When to choose bankruptcy over debt management

By Steve Bucci

Dear Debt Adviser,
I have more debt than I can handle, and I am enrolled in a debt management plan. However, my expenses still amount to more than I bring home, and the debt management agent knew this going in. They calculated my debt payment as $344 with the program, and they never advised as to whether I should file for bankruptcy. Should I have filed for bankruptcy instead? If I file for Chapter 7, would I have to include all of my debt including personal loans? 
-- Shirley

Dear Shirley,
Slow down, Shirley! You have a lot going on here, so let's take things one at a time. First, you should not have been enrolled in a debt management plan if your income level does not allow for the monthly payment. Call the debt management agency as soon as possible, and ask to speak with a supervisor. Have them go over your case from start to finish. If a mistake as big as putting you in an unaffordable plan was made, other issues may have been overlooked as well. Find out if your payment can be lowered to what you can afford. Many agencies can offer a hardship debt management plan titled a "call to action," which lowers the interest rate on your credit card accounts to the lowest possible level. That may decrease your monthly payment enough to make the debt management plan work for you.

A reputable credit counseling agency will not enroll persons in a debt management plan unless the counselor has provided a spending plan that balances income and expenses. If you are having trouble meeting your monthly payment because you are not following the spending plan provided by the agency, then you have a decision to make. Either get back on track and spend only as the plan allows, or increase your income with a part-time job or other income source.

Second, as for bankruptcy advice, I'm not surprised the counselor didn't give you any. Only an attorney can give legal advice, and bankruptcy is a legal process. However, your counselor can and should go over the pros and cons of filing for bankruptcy and whether it would make sense for you to get a legal opinion for your particular situation.

Third, should you find you absolutely cannot afford to make your payment and want to explore bankruptcy, I recommend you contact an attorney who specializes in consumer bankruptcy. To qualify for a Chapter 7 filing (in which your debts are forgiven and not repaid) your income must be below the median income for your state.

You would typically include all your debt in a bankruptcy filing, but you can file a reaffirmation document for a particular debt(s) if you have a good reason for doing so. You and your attorney will have to sign the reaffirmation document that states you can afford to repay the debt and it will not be an undue hardship on your post-bankruptcy budget to continue to pay the debt you would like reaffirmed. Typically, unsecured debts would not be included in a reaffirmation, which would include personal loans. Most reaffirmations would be for car or mortgage loans. I'm not sure why you would want to reaffirm a personal loan, but if you can convince the court and your attorney that it would be in your best interest to do so, you could file a reaffirmation for the debt.

Lastly, you wanted to know if you should have filed instead of going on a debt management plan. My answer is that if the debt management plan can be made to work, you are usually better off. A bankruptcy can stay on your credit report for up to 10 years. A poor credit report may affect your ability to get a decent apartment, home or insurance for years to come. If you have no other way out, then you may have no choice but to file. Just be sure you consider all the potential ramifications before you decide.

Read more: When To Choose Bankruptcy Over Debt Management | Bankrate.com http://www.bankrate.com/finance/debt/choose-bankruptcy-over-debt-management.aspx#ixzz1hOvuZp5p

What America Can Learn from the Greece Financial Crisis

Written by Lewis E. Lehrman
Thursday, June 30, 2011

Observations on the Greece financial crisis and what America can learn:

