Archive for the ‘Economy’ Category

If you haven’t visited the Big Apple recently, New York’s street-food vendors are selling much more than hot dogs and pretzels these days. Without setting foot in a restaurant, you can have your pick of fancy cupcakes, chicken-Thai basil dumplings, vegan tacos and other culinary offerings.

New Yorkers may stand to benefit from an even greater selection of upscale street foods soon because the City Council will consider a proposal this fall to increase the current number of food vending permits from 3,100 to 25,000, says the New York Times.

Rising unemployment has struck white-collar workers as hard as anyone else, leading more white-collar workers with former six-figure salaries to try their hand as food-cart vendors. But they’re unwittingly clashing with more traditional hawkers of gyros and kebabs. Most of the veteran vendors are immigrants, and many have occupied a certain street corner for decades; in some cases, they’ve even handed down their location on a certain block to future generations within the same family.

The city’s Health Department charges $200 for a two-year street permit, which can be renewed indefinitely, but the city doesn’t regulate where vendors park their carts, aside from enforcing parking regulations and barring street-food vendors from certain streets. Because demand for a limited number of permits is so high, the black-market value of these permits can be as much as $15,000.

Upscale food merchants new to the street-vending scene have been cursed, had their lives threatened, seen their tires slashed and otherwise been told that they’re not welcome. This street-level bullying comes not just from other vendors, who view their presence as “an unfair advantage in a desperate economy,” but also by brick-and-mortar restaurants, according to the New York Times.

Although you might think that a hungry customer looking for lunch will still head for the hot dog stand instead of the cupcakes, many vendors see it differently, believing that if someone has $5 in their pocket, each of two vendors has a 50/50 shot at getting the customer.

What’s the solution — should the city step in and start assigning street-cart locations when permits are issued? Or should we leave it to the vendors themselves to duke it out in the kind of turf wars more commonly associated with drug lords?

Mortgage giant Fannie Mae issued new lending rules earlier this month that will make it harder for workers facing job-related transfers.

Job-related transfers typically involve one spouse who’s moving to stay with the company while the other spouse has to give up their current job and find a new one, often only after the move takes place. Under Fannie Mae’s new rules, the income potential of the “trailing” spouse will no longer be considered in the mortgage application, even if the second spouse is a high wage-earner. The result? Families transferring with their employers may have to trade down to less house than they were accustomed to based on two salaries, or they may end up having to rent.

In the past, lenders usually counted at least a portion of the trailing spouse’s income when processing the mortgage application, but they’ll do so no more, given the state of the economy and particularly the unemployment picture, the Washington Post reports.

More than 800,000 relocating families could be affected each year, according to Worldwide ERC.

Freddie Mac still factors in the trailing spouse’s income, but with strict limits; self-employment income can’t be included, and the trailing spouse’s income can’t represent more than 33% of the total qualifying income.

In addition to ending consideration of a trailing spouse’s income, Fannie Mae will also start relying less on the value of stocks, bonds and mutual fund investments as part of a mortgage applicant’s financial reserves, something that lenders routinely look at as part of the mortgage application review process.

Due to stock market volatility, the value of stocks, bonds and mutual funds that’s counted as part of the applicant’s financial reserves will now be discounted by 30%, while only 60% of the value of retirement accounts will be considered as part of the applicant’s financial reserves.

Do you think tighter lending standards could cause some couples to change their minds about a job-related relocation?

In April, I shared with you my ambitious plans for a vegetable garden and promised to keep you updated on how my own personal recession-buster project was progressing.

Thanks to an incredibly cool and rainy spring, we got off to a slow start, with practically every seed-sown crop failing to germinate. A five-foot row of snap peas produced maybe three plants that grudgingly emerged from the soil. The easy-as-can-be, cool-weather radishes seemed to flourish, judging by their leafy green tops. They’re quick growers, maturing in about 25 days, but when I pulled one after 30 days, there was no bulb, just a long, stringy-looking root. Week after week, I’d pull another “test” radish and get the same disappointing results. How embarrassing for a lifelong gardener. This past weekend, I saw the radishes were starting to go to seed, signaling the end of their lifespan. So I decided to rip them all up to make room for something else, and lo and behold, I got about a half-dozen radish bulbs!

I picked some red and green lettuce, along with baby spinach leaves (another very slow starter), and together with the radish tops, I marched into the house to make a salad on the spot. Those little radishes had none of the bitterness of store-bought varieties. They were quite mild and crunchy, not unlike a water chestnut.

So, back to the garden. The red potatoes are doing quite well, and I’ve already hilled them over (to prevent the tubers growing below from turning green) several times with pine mulch. Still, I have these nasty cutworms that mow down entire stems of potato plants overnight. I painstakingly covered the base of every stem with tinfoil, but still, those little suckers managed to get around it. That’s it. I’m getting diatomaceous earth, a natural dust made of crushed-up seashells. You spread it around your plants like a protective moat, and it’ll kill slugs and any other soft-bodies creatures that attempt a crossing.

