Economists fear consumers may start spending within their means

Here's a depressing AP article about consumer borrowing habits. The Christmas shopping season is already upon us, with retailers begging you to come in and spend money you don't have. Home equity loans are dried up, leaving credit cards as the most accessible way to borrow your way into oblivion. As a result, revolving credit debt is up-up-up! That's not really what depresses me. What upsets me is that the "experts" out there, the economists, whoever they are, are completely happy with the outcome.

Now that Americans have sucked all the equity out of their home, they're diving right into higher-interest debt, with the credit card industry. It's kind of like jumping out of a pool with a couple sharks and into a pool with a dozen piranhas.

During the housing boom, when home sales were hitting records for five consecutive years and prices were soaring, many homeowners tapped the rising value of their homes to finance increased spending by taking out home equity lines of credit.

However, now that home sales are plunging and double-digit increases in housing costs are a thing of the past, home equity lines of credit have become less available. That has pushed consumers back to credit cards to finance their spending.

Hey, heaven forbid people start spending within their means. Let's increase spending even though we aren't increasing income. Let's fuel big companies by borrowing more money. Here's a question, brilliant economists: What are we supposed to do after the home equity has dried up and the credit cards are maxed out? How exactly will we still be fueling economy when we're all freaking broke and three-quarters of our paychecks are getting sucked up by interest charges?

Analysts are watching closely to see if the steepest slump in housing in 16 years could have a more serious impact on the economy through the wealth effect

I had no idea what the wealth effect was so I looked it up.

One problem, home values don't make you more or less wealthy unless you plan on selling the house and living on the street. Instead we get this "perception" of wealth by letting people take out loans.

the fear is that falling home values could cause consumers to cut back on their purchases. Since consumer spending accounts for two-thirds of total economic activity, any serious cutback in spending could lead to much slower economic growth.

GOOD! Fear? Are these experts idiots? How does it help our economy if we're all broke! People need to start paying off their debts and living within their means. Then when they have real capital they can go spend it.

FRB G.19 Release

I might need to get divorced

I had a disturbing conversation with my wife the other night. We were talking about the results of this situation with the medical bills and about our progress on paying down our debt. We threw the idea back and forth of paying off my student loan before her car loan. Now interest-wise this makes no sense, but balance-wise it does. I can pay off the student loan in one big lump payment if I focus all our debt repayment on it for one month. That would kind of simplify things since I would have one less debt to worry about, and would be a nice feel-good victory. The extra interest we would end up paying on the car loan to do this would be negligible. She agreed. Then she gave a reason why she agreed:

"Well, the car loan isn't really debt anyway."

I was floored! What? Not debt? I need to tell the bank to stop charging us interest. She stood her ground; a car loan is not really debt. So I ask her why she thinks a car loan isn't debt.

"Because everyone has a car loan."

I stopped to think about this. Does everyone have a car loan? Of course not. Does anyone need a car loan? Of course not. Very few people absolutely need to buy a car that second...they could easily just start saving a payment and buy a car in a few years. Most people buy a new car when theirs starts having problems, or they just get tired of it. That's certainly not a necessity to borrow money. Rarely do people literally run their car into the ground until the engine implodes and it refuses to move another inch (and those that do have probably been saving for a new car anyway).

Yet there is the mentality that everyone has a car loan, that everyone needs a car loan, and that it isn't really "debt". Why is this? Is it because everyone around us is so addicted to debt that one little car loan doesn't seem like a big deal? Has the automotive industry itself so well marketed buying a car on time that it seems like just another standard process in buying any car? Or are we just so entrenched in this culture of instant gratification that saving money for 5 years for a single purchase just seems outrageous and out of this world?

At what point should magazines be paying us?

I have decided not to renew my subscription to Parenting Magazine. Though we do not have any kids, I thought it would be a good idea to subscribe for various reasons, one being that we wanted some magazines for weekend morning reading material. Money Magazine was among my initial purchase, but that also will not be renewed. The articles in it are fairly fluffy and although sometimes entertaining, there is far more useful information elsewhere.

Anyway, the reason that I will not be renewing Parenting is that it not only contains very few real parenting tips, but it is almost entirely a mechanism of product advertisement. All magazines have ads, but even the articles in Parenting are usually little more than cleverly disguised product placements. Nearly every "solution" in any article involves the purchase of some commercial product. Even the recipes, which should be fairly inoculous, suspiciously include brand names or processed/frozen goods.

I can ignore the blatant disregard for the male role in parenting in this magazine, and the frequently useless (and rare) male-focused article and the general tone of the entire publication that men do little to nothing in the way of child rearing, making way for "super mom" because as my wife says they are just embracing the stereotype.

