, they have, in fact, lost more money as a result of our down economy.  Short sighted.

Bush also presided over the monetary system that encouraged bad lending practices without reigning these institutions in.  He simply turned the other way and ignored it as though it didn’t exist (again, helping his buddies make more money).  Instead, he would firmly focus on the middle east and he thought that everything would be fine.  Well, everything isn’t fine and we’re paying that price now.  Again, short sighted.

Doing what’s right

The hard choice is to do the right thing for the citizens, the economy and the country as a whole, not what’s right for big business.  Clearly, if anything, this downturn has taught us what shouldn’t be done.  I believe these are the ‘hard choices’ that will face the Obama administration.  Choices that we have yet to see in action.  Choices that I’m not even sure Obama will face without falling into the same old traps.  That’s not necessarily the fault of anyone, it’s just the way lobby groups and our political system works.  Politicians tend to cave into these demands when they don’t see any risk.  But, that risk is often masked behind rhetoric and double-talk.

Clearly, lowering the fed interest rate 2-3 years ago to a single point spurred the home lending crisis.  It’s now starting again with the interest rate at a quarter of a point.  We are now facing the same exact housing bubble possibility that faced our country the first time around.  Can we avoid this bubble again?  Perhaps, perhaps not.  Perhaps it isn’t smart to be lowering this rate this low a second time.  It’s all about cause and effect and this effect has already been felt in a major way.  We don’t need to experience it again.

Tough Choices

There are a lot of tough choices that need to be made, and those choices will affect us every day.  For each tough choice to aid our economy, another problem will result.  Is there a choice that can be made to turn the economy around swiftly?  Doubtful.  Recessions come in cycles.  This recession came a bit earlier than expected… it’s usually an 11 year cycle and our last cycle was after the dotcom bubble burst in early 2000.

Clearly, Obama’s words are tough talk on bringing this country back.  When it comes down to it, can he really make and live up to these tough choices?  Will he be able to say no to businesses over the economy?

Blame the consumer

Because of the mortgage crisis, blame is had from all over for its origins, but one finger is always clearly and firmly pointed at the consumer.  While the consumer may have been partly to blame for accepting their bad loan, it was entirely the lending instituions’ fault for granting the loan in the first place.  If you hand money to a consumer, they’re going to take it.  It is the lender’s responsibility to make the proper and correct decision to give money out and to whom.  Yes, that also means that the lenders must take responsibility for their actions when giving money to people who should never have been given that money.  It’s also the lender’s responsibility for shuttling people into specialty loans that practically ensured failure.

Fixing the lending practices is one of the first hard choices that must be made.  Trying to loosen up credit again isn’t necessarily something that we need to be doing as an economy.  This is a hard choice, but it has to be made.  It’s one of those choices that has clear ramifications.  It means that credit will be limited to those with the best credit scores.  But, people who don’t have the money to pay off loans shouldn’t be given loans.

Another tough choice that must be made is to force lending institutions to go back to standard fixed rate loans.  We must prevent these poorly crafted specialty loans from ever being granted again, no matter how tempting they may appear or how much it may appear to help out the consumer.  Balloon, ARMS and introductory rate loans must become a thing of the past.

If there is one single thing to blame in this process, it’s these poorly crafted specialty loans.  These loans created the false impression that people could afford a loan that they couldn’t afford.  So, in 2 years, when the loan reset (which was clearly written into the terms), this reset ensured a loan failure.  Again, the consumer can be blamed here because it’s easy (and because they accepted the terms).  But, it’s really the lending instutition’s responsibility for lacking the foresight in seeing that these loan products were destined to fail.

Days ahead

From here, we will have to see where Obama and his administration takes us.  Obama speaks of tough choices, but I’m waiting until those words become action on his part.  It’s easy to speak them, it’s much tougher to follow through.  We defnitely need a ‘buck stops here’ President who is willing to lay down the hammer.   We no longer need, nor can our country afford, a president who caters to the rich.   We need a president who is willing to work to bring the country together as a whole rather than filling his own bank account.

Obama, we’re ready and waiting for you to put your tough talk into tough action.

