I hope that everyone has a wonderful Christmas and Happy New Year – Thank you for reading my writings through the year!!

Next Post January 4, 2010

Bob Brooks

Believe it or not, Christmas is upon us. The craziness of shopping is about to begin. As consumers we will be forced to deal with retailers and their systems for selling items that we want to give as Christmas presents. Unfortunately in the imperfect world of business, mistakes happen.

• Company ships the wrong item
• You get home and find that some of the pieces of the item are missing
• The store overcharges you for something
• A company doesn’t ship your item in time
• You cannot get the online system to take your order
• The item doesn’t work
• You are told one thing about the warranty and the warranty reads another
• The company sends out an installer that is inexperienced and the item is installed incorrectly
• The credit card company doesn’t post a credit card payment that you sent weeks before the deadline and now you have a late charge

The list of potential mistakes that could occur during the Christmas buying season is a mile long. You need to be prepared ahead of time with the 3 Step Guide to Resolving Christmas Present Buying Mistakes.

1) Change your expectation

It is very easy to go into a situation where a mistake was made with a negative attitude created by the assumptions that we carry.

Most common set of assumptions that we make

• This is going to be a tough and drawn out process
• I am going to have to get angry to be heard
• There will be conflict.
• They will not admit it was their fault
• They will not take the item back

Remember you are not going into battle unless you create one ahead of time. You are going into a conversation with another human being with the objective of resolving the mistake.

Consider a different mindset

• I know that it is a mistake and I can prove it with evidence
• This should be an easy process. If that is not the case, I will methodically get it resolved
• All it will take is a phone call and some follow up
• Life happens and I am not entitled to mistake free consumer experiences – as long as humans are in the mix, there is always the possibility that mistakes will happen

2) Put together a game plan

Before you call or go back to the store, have all of your evidence and facts in front of you. Remember you are presenting a case to the person on the other end and need to convince them that the mistake needs to be corrected.

You also need a game plan for getting through the dreaded call center. Companies are cutting back on live customer service solutions. They use a series of frustrating phone menus in order to hopefully alleviate the need for a live person.

Try this simple technique to get through to a live person. When you call a customer service number, start hitting “0” repeatedly. I have found that this cuts straight through the menu system and gets you to a live person. You will be surprised how great this works.

3) Present your case with kindness

Remember the person on the other end did not create your problem. This is not about making them wrong and making you right. It is about resolving a mistake. People are more likely to help someone who is pleasant rather than someone with a nasty and condemning attitude.

Start the conversation off with something like, “I have a problem that I hope you can help me get resolved. For whatever reason, there is a late charge on my bill that shouldn’t be there. What steps do we need to take to get this resolved? I really appreciate your help.”

That will get you much further down the road than, “You made a mistake. There is a charge on my statement that had better get corrected. It amazes me how your company cannot seem to get things right.”

Remember, mistakes happen and your reactions to the mistakes of others pre-determine the ease to which that mistake will get corrected.

Tags: Bob Brooks, Christmas, conflict, customer service, warranty

There is an indicator for everything. There is a prediction based on who wins the Super Bowl. There is a prediction based on the length of skirts for a particular year. The list goes on and on.

The unusual nature of some of these indicators is their accuracy. For instance, there is the January Barometer. Every negative January in the S&P 500 since 1950 without exception has preceded a new or extended bear market. (Stock Market Almanac)

Then there are the first 5 days of January. The stock market has finished positive 85.7% of the time when the first 5 trading days of January are positive in the S&P 500. (Stock Market Almanac)

Then there is the famed Santa Claus Rally. The old saying goes, “If Santa Claus Should Fail to Call Bears May Come to Broad and Wall.” The stock exchange is located on the corner of Broad and Wall Street.

Failed Santa Claus Rallies have a tendency to precede bear markets. Ironically, in 2008, the Santa Claus Rally was a positive one. However, January was a negative month. I think that both accurately predicted the future. The year is obviously going to end on a solid note. However, February and midway through March was horrific. Thus that ended up being an extension of the bear market.

I only write this for a little fun. You don’t make decisions based upon these indicators. However, you do make your decisions based upon risk factors. Today, they are high.

I don’t really want to get into predictions for the New Year. I learned a long time ago that predicting is a tough game. However, I will spell out in a few weeks what I see in 2010.

Tags: Bob Brooks, indicators, January Barometer, Santa Claus Rally, Stock Market Almanac

How cool would it be if you could raise your own credit limit? Let’s say that you are tapped out on your Visa card and you need more credit. No problem – call a family meeting, vote to raise your credit limit, and then call the credit card company who you are borrowing the money from and tell them to raise your credit limit.

Well the politicians in Washington have that luxury. We currently have a credit limit or debt ceiling in this country of 12 TRILLION dollars. We are tapped out. Without any hesitation or sense of fiduciary responsibility, at President Obama’s request, Congress will vote to raise it by another 1.8 TRILLION for next year. The problem is that we the people are the credit card company that will end up paying for it.

This comes on the heels of the politicians spending nearly 1 trillion dollars on things like TARP or Cash for Clunkers. Then there are all of those earmarks for their buddies that total in the billions of dollars. It doesn’t seem to matter. It is a one party system in Washington destined to re-create America.

When you think of a one party system, what comes to mind? Communism is a one party system. It just seems that it isn’t about republicans and democrats. It is about the politician party. The actions of this group are irresponsible at best. What is next? At want point do they start to control the rest of the things of our lives? Oh yes….government run healthcare and cap and trade is on the way.

By the way, here is the Wikipedia definition of communism. “Communism is a modern political movement that aims to overthrow capitalism via revolution to create a classless society where all goods are publically owned.” Do you see much difference?

Tags: Bob Brooks, cash for clunkers, communism, credit limit, Obama, politicians, TARP

The mutual fund industry sends out all types of e-mails to advisors giving them ideas on how to handle certain situations with clients. It is information that buy and hold investment advisors can use to effectively hold the hands of their clients during bad times. One advisor had this to say in an e-mail to her peer group:

To combat fears, this advisor eases their money more gradually into investments, often taking six months to dollar cost average and up to a year, if that seems appropriate. The next time you meet a bearish bunch, don’t push, instead slow down and explain dollar cost averaging.

1. Acknowledge their fears and sympathize.
2. Go slowly.
3. Explain dollar cost averaging and ease them into the markets

Beyond the disingenuous nature of the call to be sympathetic, dollar cost averaging is presented as a solution to investing into the market in a conservative way for people who are nervous about the market. Well, it can be a great way to invest. Dollar cost averaging is a method where you take a lump sum of money and invest a little at a time each month until it is all invested. The challenge is that this is being presented as a conservative strategy to an investor who is skittish about the market. The implication is that this is a means to protect the investments. The problem is that like everything stated by the financial services industry, it doesn’t ALWAYS work.

Take an example from the 1970’s.

Let’s say that you had $130,000 back in 1970. You took the money out of the market previously because of all of the bear market losses that had just occurred. You just so happened to pick the right time to get back into the market because the market was about to take off and start a mini-bull market. So you decide to dollar cost average the $130,000 into the market $10,000 per month until it was all invested. You started that process April 1970. By September 1974, your $130,000 would have been worth $94,334.* If the bear market is truly over, then it is good advice. If not, it can be a disaster. This is the fear of the bearish investor making this advice a little questionable.

If it were only that easy…The bottom line is not knowing how to initially invest the money. The bottom line is to be able to determine when you should exit the market. Yes, no one knows for sure when the best time is to be in or out of the market. However, having a strategy is better than not having one at all.

*Hypothetical was run using CDA Wiesenberger Software – The index used was the S&P 500

Tags: Bob Brooks, Buy and Hold, dollar cost averaging, Investing, mutual fund industry

How about a little outrageous news that will really get you going on a Thursday morning? Goldman Sachs is catching a great deal of public anger and outrage over their role in the financial crisis. Goldman Sachs profited untold billions of dollars through this financial crisis at the expense of others.

Well it seems that they think they need to handsomely reward their top executives. They are reportedly giving out between 16 and 23 billion dollars in bonuses this year. Merry Christmas!! This is a record amount for the 140 year company.

Of course, these outrageous bonuses come after the American people have handed over nearly $64 billion in bailouts and other subsidies to Goldman Sachs.

Then there is the CEO. In attempt to relive the character of Gordon Gecko from the movie Wall Street, he says, “Greed was God’s work.” After realizing what a rather stupid and irresponsible thing for a person to say, he quickly apologized.

So it appears that all of this “God’s work” is catching up with them and the employees are walking around scared. According to police and many other sources, Goldman Sachs employees are getting gun permits to protect themselves from a “populist” uprising. So watch out because the Goldenites are packing.

Really? You have to be kidding me. Here is a little tip for the Goldman employees. If you are that worried, a few million in bonus money will go along way to hiring a bodyguard.

Do you think that Wall Street is just a little like Congress? Maybe not living in reality?

Tags: bailout money, Bob Brooks, financial crisis, Goldman Sachs

This was an interview that I did with Brad Tuttle for www.time.com

Bob Brooks is a 17-year veteran in the financial services and investment industry, the author of a new book about avoiding credit and debt traps, and a radio show host who counsels callers about financial issues “from a Christian perspective.” One of his messages: When a debt collector is harassing you, it’s not the time to turn the other cheek.

Brooks is the host of The Prudent Money Show, a radio program based in Texas, and the author of a new book called Deceptive Money: A step-by-step guide to take your life back from the credit trap.

I recently picked Brooks’ brain about a number of topics. In regards to new credit card legislation, he’s not impressed:

“It’s been interesting to watch. The financial services industry is such a huge contributor to political campaigns, and Congress has really does as much as it can to protect that industry. They’ve turned their backs to a lot of the consumer abuses through the years.”

What about reforms and new levels of consumer protection we’ve heard so much about?

“It’s really nothing more than sound bites… Most of the laws written in this credit card act apply to fixed rates. And so what have the credit card companies done over the last nine months? They’ve changed all their fixed rate contracts to variable rate contracts. There’s not a whole lot of protection in this plan.”

Later in my talk with Brooks, we discussed debt collection, a process that’s confusing and intimidating to consumers who feel trapped by a debt they may or may not owe.

“People react to a debt collector much like they react to the I.R.S., and in reality, debt collectors don’t have that much power over you, and that’s what people need to realize,” says Brooks. “They also need to realize there’s a set of laws out there to protect them.”

Obviously, it’s always best to settle a debt and pay off what you owe. But sometimes, there are situations when it’s not clear what to do, like when a debt collector calls and the debt belongs to your ex-spouse; when the debt is old enough to be out of the statute of limitations for filing a lawsuit; or when the debt is not yours for whatever reason—mistaken identity, perhaps, in which a debt collector has gotten hold of the wrong phone number or address.

If the debt is not yours, Brooks says you need to fight it—in the right manner. Arguing with a debt collector over the phone, or even saying much of anything to a debt collector, probably won’t help your cause. Know your rights, as spelled out in the Fair Debt Collection Practices Act, which is intended to protect consumers from “abusive and deceptive” conduct by debt collectors.

Debt collectors are not government agents. They’re not lawyers, and they’re not the police. Debt collectors are tunnel-vision businesspeople driven, Terminator-like, to collect debts by whatever means possible—and yes, sometimes their tactics are less than ethical. They’ve been known to tell debtors that they owe more than they actually do, contact debtors’ employers (debts are not supposed to be discussed with third parties), and threaten that they’re going to send the police to a debtor’s home to arrest him (debt collectors have no such power).

In his book and in the conversation that follows, Brooks spells out what to do when a debt collector calls. First, ask for the collection agency’s name and address, and the amount of the debt—simple things that some people forget to gather during what can be an angry, scary, and confusing phone call. Next, wait for a letter in the mail stating the describing the debt, which the collector is required to send. Don’t bother speaking to the debt collector until after the letter arrives. After a validation letter arrives, send a letter either disputing the debt or requesting for a verification—at the very least, “the debt collector must cease collections until he responds back to you and verifies the debt,” writes Brooks.

If you can’t reach an agreement with the debt collector and it appears like you are going to be taken to court, Brooks says you really should get a lawyer, even though you’ll understandably be reluctant to take on the potential costs of doing so. Says Brooks:

“If you do get sued, one thing people don’t realize: You’ve got to get an attorney to represent you. I’ve seen a high percentage of the time, that when people get an attorney, the case gets dropped—because the vast majority of people don’t get an attorney. So if I’m a debt collector, am I going to go after the guy who’s got the attorney, or am I going to go after the guy who doesn’t?”

Listen in for more of my conversation with Brooks about his book, credit cards, debt collection, and how to protect yourself.

Read more here

Tags: Bob Brooks, Credit CARD act, Credit Card Companies, Debt, debt collector, Deceptive Money, Fair Debt Collection Practices Act, Prudent Money Show, Time

Unemployment is mysteriously reporting only a loss of -11,000. Poof, just like that we transition from 100,000 and 200,000 plus jobs losses each month to just 11,000 without even a transition. The unemployment rate has come down from 10.2% to 10%. So what do these numbers really tell us about the economy?

Really nothing…

The unemployment rate has fallen in November two-thirds of the time over the course of the last 15 years. Most of it has to do with temporary hires for holiday shopping and nothing permanent. Regarding the job loss reporting, can you really trust government agenda filled accounting? If you look closer at the numbers you see a different picture. It is about all of the other people not accounted for in the report. Clusterstock.com had this chart of the day which I think is telling.

The number of those unemployed for at least 27 weeks rose by 463,000 people to 5.9 million.

There were 861,000 in November who were considered discouraged workers. These are workers who believe that there are no jobs available for them. This was up over the prior year.

People working part time for economic reasons stood at 9.2 million.

If you look past the 10% unemployment number and look at a closer number of those unemployed in this country from the Department of Labor, the number stands at 17.2%. Finally www.shadowstats.com has the unemployment problem in this country at 21.8%.

Then you have the number of jobs that the Government has estimated to have been created.

Thus far the Government estimates over the past three years that 2.875 million jobs have been created. Out of that number 31% of those jobs came from the Leisure and Hospitality area – how much leisure and hospitality has been occurring in the last 3 years that requires all of those jobs? If I were going to make up (did I just write that), I mean, estimate numbers I would add them elsewhere to legitimize the process.

I was talking with someone last night about the pain this country is going through. The economic numbers just don’t reflect the reality of what is occurring. The biggest concern is the result of all of this Government manipulation. There are dangerous imbalances that exist. Unfortunately, the band aid approach can only work for so wrong. Imbalances will work themselves at some point. For investors, it will be much like being in a capacity packed room and someone yells fire. You will not be able to get out of the room fast enough. Thus, if you are invested heavily in the stock market today, I would at least sit closer to the exit door or better yet consider calling it an early evening.

Tags: Bob Brooks, Department of Labor, job losses, Unemployment

I have been doing quite a few interviews on credit/debt and Christmas shopping. There are tons of these articles being written this year. Why? This is the only Christmas that I can remember where the consumer faces a unique situation. Year after year consumers face the Christmas shopping season wondering how they will pay for it.

Of course, the credit card has typically been the answer. Let’s face it! It is difficult to say no to your kids. Unfortunately, this year consumers face the perfect storm of dynamics that I think will make this Christmas shopping season different than any of the rest of them.

1) Credit card companies have reduced credit limits, raised rates, closed accounts, and restricted the availability of new credit.
2) The consumer faces unemployment or the prospects of unemployment or lower wages more so than since the Great Depression.

Most articles on this subject will be useful in that they give tips. Unfortunately, unless you have the right mindset, all of those great tips will go by the wayside. So, how do you get the right mindset this year?