I can ignore it because the entire magazine is insulting. When they are not hawking merchandise and "must have" lists that are overflowing with junk that no practical parent could ever possibly need they are filling pages with reader-contributed materials and common-sense tips. Apart from actually putting all the material together, I am at a loss to figure out what content the editors actually produce. I feel violated that I have essentially paid to be advertised to while trying to trick me into believing they are delivering original and useful information.

This magazine, and others like it, should just be made available on the free rack.

Restricting ads to children

If you've been interested in the subject at all, you'll know that advertising to children has been getting some attention for the last several years. Most notably is the Teletubbie/McDonald's fiasco. Advertising to children is nothing new. The new Transformers movie is based off of an 80's cartoon show that was created for the sole purpose of selling Transformer toys.

Parents don't seem to get upset when media and corporations turn their kids into mindless consumers, but they do get upset when it makes them fat.

Are food and drink firms going to restrict advertising to children? I doubt it. But saying you are is certainly good PR. They aren't going to stop advertising (or even restrict it), they are just going to shift it to something else. It probably won't be as obvious, and I bet most parents will fall for it.

The self-imposed rules include pledges by seven companies who will no longer use licensed characters, such as those made popular through movies or TV shows, to advertise online or in print media unless they're promoting their healthier products.

Emphasis added by me. See, McDonald's (infamous for placing popular cartoon characters on the sides of a happy meal) already heavily promotes "healthier alternatives", which I put in quotes because they generally aren't healthier; they just have the appearance of being healthy. Check the nutrition information on those salads and after you add the chicken and the dressing, you might be better off with a Big Mac.

Anyway, McDonald's knows it doesn't have to emphasize only its unhealthy junk food. It can advertise its healthy food all day long, but once the kid steps through the door, are they going to order a salad with a cheap tasteless fruit cup or with hot salty french fries? Hmm.

Four other companies said they do not advertise at all to children under 12.

No, they advertise to children over 12. And who do children under 12 look up to? Right, the children over 12. There's a trickle-down effect with child marketing. Do you really think a 9 year old is not going to be affected by the same ad that is "marketed" to a 12 year old? And do you think 9 year old Billy is going to be happy with a fruit cup when his 12 year old brother is scarfing down a delicious box of artery clogging fries?

McDonald's USA said it will advertise only two types of Happy Meal to children younger than 12: one with four Chicken McNuggets, apple dippers with caramel dip and low-fat white milk, or one with a hamburger, apple dippers and milk. They both meet the company-set requirement of less than 600 calories, and no more than 35 percent of calories from fat, 10 percent of calories from saturated fat or 35 percent total sugar by weight.

Ah, so much for the fruit cup. Do you know what "apple dippers" are? It's an apple, obviously, with a rich calorie dense sauce that you smother it with. There goes your healthy snack. Have you met a 10 year old? Do you think they are going to be satisfied with 4 measly nuggets and a few apple slices? It may be 600 calories, but if the kid has to have a snack before dinner just to fill his tummy, its NOT a "meal under 600 calories".

But wait, could the entire article be an ad? The first paragraph...

The companies, including Campbell Soup Co.(CPB), General Mills Inc. (GIS) and PepsiCo Inc. (PEP), announced their new rules ahead of a Federal Trade Commission hearing Wednesday that steps up pressure on the companies to help curb the growing child obesity problem through more responsible marketing.

...with links to the stocks of each company (and McDonald's in the subheader). Sponsors?

Parents, this is all just more marketing. It's all a ploy to get you to spend more money and stuff your kid's face with their food by tricking you into believing they give a rats behind about your fat child. The answer is not restricting advertising or coming up with wacky meals under some bizarre calorie limit (as if limiting calories is the only factor of a healthy meal, puhlease!). The answer is for you to learn how to say NO!

Are pawn shops really that bad?

MSN clearly doesn't like pawn shops. I say, "What's the big deal?"

Pawnshops really are just loan companies that take small items as collateral. It is a competitive industry, so annual interest these days is usually around 22%.

People who put their stuff up for collateral at a pawn shop probably don't have great credit, so 22% is likely better than the rate on their credit card. Are there pawn shops that charge more? Sure, but as they say it's a "competitive industry" so you can just go to another pawn shop that charges less.

these days, planners see more people using pawnshops who don't appear to be traditional customers. One of them is Monica Martinez. A computer programmer, the Raleigh resident had always stayed away from "seedy" stores but has become a regular customer at Capital Cash, where she's selling off a stash of jewelry to pay a hefty tax bill. "It's either this or leave the country," she says.

