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The average American family must look at the current stock market rally as some kind of cruel joke.  We have people anxiously waiting for government funds or paychecks to clear at the end of the month so they can wait outside of a Wal-Mart shopping center at midnight to buy food once their funds clear.  We have nearly 36 million Americans on food stamps and another 27 million unemployed or underemployed.  If this is the new recovery, many want very little to do with it.

It is hard to believe in this recovery because the bailout has gone to the financial sector and is reflected in hyper-inflated equity prices.  As obvious as it seems, some people don’t make the connection that an unemployed American is a weaker consumer.  Consumption as we all know is two-thirds of our economy.  Therefore you would assume that investors would make this connection but that is not the case.  The banks being the few with any sort of heavy government money, instead of lending to Americans, are once again gambling in the stock market casino.  What a sad testimony to our crony capitalistic system that banks instead of believing in the average American, are deciding to double down on Wall Street and trying to recoup their 2008 losses.  This on the pretense that banks needed money to get lending going again.

One thing that is clear is the employment situation is in a major funk.  10 states now have underemployment rates of over 20 percent.  We are talking about Great Depression statistics here:

The above data is pulled from the Bureau of Labor and Statistics and is an average from the fourth quarter of 2008 to the end of the third quarter in 2009.  In other words, the data above is optimistic and doesn’t use the latest data that is even higher.  For example, California recently reported their U-6 rate is now up to 22 percent.  Michigan?  Their U-6 is now closer to 25 percent.  There is nothing remotely close to a recovery in the data above.

This recovery is unlike your daddy’s recovery because multinational companies can leverage cheap labor and a pathetically weak dollar to increase business overseas.  In past recessions when we actually had a manufacturing base, once the recession started ebbing you started to see domestic production pick up thus bringing people back to work:

The pattern is unmistakable.  After every recession since the 1940s, manufacturing jobs contracted throughout the recession only to pickup after the recession ended.  This trend started getting weaker in the 1970s.  Even in the early 1990s recession, manufacturing jobs picked up slightly throughout the decade.  Now, in the 2001 recession manufacturing has been plummeting and has completely broken the trend.  In fact, we now have the same number of people working in manufacturing as we did back in 1940.  One slight difference.  The U.S. had 132 million people in 1940 and now we have 307 million.  We have nearly 2.5 times the population and the same amount of people working in manufacturing.

The U.S. Treasury and Federal Reserve would want to convince you that a declining dollar is good for you.  This might be the case if you weren’t paid in U.S. dollars and most Americans buy imported goods that will become more expensive eventually.  After all, it isn’t like we are making the stuff anymore as the above charts show.  It is a myth that the Fed tries to sell.  If a weak currency is a good thing, Zimbabwe would be the world financial center.  Or consider the fact that we import most of our oil.  There isn’t much we can do about that.  Even with demand waning domestically, oil is now approaching $80 a barrel.  We can thank our central bankers for attempting to destroy the U.S. dollar.

And forget about employment growth.  We have lost 8 million jobs since the recession started in December of 2007, 22 months ago.  We have lost an average of 360,000 jobs per month since the recession started.  Where are these jobs going to come from?  What is troubling is how many of these jobs are gone for good:

Long-term unemployment is now at a record high.  Many of these jobs are likely never coming back.  For example, think of the tens of thousands who worked in the housing industry as mortgage brokers, bankers, and construction workers that now are going to need to adjust to a new economy.  Or if you want a specific example, think of Winnebago:

Here is a company that manufactured the consumer happy motorist dream of RVs.  Yet it was built on the idea of cheap oil.  At one point, at the March low, this company was trading 90 percent off its recent highs.  The stock is still off by 65 percent even with the current stock market casino rally.  Do you think this demand is every coming back?  The average American is now looking for cheaper goods and sadly, much of that is imported.  Instead of traveling the roads on $1 a gallon oil many are looking to make food last until the end of the month.

