Monthly Archive for March, 2009

The Data Invasion and Financial Health

Published by JS Wolff on March 30, 2009 in Economy and Financial Education. 0 Comments Tags: , , .

Seems like a repeat question that keeps coming up in my financial wellness sessions is, “what was different about the Great Depression than what we are experiencing now?” How about for a start…communication and data!

On January 27th, 1927, two years before the US economy fell off a cliff, inventor Philo T. Farnsworth applied for a patent that is now considered the official birth date of the television. Because this medium was still in its infancy in 1929, radio and newspapers were the only tools with the ability to reach the masses. But as we know, all of these mediums are only good for moving information one way.

Consider October of 1938, when the voice of actor Orson Welles was heard over the radio as he described a devastating Martian attack on the earth in the now infamous “War of the Worlds” broadcast. Over 1 million people, 20% of the listening audience believed this was actually occurring and literally panicked, some even contemplated suicide.

Probably not likely to happen in today’s www.world . If Orson tried to throw that same spiel our way, instantly, we could access vast resources and communities to verify that the Martians never left Mars and assure us that we will live to fight another day. Likewise, doesn’t the Web put us in a much better position to battle our way through this current economic invasion? Yes and no.

According to comScore Marketer, searches for several terms related to the economic downturn showed dramatic gains during the past year. Among the most notable increases were searches relating to the deteriorating job market, including searches using the term “unemployment” (up 206 percent to 8.2 million searches) and “unemployment benefits” (up 247 percent to 748,000 searches). Meanwhile, terms relating to personal asset situations, including “mortgage” (up 72 percent to 7.8 million searches), “bankruptcy” (up 156 percent to 2.6 million searches), and “foreclosure” (up 67 percent to 1.4 million searches) also grew strongly.

So I decided to throw myself on this pile and did a search on the word, “mortgage” Up popped a short list of 172 million entries. So yes it was helpful that I could access topical information so quickly, but on the other hand, without some way to filter this stuff, am I really that much further ahead? I don’t know about you, but I am not energized by 172 million options, quite the opposite, like those in 1938 who ran from the imagined Martian attack, I start to run for cover.

But all is not lost…this is an opportunity in all this. The key is to be equipped with some simple, personal financial frameworks that help us quickly sift through information and facilitate sensible decision making in good times and bad. I will cover some ways to get this done in my next entry.

Financial Health and Toxicity – Mutually Exclusive

Published by JS Wolff on March 23, 2009 in Economy and Financial Wellness. 1 Comment Tags: , , .

This week the government announced a new plan to rid the financial system of so-called “toxic assets”, a general term for assets that have exposed their holders to large losses. It is these assets that have paralyzed both the credit markets and the investor community from moving forward because, to date, no one has been able to determine the extent of their poisonous reach. So to restore some semblance of confidence, the government is proposing to build an entity to capture, hold and somehow try to sell these blemished instruments.

It looks like their overall framework for economic recovery encompasses two strategies. First, remove these black hole assets from institutional balance sheets to facilitate systemic solvency, focus and confidence. And secondly, refine the regulatory environment to support prudent lending practices going forward.

While no one’s sure if these measures will ultimately work…I do buy into the framework. It’s both reactive…dealing head on with the current crisis and proactive…creating an environment where it is less likely to happen again.
At a more personal level, there are certainly indicators that economic toxicity is trickling into our workplaces.

Early this year, the Society for Human Resource Management (SHRM), surveyed its members and confirmed the effects of economic stress.  In the previous 12 months, members had seen a 26 percent increase in employees having their wages garnished by collection agencies; a 39 percent increase in requests for 401 (k) plan loans; a 20 percent increase in requests for pay advances; and a 14 percent jump in employees reporting having lost their homes.

This is obviously not just somebody else’s problem. I recently asked a Fortune 1000 SVP of Human Resources if she believed the money worries were affecting the productivity of her workforce. Her response was swift and direct, “absolutely… I have no doubt that we are being negatively impacted.” And just as swiftly she has recently led her company to install a cutting edge financial wellness program. With this kind of win-win leadership, it’s no wonder that they are consistently named on all those “Best Places to Work” lists.

A Personal Stimulus Package – Sanity and Financial Health

Published by JS Wolff on March 16, 2009 in Economy, Financial Wellness and Investment. 1 Comment Tags: , .

They are telling us that, after months of horrendous news, hints of a return to economic stability created sustained euphoria during last week’s market run-up. The word sustained is used loosely here…it means more than one day. Some large and previously battered financial companies, namely Citibank, Bank of America, and JPMorgan Chase reported that were profitable during the first two months of the year. And, investors all over the globe, who are still licking their wounds after being pummeled by the same market that ruthlessly hacked their personal wealth, now want to quickly make up their losses by getting back on the same airplane that essentially crashed in stormy weather.

Well, maybe it’s time for a sanity check. Have you ever talked with someone who lived through the Great Depression? If you ever get a chance to do so, it’s enlightening. My dad, who was 7 years old in 1929 was the son of a very prosperous retailer, Walter Wolff , whose department store occupied nearly an entire city block in downtown St. Louis. My dad clearly remembers housekeepers, nannies and drivers…in other words, a very privileged life. And from his recollection, it was all gone in a day.

It’s interesting that once a commercial pilot qualifies for his or her license that, from that point forward, about 80% of their training time is spent on simulating emergencies and only 20% on normal flying activities. Maybe it’s time that instead of blindly jumping back into the market on the first and maybe fleeting bit of good news, that we consider the lessons learned over the past 14 months and compose a more “all weather” plan. The airplane we call the stock market may be capable transportation for very long distances but, as we have found, for shorter journeys, not so much.