Is Your Money Safe?

By. Ron Lieber and Tara Siegel Bernard
Wednesday, October 1, 2008
provided by The New York Times

For all of you on Main Street who have been watching the turmoil on Wall Street for the last few weeks, Monday's shockwaves rattled even the most steadfast.

The day began with the announcement that another big bank -- Wachovia -- had been taken over, just days after Washington Mutual collapsed and was sold. In early afternoon, the House rejected the bailout package for the financial industry. Stocks plunged, with the Dow ending the day down nearly 778 points in the worst single-day drop in two decades.

What is a regular investor to make of it all? What about people who have money in bank accounts? Below are some answers to questions that are probably on your mind.

Q. Why did the stock market fall so far so fast on Monday?

A. The element of surprise surely didn't help, since everyone was expecting the bailout bill to pass. There may have been a bit of investor disgust thrown in, too, a sense that our representatives in Washington just don't get it.

Fear may be the biggest driver, however -- the worry that it may be weeks or longer before companies can get the affordable, short-term loans they need to finance their operations. Without easy access to that money, it's hard to run a profit-making operation on a day-to-day basis, let alone grow over the long haul. The professional investors who often drive big market moves don't want to hold onto stocks to see if things will really get that bad.

Q. What's likely to happen in the markets over the next few days?

A. It's possible that Monday's market moves will spook members of the House of Representatives enough that they will be willing to change their votes with only a modest amount of compromise. Or, there may be hasty efforts to write a new bill from scratch. This will take days, however, not hours, since Tuesday is the Jewish holiday of Rosh Hashana. Stocks may rebound, at least somewhat, if another similar bill emerges. But much will depend on the revisions.

Q. Is any investment truly safe right now?

A. As long as you trust the United States government, sure. Plenty of banks, like HSBC Direct and Capital One are offering online savings accounts paying more than 3 percent. These accounts have all the normal Federal Deposit Insurance Corporation protections of at least $100,000. Also, the Treasury Department is currently insuring investors who had holdings in money market mutual funds as of Sept. 19, as long as the fund company pays to participate.

Q. What about Treasury bills?

A. Treasuries are issued and backed by the United States government. But since throngs of investors have rushed into these investments, it has pushed their yields down. Way down. Some Treasuries, with maturities in the one-week to three-month range, are yielding less than 1 percent, anywhere from 0.10 percent to 0.50 percent. Clearly, many investors are willing to accept paltry yields as long as they know their money is secure.

Another government offering is Treasury Inflation-Protected Securities, or TIPS, which protect investors against rising inflation. That may be one result of any big government bailout.

Q. My retirement portfolio has been wrecked by this. How should I respond?

A. Continue to save. Big losses mean you'll need that much more time, or good news, to bring your balances back to where they need to be for you to retire comfortably. If your employer matches your contributions, this is a great time to take advantage of the largess.

As for whether you should pile into beaten down stocks, no one knows how much further the markets will fall or how long they'll take to bounce back. But people who move their savings to ultrasafe investments and then leave them there usually miss out on the gains when the markets come back. If you need to do that to sleep at night or avoid stomach ulcers, then do what you have to do. But it may cost you in quality of life come retirement time.

Q. But what if I am about to retire? Then what?

A. Leaving the work force at a time like this creates big problems. Not only is your portfolio down, but you need to start withdrawing from it. So you are essentially locking in your losses.

If your portfolio has taken a big hit, it may be time to seriously consider delaying retirement. Working just a few years more can make a big difference. Or, a part-time job may keep you from having to dip into your portfolio before it recovers. To get a better idea of how much you can afford to withdraw, you can test different amounts with a retirement income calculator on the Web, like T. Rowe Price's.

Q. With things looking increasingly gloomy, though, why not allocate extra cash to other types of savings or paying down debt?

A. If you're saving for a downpayment, you could put enough money in your retirement account to match any employer contribution. Then, use whatever money you have left for the downpayment fund, which should be in an ultrasafe account. The same logic goes for a teenager's college fund, which ought to be mostly in steady investments by now. There are nice tax breaks on 529 college savings accounts, too.

Yes, paying down debt, especially high-interest credit card debt, is always a good idea, though it's probably best to take advantage of employer matches on retirement savings first.

Q. Is it time to buy stocks?

A. Like gambling? This is a great time to make bets on the wide price swings that we're seeing in some stocks and entire sectors of the market. Just be prepared to lose big, as plenty of professionals have done of late.