America’s Recession: loans and scams

Posted in economy, fraud, scams by commorancy on December 16, 2008

Economic Downturn & The Fed

Unless you’ve been hiding in a cave, you’re probably aware that we’re going through a fairly deep recession. Recessions are cyclical, but in this case it probably could have been either avoided or lessened IF the banks and lenders had not been offering creative financing techniques. It also could likely have been avoided if our current pro-business govt. administration hadn’t chosen to look the other way while bad mortgages were being doled out. The problem with all of the creative financing is that it tended to lead some people into believing they could afford a mortgage they could not afford. When the loan reset after the promotional period, the realization quickly set in. Worse, the situation was compounded by property investors who sank huge amounts of loaned money into properties that would eventually become valued less than the loan.

It’s not as if the handwriting wasn’t on the wall several years ago when the fed dropped the rate to 1 percent. Now, we are back in this exact situation again with the fed dropping the rate to an unprecedented 1/2 percent. The feds are, again, trying to spur the economy like they did 2-3 years ago. But, this time, the banks don’t have money to lend. So, the 1/2 percent may not trickle down into the mortgage market like it did several years ago.

But, our economy is still likely being set up for yet another financial failure. The banks that do have money to lend are still advertising on the radio claiming extremely low interest rates.  The problem isn’t the rate, but the loan you’ll be getting. If it’s a standard fixed rate loan, that’s fine. But, it’s the fine print you need to read. Don’t get locked into an adjustable rate mortgage or a limited time interest only loan. Once these creative loans reset in a couple of years, you may end up deep under water.

The Fed, therefore, needs to be extra careful when cutting the rates this low again to avoid the same mortgage problems all over again.

Scams in a down economy

With the economy being so depressed, it’s also a good idea to watch your money closely. As money gets tighter and tighter, the scammers will come out of the woodwork (and they already are). I’ve already noticed a drastic increase in spam and phishing emails since the economy has taken a turn. It’s going to get worse before it gets better.

There are many scams out there from the Nigerian 419 scam that claims to give you a ton of money only to rip you off of thousands of dollars before you realize it, to sending you what look like official invoices that only turn out to be scams in themselves. Don’t fall for them. The easiest way to avoid scams is to not give out any personal information to anyone who approaches you claiming to be from a legit company. This means, if you receive a call asking you to make a payment and they request for you to give a credit card over the phone, don’t. Make sure you know who this company is first and make sure you are a customer. Then, tell the company that you will call them back through their official channels and make a payment that way. As long as you are the person making the call to the official number, you should be safe. With incoming calls, you have no idea who is really calling you no matter what the CallerID says. Always, always call companies back from official numbers located on a trusted bill or from the back of your credit card.

TV advertisements that offer products or services usually employ people who are not paid very well. So, be wary when you give your credit card number out to TV commercial based purchases. Not only are some of these companies impossible to get refunds, your card number could be enrolled in a club or, worse, stolen by one of the telephone operators in an independent scam. You should always Google the product you are thinking of purchasing to 1) find out if you can find it cheaper online and 2) find out if people have had issues with either the product or the companies refund polices.

Get rich schemes are basically another form of scam. Yes, they do make someone rich… the person who created the scheme, but not you. Get rich schemes are usually designed to part you from your money. So, in a down economy, you should avoid get rich schemes (placing classified ads, setting up ecommerce sites that sell Amway products, or Multi Level Marketing – MLM schemes). Note that MLMs only make the top most people money. If you’re anywhere near the bottom, you will be parted from your money.

Craigslist and even eBay are a haven for scammers. Be careful when you work with people selling or renting things. Never buy or rent anything sight unseen and never give money out as a ‘deposit’ or to ‘hold’ something unless you truly trust the individual. Chances are, if the person you are thinking of doing business is presently outside of the US, you should immediately stop the transaction unless you know for sure that what they are selling/renting is legit.

If you are selling a car or renting out an apartment, watch out for scams here too. There are some people who are outside of the US who will claim to give you an excessive sum of money in the form of a check. They may even send you what looks like an official check.. the problem is that it will bounce causing you fees and other associated problems (and may let them get access to your account number). Don’t cash any checks like this.

The bottom line is that in this weak economy, you should be extra careful with your money as there are lots of desperate unemployed people willing to do anything to make a buck (or a thousand). Always make sure to do your homework before buying anything or giving out personal information to someone you don’t know. If you suspect a scam, you should alert your bank or credit card company immediately.

%d bloggers like this: