Archive for April 20th, 2010

How to live in your home for free … and buy the things you’ve always wanted

April 20, 2010

Punchline:  Steve Martin has a dated comedy routine: how to get a million dollars tax-free.

First, get a million dollars.  Then, simply don’t pay any taxes.  If the Feds come knocking, say “I forgot”.

Here’s a contemporary twist: how to live in your home for free and buy the things you’ve always wanted.

First, stop making your mortgage payments.  Then, buy whatever you want until your cash runs outs.  When the repo man comes, say “I forgot”.

It used to be that American homeowners would pay their mortgage first, then the rest of their bills, and then spend whatever is left over.

My, how times have changed …

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Excerpted from CNBC: Mortgage Defaults May Be Driving Consumer Spending, 12 Apr 2010

Recent studies show Americans are now far more likely to pay their other bills first before their mortgage (which is a big turnaround historically speaking.)

That means they pay off their credit cards, cable bills, car loans in place of their home loans.

Paul Jackson, publisher of Housingwire.com, wrote a fascinating article last week that describes a case study of someone who applied for the government’s Home Affordable Modification Program.

The person had an $1,880.00 monthly mortgage payment on which they’d defaulted, but said person’s monthly bank statement showed payments to a tanning salon, nail spa, liquor stores, DirecTV bill with premium charges, and $1,700.00 in retail purchases from The Gap, Old Navy, Home Depot, Sears, etc. 

Writes Jackson:  Even if you assume that just half of the current 7.4 million currently delinquent mortgages fit this sort of ’spending profile’ (that is, they are spending their mortgage) and you assume a $1,000 median monthly mortgage payment for most U.S. homeowners — you get a $3.7 billion boost per month to consumer spending. It’s certainly enough spending to matter in the overall scheme of things. 

Since it currently takes well over a year, in some cases nearly two years, to go from missing a payment to being chucked out of your home … it’s just another, innovative way of using your home as your ATM.

Full article:
http://www.cnbc.com/id/36422316

Thanks to SMH for feeding the lead

Posted in Mortgage Crisis | Leave a Comment »

Here come the bumper stickers …

April 20, 2010

President Obama seems to have struck a nerve with unhappy taxpayers by mocking them: “They should be telling me thank you!”

The campaign bumper stickers have already started appearing.
 

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Posted in Obama - Promises Made & Kept, Taxes | Leave a Comment »

How low can you go

April 20, 2010

TakeAway:  If it’s possible to lower price, Wal-mart usually leads the way. 

And it has done it, again.  Wal-Mart, seeking to firmly establish itself as a price leader, has cut prices. 

The move serves two purposes – block competition from other discount retailers and retain middle-class consumers, who are now feeling more financially stable and may consider upgrading to Kohl’s or Target.

Of course, Wal-Mart plans to preserve its margins by simply passing the cost of lower prices onto its suppliers.

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Excerpted from WSJ, “Wal-Mart Bets On Reduction In Prices,” By Miguel Bustillo and Timothy Martin, April 9,2010

Wal-Mart is cutting prices on thousands of products in an aggressive campaign to reinforce its reputation as a discount leader, as the company seeks to reverse months of slowing U.S. sales.

The world’s largest retailer was a rare beneficiary of the economic slump, as bargain-hungry Americans … flocked to its supercenters from supermarkets and specialty clothing stores.

But Wal-Mart’s sales from U.S. stores open a year or more have edged lower recently, while other retailers have started to see an uptick in consumers’ discretionary spending. That suggests to some analysts that Wal-Mart is having trouble hanging on to middle-class shoppers.

 

Wal-Mart says that it isn’t so. Its executives attribute the chain’s slowing sales to a general decline in food and electronics prices …

The company says it believes that, despite growing consumer optimism, many Americans will continue to struggle in the months ahead. So, it is cutting prices this week on roughly 10,000 items, mostly food and other staples …

“We felt we needed to increase the intensity and excitement with our customer, especially the feeling that Wal-Mart has great deals.”

Wal-Mart is publicizing its price cuts with a barrage of placards in the aisles of its 3,700 U.S. stores and a media campaign describing how the company’s cost-cutting moves …

Wal-Mart expects to expand its price cuts with help from suppliers. The chain is encouraging them to reduce what they charge Wal-Mart in exchange for having it spotlight their products as part of its price “rollback” …

Retailing experts question how effective the strategy will be in lifting Wal-Mart’s sales, since consumers already regard the chain as a low-price leader.

Though the company may get a modest near-term sales boost, the cuts are more likely to intensify the loyalty of shoppers who came to Wal-Mart during the recession … “This will make customers say, ‘if I go back to Kohl’s and Kroger I may be missing deals at Wal-Mart.’ ”

Despite its sales slowdown, Wal-Mart has continued to post solid profits, in part due to widening margins. Some analysts believe that gives the retailer room to cut prices without sacrificing profit. Getting suppliers to share the costs of the price reductions would also mute the impact on its bottom line …

The price reductions could help Wal-Mart fend off a growing list of no-frills competitors, such as the U.S. branch of Germany’s Aldi discount grocery chain and variety stores such as Dollar General, which are nipping away at Wal-Mart’s less-affluent core customers.

Yet whether Wal-Mart is committed to pushing the envelope on pricing as it did in the days of its late founder or is merely hyping promotions as it pursues a more margin-driven strategy, is the question the industry is asking …

Edit by TJS

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Full Article
http://online.wsj.com/article/SB20001424052702304198004575172271682347064.html#mod=todays_us_marketplace

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Posted in Mktg - Pricing | Leave a Comment »