Q: I took my credit cards and created myself a summer job – when I am not teaching – by building a house. I am almost finished building the house with my credit cards and about to go bankrupt. The banks tell me they will not make me a loan even when I finish the house, as my credit-card debt is too high. I tried to explain to them that I wanted to pay off the credit cards, but they said it made no difference. What should I do?
A: If Joel Doelger had the power to turn back the clock, the director of counseling at Credit Counseling of Arkansas says that he would have recommended that you use a traditional builder's spec loan to cover the initial cost of building the home. That would have allowed you to purchase supplies, but with a lower interest rate than the credit cards have charged.
Unfortunately, that's not the case. And to worsen matters, given the current soft housing market, it may be difficult to sell a completed home, much less an almost completed home.
It's a bit of a long shot, but Mr. Doelger knows of one loan product that could help both you and any potential home buyer. The FHA offers a rehab loan that allows the buyer to roll the cost of home improvements into the initial loan.
If you found a buyer who would qualify for such a loan, he or she could buy the home now – as is – and roll the completion of the home into the initial loan. That would prevent the borrower from having to turn around right away to qualify for a second mortgage to complete the home.
Second mortgages typically have higher interest rates than first mortgages. If a buyer can purchase the home in its present state, you may be able to get out of this venture now, without having to sink additional money into it to make it marketable.
If you aren't able to pay the credit-card bills with the sale of the house but are hesitant about filing for bankruptcy, you might be able to use the services of a credit counseling agency, Doelger says. You'll want what is called a debt management plan (DMP). A legitimate agency will help you determine your current financial situation and assess the suitability of a DMP, as well as other options, for helping you repay the debt.
The Federal Trade Commission produces a variety of useful brochures on financial issues, including one on how to select a credit counseling agency (ftc.gov/bcp/edu/pubs/consumer/credit/cre26.shtm).
Q: Could you help me find the best and safest annuity company in Switzerland? I would rather have a fixed annuity, but they aren't available at this time in Switzerland.
A: One source of information on this might be swissannuities.com. On this website you can learn a lot about the ins and outs of Swiss annuities – who sells them, who regulates them, what the advantages are to owning one, etc.
What you won't find is direct advice on which particular annuity to buy. And when we contacted the Swiss Financial Planners Organization, in Bern, CEO Nicholas Koechlin said that, by law, financial advisers in his country cannot dispense such guidance. For general information on personal finances you can ring them at 011-41-31-326-2730, or e-mail them at info@sfpo.ch.
Back stateside, Rich Arzaga, a financial planner in San Ramon, Calif., can't vouch for a Switzerland-sold annuity (nor could we find anyone else in the United States with Euro-specific experience on annuities). Regardless of the country of sale, there are common threads to annuities that Mr. Arzaga says a buyer should consider:
•Time horizon. How long are you willing to tie up your money? How big a penalty are you willing to take if you withdrew more on an annual basis than the annuity contract allows?
•Risk tolerance. You say you can't buy a fixed annuity. That would leave you with a variable annuity in the US, and they mostly invest in the stock market.
•Fees. Annuities carry sales charges, as well as other fees for add-ons such as death or survivor benefits. The more add-ons, the more fees.
Annuity sales and marketing are regulated in the United States at either the federal or state level, depending on their type. There also are rating agencies that assess the claims-paying ability of insurance companies that market these products.
Showing posts with label Economists. Show all posts
Showing posts with label Economists. Show all posts
Saturday, March 7, 2009
Monday, March 2, 2009
Billionaire Warren Buffett said the economy will be “in shambles” this year
Buffett Says Economy ‘In Shambles,’ Promises Recovery
Billionaire Warren Buffett said the economy will be “in shambles” this year, and perhaps longer, before recovering from the reckless lending that caused the worst “freefall” he ever saw in the financial system. The economy and stocks will rebound, and the best days for the U.S. are ahead, said Buffett, chairman of Berkshire Hathaway Inc., in his annual letter to shareholders Feb. 28. Buffett said he’ll spend the recession shopping for new investments for Omaha, Nebraska-based Berkshire.
