The Best Years of Your Life… Now!

The Credit Card Freeze Has Begun — How Could The Dominos Start To Fall?

As I’m writing this credit card issuers are pulling back credit lines on many of their card holders.  The first announcement of this change in your status might arrive in an email which is followed by a letter you’ll receive in the mail notifying you that your line of credit — the difference between what you’ve charged and what you’re limit is — has been altered.  For example if you had $4k left on your card now you suddenly have only $1k left.

If you get an email similar to this  – from any credit card company — do not respond to that email or in any way online — It could be someone “phishing” for information.

Go online to your credit card account and check if your credit limit has indeed been changed — or make a phone call.

Let’s say it’s true and your credit limit has been changed — you still have a thousand dollars left on your limit so what’s the big deal?

The potential “big deal” has to do with how the other credit card companies and the credit reporting agencies are going to react. 

Many people don’t realize that if you go above certain amount of your available credit, let’s say for example 80% –  it changes your status — as far as the credit card issuer is concerned.  

An unexpected change in your line of credit —  by the credit card issuer — can put you over that threshold — even though you never used the credit available, have a great credit rating and pay your bills on time.  

This sudden change in your status  could cause a domino effect with your other credit card issuers, and here’s why:

If you read the fine print in the “cardholder agreement” you’ll more than likely find wording to the effect that any change taking place with any of your other credit issuers can be used as the basis for determining your status — they can raise your interest rate — limit your available credit — or freeze your account altogether. Any of these actions can trigger similar actions by your other credit card issuers.  In other words:  If one does it the others may use that as an excuse to do it too.

And remember:  It may not have been your spending habits that caused this change…

It might have been an across-the-board change affecting millions of other card holders –  all at the same time.  Hence the “domino effect” because of the automatic (more than likely computer programmed) reaction– by your other credit card issuers — that could take place which can affect your ability to use your other credit cards.

What can you do?

Let me tell you what I did recently as a precaution: 

I went through all of my credit card accounts and found I actually had several credit cards with zero balances — some I had never used — or had paid off months or even years  ago. They were still active accounts but  I forgot I had them!  So I got on the phone and cancelled those accounts!  

And here’s why:

Each credit card account you have has a credit limit on it.  If you start adding up the credit limits on accounts —  you’re not using — it adds up to a surprising amount.  The credit reporting agencies have this information about all those credit limits and make it  available to credit card issuers.  

If you don’t use the credit card that credit limit is still active. 

So get rid of it!  Make a call and close the account.  If you’ve got good credit you can probably open it again — if you need to — at a later time.  In fact that’s what several of the credit card issuers said to me:  ”just give us a call and we’ll be happy to reinstate your account”.  

The important thing  is to  lower your outstanding “available credit”  by closing credit card accounts you’ve probably forgotten about — but  you’re other credit card issuers are very aware of — and may be using to determine how they rate your current “status”.

I’m not a financial advisor so what I’m telling in this blog post is nothing more than my opinion… I’m only telling what I think and what I would do.  What you do is strictly up to you — it’s your life and your decision and responsibility.

Just don’t stand by and do nothing and then act surprised when the unexpected occurs. I’ve got a feeling that a lot of unexpected things are going to happen in the days and weeks ahead.  The best thing you can do is to protect yourself by using common sense and taking action when it comes to our personal welfare.

Because in times like these reacting to a situation could mean it’s already too late!

-Bob Baran

When I wrote my first blog a year ago in October, 2007 I never imagined I would be writing blogs about a global financial collapse only a year later. 

But the fact is: As of today, October 10, 2008, the stock exchange has lost over 40% of its value since October 9, 2007.  Housing values continue to decline from month to month at a rate never before seen since the great depression. The Federal Reserve has lowed it’s interest rate to 1 1/2 %  – and the credit markets are still dried up!

Now here’s the reality check: 

Five days ago (Monday October 5, 2008)  I used the warning issued by Jim Cramer, of the “Mad Money” cable tv show as a means of communicating to you just how dire the situation was.  On Monday, Cramer said take your money out of the stock market.

That was Monday…  Counting Monday through Friday  –  this week the market has dropped an astonishing 1,874  points according to MSNBC!  Those of you who took their money out of the market and parked it in FDIC insured savings accounts will be able to repurchase their stock portfolio back at an average cost of  18.2% less than what it was worth on Monday. 

But, knowing how most people tend to be in “denial” of reality — the worst is yet to come. 

This coming Monday, as people have had the weekend to mull over their financial situation   — many small investors will start to pull their money out of the market — in a panic —  which will push the Dow even lower. They will get even less money than they could have when I related the warning from Jim Cramer on Monday.  But waiting until it’s too late is human nature.