The government is in cahoots with Wall Street and maybe they don’t care what the average American is going through.  Clearly on the jobs front little of the bailout money is making its way down.  If we consider 79.9 percent interest rates on credit cards as helping the consumer then we really have things backwards.
Welcome to the new kind of recovery where jobs are lost and incomes get sucked into a vortex.  But at least you can still afford cable and see that wonderful CNBC ticker go up as those on Wall Street gamble the bailout money away.

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Bankruptcy Bill will be in Texas this week, both literally and virtually!

1.  I’ll be attending the Jay Westbrook Bankruptcy Conference at the University of Texas Law School, which means I’ll be in Austin, TX from Wednesday, Nov 18 through Friday, Nov 20.

2.  A special “Texas edition” of Bankruptcy Bill will be running in the newsletter for the Bankruptcy Section for the State Bar of Texas due out this week along with a profile about the cartoon.

I’m looking forward to meeting any Bankruptcy Bill and BAPCPA Man fans in attendance, so please come up and say hi if you recognize me or feel free to get in touch in advance as well.

-Steven

E-mail: bill [/at/] bankruptcybill [/dot/] us

What happens when you take two spirited six-year-old boys who love to use their imagination and pretend to be Power Rangers, and it also happens that both of their fathers are bankruptcy attorneys?

Read this amusing post by Long Island bankruptcy attorney Craig Robins to find out.

"...and they tried to collect the debt right on the ski lift."

Friends of Bankruptcy Bill (FOBBs) are experienced consumer bankruptcy lawyers willing to share their thoughts and answer bankruptcy questions on this site. Feel free to get in touch if interested in contributing as a FOBB.

Gailyn Wink handles personal and small business Chapter 7 and Chapter 13 bankruptcies for Wink & Wink, P.C. She focuses on adversary proceedings and other bankruptcy litigation.  For more information, go to www.winkandwink.com.

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Debt Collection in Colorado:  Know your rights

If you are struggling with debt, there’s a good chance you are also struggling with unwanted contact from debt collectors. Sometimes these are your actual creditors, the ones you signed a contract with, but often the person calling you works for another company altogether because your debt has been sold to a debt collection agency. No matter who is contacting you about your debts, it’s not a good feeling. And when debt collectors cross the line, it can be downright scary. Knowing your rights where debt collection is concerned is important and empowering. Here’s some information about debt collection in Colorado that can help you get some control back if you are in that situation.

THE FAIR DEBT COLLECTION PRACTICES ACT

The Fair Debt Collection Practices Act, often referred to as the “FDCPA” was passed by Congress to reduce abusive, deceptive and unfair practices by debt collectors and to give consumers affected by that abusive behavior a remedy for violations: cash damages.

The FDCPA applies to debt collectors working to collect debts due to someone other than themselves. This means that the Act does not apply to in-house collections, such as when a department store with whom you have a credit card contacts you directly. There is an exception if the collector uses any name other than his own which would indicate that a third person is collecting or attempting to collect the debt.

WHAT THEY CANNOT DO

Talking to Other People: When contacting a third party (anyone other than you), debt collectors can only attempt to find out where you live and where they can contact you. They must correctly identify themselves, but they cannot tell the third party that they are calling about debt collections. They cannot call third parties if they already know where to find you. They cannot call third parties more than once (unless that person asked them to call back).

Talking to You: Debt collectors cannot contact you at unusual or inconvenient times. This means no calls before 9:00am or after 8:00pm (unless you or a court has authorized times outside of these boundaries). Debt collectors cannot contact you if you are represented by an attorney. Debt collectors cannot call you at work if they know your work does not allow you to receive such calls (tell them this the first time they call!). And very importantly, they have to tell you who they are and, if you ask, who they are working for, and that anything you tell them is going to be used to collect on the debt.

They Must Play Nice: The FDCPA prohibits abusive and harassing behavior. That means that debt collectors cannot threaten you, your reputation or your property. They cannot use obscene language. They can’t keep calling you with the intent to harass, annoy or abuse you. Along these same lines, debt collectors cannot mislead, deceive or lie to you about 1) the type, amount and character of the debt, 2) who they are (eg. saying they are an attorney when they are not ), 3) what they can do to you (eg. they cannot say that they will call your boss and disclose your debt situation, they cannot say they are going to have you arrested, and they cannot threaten to take your property unless they are allowed to do that under the law).