I also see cucumber beetles are gnawing numerous tiny holes on the potato plant leaves, but I have plans for them, too. I’ve mixed a blend of onion, garlic, cayenne pepper and dish soap in water, and the pungent brown concoction, sprayed on my veggie plants, should act as a natural bug repellent. That is, if our torrential rains ever stop.

Yellow wax beans and string beans have emerged, but they, too, have been cruelly mauled by slugs, which I pick up and fling away when I find them. The garlic is growing like gangbusters, as are the tomatoes, which are sporting a few small blossoms. The bell peppers have been ravaged by what I suspect are slugs. Inexplicably, the zucchini, acorn squash and spaghetti squash seed I planted ages ago never germinated, so I replanted again yesterday, hoping there would still be enough time for the plants to mature.

I’m guessing the cold start to the growing season has also stymied other gardeners here in the Northeast. According to a Washington Post story, the demand for vegetable seed has skyrocketed this year, up 75% compared to last year at one longtime seed grower.  Contributing to the gardening mania are fears about salmonella outbreaks, rising food prices and concerns about pesticide use.

Some seed growers have even reported runs on certain staples, like beans, potatoes and lettuces, while certain varieties of other vegetables, like carrots, beets, onions and spinach, remain in short supply. Plants like melons, which require a lot of water and space, are not selling well.

My harvest to date? About three servings of lettuce greens with baby spinach and radishes. A paltry output, but hope springs eternal.

It’s a familiar scenario — a diligent, even workaholic, career-bent employee unexpectedly gets laid off from his job. Pity the poor jobless person who suddenly has nowhere to go and countless hours to scour want ads in her pajamas … right?

Wrong!

Get that image of a depressed and downhearted job seeker out of your mind.  Think about replacing it with a 30-something young woman relishing the ocean breezes while sipping a margarita.

Some laid-off employees, particularly those in their 20s and 30s, are quickly transforming sudden unemployment into “funemployment,” according to a June 4 Los Angeles Times story.  Others arrive at that happy state by voluntarily quitting their jobs.

While the “funemployed” may have outwardly appeared to adopt the work ethos of older generations who accepted the bonds and limitations of traditional employment, more young people today are skipping what they believe will be a fruitless job search and heading straight for the beach, golf course or travel abroad.

One young person interviewed by the Los Angeles Times put it this way:  “The rat race puts blinders on you and makes time fly, and then the next thing you know, you’ve missed the chance to be your more exciting self, or to push yourself in a gutsier direction.”

Instead of slinking away to a hole somewhere and expecting everyone to forget them, today’s unemployed often blog or twitter about their new lives of unemployment quite happily.  And instead of taking a temporary sabbatical from work, some people are opting out of the system entirely, with no desire to return to corporate America. (Of course, it helps if you have substantial savings or generous parents.)

Everyone deals with a crisis in their own way, and it seems to me that if you’re forced to deal with a layoff, it’s better to make the most of your newfound time instead of wallowing in self-pity. Still, if you’d prefer to return to the workforce as hastily as possible, we’ve got a 16-step guide to help you get back on course.

When the world’s largest public corporation (and largest private U.S. employer) tinkers with its highly successful business model, it’s hard not to take notice.

According to Wal-Mart executives who recently concluded a shareholder meeting, a recession is no time for wimps.

And it’s no time to rest on one’s laurels, even if the laurels include hitting the $400 billion mark in sales for the first time during its last fiscal year, according to a New York Times story.

Sales have been robust for the retailing giant during this recession, but the company’s head honchos have set out to build long-lasting relationships with its new, more affluent customers. Many of them set foot inside a Wal-Mart for the first time during this recession seeking refuge from higher prices elsewhere, and Wal-Mart’s betting that the sea change in consumers’ attitudes about spending will be a permanent one.

The company’s retention strategies include a new store design and remodeled layout that would make shopping — and checkout — a more pleasant experience. This means wider, more easily navigated aisles with lower shelves, as well as expanded food and electronics departments, two product categories that are selling briskly. The most popular items, including groceries, pet supplies, health and beauty goods, and baby products, will be located closer together so customers don’t have to schlep all over the store. There’ll be fewer brands, and the take-out food and deli areas will be relocated closer to store entrances to accommodate customers who want to eat on the go.

While many smaller businesses have already closed or are struggling to stay afloat, Wal-Mart has leveraged its massive buying clout to deliver on its mantra of low prices. (“Save Money. Live Better.”)

What’s your take? Does this bode well for consumers?