1. Greece is only one example of an irresponsible, reckless, insolvent government, which is spending itself into bankruptcy. There are dozens of such countries, both developed and emerging.
2. Central bank and commercial bank credit financing of the government budget deficits in every country leads to inflation. This mechanism leading to inflation is subtle but pervasive and inevitable.
3. The solution to the problem is to prevent governments from requiring their central banks and commercial banks from creating new money and credit to finance government spending.
4. In the case of America, the budget deficit and the balance of payment deficit affect the entire world because the world is on the paper dollar standard. The dollar is the official reserve currency of the world. These US deficits are financed by the Fed, the commercial banks, and foreign central banks with new money and credit which cause the depreciation of the dollar. The vast new Fed created credit of QE1 and QE2 floods the world banking system with excess dollars, causing world wide inflation.
5. Greece is the concrete lesson for American public finance. Central bank and commercial bank financing of the government budget must be restricted or, even better, prohibited.
6. The best institutional restriction on undisciplined Federal Reserve discretion to finance the budget and balance of payments deficit is to establish convertibility of the dollar by statute to a fixed weight of gold and to end the official reserve currency role of the dollar.
7. When the dollar is convertible at a fixed parity to gold, then if the Fed and the banks create too much money and credit, causing inflation, the American people can protect themselves by turning in their undesired dollars for gold at the fixed parity. Since the Federal Reserve and the banks would be required by law to redeem the dollars in gold, the banks must then reduce the expansion of credit, tending to reduce inflation.

The gold standard, in a word, is democratic money. The sovereign American people should regulate the quantity of money and credit, not the Federal Reserve, a government agency. Gold is also the money of the Constitution as stipulated in Article I, Sections 8 and 10. Thus, the monetary system must be regulated by a democratic people, and not by economists manipulating the currency at the Federal Reserve Board and the Treasury.

http://www.thegoldstandardnow.org/the-lehrman-gold-standard-articles/533-greece-financial-crisis-solution

Why The Fed Can't Be Counted On To Save The Economy

Written by Jim Powell - Forbes
Wednesday, December 21, 2011

The Federal Reserve was established in 1913 supposedly to maintain economic stability, but it presided over America’s worst depression (1930s), the worst peacetime inflation (mid-1960s to mid-1980s) and probably the worst asset bubble and bust (early 2000s to the present). In addition, there have been 18 recessions or depressions during the Fed era, generally the result of prior inflations.

How could such a problematic track record be possible? The Federal Reserve was billed as an improvement over the gold standard. For starters, maintaining economic stability is at best a central bank’s second priority after doing whatever might be necessary to support government financing activities in war and peace, which can conflict with the goal of maintaining economic stability. Moreover, there are congressional directives, such as the Employment Act of 1946 that makes the Fed responsible for achieving “full” employment.

Over the years, the Fed has been directed to achieve more and more conflicting priorities, including economic growth, price stability, interest-rate stability, financial market stability and exchange?rate stability as well as government funding and full employment. Multiple objectives have made the Fed’s behavior more unpredictable, because nobody knows what the top priority is going to be – or for how long. Consequently, it’s more difficult for people to make decisions \about business and personal finances.

Read Full Article http://www.forbes.com/sites/jimpowell/2011/12/20/why-the-fed-cant-be-counted-on-to-save-the-economy/

A retirement horror story

By Barbara Whelehan · Bankrate.com

Friday, October 14, 2011

Posted: 2 pm ET

More than half (54 percent) of full-time workers from ages 21 to 64 participated in their employer's retirement plan last year, according to a report released earlier this week by the Employee Benefit Research Institute. Among all workers, including part-timers, the participation level was 40 percent.

That means a lot of people slip through the cracks.

The phenomenon extends overseas in England. More than a third of nonretired adults no longer pay into their plans, according to a Prudential survey. Nearly one out of three who don't participate (27 percent) say they just can't afford the contributions.

The fact is, they can't afford not to make them.

Frightening true story

What happens if you don't do any retirement planning and you have little savings to fall back on?

Let me tell you a story about my eccentric friend Jeanette, who many years ago received a Master of Fine Arts degree from the Hoffberger Graduate School of Painting at the Maryland Institute in Baltimore. During most of her career she worked part time as an art teacher. She's also a talented artist in her own right whose works are being sold by an art gallery in Naples, Fla., though she hasn't seen any proceeds from recent sales. She doesn't want to press charges against the gallery owner because if she does, she says, her name would be mud in the art community. "No, you don't understand the art world," she says each time the subject comes up.