Q. I'm worried sick about my parents, who rely on stock dividends for their income. What will happen to them?

A. It's not a great time to be relying on dividends. We've seen plenty of companies cut them. (Citibank did so on Monday as part of its acquisition of Wachovia's banking operations.) Still, if your parents were planning all along to keep their shares until they die and live only off the dividends and Social Security, perhaps now is the time to encourage them to be selfish. They could sell some shares and live well now, even if it means you'll get less later when they pass on.

Q. I'm a long-term investor and prefer not to see my retirement balances as real numbers for now. So the crisis doesn't feel like it has hit me financially yet. Should I be doing anything defensively?

A. It's not yet clear how much more the crisis will affect employment levels. Still, this seems like the best moment in years to have a few months of cash set aside in one of those online savings accounts just in case you lose your job or face some large expense that you haven't predicted.

Q. What's the next shoe to drop?

A. It seems certain that it will be harder for consumers to borrow money in the next year or two than it was earlier this decade. How much harder isn't clear yet. It will be more difficult for people who need jumbo mortgages than for those whose lenders can simply sell off their loans to Fannie Mae or Freddie Mac. Home-equity lenders are already cutting plenty of people off, while credit card companies are lowering credit limits on others.

Q. What about more bank failures?

A. They will happen. In recent days, we've seen the F.D.I.C. getting out in front of troubles at big banks like Wachovia and Washington Mutual, by arranging for other banks to take over their consumer accounts. What's less clear, however, is how many healthy institutions are left to take in other big banks that may run into trouble.

As always, stay within F.D.I.C. deposit limits. Then, the worst-case scenario is that it will take a couple of days to extract your funds from a failed bank.

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Why This 'Credit Crisis' Hits Everyone

by. Dave Kansas
Tuesday, October 7, 2008
provided by The Wall Street Journal

The past few weeks have rattled financial markets around the globe and shaken investors deeply. Amidst all the turmoil, Congress passed a $700 billion bailout bill last week aimed at restoring confidence in the financial system.

The stock market has grabbed the headlines, but it is the reeling credit markets that will get the most government attention in its bailout efforts. Understanding the problems in the credit markets can help you get a better handle on what is driving the current financial crisis.

These vast markets include everything from the trading of 30-year Treasury bonds to investing in securities tied to auto loans. In essence, the credit markets act as a vital lubricant throughout the nation's economy, helping businesses to operate and families to purchase a home or pay for college. For instance, mortgages are often packed together and resold.

But lately, credit markets have been hobbled as fearful investors back away from trading.

Blow to the Economy

When the credit markets falter, the economic impact can be quite swift and severe. Some of the ill effects are already noticeable. Auto financing is less available, one reason car sales have dropped sharply. Approvals for home mortgages have gotten much tougher. Credit-card interest rates have jumped. Indeed, the recent credit problems, if not resolved quickly, could drive the economy into recession.

A big part of the problem is that an enormous amount of borrowed money flowed into the credit markets over the past several years. For a time, this borrowed money amplified the profits that banks, securities firms and other investors earned in, say, mortgage-backed securities.

But when those strategies went awry -- such as when mortgage delinquencies led many mortgage securities to tumble in value -- the borrowed money acted like kerosene on a burning building, amplifying problems to the downside.

Many financial companies found themselves with insufficient capital to absorb their losses. What has followed is a run of failures and a sharp erosion in confidence among credit-market participants.

Credit markets essentially run on confidence. Buyers of debt are lenders and they expect to get paid back, with interest. When companies fail and debts go unpaid, lenders get nervous. In usual circumstances, the lenders will simply charge higher rates and set tougher conditions for loans. But today, there's a huge wariness about lending anything at all.

Like an engine with no oil, the credit markets are seizing up.

Adding to the lack of confidence: Nobody knows how bad things could get or how much bad debt remains in the system. Much of the trouble is in the opaque "credit derivatives" markets. Credit derivatives are investments derived from other credit-market instruments, like securities backed by mortgages.

While that sounds straightforward, financial engineers came up with multifarious ways to slice, dice and package these derivatives. Now people are having trouble figuring out what these investments are actually worth. (Hint: much less than they thought.)

Impact on Individuals

For individuals, the credit markets matter on several levels. Many investors, especially those close to retirement or in retirement, hold credit investments, usually in the form of Treasurys, corporate bonds or bond mutual funds. Treasurys are considered extremely safe, while corporate bonds range from pretty safe to frighteningly risky. Many corporate takeovers during the past several years were funded with borrowed money in the form of "junk" bonds. These corporate bonds sport a high yield but also a high risk of default.

