After Christmas Sales for 2010 May Have Fallen Short of Expectations

In the past many shoppers have been persistent in their efforts to find the ultimate bargains after Christmas. Retailers also anticipate huge crowds after Christmas as they continuously boast about the sales and bargains that customers will receive. They are hopeful that customers will come out eagerly buying that gift that they did not receive for Christmas. December 26, 2010 the crowds were smaller than expected. This reduction in the after Christmas shopping crowd came as a result of either in climate weather or just overall lack of funds. Now on the east coast in particular crowds were low because it was slammed by snowstorms. These snowstorms kept many would be bargain shoppers at home. Some stores were even offering extra discounts to people who were bold enough to fight through the storm to continue their shopping. Now the economic factor played a role also in the low customer turnout for after Christmas sales. If you really think about it, from a financial standpoint people cannot spend what they don’t have. Then there were some people like myself who were just overly frugal. Like other people I want to be able to weather the economic storm that we are going to face in the United States in 2011.

I went out to do some shopping but my purchases were so minimal I noticed that the after Christmas sales were not as good as they had been in the past. One thing that I observed while shopping was that most people were using cash instead of credit cards when they made purchases. I also refrained from using my credit cards because it makes no sense to be paying for items next year that were purchased the previous year. People are trying to get out of debt. Reduced consumer confidence also played a major role in people spending less money after Christmas. One stunning fact that consumers realized this year is that they have to get back to reality after the Christmas holidays. They took in consideration that they have to be prepared to live the other 364 days of the year.

Bloomberg News, Snowstorms smothers index after Christmas shopping, New Jersey

Gray Pilgrim, After Christmas Sales 2010,

Bankruptcy Alternatives: Debt Relief Orders (DRO)

Due to the long-term problems of bankruptcy filing, which go beyond the mere consideration of a ruined credit record, many will seek one of the alternatives to bankruptcy. One key way to avoid bankruptcy is to consider applying for a debt relief order.

Avoid Bankruptcy: What are Debt Relief Orders?

Debt relief orders came into effect in the UK in April 2009 as an alternative to bankruptcy. A debt relief order is designed to help those who can not pay off their debts seek refuge from creditors and restore financial health within a 12-month period.

Should a court decide to issue a debt relief order, then the individual is protected from further actions from the listed creditors for the period of the debt relief order, which usually lasts for 12 months. Further more, at the end of the period all those debts which have been listed in the debt relief order will be written off.


Despite the benefits of a debt relief order, during the period of the debt relief order the individual will still have to make payments to any creditors which have not been listed on the debt relief order. In addition, at the end of the debt relief order any debts which where not listed will still have to be paid off in full.

Bankruptcy Solutions: Who Can Apply for a Debt Relief Order?

One can apply for a debt relief order as an alterative to bankruptcy if the following circumstances exist:

Level of Debt – The level of debt should not exceed £15,000. These debts must be considered as “qualifying debts”. Qualifying debts are usually unsecured forms of debt including rents, credit card debts, overdrafts and other unsecured personal loans.

Disposable Income – In order to apply for debt relief orders one must have a disposable income of less than £150 per month.

Personal Assets – To apply for a debt relief order an individual must not have assets greater than £300. This excludes motor vehicles; here an individual can only qualify for relief if they own a motor vehicle worth less than £1,000.

Residence – To apply for a debt relief order one must have resided, worked or owned a property within England or Wales for the last three years.

In summary, if one has personal unsecured debts less than £15,000, seeking a debt relief order may be a cheaper and less stressful option than going bankrupt. However, whilst debt relief orders offer a credible alterative to bankruptcy solutions, a debt relief order may not be suitable for everyone, especially where significantly large levels of debt have been amassed.

Debt-to-Income Ratio (DTI): Using Financial Statements to Determine Financial Health

When a person’s personal economy is in turmoil, it is common for debt to mount while income either drops or stagnates. When the going continues to get tough, more credit may be needed either through extended lines, or new ones.