Between her pension and Social Security, Jeanette's income amounts to $900 a month. When her mother passed away some 20 years ago, she left Jeanette her condo and a small portfolio of stocks, about $50,000 worth. Over the years, Jeanette slowly liquidated the stocks, spending the money on necessities. Six years ago, she sold her condo at the height of the real estate boom and bought another cheaper one outright for $85,600 in a different area. The reason for the move? She thought her neighbors were trying to gas her. Jeanette is plagued by delusional thoughts.

Three weeks ago she was evicted from her condo. While movers hauled her furniture and all her possessions to the parking lot, two police officers seized her, put her in a "cage" and brought her to the psych ward of a local hospital. She had been "Baker Acted," involuntarily committed for detention so that psychiatrists could evaluate her mental health. I received a call from her that evening. "Barbara, you've got to come pick me up. I have to get out of here," she said urgently.

It wasn't that easy. They wouldn't let me take her anywhere, not even to look for alternative housing. The hospital's case manager wouldn't talk to me until Jeanette signed a form, which Jeanette was reluctant to do. It took me a week to convince her to sign it. Her stubbornness is exasperating.

When we finally talked, I told the case manager that Jeanette didn't belong in a locked ward, and she didn't belong in an assisted living facility either. That was where the case manager was trying to place her. Jeanette didn't go along with the idea. She said she didn't want to eat prepared food in a dining hall; she wanted to cook her own food. And she didn't want to give up her Social Security check to live in a facility. That would mean she'd have no way to make car payments. And if she gave up her car, it would be like giving up everything.

A couple of days after I talked to the case manager, Jeanette was released. Our mutual friend Louise picked her up and took her to a nice, but inexpensive, hotel.

Why was Jeanette evicted? It turned out she had ignored a $6,000 plumbing bill, which over time, due to fines and penalties, escalated to $15,000. She paid her bills, but that one she had dismissed, telling herself she had been singled out by the condo board. There was no proof the leak came from her apartment, she'd told herself. She ignored the bills, and then years later, the eviction notices. In her mind, it was all a big scam.

Now she feels she's really been scammed. She lost her paid-for condo to the condo board in a foreclosure for a judgment of $11,337.20. Prices for comparable units are on the market for around $35,500.

Getting back on track

Over the past couple of weeks, Louise and I have been trying to help her straighten out her finances and find housing. Her stuff had been put into storage, paid for by her brother in New Jersey. Jeanette can't go back and live at the condo; the board won't let her back in. Apartment rentals seemed out of the question, at a minimum of $665 a month. Luckily, a friend of a friend found a one-bedroom apartment for $410 a month.

On Monday, Louise and I accompanied Jeanette to visit her broker, and she sold the last of her stock -- 461 shares of Merck, 12 shares of Comcast, and three shares each of AT&T and Verizon. She got roughly $15,000 from the sale.

Jeanette is living on the edge and it's only a matter of time before she runs out of resources. This is what retirement looks like without retirement planning, but who's to blame for this? She's always lived a frugal existence. She was lucky to get an inheritance. But one big unexpected bill -- and her inability to take it seriously -- were all it took to throw her life off kilter.

Read more: A retirement horror story | Bankrate.com http://www.bankrate.com/financing/retirement/a-retirement-horror-story/#ixzz1hOmvKUww

The 8 Rules I Use to Earn $124.29 in Dividends Per Day

By Paul Tracy This easy list of rules has helped grow my daily income from almost nothing to more than $100 per day. The 8 Rules I Use to Earn $124.29 in Dividends Per Day