Additionally, debt collectors cannot report false information about your debts to anyone, including the credit bureaus, and they can’t send you letters on official-looking letterhead that pretends to be from someone it is not.

WHAT TO DO

Put it in Writing!: Write the debt collector and tell them you want them to cease all communications with you. Once you do this they cannot contact you anymore except to 1) tell you they are stopping their collection efforts, or 2) to notify you they are going to, or did take another action (such as wage garnishment or pursuing a judgment) to collect the debt, as long as they normally do take that action (in other words, they can’t say they are going to take you to court if they have never done that in the normal course of their business).

Don’t Do Nothing!: Within five days of the initial contact, debt collectors must send you a document identifying the amount of the debt, who they are collecting it for and a summary of the actions you must take if you want to dispute the debt. If you think they have the amount wrong, or the dates wrong, or anything wrong, follow those instructions and protect your rights!!! Keep copies! Send things registered mail!

Keep Records: If you have unscrupulous debt collectors making you miserable and you think their actions violate the FDCPA, keep records. Record the time, date, content of the communication and the name of any caller. Why? Because these violations come with a remedy: cash damages. You can receive $1,000 per  violation if you can prove it in Court! That is not only money for you, but a huge slap in the face for the nasty pieces of work that Congress had in mind when the drafted the FDCPA. Going after those (oh, I could really get colorful here) jerks keeps them from getting away with it again and again.

COLORADO STATUTES OF LIMITATION

There is one very important piece of advice when dealing with debt collectors: Beware of extending the statue of limitations! Colorado puts a limit on how long creditors can seek to collect on old debts.  These statutes of limitations range from Three Years for certain contracts to 20 years for District Court judgments. (An attorney can answer questions about specific cases.) What debt collectors try to do when your debt is about to expire (meaning no one can bother you about it ever again) is to attempt to get you to pay some small amount on the debt. Why? Because if you do, the statute of limitations starts all over again. Gotcha!

In conclusion, if you are struggling with debt, don’t allow yourself to become a victim of illegal debt collection practices. Make sure you know your rights under the FDCPA, and if someone is breaking the law make sure to keep track of it in detail. A bankruptcy attorney can help you pursue a claim against anyone who violated your legal rights while collecting a debt. Additionally, bankruptcy can help you wipe out that debt and wipe out the possibility that someone will violate your rights trying to collect.

California has been the poster child of ineffective state government.  Bickering politicians, constant spending, and budget deficits that baffle the economic bottom line.  But California isn’t alone in this spend more than you earn reality.  Last year, California had to patch up $60 billion in budget deficits.  A large and historical sum no doubt.  Yet the federal government ran a $176 billion deficit in one month alone!  In October the federal government brought in $135 billion in revenues (taxes) and spent $311 billion.  This is not the kind of math you want to be seeing.

In fact, let us put this on a graph.  Be warned, this is a financially scary graph but get used to it, since this is the future:

What a coincidence that in the 1970s when President Nixon took us off the gold standard, we suddenly started having epic swings in surplus and deficit spending.  Without any standard, the fiat money world allowed our government to spend as much as the world would allow us and gave incredible power to the U.S. Treasury and Federal Reserve to print money out of thin air.  The government is arrogant at best if it thinks it can print money and at same time, allow revenues to decline.  Any company operating like this would be bankrupt in a short time.  In our case, foreigners are starting to worry and are exiting dollar trades and pushing up commodities like gold.

I’m not a gold bug and I won’t recommend you go 100 percent in to gold.  But make no mistake, gold is a trade against the stability of the U.S. dollar and the trust people have in the U.S. Treasury and ultimately our government.  There is good reason to believe this is going to go on given the massive budget deficits we are now operating under.  Now we are hearing whispers of stimulus version 2.0 and the Treasury has already talked about secretly bailing out the commercial real estate market.