Potential creditors, such as Bank of America or the local car dealership, will offer or deny such lines based on a person’s debt-to-income ratio, or DTI.

Figuring a Person’s Debt-to-Income Ratio

The average person might think of debt as the entire amount borrowed compared to the entire amount earned. For example, if a person earning a yearly income of $90,000 has the following debts:

  • Home mortgage – $210,000
  • School Loan – $30,000
  • Auto loan – $20,000
  • Credit card – $3,500
  • Credit card – $2,500

Then it could be falsely concluded that their debt ($266,000) to income ($90,000) ratio was just under three, meaning $3 borrowed for each dollar earned.

Creditors, however, look at it in terms of the monthly obligations (also called a minimum payments) versus monthly income. Using the example above, it might look more like this:

  • Home mortgage – $1,500
  • School Loan – $300
  • Auto loan – $420
  • Credit card – $42
  • Credit card – $35

This means that the person above has a DTI of $2,297:$7,500, which is just over .3, meaning that 30% of this person’s earnings are called for at the start of the month, and he has the rest to live off of.

What is a Healthy Debt-to-Income Ratio?’s article titled “Calculating Your Debt-to-Income Ratio” notes that a lender’s maximum DTI is not to exceed .64, meaning that a person should not borrow more than $64 for each $100 earned.

It goes further to explain that a home payment should not exceed 28% of a person monthly income and that other debts should not total to exceed 36%, though there are some exceptions in cases of VA home loans.

But these numbers are subjective. For example, if one was to ask financial guru Dave Ramsey, he would strongly urge the person in the example above to utilize a debt snowball to bring his DTI down to zero.

Flaws in DTI

Debt-to-income ratios are flawed, and in a way that could prove harmful to someone calculating without the following knowledge.

The income used in DTI measurements is income before taxes. So, while the $7,500 used above may be the money that that person actually earned, he’ll only be able to access 72% of it since 28% will be taken out in federal income taxes, leaving his DTI to be $2,297:$5,400, or about .45.

Despite his high income, $45 of every $100 (at a minimum) will go to creditors.

Knowing one’s DTI is crucial for understanding short-term financial health. It can be found by keeping cash flow statements, which will help one keep a closer eye on the long-term financial health found in a balance sheet.

Where is a Good Place for Savings? With Interest Rates Declining, Where Should You Save Money?

The average interest on savings accounts in the UK has now gone below 1%, with some giving savers far less than that. When one considers inflation, this means that any cash in ordinary savings accounts is now decreasing in the real sense! So where should savers keep money in the current economic climate? Here is the advice of some experts.

Pay off as Much Debt as Possible

No matter how low the interest rate on any current debts people may have, it is better to pay it off and reduce the money in savings accounts. This is particularly true for those who have credit card and similar debts at a high rate of interest, but applies equally in the present climate to things such as mortgage debts. Experts advise keeping a small emergency savings fund, but suggest that this should not be more than three months salary; any more should be used to pay off any type of debt.

Put Extra Savings into a Cash ISA

Everyone is allowed to put £3600 per year into a cash ISA (Individual Savings Account). The interest on these is tax-free, and some are still offering a reasonable rate of interest. This should be the first place for any spare money. Many people only put money into cash ISAs at the end of the tax year, but one can do it at any time. It would be sensible to do this now, and if possible find one where the rate is fixed, before interest rates drop any lower.

Regular Savings Accounts

Some banks and buildings societies still have good rates for Regular Savings Accounts, where the saver puts in a set sum each month. The maximum is usually relatively small, around £500 at most. However the rates are usually fixed for the year, so this is worth doing now for those who have any spare cash. At the present time Barclays Monthly Saver, Close Brothers Premium gold Account, and Abbey Monthly Saver, were all offering rates over 5%.