“The economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond,” said Buffett. “Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so.”
Buffett, an informal adviser to President Barack Obama, said the consequences of the U.S. housing bubble are now “reverberating through every corner of our economy.” Gross domestic product shrank at a 6.2 percent annual pace from October through December, the most since 1982, the Commerce Department said last week.
Late last year, “the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country,” said Buffett, 78. “Fear led to business contraction, and that in turn led to even greater fear.”
Berkshire’s fourth-quarter net income fell 96 percent to $117 million, the firm said Feb. 28. Book value per share, a measure of assets minus liabilities, slipped 9.6 percent for all of 2008, the worst performance under Buffett’s watch, on the declining value of derivatives and the stock portfolio.
‘Socks or Stocks’
Berkshire fell $4,250, or 5.4 percent, to $74,350 at 10:16 a.m. in New York Stock Exchange composite trading. The stock has plunged 47 percent in the past 12 months.
The Standard & Poor’s 500 Index will probably gain in three-fourths of the next 44 years, just as it did in the period since Buffett took over Berkshire in 1965, he wrote. The benchmark dropped 38 percent last year, the most since 1937.
“We enjoy such price declines if we have funds available to increase our positions,” Buffett wrote. “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” Berkshire’s cash hoard was about $25.5 billion at year-end, down from $33.4 billion on Sept. 30.
Buffett disclosed increased holdings of Posco, Asia’s third-largest steelmaker, and Sanofi-Aventis SA, France’s biggest drugmaker. Berkshire sold $4.77 billion of equities in the fourth quarter to help fund private deals for preferred shares in Goldman Sachs Group Inc. and General Electric Co. The sales included shares of Johnson & Johnson, Procter & Gamble Co. and ConocoPhillips, holdings that, Buffett wrote, “I would have preferred to keep.”
‘Major Mistake’
Buffett said he made a “major mistake” in buying shares of oil producer ConocoPhillips when oil and gas prices were near their peak last year.
Monday, January 26, 2009
Economists: slump getting inferior
Analysis at private-sector companies forecasts greater job losses and deterioration economic conditions in the months to come. Economists expect an already deep recession to get even worse in 2009, according to a survey released Monday.
Companies will lay off more workers and hoard more cash during the next 12 months, according to the National Association for Business Economics survey, a quarterly take from a panel of economists at private-sector companies in various industries. A vast majority of the 105 economists polled believe the country's gross domestic product will continue to sink in 2009.
If business conditions indeed worsen during the year, they will be sinking from already historic lows. The survey's measures of consumer demand, profit margins and capital expenditures all hit their lowest-ever levels in January's edition of the 27-year old survey.
"NABE's January 2009 Industry Survey depicts the worst business conditions since the survey began in 1982, confirming that the U.S. recession deepened in the fourth quarter of 2008," said Sara Johnson, a NABE economist.
Nearly half - 47% - of surveyed economists said overall industry demand was falling, compared with 35% who said so in the October survey. Just 10% of respondents said profit margins were rising, compared with 52% who believe they are falling. And 38% of economists said capital expenses are falling, up from just 15% in October.
Credit conditions hurt businesses, according to the economists, as customers had less leverage to buy discretionary products. 78% of respondents said tightening credit conditions affected customers, and 52% said the credit crunch directly hurt businesses in their industries.
Pessimistic outlook on weak environment
With business conditions souring, the outlook for jobs has grown increasingly negative. 39% of economists believe their industries will lay off employees in the next six months, compared with 32% in October.
The forecast was particularly poor for the goods-producing sector, in which 69% of economists saw layoffs in the future, and no one believed the industry would be adding jobs. Service-sector economists were the most optimistic, with only 9% seeing layoffs and 29% saying their industry would be hiring in the next six months.
Companies will likely curtail spending in the coming months as well, according to the survey. 44% of the economists believed capital spending in their industries would fall off in the coming year, compared with just 16% who believed their businesses would increase spending.
Rising unemployment, tightening credit conditions and a difficult lending environment led economists to give a more pessimistic outlook on growth for 2009.