Beyond investments, credit markets are essential to the economy. For instance, banks use credit markets to fund their day-to-day activities. The rates banks charge one another to borrow money for short-term needs have risen sharply, an indication that banks don't trust one another.

That translates into less money available for banks to lend to individuals or businesses, putting a squeeze on economic activity.

The most widely used bank-to-bank lending rate, the London interbank offered rate (Libor), which has risen sharply, is also used to calculate interest rates on credit cards and many adjustable-rate mortgages. That's more bad news that consumers and homeowners don't need.

Commercial-Paper Crunch

In another nook of the credit markets, banks and businesses actively use "commercial paper" to fund day-to-day business activities. Commercial paper represents short-term loans, sometimes as short as a day, and money-market mutual funds invest in this paper. But the credit crunch has even forced this usually routine market into crisis.

Some blue-chip companies report difficulty selling commercial paper, which means finding more expensive alternatives to fund business operations. Also, money-market funds, which historically are very safe, have gotten caught up in the commercial-paper crunch, with at least one fund seeing its price fall below the $1-a-share money funds almost always maintain. The government recently introduced an insurance program to backstop money funds.

A big part of the government bailout effort is aimed at restoring confidence in the credit markets by creating a "buyer of last resort," especially for the toxic credit derivatives that have heavily damaged the financial sector. Until the credit markets rebound, pressure on the economy will mount.

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10 (More) Reasons You're Not Rich

By. Jeffrey Strain
Wednesday, October 1, 2008 provided by

Many people assume they aren't rich because they don't earn enough money. If I only earned a little more, I could save and invest better, they say.

The problem with that theory is they were probably making exactly the same argument before their last several raises. Becoming a millionaire has less to do with how much you make, it's how you treat money in your daily life.

The list of reasons you may not be rich doesn't end at 10. Caring what your neighbors think, not being patient, having bad habits, not having goals, not being prepared, trying to make a quick buck, relying on others to handle your money, investing in things you don't understand, being financially afraid and ignoring your finances.

Here are 10 more possible reasons you aren't rich:

You care what your car looks like: A car is a means of transportation to get from one place to another, but many people don't view it that way. Instead, they consider it a reflection of themselves and spend money every two years or so to impress others instead of driving the car for its entire useful life and investing the money saved.

You feel entitlement: If you believe you deserve to live a certain lifestyle, have certain things and spend a certain amount before you have earned to live that way, you will have to borrow money. That large chunk of debt will keep you from building wealth.

You lack diversification: There is a reason one of the oldest pieces of financial advice is to not keep all your eggs in a single basket. Having a diversified investment portfolio makes it much less likely that wealth will suddenly disappear.

You started too late: The magic of compound interest works best over long periods of time. If you find you're always saying there will be time to save and invest in a couple more years, you'll wake up one day to find retirement is just around the corner and there is still nothing in your retirement account.

You don't do what you enjoy: While your job doesn't necessarily need to be your dream job, you need to enjoy it. If you choose a job you don't like just for the money, you'll likely spend all that extra cash trying to relieve the stress of doing work you hate.

You don't like to learn: You may have assumed that once you graduated from college, there was no need to study or learn. That attitude might be enough to get you your first job or keep you employed, but it will never make you rich. A willingness to learn to improve your career and finances are essential if you want to eventually become wealthy.

You buy things you don't use: Take a look around your house, in the closets, basement, attic and garage and see if there are a lot of things you haven't used in the past year. If there are, chances are that all those things you purchased were wasted money that could have been used to increase your net worth.

You don't understand value: You buy things for any number of reasons besides the value that the purchase brings to you. This is not limited to those who feel the need to buy the most expensive items, but can also apply to those who always purchase the cheapest goods. Rarely are either the best value, and it's only when you learn to purchase good value that you have money left over to invest for your future.

Your house is too big: When you buy a house that is bigger than you can afford or need, you end up spending extra money on longer debt payments, increased taxes, higher upkeep and more things to fill it. Some people will try to argue that the increased value of the house makes it a good investment, but the truth is that unless you are willing to downgrade your living standards, which most people are not, it will never be a liquid asset or money that you can ever use and enjoy.

You fail to take advantage of opportunities: There has probably been more than one occasion where you heard about someone who has made it big and thought to yourself, "I could have thought of that." There are plenty of opportunities if you have the will and determination to keep your eyes open.