Premium Bonds

Those with a significant amount of money in Premium Bonds usually have small wins at regular intervals, and of course there is always the possibility of winning a large amount. So this could be a sensible place to save at present, even for those who do not usually do anything approaching gambling. And since Premium Bonds are government owned, the original amount of money is always safe.

Perhaps the most important thing to do is keep an eye on savings rates and be prepared to move accounts if a better deal comes along. In the present economic situation this could make the difference between making a small gain at the end of the year, and losing money in real terms.

How the Federal Reserve Board Controls Money and Banking

What is money? Americans handle money every day of their lives, but few have any understanding of what money actually is or where it comes from. Money can be defined as a unit of account, a medium of exchange or a store of value, but this gives little idea of what the green stuff is or where it comes from.

Two Forms of Money: Currency and Demand Deposits

The first form of money is currency, more technically known as “Federal Reserve Notes.” A dollar bill actually is a note saying the Federal Reserve owes you one dollar. The dollar bill is also legal tender, which means it must be accepted as payment for goods or services.

The other form of money is demand deposits, which is sometimes called “checkbook money.” This is money that has been deposited in commercial banks and makes up the majority of all US money.

Material Value Behind Money and What is Behind Demand Deposits

Historically, banks were required to keep a store of gold or silver in reserve, in case someone came in and demanded “hard” money for his or her bank notes. On the basis of the reserves of gold or silver, banks lent many times the actual amount of their reserves. This worked well as long as both the depositor and the borrower didn’t come at the same time, demanding the bank’s demand deposits. By lending, banks actually created money because they lent far more than they actually had.

Today’s banks work much the same way, except there is no gold or silver behind the demand deposits. What is behind these demand deposits is somewhat hard to define. It consists of currency and coins, and deposits of commercial banks in the Federal Reserve. What this actually means is that it consists of the people’s faith in the Federal Reserve System.

What is the Federal Reserve Board and How Does the Fed Control Money and Banks?

So what is the Fed? How do these seven people in Washington affect the nation’s money supply? These seven people, making up the Board of Governors of the Federal Reserve System, are appointed by the President to rotating 14-year terms. They are not elected by the people, nor do the people have much control over the Fed’s decisions. Congress and the President also have little control over the Fed’s decisions. The Fed is basically an independent, semi-private, semi-public body. Yet it exercises almost complete control over the nations’s money.

The Fed does this in three ways. The first is by changing the legal reserve requirement. At present, all banks are required to keep in reserve at least 10 percent of their total amount of deposits. Suppose the Fed were to up this to 15 percent. Banks would then cut back on lending because more demand deposits would have to be kept in reserve. As loans were paid off, they would keep the money in reserve and stop lending until their reserves equaled 15 percent of their total deposits. If the Fed lowered the requirement, the opposite would take place. Banks would have “money to spare,” which would result in easy credit and more loans.

Another “tool” of the Fed is the discount rate. This is the rate of interest at which banks can borrow extra funds from the Fed. If the Fed raised the discount rate, it would discourage bank borrowing, which would decrease the amount of money banks would have to lend. A lower rate would result in banks borrowing more money, and thus having more money to lend.

The final and most often used way the Fed affects the money supply is through what is called “open market operations.” This involves the buying and selling of government bonds. For instance, the Fed decides to sell a certain amount in bonds to a private broker. The broker pays by writing a check. The Fed then presents this check to the private bank for payment. The private bank must, in turn, dig into its reserves. This reduction in reserves causes the bank to reduce the amount of lending. Again, by reversing operations, the opposite effect can be achieved. In order to encourage an increase in lending, the Fed can buy government bonds. The money it pays is then deposited into the reserve of the private bank, which means there is more money for lending purposes.

Through all this, the Fed cannot force people to borrow money. It can make it easier to borrow, thus encouraging it, but individuals and firms still have a choice as to whether or not they want to borrow. Banks also have the choice of whether or not they want to make money available for loans.