States unlike the federal government, have to balance their budgets.  And many states are facing epic problems:

Source:  Pew Center, Zero Hedge

The sizes of the budget gaps are simply incredible.  It is a basic arithmetic problem.  The recession has caused record unemployment and profits to fall in the real world.  Sure, Wall Street is seeing markets up by 60 percent but this is casino like profits.  In the real world, unemployment is up to 10.2 percent and in states like California, the underemployment rate is up to 22 percent.  This is depression like statistics.

Take a look at the chart above.  7 states have budget gaps of over 20 percent.  9 out of the 10 states researched by the Pew Center study have seen revenues fall by over 10 percent.  These are reflections of the Great Recession.  States like California, Arizona, Florida, and Nevada built entire economies on the decade long housing bubble.  Short of seeing another housing bubble, these states are going to be in an economic funk for over a decade.  Where is the revenue going to come from?  So far, the federal government has demonstrated that all they care about is protecting the profits of Wall Street.  Did your paycheck go up by 60 percent?  Is healthcare 60 percent cheaper?  Is education 60 percent more affordable?  The 60 percent rally is a joke.  It is based on hot money and as you might have noticed, the only folks pushing out record profits are the banks.  Other bread and butter companies are showing profits because of firing workers and restocking inventory.  Is that really something to jump in the air for?

Just run the score card.  Let us see how things have changed over a one year timeframe:

Every measure seems to be worse except the stock market.  The unemployment rate nearly doubled in the year, 7 million more Americans are on food stamps, and foreclosures are higher.  But things are getting better supposedly.

And the foreclosure rate isn’t abating:

From 1999 to 2007, the U.S. foreclosure rate was much higher than that of California.  But after that, California’s housing market completely imploded.  This wasn’t any accident.  Much of this was brought on by toxic mortgages like option ARMs that were nothing more than financial time bombs.  The chart above is troubling on many fronts because it shows no abatement to the ongoing foreclosure disaster.  Most can understand that until foreclosures trend lower, any talk of a real recovery is rather mute.
States, like average American households, are dealing with the realities of a shrinking balance sheet.  Or to be more precise, the revenue side of the equation is quickly shrinking while debts are still elevated to bubble levels.  That is why some $12 trillion has evaporated from the net worth of U.S. households.

The October federal budget deficit is troubling.  Last October the government brought in $164 billion compared to $135 billion this October.   A 17 percent drop in revenues.  The federal government makes the state budget deficits look like child’s play.  At some point, the government is going to need to adjust the revenue side of the equation.  You can either raise revenues (taxes) or cut spending.  Since they are choosing to do none of the previous options, they are opting to devalue the U.S. dollar and putting all their faith in Wall Street and the banks to save us.

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Five-Cent Nickel features a nice guest post by Craig Ford, proprietor of Money Help for Christians. Craig holds forth on ways and places to find a good deal, among them yard sales. Just last night, I was congratulating myself for having found one of my all-time best buys—a deluxe “Rabbit” wine opener that normally sells for as much as a hundred bucks—at an estate sale. I picked it up for five bucks.

Estate sales are different from yard sales in several big ways.

• A true estate sale is organized by professionals. Estate sale operators are companies and so must charge sales tax. They have a good feel for what things are worth (usually less than the homeowner thinks), and they usually do a nice job of organizing the merchandise.

• Estate sales are generally held inside the house and in the back yard, so you get to see how other people live.

• And some of the other people live mighty high off the hog. Estate sales often take place in multimillion-dollar homes, sometimes owned by people who can afford to maintain several places and who, when selling a house, simply dispose of all the designer furnishings and redecorate the next place from scratch.

• Estate sales may take place in gated communities and HOAs where ordinary yard sales are not permitted.

• Nine times out of ten, the offerings at an estate sale are much, much nicer than anything you find at a yard sale. Often you’ll find expensive items that are barely used or even brand-new.

In addition to the Rabbit, which I use a couple of times a week, I’ve bought high-quality cutlery, a beautiful set of coveted Tonalaware, a matching red leather sofa and recliner for M’hijito’s house, a fun leather ottoman for my own place, a gorgeous custom-made library table, upscale cookbooks, and any number of tschotchkies, yard items, and household gadgets.