I'm glad to know that Monica thinks leaving the country to avoid paying taxes is a viable solution, but anyway, is it so bad that she puts up her stuff as collateral for a loan? Every time you finance a car, your car is collateral, and if you have bad credit, your auto loan rate can easily approach 20%. What's the difference?

Flat wages and mounting debt are problems that drive even socialites in Beverly Hills, Calif., to pawn their Pradas.

Forgive me if I don't feel too sorry for someone pawning a Prada bag. Flat wages and mounting debts don't happen overnight. If you have a flat wage and a lot of debt, you need to be changing your lifestyle and spending less than you make, not buying Prada bags with your credit card. If you really are in such a bad situation, SELL your purse. I bet you get a lot more for it from eBay than the Pawnorama.

I remember a couple years ago my local news station did a piece on pawn shops and gas prices. A guy drove up in a newish Jaguar and said he was pawning his very expensive Rolex just to pay for gas. I guess it didn't occur to him that he had a gas guzzling luxury sedan.

So what about the other side of the coin? A pawn shop is like an air conditioned garage sale. People sold their stuff for cash and now the store is selling it to me for a little profit. Sounds like an honest transaction to me. Consumer needed money, sold stuff to pawn shop, I go in and buy it. Is it so wrong?

Misleading marketing has made me cynical

I am utterly cynical and untrusting of just about every single company I do business with. It's the big companies that have ruined me. All their fine print, twisty service agreements, bundled restricted packages, and outright lies have left me scrambling to look for the asterisk. The asterisk on all "Free!*" deals that read in fine print on the bottom, "* free with annual contract, see form 293-D section 3 column 2 at atandt.com/home/phone/billing/39eedjdf3.axps39e for pricing details; restrictions that will be revealed after you sign up do apply".

So when AT&T sent me a free calling card worth 150 for apparently no reason whatsoever, I regarded it with absolute suspicion. It was in a nondescript envelope with my name on it. Though I do business with AT&T, I almost shredded it because it said AUTO 29439e*#* above my name, meaning this is a general mailer (read "advertisement"). But when I opened it up, here was this folded up piece of paper with a 150 minute calling card on it.

The letter read "For being a good customer, we are giving you this 150 minute calling card..." and the letter continued on about the various services AT&T offers and how absolutely wonderful they are and I should be praising the Lord that I get to give my money to such a fantastic company.

But there was no asterisk, no fine print, no other terms anywhere to be found in this offer. It's just a free 150 minute card apparently. My wife wondered what was wrong with me. "They sent it to us for being good customers" she told me, "it says so right here," after she read the enclosed letter.

Right. AT&T just sent me something out of the kindness of their hearts? Well, I have to call and activate this thing, so I guess I will tonight. What's the worse that could happen?

Consumerism at its best

Here's consumerism and overconsumption at its best.

iPhone cravers

Some people are just dying to get their hands on the new iPhone. They are willing to pay hundreds above the already ridiculous retail price to have it, and they are willing to stand in line for days to be the first to have one. Are we going to see a repeat of the Playstation 3 mess?

No doubt there is a team of advertising marketers somewhere working with Apple patting themselves on the back right now, because pushing people to this level of sheer stupidity is an award-winning accomplishment!

Here are some amusing quotes.

I am looking for several people who will wait in line for me to buy the new Apple iPhone on Friday, June 29...You need to be reliable, mature, and patience will definitely be a plus

I don't think this will get many responses. The problem is that anyone who is mature and patient is going to wait until they can walk in and buy an iPhone, not wait 3 days outside a store.

I am charging approximately $150 over the cost of the iPhone

Some people pride themselves in finding good deals, or buying things on sale, others happily pay significantly more.

It seems like the asking price for people to stand in line is 200-300 dollars (however i have seen offers for 150). but I want to make SURE that i get one, and I'm pretty much willing to pay the 200-300 extra for it

Who is going to stand in line for $300 for 3 days? That ends up being $4.16 an hour.

Ok, so here's the deal. I need an iPhone. Like, really need an iPhone. It's so bad, I've taken to carrying around my paper cut-out just to get used to the size

Here's a corporate executives dream come true. He hasn't even used the product yet, but he is completely obsessed over it.

In any case, the iPhone release is going to be really entertaining. I can't wait to hear the first report of someone paying $1,000 for their iPhone and then accidentally dropping it in the toilet a day later.

A mirror on the cover wasn't enough

Wired magazine is offering a new service. You can now have your own face on the cover of its magazine issue. I have to write it again just so it sinks in. The magazine is personalizing its issues to include your face on the cover.