If there were no controls on the money supply, banks would lend money far beyond what they had in reserve. People would lose faith in their banks, and thus in the value of money supply.

Though the basis of money has changed over the years, its basic functions remain the same. These functions are kept under control by the Federal Reserve System.

Banking Options for Families: Alternatives to Banks for Household Financial Services

Although traditional retail banks are still the biggest players in the finance industry, there are alternatives to banks for excellent household financial services and products. Find out what banking options families have to save and grow their money.

Retail Banks

Retail banks are profit-driven and work to benefit their shareholders, often a small group of investors. Each bank is controlled by a board of directors, who make decisions on the types of services offered and the fees charged. Its customers have absolutely no authority in matters regarding the bank’s operations.

Banks are useful in many ways – they serve anyone and everyone and they usually offer a wide range of innovative financial products and services. However, banks also charge higher fees, higher loan interest rates and impose many restrictions.

Credit Unions

Unlike banks, credit unions are owned and controlled by their members – people who save and borrow with them. They are popular alternatives to banks for household financial services because they exist to provide affordable services to its members, who often belong to a group or association and who receive their profits through dividends and lower fees and loan interest rates.

Although smaller than banks, credit unions are found to provide excellent customer service. Figures released by Abacus – Australian Mutuals, the association representing credit unions and mutual building societies in Australia show that 85.7% of credit union members and 88.5% of building society members reported high customer satisfaction in a survey done in May 2015. Credit unions can also be more flexible and innovative. In fact, a credit union, not a bank, was the first financial institution in Australia to install an ATM and to use electronic funs transfer at point-of-sale (EFTPOS).

However, there are limited numbers of credit union branches and this can cause some inconvenience to members. And because most credit unions have no international banking ties, they are not very useful for those who travel abroad regularly.

Building Societies

Like credit unions, building societies are smaller, regionally based, with fewer financial products. They are customer-driven too and provide customers a strong sense of community. They have their origins in cooperative movements. In Australia, their numbers have shrunk to only nine presently due to decades of mergers and acquisitions. Even so, building societies have a big role in regional communities and have increased their commitment while bigger banks have closed down their branches and moved away.

Community Banks

Big banks’ aims are to make money, not to serve customers in the real sense. Not surprisingly, they have abandoned many smaller, rural areas, much to the disappointment and inconvenience of regional households. Fortunately, a few banks still care and join forces with local communities to build community banks. Often, the bank provides banking authority, financial services and products while a community-owned company runs the operation. One bank that has undertaken this challenge in Australia is Victoria’s Bendigo Bank.

Retail banks are not the only banking options for families, particularly those living in rural or regional areas. These families can consider more customer-centric alternatives to banks for household financial services such as credit unions, building societies and community banks.

U.S. Banking Regulations and Market Control: Foreign Investors and Nonbanking Industries Interest in Status Quo

David Wyss, chief economist at Standard & Poor’s, recently reported to The Washington Times that the S&P is concerned that the financial reform legislation, now pending as a Senate bill, would have adverse effects on foreign investors. Wyss states that “nearly half of the government’s publicly held debt” is held by foreign investors and the pending reform would be seen as the U.S. government’s “attempts to intimidate the Fed” and an attack on the Federal Reserve System’s independence.

Foreign investors are also looking at the U.S. Congress’s delay in reappointing Federal Reserve Chairman Benjamin Bernanke. On December 17, 2009, the Senate Banking, Housing and Urban Affairs Committee sent Bernanke’s nomination to the floor. A populist grassrote movement is developing in the U.S. against Bernanke’s reappointment. Sen. Bernie Sanders (I-Vt) managed to gain tripartisan support to place a hold on the senate vote until January 2010.