Copyrighted, TheStreet.Com. All rights reserved.

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Well This Is Me : Honda Motorcycle in the Daily Life

Well This Is Me and My Stories.

Motorcycle has become a more affordable transportation media because not take the place of widely on the road or in the parking lot. With the practicality of this, makes a motorcycle as a popular means of transportation within society.

Each user's have the stories about motorcycle, why this transportation is a choice. With a good reason in terms of affordable prices and, for the road congestion is getting more solid and increasing alienation. Also I have story and experience use of motorcycles, especially Honda Supra Fit as a selection tool my transportation day-to-day, and become a friend and part of everyday life that can not be separated.

Without Honda motorcycle my condition may not be like this now, living on easy street with the economy, live free and independent without too depend from other people help. The stories effectively began when I come to wander the capital city of Jakarta.

Beginning in 2004 I came to Jakarta to speculate that can live independently with the job search, for permission from God through the help of a friend during the course I recommended to work in the PT. BTN as an IT programmer. And until now I still work as a programmer in the IT field PT. BTN, I am very grateful and thankful the company accept me to worked.

After my problem not get the job finished it, the biggest problem is finding a job after the transportation problems that will not work to the day-to-day, even to other places if I need. Why transportation problems that annoying enough?, this is all because my physical condition that is not possible if I have to use the Bus Way or other transportation media go to work or to other places. In my to feet get folio when I was small child and must be assisted with the 2 (two) crutch for helping me to stand upright and walk.

At the beginning of work I use a taxi as a transportation from my home in Blok-M to the office, the transportation I select with the consideration that the most feasible and most secure for going to work or to another destination.

At that time the cost of taxi can still affordable by the salary that I received, more than 800,000 - 1,000,000 rupiah the cost of taxi ride for a month. At the end of 2004 until early 2005, the cost of taxi ride up very high, in line with the increase in fuel prices and rising my taxi costs be 1,600,000 - 2,000,000 rupiah a month, up 2 (two) times. I feel the cost is too high and cut half of the salary that I received during one month, and this is very heavy because my received salary for a month almost out only for the cost of transportation.

With this view, I decided to find alternative transportation that can work day-to-day, and of course with the cheap cost. And I thought a plan to make a transportation that I can ride on my own. But the problem arising from the cost side, if I buy a used car even though my money is not enough, and at last the choice of a motorcycle because my money is enough to buy a motorcycle and make a modification.

Before I decide to buy a motorcycle products that will use it, I ask questions on friends and compare various products motorcycle, after consideration of thinking with reliability, machines strength, easy maintenance, and have economical fuel at the end of 2005 I decided to buy a bicycle Honda Supra Fit with the disk brake option worth 11,300,000 rupiah. I do modification to my motorcycle, the rear wheel from 1 (one) wheel become 2 (two) wheels so after modification total of 3 (three) wheels, for modification to cost more than 2,500,000 rupiah. Picture

This result modification of Honda Supra Fit motorcycle.

This Motorcycle is to be my best friend that always accompanied me to work place, and also go to the home friend of mine to play or chat with them.

With this motorcycle cost for transportation far less, I only spend 20,000 rupiah in one (1) week to buy the fuel and in one (1) month more than 80,000 to 100,000 rupiah to buy the fuel, very far away compared with the the cost of using the taxi. And for the routine treatment once every 2 months I went to the official workshop of Honda (AHASS) to check the engine and services. The reliability and obstinacy engine is proved less than 2 (two) years work well in rain and dry conditions.

Every day I use the motorcycle as my transportation media, some times I often meet with colleagues do on the road in both the motorcycle and a car. When one of my partners do take my pictures driving a motorcycle on the road from his car. Below is a picture taken by my partners that meet in the road during I go to work.

With my motorcycle, I can undergo my daily routine activities smoothly and become not too depend to other people help. I can easily go to work place and go to other places that I want to visit.

I hope motorcycles or car producers make a special motorcycle or car for people with physical disability like me, so that they can use as a tool to facilitate transportation to they routines activities day-to-day to go to work or go to other places. Hopefully, Honda Motorcycle or other manufacturer can create a motorcycle or car as I expected.

I am very grateful with my motorcycle Honda Supra Fit that very special helping me lead to the work place, and I will treat because this has been a friend and part of my everyday life that cannot be separated.

Thankyou my Motorcycle Honda Supra Fit, I will treat you so always able ride me to my Work place.*

Jakarta, February 17, 2008
Abdul Rozak

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