Just 22% believed the U.S. economy would expand this year, down from 62% who thought so in October. Although 26% now believe the economy will shrink less than 1% this year, 52% now think the economy will shrink by more than 1%, which no one predicted in October.
Companies will lay off more workers and hoard more cash during the next 12 months, according to the National Association for Business Economics survey, a quarterly take from a panel of economists at private-sector companies in various industries. A vast majority of the 105 economists polled believe the country's gross domestic product will continue to sink in 2009.
If business conditions indeed worsen during the year, they will be sinking from already historic lows. The survey's measures of consumer demand, profit margins and capital expenditures all hit their lowest-ever levels in January's edition of the 27-year old survey.
"NABE's January 2009 Industry Survey depicts the worst business conditions since the survey began in 1982, confirming that the U.S. recession deepened in the fourth quarter of 2008," said Sara Johnson, a NABE economist.
Nearly half - 47% - of surveyed economists said overall industry demand was falling, compared with 35% who said so in the October survey. Just 10% of respondents said profit margins were rising, compared with 52% who believe they are falling. And 38% of economists said capital expenses are falling, up from just 15% in October.
Credit conditions hurt businesses, according to the economists, as customers had less leverage to buy discretionary products. 78% of respondents said tightening credit conditions affected customers, and 52% said the credit crunch directly hurt businesses in their industries.
Pessimistic outlook on weak environment
With business conditions souring, the outlook for jobs has grown increasingly negative. 39% of economists believe their industries will lay off employees in the next six months, compared with 32% in October.
The forecast was particularly poor for the goods-producing sector, in which 69% of economists saw layoffs in the future, and no one believed the industry would be adding jobs. Service-sector economists were the most optimistic, with only 9% seeing layoffs and 29% saying their industry would be hiring in the next six months.
Companies will likely curtail spending in the coming months as well, according to the survey. 44% of the economists believed capital spending in their industries would fall off in the coming year, compared with just 16% who believed their businesses would increase spending.
Rising unemployment, tightening credit conditions and a difficult lending environment led economists to give a more pessimistic outlook on growth for 2009.
Just 22% believed the U.S. economy would expand this year, down from 62% who thought so in October. Although 26% now believe the economy will shrink less than 1% this year, 52% now think the economy will shrink by more than 1%, which no one predicted in October.
more....
Global outlook to be slashed - again
The International Monetary Fund (IMF) will cut its 2009 global growth forecast again, this time to between 1% and 1.5%, as economic conditions deteriorate further, an IMF official said on Sunday.
The IMF's latest forecast, made in November, was for growth of 2.2%.
"It will be revised to 1 to 1.5% in 2009, which is huge," Axel Bertuch-Samuels, deputy director of IMF's monetary and capital markets department, told Reuters on the sidelines of a conference in the United Arab Emirates.
"Global economic prospects have deteriorated in recent months, consumer and business confidence have dropped to levels that we have not seen in decades and activity too has dropped sharply," he said.
The 2009 year will be enormously challenging for the world's economy, he said.
In November, the IMF cut projections sharply for world growth in 2009 to 2.2%, down 0.8 percentage points from an October forecast, noting industrialised economies were headed for the first full-year contraction since World War Two.
An official release of updated IMF economic forecasts is expected on Wednesday, he said, and even forecasts for emerging markets like China and India will see downward revisions.
The IMF's latest forecast, made in November, was for growth of 2.2%.
"It will be revised to 1 to 1.5% in 2009, which is huge," Axel Bertuch-Samuels, deputy director of IMF's monetary and capital markets department, told Reuters on the sidelines of a conference in the United Arab Emirates.
"Global economic prospects have deteriorated in recent months, consumer and business confidence have dropped to levels that we have not seen in decades and activity too has dropped sharply," he said.
The 2009 year will be enormously challenging for the world's economy, he said.
In November, the IMF cut projections sharply for world growth in 2009 to 2.2%, down 0.8 percentage points from an October forecast, noting industrialised economies were headed for the first full-year contraction since World War Two.
An official release of updated IMF economic forecasts is expected on Wednesday, he said, and even forecasts for emerging markets like China and India will see downward revisions.
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