I counted twice, just to be sure...  $41,513.18. That's the amount in "daily paychecks" -- more commonly known as dividends -- I've received from my investment portfolio in 2011. That total comes to $124.29 for each day of the year. Cash. Why am I telling you this? It's not to brag. I was born and raised in Wisconsin. The typical Midwestern mentality is so ingrained in me, I veryrarely talk about money. And I'm not one to show off, either. I drive a Nissan I bought six years ago. I get my hair cut at Supercuts. No, I'm telling you this because I honestly think what I've discovered is the single best way to invest, hands down. I'm talking, of course, about the "Daily Paycheck" strategy. If you've read Dividend Opportunities for even a couple of weeks, you're likely familiar with Amy Calistri and this strategy. Amy is the Chief Strategist behind our premium Daily Paycheck newsletter. Her goal is to build a portfolio that pays at least one dividend every day of the year. The idea for her advisory came from my personal "Daily Paycheck" experiment.  I've been following the strategy personally for a few years now. In that time, I've not only been able to build an investment portfolio that pays me more than 30 times a month, but the checks are getting bigger and bigger as time passes. What I like best is that it's the easiest way to invest you can imagine. Once you get started, it runs on autopilot. Of course, you'll make a few portfolio adjustments now and then, but you won't have to anxiously watch your holdings every day.  Now it's time to come clean. If you start this strategy tomorrow, it's unlikely you'll be earning $124 a day by the weekend. I've been fortunate to start with a healthy-sized portfolio. And as I said, I've enjoyed the benefits of implementing the "Daily Paycheck" strategy for a few years now, so my payments have grown much larger than when I started. But here's the good news... it doesn't matter. Whether you have $20,000 or $2 million, you can start your own "Daily Paycheck" portfolio today. The results are fully scaleable, and anyone can have success, as long as you follow eight simple rules Amy and I created to not only build our portfolios, but also manage risks... 1. Dividend payers beat non-dividend payers. According to Ned Davis Research, firms in the S&P 500 that raised dividends gained an average of 8.8% per year between 1972 and 2008. Those that cut dividends or never paid them produced zero return over this entire time span. 2. Higher yields beat lower yields. This is such a "no-brainer" that it doesn't require explanation. Clearly, a bigger dividend puts more cash in your pocket.  3. Reinvesting your checks beats cashing them. Reinvesting buys you more shares, which leads to larger dividend checks, which buy you even more shares, and so on (this is how my dividend checks have grown). 4. Small caps beat large caps. A 70-year study of different equity classes showed that $1,000 invested in small-cap stocks grew to $3,425,250. In large-cap stocks it grew to only $973,850.  5. International beats domestic. The average U.S. stock pays just 2.1%. That's peanuts compared to yields overseas. Stocks in New Zealand yield 4.9%... stocks in France yield 4.7%... in Germany 4.0%... and in the U.K. 3.9%. 6. Emerging markets beat developed. It's much easier for a small economy to post fast growth than a large one. And investors who know this benefit. Over the past 10 years, Vanguard's MSCI Emerging Markets ETF (NYSE: VWO) has gained an average of 10.7% per year. Stocks throughout the developed world, as measured by the MSCI EAFE Index, have been up an average of just 4.8% per year. 7. Tax-free beats taxable. Tax-free securities often put more cash in your pocket at the end of the day -- especially if you're in a high tax bracket. A muni fund yielding 6.0% pays you a tax-equivalent yield of 9.2% if you're in the 35% tax bracket.  8. Monthly payouts beat annual payout.  Getting paid monthly is not only more convenient -- you actually earn more. Thanks to compounding, a stock paying out 1% monthly yields far more than 12% -- it can actually pay you 12.68% if you reinvest. It's these eight rules I've followed to build a portfolio that has not only paid me $124 a day in 2011, but that is also seeing rising payments. In November, I earned 37 checks, at an average daily amount of $160.30.  I've been investing for the better part of two decades. During that time, I've tried just about every strategy and style you can imagine. And don't get me wrong -- you can make money any number of ways in the market.  But earning thousands of dollars each month consistently? I never experienced that until I implemented the "Daily Paycheck" strategy. Good Investing! Paul Tracy Co-Founder -- StreetAuthority, Dividend Opportunities P.S. -- My ultimate goal is to build a portfolio that pays me $10,000 a month. In November I pocketed $4,808.87, so I'm well on my way. To learn how easy it is to set up your own "Daily Paycheck" portfolio, be sure to read this memo. It has all the details on how to get started yourself. http://globaldividends.com/newsletter.asp?d=5715&utm_source=outbrain&utm_medium=referral&utm_campaign=do-ob-1011