U.S. Government Concern with Fed Supervision and Transparency

Within the financial market reformation debate, U.S. lawmakers have constantly raised the issue of Fed transparency. Sen. Richard Shelby (R-Ala.) expressed the concerns of the major political parites in his questions to Bernanke at the December 3, 2009 reconfirmation hearing:

“If we were to go back, Mr. Chairman, and review the minutes and transcripts of all the Federal Open Markets Committee (FOMC) meetings between 2003 and 2008, I wonder what fraction of the time would have been devoted to issues involving supervision and regulation of … holding companies. Was it half the time? Was it a fourth of the time?”

Bernanke initially responded that in a typical meeting “there would be very little discussion of supervision.” He qualified, however, that “[r]ecently we’ve talked about it quite a bit because of the financial crisis,” he said. “But it depends on the situation.”

“‘Congress has a seat’ on the Fed’s rate setting committee,” said Bernard Baumoh, chief global economist at the Economic Outlook Group in a 12/30/09 The Washington Times article. “[A]s long as the Senate strings out a vote on Mr. Bernanke’s nomination and [on the] legislat[ive] debate” the U.S. government could maintain its seat on the FOMC.

The Elephant in the Room: Non-regulation of the Nonbank Financial Sector

Another question regarding direct government control over regulation of the U.S. banking industry is whether the nonbank financial sector will continue to go unregulated? There has been a huge development within the financial industry of financial entities, products, and transactions that make no reference to the word “bank” in their names.

The biggest of these financial growth markets include hedge funds, holding companies, and derivative trading. The growth of pay day lending within the U.S. domestic market also raises the issue whether there needs to be greater consumer protection against usurious payday lending financing. Charles S. Gardner, former senior official at the International Monetary Fund, notes that the nonbanking sector even operated outside of the reach of the Fed and expresses great concern regarding unregulated derivative trading.

“Requiring open trading of derivatives will help regulators identify potentially risky credit creation outside the regulated banking industry,” writes Gardner in his recent article “What the Senate Must Do Now.” Gardner proposes that the U.S. government needs to take a leading role in fostering global financial regulations.

A Senate floor vote is expected on Bernanke’s reappointment, but has been held over to January 2010. According to a joint statement released by lead negotiators, a “deal could be struck before the Senate reconvenes in January” on the pending financial reforms regulations.

Save Money by Using Online Banking: Advantages of Managing Checking & Savings Accounts Online

More and more people are taking advantage of all the bells and whistles that come with doing their banking online. Whether they use it for paying bills, staying on top of account activity or integration with accounting software, these features are well worth the time taken to learn how to use them. This article will look into how these banking features can help anyone to better manage their money.

Paying Bills Online

Many banks offer online banking to their customers for free and allow them to pay bills online without any additional cost. Some might charge for the use of this feature however, so checking with them before using this option is important. Anyone that starts using this feature will probably never go back to writing checks again. It’s easy to become addicted to the idea of going online to pay all your bills without having to worry about postage charges.

The ability to schedule payments weeks ahead of time and to configure regular automatic payments can also pay dividends. For example, many people are familiar with the interest savings that come from paying the mortgage bi-weekly instead of monthly but most mortgage companies charge a fee for setting this up. Most banks will allow this type of payment to be configured for free through online banking.

Monitor Account Activity with Online Banking

When two or more individuals spend money from the same account, it is not difficult to accidentally have overdrawn accounts that create bank charges. Checking the account activity online not only allows verification of existing funds but easy monitoring of scheduled bill payments. If the accounts of children with debit cards are setup this way, their shopping habits can be easily checked and their funds replenished without paying fees money transfer fees.

Integrate with Accounting Software

Many find it difficult to create and stick to a budget because they do not know how their money is being spent. Having access to banking information online can help with this as well. Most banks, and credit card companies, allow account data to be easily downloaded into your accounting software. When all spending data is consolidated in this way, the software can analyze spending habits and give a clear and accurate picture of where the money is going.

There are many ways to save money and time by managing banking information online. Some banks offer all the features mentioned here for free while some might charge for them. Talk with a representative at your bank or credit union or check out their web-site carefully before signing up for these services.