The bottom line is this:

There’s a financial free-fall going on right now because people are scared – and those who have been in denial are starting to wake up and react — it’s the larger mass of people who always react more slowly that are probably going to force the stock market even lower.

With manufacturing giants like Ford Motor going for only $1.92 a share  (at the close of the market today) you had better understand that a gigantic deflation in the value of everything is taking place right now –

The $700 billion dollar bailout is way too little too late — The sad truth is that the Untied States Government does not possess the means necessary to stem the downward tide of the global financial markets — and most investors around the world know that’s the case.  

It’s as if a gigantic ponzi scheme has finally fallen apart because the people at the bottom of the pyramid have lost faith in the “deal”…  And don’t be fooled by the mainstream media into believing that the cause was sub-prime mortgages… That’s just a convenient scapegoat and only part of the problem.

I bought into that one until I started doing some investigation on my own. 

First off, it’s really hard to get accurate information.  You need to understand that the reason for this is because the hyper leveraging of financial derivatives was not regulated —  and frankly was not even understood by those who could have had the power to regulate it.

Think about that for a moment… We’re talking trillions of dollars here — not billions!

The financial shenanigans were so arcane that nobody really understood what was going on or how wide spread these financial transactions were.  The “rating agencies” were telling investors these things were good and safe investments — when the truth was they didn’t fully understand what they were rating!

This was all “high finance” stuff — you had to have millions in order to even play this game.  So the “players” were gambling on these financial fantasy products to the tune of TRILLIIONS  OF DOLLARS — and the whole world was buying into it.

Why do you think the entire world financial system is now in chaos?

The most  important thing now is for you to think about your own safety and your own ability to survive and prosper — to the degree you are able to — during the coming weeks and months.  

I hope that what I’m writing right now in this blog will turn out to be an overreaction to the current situation:

I would love to humbly apologize to you at some later time for overreacting.  I just don’t want to apologize to you for standing by and not saying anything!  

You need to think very seriously about your own physical survival in times like these.

Do you have some cash on hand — just in case your credit cards are suddenly no longer valid?

I would guess that 70% or more of day-to-day retail transactions are conducted through credit and debit cards– it’s just the way things have evolved over the last few years.

My biggest concern is if  the banks who issued the cards suddenly stopped the credit lines — the credit they’ve already given you!  What if you couldn’t use your credit cards to buy food or gasoline for the next week or two — or more? 

What would you do?  Are you prepared for something like this?

Maybe having at least a month’s worth of cash on hand or making sure the places you shop still accept checks from your FDIC insured bank account  is something you had better think very seriously about.

Because of the drastically changing outer reality, Gwen and I have decided we are going to shift the attention of Intentional Prosperity™ into a practical  “survive and prosper” mode. You’re going to notice a change in our web site in the next few days… And you’ll be hearing me on the radio talking about it.

The Intentional Prosperity™ philosophy isn’t going to change — in fact it’s more valid now than ever.  We are however going to be changing our message to include practical steps you need to take in order to ride the wave of the coming changes in the weeks and months to come.

Now more than ever, you need to understand how life really works — where prosperity and abundance really comes from. 

Life as you knew it is changing right before your eyes.  If you are prepared for the coming changes and the new opportunities that change always brings — you will survive and prosper in the days and weeks to come.

If you choose to bury your head in the sand and entertain yourself with distractions and any other activity that enables you to ignore the reality of what’s going on all around you — then you are setting yourself up to be a victim of circumstances instead of the master of your destiny.

Intentional Prosperity™ is and always will be dedicated to making you the Master of your own destiny, regardless of the changes to your day-to-day world.

-Bob Baran

“Take your money out of the stock market now” — Those words from “Mad Money’s” Jim Cramer, to “Today” show’s Ann Curry, this morning!

I read a report about this and watched an online video snippet of the interview a few minutes ago — and I was stunned!

Jim Cramer, is not someone who has anything to gain from telling people to “pull out now!”. — and he seems to be bucking the mainstream media trend of not “rocking the boat” regarding the growing financial crisis.  In fact, “common knowledge” seems to be to “hang in there” from the commentators.

Hang in there?

Isn’t that what the CEO of Enron was telling everybody to do just before the bottom dropped out?

I’m not a professional financial advisor — so don’t blame me if my opinion turns out to be wrong — it’s your money and your decision — but it seems to me that the market keeps falling.  Common sense would suggest that if the Banks are going to be able to now insure individual depositors up to $250 thousand dollars — up from $100 thousand — your local FDIC insured bank sounds like it could be the safest place to put your money.