Consumers are still stubbornly clinging onto their hard-earned dollars, so much so that marketers of many national brands are working harder than ever to convince consumers it’s still worth parting with them.

Procter & Gamble, the New York Times reports, plans to selectively reduce prices on brands it believes are perceived as being expensive compared to its rivals.  But it will also try to position its products as being a better value. 

Consumers, we’re told, are looking more closely at the spread in prices for different brands offering the same product and making individual choices about what’s best for them — the dirt-cheap brand, the middle-of-the-road brand or the premium brand.

As the Times pointed out, “value” means different things to different people, and people may differ in their willingness to pay a premium for value for certain purchases.

It reminds me of the old L’Oreal hair coloring commercials that justified the higher price with the tagline, “Why? Because I’m worth it.”

Some might insist on paying more for good-quality clothing, while for others it’s a top-of-the-line plasma TV. I guess it really comes down to personal priorities and what’s important to you.

 Are there certain high-end brands you’re still willing to pay extra for, or has the recession put all things on the table?

While the 30-year fixed rate mortgage loan has long been the traditional choice of homebuyers, recent data show a growing trend by home shoppers to opt for a 15-year mortgage.

The number of 15-year mortgages rose by 43% in February compared to the previous month; in dollar terms, 15-year mortgage loans more than doubled from February to March, and this pattern is expected to continue amid the current refinancing boom. 

What’s the allure of the 15-year mortgage? Homebuyers may be experiencing a growing abhorrence of debt, understandable in the current recession, and want to pay off their debt as quickly as possible. That’s a good thing, because it sets the stage for disciplined mortgage holders to enjoy their retirement days free of mortgage debt.

Still, the 15-year mortgage is not a slam-dunk decision for everyone, since 15-year mortgages will command significantly higher monthly payments compared to a 30-year loan at the same interest rate. In the long run, though, the 15-year mortgage holder would pay $194,000 less in interest over the life of a $400,000 mortgage than on a 30-year loan, according to a New York Times story on the subject.

In the New York Times example, a borrower taking out a $400,000, 15-year loan at 4.375% would have monthly payments of about $3,034 a month, compared to about $2,056 a month on a $400,000, 30-year fixed-rate loan at 4.625%.

Taking on the higher interest payments of a 15-year mortgage also carries added risk should you lose your income. Indeed, some economists predict we’ll soon see a “third wave” of foreclosures as many of those with good credit and prime loans lose their jobs. (The first wave was foreclosures induced by speculators, and the second wave occurred when low-interest introductory rates expired and the rates shot higher, resulting in prohibitively expensive monthly payments.) 

That’s why it puzzles me to see consumers willingly take on such added risk in a climate of continued high unemployment.  There’s a perfectly workable alternative that allows them to pay off their mortgage as quickly as they could with a 15-year mortgage — but without the greater burden they’d face if they were laid off.

Simply take out a 30-year mortgage, but make the higher payments you would make as if it were a 15-year loan. This way, you have the flexibility of stopping the higher payments in the event you lose your income; when your income returns to normal, you can resume the higher payments. The only shortcoming here is that you won’t benefit from the lower interest rate associated with a shorter-term loan. Still, assuming you held onto your job for the duration and that you have the discipline to continue the higher payments, you’d succeed in paying off your loan in just 15 years, with built-in flexibility and safeguards. (Just make sure there are no pre-payment penalties in your loan contract.)

In the end, it’s an individual decision that balances the value of the savings you’d gain from the lower rate of a 15-year loan versus your confidence in your job security and how things would go if you lost your job.  It’s your call.

Have you ever considered why you bank with Chase or Bank of America instead of your local community bank or credit union?

Now might be a good time to reconsider your banking habits, since we keep hearing how lending has dried up at many of the big banks. According to a recent New York Times story, the nation’s 8,500 community banks have plenty of money to lend and are itching to supply borrowers with needed cash, if only they could find them.

What’s the big difference between a bank like Citigroup, the world’s largest financial services network, and your local savings and loan? For one thing, community banks have come out on the other side of the recession in pretty good shape. That’s because they mostly steered clear of such exotic financial instruments as loan securitizations and credit-default swaps and instead stuck to the basics.

Consider the philosophy of Rusty Cloutier, CEO of Lafayette, Louisiana’s MidSouth Bank, as told by the New York Times:

Cloutier says he believe his job as a banker is to know who runs a business well and thus may survive a downturn. Community banks are well equipped to make that kind of judgment because, as clichéd as it sounds, they really do know their customers. “If a guy owes you seven or eight million dollars, you better know everything there is to know about him,” Cloutier [said]. Cloutier knows scores of people just from coaching local basketball, baseball and football teams. Like most community banks, MidSouth sponsors a long list of organizations and causes; the shelves in Cloutier’s office are lined with awards from civic organizations. And because community banks often sit on the board of nonprofits and local businesses, they know their local industries.