History of Mergers in the U.S.: Blueprint of the M&A Activity Since the Early 20th Century

Through each wave, mergers and acquisitions varied, usually depending on how much and in what manner the regulatory landscape had changed. The same could be said about the types of industries most heavily involved in each of the waves. Usually, the majority of the M&A activity clustered in a relatively small number of industries as they went through dramatic transformations, such as industry deregulation or technological evolution.

Starting with the Reign of Horizontal Mergers (1897 to 1904)

As the 19th century came to a close, regional markets experienced greater growth rates, mostly due to railroads. With more and more railroads weaving a complex web all over the country, many companies managed to capitalize on the fast-emerging U.S. economy. Operating within a rather lax regulatory environment, many horizontal mergers contributed to the creation of almost monopolistic-type markets in a number of industries. By 1904, the U.S. Supreme Court brought the first wave to a halt with its landmark decision that significantly limited this type of mergers.

Vertical Mergers Take Over (1916 – 1929)

By the time the 1920s arrived, cars, radios and vastly improved transportation infrastructure further advanced the U.S. economy. The second wave of mergers and acquisitions, much like the first wave, was marked by sharply rising stock prices.

However, the regulatory landscape was not exactly favorable towards horizontal mergers and the resulting creation of huge companies that would often monopolize their market segments. Instead, vertical mergers became increasingly popular, as many companies sought to integrate forward or backward along the production chain, which, in turn, led to the creation of oligopolies.

Note that this wave of mergers came to a screeching halt with the devastating stock market crash of 1929.

Conglomerates Rise from the Ashes (1965 – 1969)

By the time capital markets recovered from the 1929 crash, the regulatory environment was vehemently opposed to both horizontal and vertical mergers because both types were perceived as an obstacle to healthy competition with any industry.

Companies that wanted to achieve higher growth rates had to look outside their own market segments, which is how conglomerates stepped onto the scene. Truth be told, many of the conglomerates formed during this period eventually ended up underperforming the market. And their reign effectively ended in 1969 when antitrust laws took a sharper turn, “curbing the enthusiasm” of the conglomerates in the process.

All Mergers Are Back in Vogue, Including Hostile Takeovers (1981 – 1989)

In the 1980s, all types of mergers were much more favorably accepted than was the case two decades earlier. It was a combination of factors, including decreasing interest rates and increasing stock prices, both of which contributed to the popularity of leveraged buyouts. Although hostile takeovers were not exactly a novelty, tapping into the high-yield bond market enabled many takeovers that would not have happened otherwise.

This period was also marked by sophisticated takeover strategies, including corporate raid and its variants, such as greenmailing. A corporate raid is a term used to define a certain type of hostile takeovers, whereby the acquirer immediately sells all of the assets of the target company, essentially dissolving the target.

Greenmailing also involves asset selloffs of a target company, only instead of actually going for it, the acquirer promises to withdraw the takeover offer, provided the target buys back the already purchased assets at usually a stiff premium. Either way, shareholders of takeover companies usually ended up shortchanged.

The Long-Running Bull Market Boosts Merger Activity (1992 – 2001)

After the early 1990s recession, mergers and acquisitions intensified yet again. Many companies enjoyed high market valuations, enabling them to engage in takeovers and to pay for them with their equity. In addition, the regulatory landscape became more open to consolidations and foreigners gaining access to North American capital markets via takeovers. Industries such as banking, healthcare, defense and telecom were among the particularly active ones. Note that the fifth wave ended with another crash; that of the tech bubble in 2001.

The Bigger the Better (2003 – Present)

A more pronounced M&A activity returned in 2003, with a bounty of new deals coming to the table. It appears we are currently in the midst of the sixth wave, which is marked by high transaction volumes, more consolidations, and the creation of large companies that are much better equipped to deal with the cutthroat global competition.