Is the KLSE overvalued? 15.12.2011

KLSE Composite Index:  Market Valuation

15.12.2011

KLSE Market PE Ratio 15.05
Div Yield 3.42%
Price/Bk Value 2.15
KLSE CI 1,464.11

Earnings yield = EY = 1/PE = 1/15.05 = 6.64%
Risk free FD interest rate = 3.4%
Equity risk premium = 6.64% - 3.4% = 3.24%

Equity risk premium is the compensation investors require for holding stocks.
Equity risk premium = earnings yield (1/market PE) - the risk free rate.

More than 3.5%, market is undervalued
0.6% to 3.5%, market is fairly valued.
Less than 0.6%, market is overvalued

So, presently, by the above criteria of equity risk premium, the market is neither undervalued nor overvalued, and is at fair value.


Read also:
http://myinvestingnotes.blogspot.com/2009/07/when-is-market-over-valued.html

Is the KLSE overvalued?  5.10.2010

http://myinvestingnotes.blogspot.com/2010/10/is-klse-overvalued.html

Comparing Warrants: Learning from Alan Voon, the Warrant Specialist

PBBANK Warrants Comparison

Written by Alan Voon

Saturday, 18 July 2009 12:27

The share price of Public Bank has been rising significantly since the beginning of July 2009.  From a price of about RM9.00 in early July, the share price of Public Bank has risen more than 12% to RM10.10 at the closing on July 17 2009. Public Bank is expected to announce its half year results soon and investors who wish to speculate on further upside of Public Bank upon announcement of its results can consider the call warrants of Pulblic Bank that are listed on Bursa Malaysia.  There are three Public Bank call warrants which are still trading in Bursa Malaysia now.  There are PBBANK-CH and PBBANK-CJ issued by CIMB and PBBANK-CK issued by OSK.  With the exception of PBBANK-CH which is an American style warrant, the two other warrants are European style where holders can only exercise the warrants on expiry.  The following tables are the prices and indicators of all three Public Bank warrants. PBBANK-CH PBBANK-CJ PBBANK-CK Warrant Price (RM) : 0.03 0.61 0.195 Underlying Share Price (RM) : 10.10 10.10 10.10 Exercise Ratio : 10 4 8 Exercise Price (RM) : 9.85 7.50 8.80 Expiry Date : 3/9/2009 29/9/2010 7/4/2010 Premium : 0.50% -1.58% 2.57% Gearing : 33.67 4.14 6.47 Underlying Historical Volatility : 15% 15% 15% Implied Volatility : 12% 27% 31% Delta : 0.70 0.80 0.70 Effective Gearing : 23.6 3.3 4.5 From the table above, we note that PBBANK-CJ is actually trading at a slight discount.  Is there an arbitrage opportunity for Public Bank shareholders? The answer is no because this is an European style warrant and its holder cannot exercise the warrant immediately.  Given the generous dividend payout of Public Bank in the past and expected in the near future, PBBANK-CJ holder will lose out by not getting any dividend benefit and hence it is trading at a discount although a very small one.  If you plan to hold PBBANK-CJ until expiry, there is actually no discount because the expected annual dividend yield of Public Bank is closer to 5% and the warrant has more than one year to expiry. For punters who wish to punt on results rally, PBBANK-CH is the best choice of the three due to its much higher effective gearing and low implied volatility.  Based on an effective gearing of 23.6 times, if the mother share rises 10%, the warrant should rise 2.36 times in theory.  This warrant has just become in the money after the big rise in mother share the last few weeks and is now the most attractive punt of the three warrants.  However, it can also be the riskiest if Public Bank share drops back soon on possible correction.  If the retracement is substantial and the mother share drops below the exercise price, holder of PBBANK-CH may not have enough time to recapture intrinsic value since the warrat is expiring in a little more than 1 month.  High Risk High Gain! PBBANK-CK is probably the least favoured.  Its valuation is not excessive but in terms of premium and implied volatility, it is the most expensive of the three. Alan Voon Warrants Specialist alan@warrantscapital.com July 18 2009 This article is for information and education only.  It is not a recommendation to buy or sell any securities mentioned in the article. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned. http://www.warrants.com.my/english2/index.php?option=com_content&view=article&id=74:pbbank&catid=42:articles-3month

