This Is a Sign – Greed Is Good 

This Is a Sign – Greed Is Good
note:  This is an opinion piece and not a recommendation to buy or sell Sears stock.  Bob Brooks nor clients of Bob Brooks have any short or long financial interest in Sears within his management program.
Eddie Lampert, the CEO of Sears, loans the company 200 million dollars from his hedge fund.  Investors go crazy and start buying up the stock.  The stock goes up 9%.  Then it is up another 3% this morning. Now this is the same company that Eddie Lampert admitted to a few months back that they might not make it.  What CEO actually says something like that?  This is the same company that faces the same problem as many other retailers.  They don’t have a business model that can compete with the monopoly they call Amazon.com.  (Which begs the question.  Will Amazon.com ever be accused of being a monopoly?)  This is the same company that is getting sued by its’ employees alleging that Eddie Lambert encouraged the employees to buy company stock.  Of course those employees that followed that encouragement lost millions of dollars.  Finally, this is the same company that needs a 200 million dollar lifeline to survive.  Of course that is not how they are spinning it.
Help me understand what makes Sears a good investment?  An investment in Sears is not an investment.  It is a gamble that 200 million dollars is going to make them look short-term profitable when the long-term problems have not been solved.
Gordon Gecko in the 1987 movie Wall Street famously said, “Greed is Good.”  Greed and speculation are signs that we are in the final innings of a bull market that is out of balance and spinning out of control.   Investors get bullet proof in the final stage of bull market cycle.  To me, you would have to be bullet-proof to invest in Sears stock.

Could Your Credit Score Increase What You Are Paying for Car Insurance?

Could your Credit Score Increase What You Are Paying for Car Insurance?
You want to know how important your credit score? It can be the determiner as to how much you pay for car insurance. Wallethub.com just recently released a report that shows the effect of low credit scores on car insurance premiums. This is not welcome news for those it effects.
Here is a sampling of the data:
  • People with no credit pay 65% more for car insurance than people with excellent credit, on average. Drivers with no credit pay at least twice as much in PA, NJ and MI.
  • Farmers Insurance seems most reliant on credit data, with credit newcomers paying over twice as much as excellent-credit customers. Even GEICO (least reliant) has a 40% penalty.
  • The five major auto insurance companies use credit data in 90% of the states in which they operate, on average. Only Progressive uses credit data in all of the states it serves.
  • Travelers is the most transparent about its use of credit data, providing a clear disclosure when generating quotes.
For the full report, including a state-by-state breakdown, please visit: https://wallethub.com/edu/car-insurance-by-credit-score-report/4343/
Fortunately, credit scores are higher today than they have been in a long time.  It is mainly because negative items from the financial crisis have had a chance to fall off by now.  For more information on improving your credit score, check out my book at www.deceptivemoney.com.

What Do You Think About Church Bonds?

What Do You Think About Church Bonds?

Dear Bob,

Have you been involved with church bonds? I have inherited a bond which has gone into default. The trustee petitioned the court to allow a restructuring of the loan by transferring the debt to a third party. It seems that the bond holders will not receive value owed on the bonds. Over a period of 15 to 30 years, the bond holders will receive some amount of their bond and interest but not all. The trustee says this will be better than a foreclosure on the original debt. Is this a common practice? Seems to me the trustee gets all of his cost and the bond holders do not.

This is a common practice for more debt markets than just church bonds.  In fact, you can see something similar happening in Greece right now or another good example “will” be the State of Illinois. The bottom line is that the country, church, organization, etc. cannot pay the loan back. At this point, one of two things could occur. The organization, church, country, etc. could default and no one gets anything.

The entity could also go to the bond holders and restructure the debt. That is a fancy way of saying – you are not going to get what you have coming to you; however, something is better than nothing. Welcome to the Post Financial Crisis Environment of Debt!

So, what about church bonds? A church will issue a bond and borrow money from its congregation or other investors and agree to pay back the money with a fixed interest payment over a period of time and then return the principle at the end of the investment period.  It works really like any other bond.