The trick to estate sales is finding out about them and then getting there before they open. An easy way to find an estate sale in your area is to go to Estatesales.net and subscribe. At the site, you can click on your state and then your city to find a list of nearby sales. It’s even easier to subscribe; this will elicit a weekly e-mail listing of upcoming events, and the e-mail generally tells you whether and where the estate-sale company has posted photos.

A listing with photos is especially useful, because you get a feel for whether a given sale has goods that may interest you, and you waste a lot less time than you do wandering from yard sale to yard sale.

Remember, though, that you will be competing with antique and second-hand dealers. This means you need to get there early! Be there a half-hour before the door opens, and be prepared to stand in line. If a sale is really hot, the organizers will let only 15 or 20 people in at a time, for safety and for the sake of maintaining order. The dealers are always there as dawn cracks, and they go straight to the best stuff.

It’s smart to bring a basket, box, or shopping bag, so you’re not having to balance things in one hand while you inspect the merchandise. Also, some people will bring their own tags marked with their name and SOLD. Usually you claim an item by removing the tag or picking it up and carrying it over to the cashier’s table, but not everyone knows an untagged item is considered “sold.”

Estate sales are a lot of fun, not only because you sometimes score a fantastic deal but because you get to see some amazing real estate, some interesting antiques, and some expensive designer furniture. La Maya even found her house in our neighborhood at an estate sale. She visited the estate sale, having found it in a weekly e-mail notice, and once inside she realized she loved the beautiful house. When she asked the estate-sale organizer if the owners were planning to sell, the answer was yes! Instantly she called her partner, who agreed that it was a perfect place for them, and before long they were living around the corner from me. Now there’s an estate-sale triumph!

Related posts:

• Watch out for “sales” that aren’t
• Recreational Shopping: A change of habit
• Estate-saling in a tropical storm

It’s official.  Bankruptcy Bill (’s creator) has joined the American Bankruptcy Institute (ABI)!

"No, Struck, I don't think there's any chance they'll change their name to the American Bankruptcy Bill Institute."

There seems to be a growing divide in the current U.S. economy.  On the one hand, you have the financial sector swimming in their bailout-induced profits like a modern day Scrooge Mcduck.  In their circles, it appears as if the recession is over.  On the other hand, you have average Americans seeing access to credit cards shut down, equity in their homes vanishing, and their stock portfolios looking a little too much like 1999.  Then you have 35.8 million Americans, roughly 11 percent of our population, on food stamps.  To this group the recession is still very much alive.

At a recent Alliance for Family Entertainment of the Association of National Advertisers, Wal-Mart gave a sobering look at the current economy:

“(NY Times) There are families not eating at the end of the month,” said Stephen Quinn, executive vice president and chief marketing officer at Wal-Mart Stores, and “literally lining up at midnight” at Wal-Mart stores waiting to buy food when paychecks or government checks land in their accounts.”

Now this is important since Wal-Mart is in every corner of every American metro area:

The fact that you have people lining up at midnight just waiting to have their paychecks or government checks clear for food is probably something you are not going to see on CNBC but it is happening.  This recession is really creating a split and is also flaming the fires of class warfare.  Average Americans and working class Americans are still dealing with what is known as the Great Recession.

Wal-Mart is looking to meet the new market reality by offering items that meet the new austerity demanded by millions of American families:

“Among the steps Wal-Mart is taking to address the changes in shopping habits, Mr. Quinn listed an overhaul of the retailer’s private-label brand, Great Value, which is promoted in commercials describing how families can fix dinners with Great Value products “for less than $2 a serving.”

For less than $2 a serving means millions of families are now needing to stretch their dollar.  So as you might have guessed, having the U.S. Treasury and Federal Reserve go on a path of dollar weakness actually hurts those at the bottom and middle class the most.  Yet they are concerned more about the financial sector and the chips may fall where they may for the remaining group of Americans.