Malaysia's Petronas posts 54 pct profit rise; warns of 2012

By Min Hun Fong and Viparat Jantraprap

KUALA LUMPUR | Thu Dec 1, 2011 5:40am EST

Dec 1 (Reuters) - Malaysia's state oil firm Petronas posted a 54 percent increase in second-quarter profit on Thursday, helped by better crude oil prices and a stronger dollar.

The company warned however, the trend would not continue into next year. Petronas' president and CEO, Shamsul Azhar Abbas, told reporters that higher market volatility stemming from the price of oil, the eurozone crisis and an uncertain American recovery would impact its bottomline.

"I will not be surprised if the second recession were to come next year," he said.

Petronas was on track to meet its full-year pretax profit forecast of 70 billion ringgit ($22.02 billion) to 75 billion ringgit ($23.60 billion) for its nine-month fiscal year ending Dec. 31, Shamsul added.

Petronas reported a second-quarter net profit of 18.3 billion ringgit, which was 53 percent higher than the 11.9 billion ringgit from a year ago.

At the same time, Petronas said it was looking to cast a wider net around oil and gas assets in the region and has put in a bid for exploratory rights in Myanmar's on-shore blocks.

"At the moment in Myanmar we are only offshore and the business has been quite good," executive vice president of exploration and production, Wee Yiaw Hin said. "There has been recently a bid on the onshore block and we are looking at opportunities to go onshore in Myanmar."

Wee said the bidding process will end some time next year. He added that he was not aware of any other Malaysian companies bidding for the same blocks.

Petronas is facing depleting oil and gas reserves in Malaysia and has stepped up its deep-water exploratory activities as well as re-exploring marginal fields.

Meanwhile, Shamsul said Petronas was contemplating entering Japan's power industry because of the island nation's commitment to reduce its dependency on nuclear power.

Petronas bought a 30 percent stake in Singapore power concern GMR Energy (Singapore) Pte Ltd, which was its first foray into the international power business.

NORMALISATION OF GAS SUPPLY

Shamsul said Petronas has taken a number of steps to normalise the supply of natural gas in Malaysia, which has crippled the power production sector in the country.

A disruption in the supply of gas since the second quarter of this year has forced national power producer Tenaga Nasional to switch to more expensive alternative fuels.

Shamsul said Petronas would help pay for a third of the additional fuel cost incurred from the gas shortage but "would not fund inefficiencies."

"We need to ascertain from Tenaga whether (the additional fuel cost is) 3 billion ringgit...and not due to their own inefficiencies. We are not prepared to fund inefficiencies," Shamsul said.

He said the company was in the planning stages of building another regassification plant in Lumut, Perak, in addition to two plants already under construction.

The regassification plant in Melaka is expected to come online in the second half of 2012.

Shamsul said the gas supply disruption in Malaysia was expected to continue until the Melaka plant was in operation. Malaysia's energy minister had earlier said that the disruption would last "two to three months."

Petronas was also fast-tracking the construction of two floating natural gas production plants in East Malaysia, which will come online by 2016.

($1 = 3.1785 Malaysian ringgit) (Reporting by Min Hun Fong)

http://www.reuters.com/article/2011/12/01/petronas-idUSL4E7N11YH20111201