The mega banks, on the other hand, make loan determinations based on mathematical models and mainly measure creditworthiness based on income and a look at the consumer’s credit score.

Why do consumers continue to bank with lenders who accepted billions in taxpayer bailout dollars after their greed and widespread abandonment of standard lending standards dismantled the global monetary system? Many of these same banks are now trying to bilk yet more money from responsible credit card borrowers before more consumer-friendly laws go into effect next year.

As the Times points out, the five largest American banks (that would be J.P. Morgan Chase, Bank of America, Citibank, Wachovia, and Wells Fargo) control 40% of all deposits, yet community banks still make 43% of all small business loans under $1 million. Significantly, less than 1% of all community banks have failed since January 2008.

Simon Johnson, a former chief economist at the International Monetary Fund, said our financial system would be healthier if we abandoned the mega banks in favor of a network of regional banks and community banks, the Times reported.

Meanwhile, back in Lafayette, Louisiana, Mr. Cloutier says that “trying to make a loan today is like trying to feed my 7-month-old grandson green peas.”

All I can say is that if we all act like sheep, we’ll continue to be led around by a halter and collar. Let’s connect the dots between what we read about in the news and how it affects our everyday financial lives. Then let’s decide not to condone or contribute to the mess that big banks have gotten us in by continuing to give them our business, whether it’s in the form of a loan, checking account or credit card.

A lot of things about Texas are big. In terms of landmass, it’s the largest state in the contiguous U.S., second only to Alaska overall. It’s also the second-largest state in terms of population, after California. The Texas economy is also out-sized, with leading oil, biomedical research, aerospace and information technology companies headquartered there.

Texas is also “big” in terms of tuition rate hikes at its state colleges and universities. Those schools have increased their tuition costs by 89% during the past six years, according to ConsumerAffairs.com.

Texas legislators recently said enough’s enough. State senators approved a bill that would limit tuition and fee hikes to 5%. But they would only mandate the 5% limit at those schools where tuition and fees were above the state median.

State lawmakers had established tuition rates at state universities in the past, but as their ability to provide monetary support to the schools dwindled in recent years, they decided to let state schools set their own rates so they could make up for the lack of support from the state.

Many would argue that, when left to its own devices, the state university system in Texas, as elsewhere, went overboard.

Are rate increases at state-funded universities in your state within reason, or rising by leaps and bounds?

A truly great bargain offers an unforgettable experience. I still bask in the glow of getting a designer dress originally priced at over $400 for a mere $52 — and that was over four years ago. But ask anyone — male or female — to recall their all-time best bargain, and within seconds they’ll proudly describe the details of their steal. (In a quick, unscientific survey, four out of five men were able to tell me all about their “deal of a lifetime.” I’m willing to bet the fifth’s girlfriend must do all of the shopping.)

Surprisingly, or perhaps not so surprisingly in this economic climate, one man’s first response was “my house,” and another said “my car.” We’ve been hearing for a while that now is the time to act on a new home purchase if you can afford it. There’s a lot of inventory out there, and many sellers are willing to make a deal — not to mention foreclosure and short-sale bargains. Now it appears that car dealers are backed into the same “must-sell” corner and willing to do what it takes to move overstocked inventory, including selling cars for less than what they paid the factory.

According to MarketWatch, dealers “were selling about 25% of all 2009 model cars below cost” by March 2009.

While I have to appreciate the amazing deals that means for consumers, I also find it somewhat bittersweet. It’s certainly a huge advantage for car-shoppers to score a new car at such a discount, but it’s also another indication of the sad state of the economy. Dealers willing to lose money just to get cars off their lots present staggering economic implications.

When gasoline was priced over $4 per gallon last summer, Toyota dealers couldn’t keep their prized gasoline-electric hybrid Prius models in stock. Consumers were calling dibs before the cars even arrived on the lots and paid thousands over sticker price just to get behind the wheel of these fuel-saving machines. Fast-forward almost a year: Gas prices have dropped by 40 percent, the economy is ailing (to say the least), and those formerly coveted hybrids are sitting on lots with no where to go, even with the energy efficiency tax credits available.

I’d like to think it’s the economy — not apathy towards the environment following lowered gas prices — that’s stalled hybrid sales. But regardless of why, the facts remain the same: The cars simply aren’t selling.

And here’s an interesting illustration of supply and demand: Last July, eager car-buyers were paying up to $4,000 above sticker price to own a 2009 Prius. Today, you can get that same 2009 Prius for $4,000 BELOW dealer cost in some cases.

So if you’re able to cash in on incredible savings, it seems now is the time to do so. Be sure to head to the dealership educated and ready to negotiate, and you too could drive off with the deal of a lifetime.