Punishing the Prudent Saver

Those that save and are cautious with their money, are now being forced to make difficult decisions.  Even holding on to U.S. dollars is not a good move with the way the Fed is systematically devaluing the dollar. The Fed is artificially keeping rates at record lows so putting your money in a savings account amounts to stuffing it into your mattress.  Take a look at three of the too big to fail (TBTF) banks and their savings rates:

All you are doing is giving them your money to hold.  That is it.  A 0.1 or 0.05 annual interest rate is laughable.  Even if we have 0 percent inflation, the U.S. dollar is now down by nearly 20 percent since the March levels.  You have lost money.  Unless, you placed your money into the casino known as Wall Street.  The stock markets are now up by 60 percent since the March lows even though P/E ratios are at historic levels and unemployment is now up to 17.5 percent using the U-6 rate.  Most of the recent gains are based on cost cutting (aka layoffs) and restocking of inventory.  Basically we are seeing companies slim down and using one time gains to capitalize in the current marketplace.

If you doubt this, just take a look at the stunning 9.5 percent growth in worker productivity in Q3:

The above can be summarized as doing more with less.  Yet this is somehow good news for the average American?  Those that are prudent are left with very few places to protect their money.  Do they invest in the stock market even though earnings do not justify current lofty prices?  Do they put their money in the bank and allow the devaluation of the U.S. dollar eat their purchasing power away?  There are few places to go.

But even with these pathetically low rates at banks, deposit accounts are the only sector that has seen steady growth in the last few years:

Every other major asset class from real estate, equities, to pension reserves has fallen.  Yet savings deposits have steadily increased.  A largely unspoken trend is out there and many people are basically protecting their money at all cost and believe cash is king, even if the cash is slowly being devalued by the U.S. Treasury and Federal Reserve.

There is little reason to believe that the dollar is going to spike significantly over the long run.  We simply have too much debt:

Add up the above and you arrive at $52 trillion in debt.  Home mortgages are $10.3 trillion of this amount.  State and local governments struggling with tax revenues have $2.3 trillion in debt.  Add in unfunded Social Security and Medicare liabilities and you can see why we are entering a perfect storm.

Summary

The financially prudent have taken it on the chin with the current bailouts.  The working and middle class Americans are largely caught bailing out the wealthy financial class while confronting the realities that the bailouts were largely designed to protect the banking sector.  Corporate equities and mutual funds have taken major hits in this crisis but the wealthier bond holders have faced minimal cuts.  Examples like AIG paying out to Goldman Sachs only reinforce this horrendous transfer of wealth.  Until the majority of Americans demand action and take to the streets, this pseudo-recovery is going to go on for years until finally Americans wake up and realize that they have given all their wealth to the banks.

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The interview at Glendale Community College went well. I think. But then…what do I know?

Their strategy is to hand you a C-level student paper and ask you to grade it in 15 minutes. Then they take a half hour during which you are to respond to six questions. So it’s a whirlwind trip that can’t possibly reveal very much about any one candidate other than how he combs his hair or whether she brushes her teeth.

A friend had clued me that Glendale prides itself on its high-tech pedagogy and that its leadership is committed to the Student Success Initiative, and so I had several related buzzwords on my tongue. Probably if I was weak on anything it was on pedagogical theory. I don’t do theory well. I teach by the seat of my pants. Generally I come out about where the theorists would like, but I don’t get there the same way.

So, we shall see.

We may see fairly soon: they’re hiring for January! We’re already a third of the way through November. They’ll have to select a hire soon, in order to get the person on the payroll by the time spring classes begin. Surely they’ll make a decision by the middle of December.

Related posts:

• Managing a large workload
• The perils of adjunct faculty
• Why you should become a teacher

The New York Times‘ Andrew Ross Sorkin is apparently a fan of Bankruptcy Bill, as evidenced by his recent mention of us in “Talk to the Times:  Andrew Ross Sorkin“:  http://www.nytimes.com/2009/10/19/business/media/19askthetimes.html?_r=2&pagewanted=all

Sure it’s at the very end.   But we’re definitely not going to quibble.  We just hope that no one’s actually making investment decisions based on our cartoons.

Hey Andrew!  Let us know when you’re ready to “meet” Bankruptcy Bill and we’ll cartoon-ize you for a strip.

(For more on Andrew Ross Sorkin, check out this Nov 8 New York Magazine article about him and his book, Too Big to Fail,which should probably be added to Bankruptcy Bill’s recommended reading list.)