News Cut: October 8, 2008 Archive

Weathering the storm

Posted at 10:52 AM on October 8, 2008 by Bob Collins (2 Comments)
Filed under: Economy

MPR's Midmorning today talked with Sandra Block, a personal finance columnist for USA Today today. Much of it we've heard before, but many of us are near panic. And today, I detected a lot of "pushback" from the audience, which should tell us something.

Block also said the poll earlier this week that showed most people expect a depression shows that most people don't know what an economic depression is.

Here's the Cliff Notes version.

1. I'm tired of hearing "don't move stocks and mutual funds." Why should I?

The problem with giving up is you've given up the opportunity to recover gains. What matters isn't what your portfolio is worth now. What matters is what it's worth when you need the money.

2. We're near full panic, we should keep the cash in our house. But the bank won't give me cash now.

There are federal reporting requirements for large withdrawals from banks to discourage the underground economy. Your bank doesn't have enough cash in its vault for everyone to take their money out. Keeping large amounts of money in your home reminds me of Y2K when people built cabins on mountains.

3. How much "liquid cash" should I have?

It depends on how many kids and how many incomes. Most people barely have enough for two weeks so when we talk about six months, people won't even try. Just start with trying to have enough so if your car breaks down you can pay cash.

4. I moved my mutual funds from stocks into cash prior to the worst of the downturn. When should I put it back into the market?

Now.

5. I have some property overseas. Should I sell it to pay off debt?

It's always a good idea to pay off debt in this economy. Be careful about tax liabilities. If you're paying credit cards with 20% interest, that's a 20-percent rate of return. If you've been paying on time and haven't been late, you have a good deal of power to negotiate lower rates.

6. Why am I still get credit card solicitations if there's a credit crunch? And can I negotiate with my credit card company?

They're sending these to everybody but if you actually apply, you may not be able to get what they're offering. It's just cheaper to send the solicitations to everyone. They want to give money most to people who don't need it.

7. I have a spending problem. What should I do?

Write down everything you spend money on. You'll be more conscious of the "leakage."

8. I'm 50 and self-employed and lost $35,000 in my retirement account and rebalanced to 80% stocks and 20% bonds, was that a good move.

Yes. You're self employed so you probably plan to work for a long time and you're still young. As you get older, gradually rebalance that once the market comes back.

9) Should I cash in the 401K and pay off the house?

No. That's for your retirement. What good is having a home paid for when you can't afford groceries? If you want to pay off your house sooner, make an extra payment every now and then.

10) What's the difference between a recession and depression.

Old saying: A recession is when your neighbor loses his job and a depression is when you lose your job. We've only been in a depression one time but I'd say it's double-digit unemployment, banks closing, and no GDP growth of years, not quarters.

Unemployment is going to go up. We're in a recession which is why people need to bulk up savings accounts.

Kerri said one of the reasons she had Block on the show is to help people take steps to prepare for a coming layoff. But nobody had any questions about preparing for a layoff. Many of the questions were from people who appear to be in fairly good economic shape and had money socked away. We need to take another stab at this issue and concentrate solely on people facing layoffs. It's hard to relate to the caller who has $1.8 million still.

Photo: Maragaret Bourke-White

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The sentencing

Posted at 12:08 PM on October 8, 2008 by Bob Collins (12 Comments)
Filed under: Crime and Justice

A judge today sentenced Olga Marina Franco Del Cid to 12 1/2 years in prison for the accident that killed four students aboard a bus near Cottonwood in February.

The accident has been a lightning rod from the start, not only for the tragedy, but for the fact that the woman, who still denies being the driver of a vehicle that hit the bus, was in the United State illegally.

Now, the sentence itself is part of the controversy.

"That's IT! This is insane!," one commenter on the West Central Tribune Web site said after the sentence was announced.

"She should get the death penalty for killing those kids. Then we wouldn't have to waste more resources on illegals. Maybe that would send a signal. If you are here illegally and get caught, you hang," said another.

Things aren't any quieter on the Marshall Independent's bulletin board.

Typical online commentary, or does it speak to the emotion of the immigration issue in an area of the state where it is more acute?

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The "D" word

Posted at 6:23 PM on October 8, 2008 by Bob Collins (0 Comments)
Filed under: Economy, Life

The economic meltdown is bad. Most of us are pretty scared, more than a little angry, and our ears perk up when we hear people throw the "D" word around pretty loosely.

Earlier this week, a poll showed that almost 60% of those surveyed think a depression is likely. "Most of those people don't know their history," a guest said Wednesday on MPR's Midmorning.

Elizabeth Schaefer, 86, of Shoreview is as good a history book as any of the thousands she probably touched in her career as a librarian. She was born seven years before the stock market crash of 1929 and grew up during the Great Depression.

Elizabeth was born in Chicago. Her mother took care of the kids and kept an eye on the money. Her father worked as a railroad engineer when the railroad had work.

"They didn't talk about their financial problems with us, but they must have saved their money, because my father wanted a place where we could walk to school without crossing the street, so he went out for a loaf of bread one day and came back with a house (See photo)," she told me during my visit at her retirement community in Shoreview.

Her parents were strict and kept the kids in the yard and sent them to a Catholic school. "My mother refused to buy the school uniforms so she made them for us. But, of course, it didn't look like everyone else's."

"Mom was always saving," Elizabeth said. "She'd make a little bit of meat and a lot of noodles to go with the soup. You were supposed to add one can of water and she'd add two." In the evenings, men would knock on the door looking for food. Her mother would share the supper. They'd eat it out on the porch and then move along. "We were fortunate we had a house to live in," she said.

Her mother kept strict track of what it took for her to go to college. "It was $800 and I paid it all back my first year." She worked as a librarian for 25 cents an hour. She tried to get a job in a library in Chicago, but didn't realize when she submitted an application to the alderman, she was supposed to include a bribe.

After getting married, she says she never had any arguments with her husband over money. "He'd cash his check and put it on the dresser, after putting some in the bank."

She never stopped "saving things that possibly had another life." At her retirement home, people put things they don't want anymore in a cart. She pulls things out of the cart and offers it to others. How often do they take it? "Not too often," she says.
She, too, made her childrens' clothes when they were small. Her kids have grown up to be frugal, but also generous with others through food drives and other charity.

How does she view the panic of the last few weeks?

"It's out of my hands and you just have to trust that God's gonna... whatever happens happens and hope somehow you have what it takes to cope with it," she said.

She says she always talked to her daughters about saving for tough times. "People didn't do that because they didn't believe that. They'd make fun of you for being frugal. You never know what's going to come. I see so many people that... when people get married, they think they have to start out with a house and everything in it, stuff that people worked for years to save for...I'd die before I'd pay finance charges on credit cards. It seems like if you don't have the money for it, you go without it until you do have it."

Things are bad. Things may get worse. But there's plenty of evidence that says it's no Great Depression.

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Making sausage, making news

Posted at 6:12 PM on October 8, 2008 by Bob Collins (1 Comments)
Filed under: Politics

Most of the time, you can't see your Capitol press corps at work. Stuff like this doesn't make the final, polished products of mainstream media. But this is what it looks like when they have questions they want answered, and they go up against someone who doesn't want to answer them.

The issue being discussed here, filmed by the DFL, is whether Sen. Norm Coleman took a gift of suits from a contributor.

It was a confrontation reminiscent of the legendary White House standoffs between the White press corps and former Bush spokesman Scott McClellan.

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