If you’ve got more than $250K,  open a savings account in more than one bank…

I never thought I’d be writing a blog post like this but too many of us tend not to take the necessary action until it’s too late.  There’s a lot at stake here and putting your money in the bank could actually help boost deposits and unleash more money into the credit stream — which would be a good thing right now.

I watched Jim Cramer, very closely and I believe he was very sincere about his warning.  You have to do what is prudent for you — I just thought I’d let you know that I felt “moved” to let you know you should be thinking very seriously about your financial position — and how you’re going to protect it.

Now more than ever your prosperity has to be intentional!

-Bob Baran

“The Intentional Prosperity™ System”

The 700 billion dollar financial bail out bill was voted down by Congress on monday.  The stock market lost 777 points wiping out 1.2 trillion dollars.

Then the price of oil dropped 10 dollars a barrel — the dollar rose 5 percent against the pound — the price of crops, metals and other commodities have begun to fall.

WAIT A MINUTE — I’M CONFUSED!

Some of those things don’t sound so bad —  like the dollar going up in value and the price of oil falling… The stock market plunging may not be good some investors but so far — the world hasn’t come to a screeching halt either.  Maybe we’re seeing the artificially high stock prices going through a little bit of a correction.

Wasn’t it just a few days ago we were told we had to immediately throw 700 billion dollars at the financial system or we were going to have a global meltdown?

Well, it didn’t happen — where’s the meltdown?

Maybe the house of cards has to correct itself without government interference.  At least that’s what the majority of the voters feel and they let their Congress men and women know about it.  Maybe it’s just some fat that has to melt.

So the question is — how much can you believe?

Who knows,  maybe in the next couple of days the world is going to go to hell and everything I’ve written here will be an exercise in futility.

I don’t know about you but I think the government isn’t  telling us everything.  One way or another, it’s going to be a very interesting October.  Frankly it was good to see the Congress back away from walking in lock step with the Administration and the leadership of both parties — and paying attention to the voters.

Maybe a little correction and a few losses will allow the financial system to find it’s own level.  Only time will tell.

But just in case:  Stock up on non perishable food and drinking water. 

Oh, and if you happen to be in town stop by your bank and withdraw some “emergency cash”.

Then call your Congressman or Congresswoman and let him or her know how you feel about this financial crisis.

You know, just in case — they’re actually listening.

-Bob Baran

The real  axis of evil is not a highly complex and surprising house of financial cards — when you realize the current financial crisis is a symptom of one ultimate cause —  personal greed.

I was going to focus on short selling and naked short selling in this blog.  As this crisis continues to unwind it’s becoming apparent that the greater cause of the problem we find our economy faced with falls on individual morality shrouded in corporate culture.

I had no idea how extreme the leveraging of financial instruments has become.

Did you know, that as of this writing, purchasing all of the “bad” mortgages would cost a little over 100 billion dollars.  So why is the “initial” cost of the proposed bail-out 700 billion?

It’s because of the financial products which were created using those bad mortgages as the basis of the leverage.  Remember I said — in my last blog — that the actual value of the collateral used to create new financial products/investments may represent only 1/12 or less of the value of the “financial products”.  One dollar of real collateral is inflated 1100 percent and then resold as a derivative financial product. 

So a few bad mortgages — losing value because of falling house prices and loan defaults — which probably represent less than five percent of all mortgages  – has turned the financial world upside down.

You can’t build a foundation if one out of every twelve bricks is made out of concrete while the other 11 are made out of paper — and if the one solid brick cracks?  Cracking of the collateral is what has happened.

Where does personal greed come in?

Because there is no regulation over the levels of leverage that have taken place,  does it make it right to still engage in the leveraging?  This is an important question.

Just because something isn’t against the law — but has the potential of creating substantial profit regardless of problems it may create later — should you engage in that activity?

Unfortunately, unregulated short-term greed without personal moral accountability and consideration for the long-term consequences of those actions — has resulted in the problem we are now facing.  

There was a time in our country when people would not engage in activities because it was considered not to be in the best interest of the country.  It had nothing to do with that activity being lawful or unlawful — it just wasn’t done.

Somewhere in time, we lost a sense of morality and personal accountability.  Taking advantage of any situation which created profit became an acceptable way of doing business.  If a regulation was lifted or none existed — any activity that created profit was fair game.

This is the real cause of the financial crisis — the axis of evil which absolves personal responsibility in the pursuit of profit. Doing the wrong thing because there is no law telling you not too.

Just because it’s not illegal to do something doesn’t mean it’s okay to do it.

What happened to individual honor? — and the respect we as a society used to pay to those who had power and chose to do the right thing?

Have those generations passed on? 

What would they think about their children and grandchildren?

-Bob Baran