Church bond financing has been a wonderful tool for churches to build their ministries.  There has always been a risk that goes along with church bonds. A Pastor and lay leader group of the church might feel that this is where the Lord wants the church to go and that bond financing is the route to take. But by being overly convicted about what they feel is the Lord’s direction, they might get careless with the structuring of the debt or might end up putting together a deal that is destined to fail.

I have always believed that you move with faith. I also believe that along with faith and direction, God also asks us to use common sense and conduct extensive due diligence on every available option and take a great amount of care and time in the process. Many times, that due diligence process is not conducted as it should. Worst case scenario – you have a church that is practicing horrible stewardship and the whole process is doomed from the start.

On the surface, loaning money to the church sounds like a great move. But a congregation can get caught up in the spirit of things and on blind faith and loan their money without once again doing the proper research and evaluation.

The bottom line is that it can be a great method for church financing. In this environment, you just have to be especially careful. Remember that oftentimes a church will go into a bond deal because they cannot get traditional financing. Don’t just trust!  Do the due diligence !  Church and business don’t always mix well!!

Be on the Alert for a New Scam

Be on the Alert for a New Scam
I know you might not live in the DFW area. However, it is good to educate yourself on various types of scams. This way, you will know it when you see it!
Collin County Sheriff Jim Skinner is warning citizens throughout Collin County and the DFW Metroplex to be on the alert for a dangerous scam being perpetrated by individuals posing as Collin County Deputy Sheriffs. Individuals posing as Deputy Sheriffs are calling citizens and advising them there has been a warrant issued for their arrest for failing to answer a jury summons.
The citizen is directed to remain on the telephone and bring cash to the Sheriff’s Office in McKinney where they are to meet the “deputy” in the parking lot in order to pay a fine. These criminals attempt to keep their victims on the phone in order to keep their victim from calling the real authorities while they are on the way to bring money.
Sheriff Skinner wants the public to know that NONE of our deputies, or ANY other law enforcement official, would EVER contact anyone and request they bring money to pay a fine. THIS IS A SCAM!! Law enforcement does NOT take money, in any form, from citizens for any purpose!! If you, or anyone you know, is contacted in this manner, please report this immediately to your local law enforcement authorities or the Collin County Sheriff’s Office at (972) 547-5100.

The Top 10 Things You Need to Know When Dealing with a Debt Collector

The Top 10 Things You Need to Know When Dealing with a Debt Collector

The Consumer Financial Protection Bureau recently published a report on the most common consumer complaints Americans submit. Since the CFPB started accepting debt-collection complaints in July 2013, consumers have filed some 316,810 of them. The problem is that consumers don’t know what to do when a debt collector calls.  So, to remedy that here is what you need to know.

(1)  Know your Statue of Limitations period 

The statute of limitations period is the time period where a debt collector or a creditor can sue you as a means of collection of the debt.  In Texas, it is 4 1/2 years past the first missed payment that made the debt go bad.  Once you get passed that time period, the debt collector has no legal power over you.

(2)     Even Past the Statute of Limitation period you always owe the debt

You have to know that you always owe the debt. Once again, the difference is whether the debt collector has legal power over you to collect.  (see above)

(3)     The debt collector cannot do anything to harm you beyond file a lawsuit

They can’t garnish your wages (unless it is student loan debt).  They can’t take you to jail.  They can’t repossess your car unless the loan was on your car. They can’t take your house unless the loan was on your house. They can’t take your driver license. They can and they will unlawfully threaten you. However, it is only bullying designed to get you to take action.

(4)     Beware of the downside to sending a cease and desist letter

You have the right to send the debt collector a cease and desist letter alerting them that they must cease all debt collection efforts.  The downside is that you put them in a corner giving them only one way to collect – filling a lawsuit (if you are still in the statute of limitation period).  If they don’t honor your cease and desist letter and continue to collect, you have the right to sue them.