Ahem. Apparently having a magazine put a mirror on the front so you can look at yourself and say "I'm the best person of the year!" wasn't enough, now we need to have our photos in bold color print. The whole idea was rather silly, but this new venture is a true testament to our growing narcissism. Over 5,000 subscribers went out of their way to submit their photographs to this magazine so they could see themselves on the cover of the next issue.

But I wonder what the point is? No one else is going to see it, unless you drag the issue to work and force your coworkers to look at it. Really, this does nothing but let the subscriber sit in his living room and gaze adoringly at himself on the cover of a magazine.

Of course, the real reason for this is not just to draw us in by stroking our self-loving egos, but to engage the audience in a new kind of magazine; one that is personalized for each subscriber. What will this mean? If you guessed "Advertising" you get a gold star (and a party with a banner that reads "You're special and super smart!"). Its really a brilliant idea. Food companies (especially those that sell frozen processed boxed stuff) advertise heavily in magazines, and there is a huge database of what kind of products you are buying sitting in some grocery stores computer that you have been kindly assisting them in compiling as you swipe your "club card".

The article ends with this:

If your cover is on a national magazine, but only on the issue you receive, does that qualify as your 15 minutes of fame?

No, but at least no one else will know you did it.

Target doesn't support my 10 year old vacuum

I have two busted vacuum cleaners. The first is a Dirt Devil that is a few years old. The second is a Hoover that is about 10 years old. As near as I can tell, vacuum cleaners have become expensive throw-away items. The average price for a vacuum cleaner at Target is $100. However they only sell the belts and accessories for the vacuum cleaners that they stock, and the models change every single year. Worse, the manufacturers have different belts and bags for just about every model (my Dirt Devil is a bagless upright though). I recall when a Hoover had 2-3 belt styles and any large store would stock all 3. The newer models used the same belt as the older ones. And why not? You can easily design your newer vacuums to use one size of belt.

It's bad enough that all vacuum cleaners are now made entirely of plastic, except for the screws holding them together.

Dirt Devil however does sell parts for my machine. I had to order a new roller for $15 plus $5 shipping. 20% of the whole vacuum price, ouch! Hoover's website however only stocks the basics for my vacuum; bags, filters, and belts. If that Hoover should break (right now it just needs a new belt, but Target nor anywhere else sells it) it will be going in the trash; I can't get parts for it.

Am I wrong to expect a manufacturer to support an appliance for its entire life? This vacuum is great; it runs perfectly with no problems. Should I expect to be able to buy parts for it? Or have vacuum cleaners just become disposable?

What is an electrolyte anyway?

I was standing in a convenience store trying to find the Red Bull (because every once and a while I like to enjoy a useless heavily caffeinated cold beverage, and its cheaper than a Starbucks frappawhataever) and found myself staring at the Gatorade. Gatorade, it claims, restores valuable electrolytes after exercise. That sounds pretty important.

Does anyone know what an electrolyte is?

I didn't, so I decided to use the net to find out. I ended up at Wiki, because that's usually a pretty decent source of generic information like this. Here's what I found (and you can see the page here)

Electrolytes are commonly found in sports drinks. In oral rehydration therapy, electrolyte drinks containing sodium and potassium salts are used to replenish the body's water and electrolyte levels after dehydration caused by exercise, diaphoresis, diarrhea, vomiting or starvation. Giving pure water to such a person is not the best way to restore fluid levels because it dilutes the salts inside the body's cells and interferes with their chemical functions. This can lead to water intoxication.

So electrolytes are sodium and potassium salts (with some other elements mixed in). Like...in a banana? Anyway, replacing these electrolytes only seems to be important after you are dehydrated. In other words, Gatorade, which replaces electrolytes and is commonly used while exercising, is completely useless when compared to plain water because it doesn't matter if you are replacing electrolytes unless you are severely dehydrated.

Good to know.

Jumpsnap

I saw 'reports' on this product on no less than 5 different news sites. It's an invisible jump rope called JumpSnap. This is the stuff of late night QVC shows, gizmos invented where there really was no need for it. Its right up there with the hundreds of onion choppers, magnetic stimulation belts, and x-ray glasses. This little device will set you back around $60.

It is basically a pair of handles with weights. As the weights spin, the handle counts the revolutions and clicks as each revolution is completed. It's an invisible jump rope. And it's completely pointless.

Jump ropes cost $5-10. You can probably make one out of junk in your garage for free. An invisible jump rope? Put a ROCK in each hand and pretend to jump rope. You have just accomplished what this $60 product does for you.