• Face the economic environment – The best advice I can give to anyone is to reduce risk in all areas of your life. This is not an environment where you want to assume a great deal of risk. As consumers we just don’t have the luxury of creating a lot of new debt. In the name of risk, resist the temptation to enter January with higher debt balances than December 1st.
• Face reality – No more can we afford to practice Fantasy Budgeting where we charge money with our eyes closed in the hopes that we can pay it off. Take a cold hard look at your finances. What can you realistically afford this Christmas? If you cannot afford it and insist on charging it, can you get it paid back quickly?
• Face the costs of borrowing –We aren’t talking about the 0% and 5% interest rate environments anymore. We are talking the 15% plus variable rate environments that will be charged to any new debt. Do you really want to pay that high of a price to fund Christmas?
• Face your kids realistically – There are two ages of kids. First there is the age where a child doesn’t know the difference between a $2 gift and a $50 gift. My 5 year old gets as excited about getting a happy meal toy as he does a $20 gift. So, think smaller prices and take advantage of quantity (which they like anyway) and save money. Then there are the kids who want the Rock Band 2 and realize it costs money. Make it a teaching moment and show them expenses and income. Show them the amount you have to spend on Christmas. Have them choose what types of prices ranges they want you to use when shopping for them this year.
• Face the one question – Is it worth it to make Christmas simply about how many toys you can give or is it worth it to work harder at making a Christmas a wonderful and spiritual holiday that centers on celebrating the birth of Christ and not the latest X-Box game?

The one positive byproduct of this environment will be families going back to the values of old. Think old school values this Christmas. You will create stronger memories and be much happier in January without the credit card hangover.

Tags: Bob Brooks, Christmas, Christmas shopping, consumers, credit, Credit Card Companies, Debt

Whether you believe that we are still in the midst of a financial crisis that is just taking a break or that the whole thing is over, I think that you will agree that the effects of the crisis are still being felt all over the country. People are feeling the pinch of the debt crisis in personal and mortgage debt as well as the effects of a bad employment situation.

In addition, credit card companies are on assault right now by charging new fees and limiting the availability of personal credit

All of this will make for an interesting Christmas. To further challenge the of shopping season, Christmas is the most financially ill-prepared time of the year. Consumers rarely put money back for Christmas. Instead, they use credit in the hopes that the bills can be paid off in January. Unfortunately, that spending usually results in additional revolving debt.

Amber Dakar, the personal finance expert for Money and Markets, shares these tips on the Holiday Shopping Season.

If holiday shopping is on your to-do list this season, before you leave the house, fine-tune your shopping list, stick to your budget, pocket your debit card, lace up your running shoes, and get ready to take advantage of some of the steepest holiday shopping discounts we’ve seen in recent years!

Step 5. And always remember: Cash is king. Make every effort to pay for your purchases with a debit card or cash. This will prevent credit card shock when you receive January’s bill.

Out of Amber’s 5 steps I think that step 3 is the most important step. Have that family meeting and talk through financial constraints and the reality of Christmas this year. Create a teaching moment for your kids by explaining to them the real meanings behind Christmas have nothing to do with the latest X-Box game.

I would love to see the byproduct of a financial crisis be families growing closer and celebrating Christmas like they did decades ago when commercialism was not the main emphasis.

Tags: Bob Brooks, budget, Christmas, Christmas shopping, financial crisis

Ask any politician, and they will tell you that they have done America a favor by passing this new credit card legislation that goes into effect February 23, 2010. Really? Do the politicians really do favors for the American voters? Well, I have been studying this act since it came out looking for loopholes. I have come to one conclusion.

As politicians always do, they pass legislation that looks as if it is there to protect the American people. At the same time, they have to be careful not to bite the hand that feeds them. Banks, financial services companies, and credit card companies are big campaign contributors. So, what is the solution to not bite the hand that feeds you while looking as if you are taking care of your constituents?

You write legislation that is mild and full of loopholes. I have pointed out some in previous writings. I wanted to add two more to the list.

Loophole 1 – The 60 day Grace Period
ADVANTAGE CREDIT CARD COMPANIES

One dangerous aspect of this new legislation has to do with the enactment of the 60 day grace period. On the surface, this looks like a great idea. Currently, credit card companies give most consumers a 30 day grace period to pay the credit card payment without being late. Congress interpreted that as not good enough. As a result, they extended it to 60 days. However, lengthening it to 60 days will be a much more dangerous proposition for consumers and here is why.

If you are facing a tough time financially, it is human nature to put off making a payment for as long as possible. Giving people an additional 30 days could end up being a disaster. Being two months in the hole is much worse than being one month in the hole. As a result, I think that more people will be late resulting in higher interest rates and late payment fees. If people can push it 30 days then they will surely push it 60 days if given an additional 30 days.