(5)     If they sell your debt it is a good sign

When a debt collector is not getting anywhere, they have the option to either file a lawsuit or give the debt back (if they are collecting for a creditor) or sell the debt (if they own it). Anytime a debt is sold, I have always thought it was a sign that the debt was not worth taking legal action over. If that is the case, wouldn’t you rather manage debt collectors than manage lawsuits?

(6)     If you get a call from a debt collector, verify that the debt is yours.

This happens all the time. Consumers get served with a debt collection letter and it is not even their debt. If that is the case, send certified mail to the debt collector telling them that in no uncertain way this debt is yours.

(7)     If you get harassed the law is on your side

The Fair Debt Collections Act states that if a consumer is harassed the consumer has the right to sue the debt collector for damages and the debt collector has to pay the consumer’s legal bills. One of the best pieces of legislation that Congress has ever written.

(8)     Your debt will probably stick with you for a lifetime

You have to manage your credit report because an old defaulted debt will more than likely get sold from debt collector to debt collector. Oftentimes, when that occurs, the debt collector will put that back on your credit report as a new debt. even though that is not true.   You have to watch your credit report and get those erroneous remarks removed from your credit report. This is one of the main reasons why you want to avoid default. It can stick with you for a lifetime.

(9)     Stay organized and keep good notes

If you find yourself in a debt collection process, take good notes.  Down the line you might need proof to get something removed from your credit report and or to make a debt collector go away.

(10)     Negotiate, Negotiate, Negotiate

The payment of debt is negotiable. A debt collector oftentimes pays pennies on the dollar for the debt. So, they have big profit margins. In addition, oftentimes they claim you owe more debt than you do after they illegally trump of the bill. You can always negotiate. Be aggressive! Also, if you reach a deal, always get them to acknowledge in writing before you make any payments.

This is not written to give you tips on how to get out of a debt. You should pay back your debts in some form. It is about making the playing field fair.

For more information on the entire process. Read Bob’s book Deceptive Money.

 

More Fake Unemployment Numbers?

More Fake Unemployment Numbers?
What do you get when you cross President Trump who is all about the optics and the ability for the government to estimate economic data? You get favorable numbers. We could be in the midst of the great depression and the government would still be reporting strong employment numbers and telling us how strong employment is right now.
As a review, the government reports employment numbers at the beginning of each month. Those numbers have two components. First, the labor department reports how many jobs were gained or lost in the economy for the prior month. Second, they add or subtract the number of jobs they “estimate” were created or lost.  This is referred to as the birth/death ratio. It is how many jobs that were born or died that the department of labor’s normal way of calculating missed.
I have always had a problem with that number because probably like you I don’t trust politicians. When it is all said and done, those estimates are going to paint a positive picture. Yes, there are months were that birth death ratio was negative and jobs were subtracted from the main numbers. To be fair all Presidents have had access to this estimate. So this is not a President Trump thing. President Obama pumped up his numbers as well.
As of last month, we were at 641 estimated jobs created versus 594 reported jobs. You can do the math. Without the estimates, we would have negative job growth. Today’s number was the creation of 222,000 jobs with 102 being estimates. That brings the total number of jobs with a net of 73 jobs since President Trump  took office.
So what kind of shape is the real economy in job wise?  What  is the stock market betting on?  I don’t that things are as good as reported and here is why.  President Obama was the only President in history to not have a 12 month period where economic growth exceeded 3%.  His last year in office the economy was wavering on a high wire. Things turn around immediately when President Trump gets elected? Companies start hiring on the promise of tax breaks and reform? Finally, we recover from 8 years of failed policy like that? Turning job creation around is a lot like turning the Titanic around.  It doesn’t happen over night.
President Trump promised job growth and lots of it. He is a master of controlling the optics. The problem is the stock market is betting on something that probably is not there.
note:  these numbers are based on original numbers and not “revised” numbers.
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