This falls in line with the current abusive credit system. Credit card companies have depended on human error for profits for decades. They set up programs where making mistakes are easy to do. Thus, the consumer makes the mistake and the credit card company profits through the use of penalty rates and fees. This extension of the grace period will end up putting more people in harm’s way.

In addition, giving the consumer more time also creates the potential that dates get confused or forgotten which ends up making the consumer late with the payment. Thus this creates those penalty rates and late fees.

Loophole 2 – Application of Payments
ADVANTAGE CREDIT CARD COMPANIES

Then there is Congress forcing credit card companies to stop applying payments to the lowest interest rate. Credit card companies often have two different interest rates that are being applied to a consumer account. Part of the account might be charged a higher interest rate only applied to new purchases and then the other might be a lower interest rate being applied to a balance transfer.

Currently, credit card companies apply the entire monthly payment to the lower interest rate portion of the account allowing the higher interest rates debt to accrue at the higher interest rate charges. Congress is going to fix that problem for you too.

They are forcing credit card companies to apply everything made above the minimum payment to pay off the higher interest rates. The minimum payment goes to the lower interest on the account. How many people actually pay more than the minimum? This is especially the case since the minimum payment has been increased on most cases.

Looks are deceiving.

Tags: Bob Brooks, Credit CARD act, Credit Card Companies, grace period, interest rates, politicians

I came across this chart from The Business Insider yesterday and thought it was very telling. If you hear the stories, you would think that Christmas shopping for the Black Friday weekend were off of the charts. I was talking to a cashier at Best Buy on Black Friday (in the evening I might add) and he said there over 2,000 people lined up outside when they opened the doors.

I was in Wal-Mart that same day around 11:30. I asked the cashier how the crowds were that day because it looked pretty dead to me. She said there were mad crowds between the sale hours that lead up to 11:00.

The crowds are there this year. However, as the chart shows, people are just not spending money. As you can see, the average dollar spent is way off from last year’s levels and more like the levels back in 2005.

When it is all said and done, this is going to be a much different consumer shopping season than we have seen in years.

Tags: black friday, Bob Brooks, Christmas shopping

Last Friday the markets thought that the potential credit defaults on 60 billion dollars was a big deal. On Monday, it all of the sudden wasn’t such a big deal. Let’s take a look at the situation and draw some conclusions.

The problem started when Dubai World, a government owned investment company, announced that they wanted to forego paying the interest on roughly 60 billion dollars of debt while they seek a way to restructure it. In other words, there is trouble in the world of Dubai.

The Central Bank of the United Arab Emirates stated that they would help out some of the local banks but that they would not be bailing them out. So, what is going to happen with the 60 billion dollars of debt? This is where Abu Dhabi comes into the picture.

Abu Dhabi is the second largest city and the capital of the United Arab Emirates Government. They control roughly 7% of the world’s oil reserves making this area an extremely wealthy one. Abu Dhabi is extremely connected to Dubai and cannot afford this debt to go into default. This is especially true since they are also acting as a creditor in some cases to Dubai. Thus they will probably be forced to bail Dubai World out. Regardless, there could be some real problems in the credit markets. However, it would probably be on the strictest of terms.

So then, what is the problem? The problem comes in not knowing what else could go wrong or is wrong. Is this the smoke from a larger fire we are not seeing? Is this the kick-off of debt crisis 2? It is always the unknown in a debt crisis that can end up being the problem.

Dubai was a booming region. They were very extravagant in their building of outrageous projects and spending and borrowing huge sums of money. They built man-made islands in the shape of palm trees. They developed outrageous projects like the worlds only indoor ski resort. They have also built the world’s largest building which will open in a matter of weeks. Ironically, the Empire State building which at the time was the world’s largest building opened amidst the worst bear market on record and during the Great Depression.

Dubai World would make claims that investors should expect high returns. Their slogan is that the sun never sets on Dubai World. Well it appears that nighttime is fast approaching. Maybe their newest slogan should be pride comes before a fall.

This seems to be another example of the dark side of arrogance and greed. Now the world’s financial markets wait to see the real fall-out from this situation. It is always what the market doesn’t know that becomes the problem.

Tags: Abu Dhabi, Bailout, Bob Brooks, Debt, debt crisis, Dubai, Dubai World, Great Depression, United Arab Emirates