The stock market has declined substantially, but there has never been a better time to invest. Many people tend to buy when the stock market is red hot and sell when blood is on the streets, which goes against the "buy low, sell high" mentality that every great investor should embrace. The news has portrayed this as the worst meltdown in the stock market and economy ever, but in reality this sort of thing happens every decade or so. Long-term Capital Management nearly caused the collapse of the stock market in the 90s, for example. The key is just riding out the bumps and focusing on the long-term - whether it be in US stock markets or abroad.

From CNN Money:
The market is now down about 10 percent for the year and more than 15 percent from its high in October of last year. Sensationalistic headlines read something like "worst start ever for the stock market," and "as January goes, so goes the year." Such anxiety-inducing hype makes it virtually impossible for us to ignore the doom and gloom and just stay the course, but that's exactly what you should do.

Those looking to get in on the benefits of a Roth IRA still have time to get one for 2007 as long as they act before the April 15th tax deadline. Setting up a Roth IRA before this deadline can also enable you to contribute the full amount for 2008 instead of having to wait until later. This is especially a great move for those just getting started as a little bit now can definitely add up in the future.

From CNN Money:
... You can still stash up to $4,000 ($5,000 if you're 50 or older) in an IRA and have the contribution count toward the 2007 tax year, as long as you do so by the April 15th tax filing deadline. Just be sure that you make it clear to the brokerage firm, mutual fund company or bank you're dealing with that the contribution is for the 2007 tax year. As long as you do that, you'll retain the option of also making a contribution for this tax year, which, by the way, can be even larger, since the ceiling for IRA contributions for the 2008 tax year is $5,000, plus an extra $1,000 catch-up contribution for anyone 50 or older.

The Fed's actions today were widely expected and should have at least some postive effects for consumers, despite being unlikely to stave off a U.S. recession. Consumers will find lower mortgage rates, car loans, and credit card interest rates; however, savings accounts will earn much less as the move is designed to encourage consumers to spend or invest their savings. The emergency rate cut comes after a massive drop in the world stock markets ahead of a widely expected U.S. recession. Consumers may also find themselves with more money with an anticipated tax refund...

From US News:
Consumers aren't directly affected by today's Federal Reserve cuts in short-term interest rates, but they could be soon, as banks respond to the opportunity to borrow money more cheaply.

Mortgages: Consumers with good credit and money for a down payment are likely to find lower mortgage rates. "It will be cheaper to borrow money if you can get the loans at all," says David Wyss, chief economist at Standard & Poor's, noting that banks have grown more careful about lending money to risky consumers. "If you have bad credit, or if you're trying to buy with nothing down, as many have been doing over the last few years, it's a lot harder," he adds.

Car loans: Car loans also tend to respond quickly to changes in the prime rate, says Wyss, so those in the market for a car could find it cheaper to borrow money.

Credit card debt: Many cards come with fixed interest rates, which are unlikely to be affected by the Fed's decision, and even those with variable rates are unlikely to see changes anytime soon. "Credit card rates move very sluggishly," Wyss says.Savings: Interest rates on savings accounts, treasury bills, and municipal bonds tend to move together, so those who are storing money in savings accounts, certificates of deposit, or money market funds will most likely see their money earn less. "That is part of the Fed's planning. They want people spending (or investing), not saving," Levenson says. "That's what low interest rates do."

Savings: Interest rates on savings accounts, treasury bills, and municipal bonds tend to move together, so those who are storing money in savings accounts, certificates of deposit, or money market funds will most likely see their money earn less. "That is part of the Fed's planning. They want people spending (or investing), not saving," Levenson says. "That's what low interest rates do."

Equity markets around the world took a huge hit yesteday while the U.S. stock market enjoyed a holiday. Markets in Europe, Asia and even Latin America experienced massive declines as fears of a U.S. recession gained even more traction. The Fed agreed to cut rates once again, but many believe that it may no longer be enough to stave off what could become one of the toughest recessions in recent times. The U.S. stock market, which opened today, found itself able to hold off on the massive declines predicted by the futures market on Monday, but losses still came in at over 100 points. It appears like a recession is more likely now than ever before...

From SperoForum.com:
On Monday, fears of a US recession spilled over into Asian markets sending stocks tumbling. Indexes were hammered across the board in what turned out to be the worst day of trading since 2001. In India, the Bombay Sensitive Index plunged 1408 points, to 17,605. In China, the Shanghai Composite dropped 266 points (or 5.5%) to 23,818, while in Japan, the Nikkei fell 535 points, to 13,325 points. The bloodletting stretched across the continent and into Europe where shares nosedived by more than 4% by mid-morning “putting them on track for their biggest one-day fall in more than four and a half years.”

The President's new economic stimulus package is something that has to be approved for the simple reason that nobody wants to oppose it. Would you vote for the guy who decided against giving you free money? The currently planned $800 cash giveaway would provided citizens with money, but it's not all that likely that they will go and spend it at the mall and stimulate the economy. Many American's are cash poor these days and would likely put the money towards holding off creditors for another day. All that does it keep them alive for a few more weeks... What America really needs is economic change that would instill confidence in our economy and prevent any future busts like the one we've seen recently and so often in the past.

From AxisOfLogic:
The new word of the week is "economic stimulus package." Everyone is for it.

The President wants it if only because he knows a worsening economic crisis will leave his Administration in deep doo-doo, the way it did his dads' back in '92. Ben Bernanke, chairman of the Federal Reserve, is all for it if only because all of his rate cuts and "injections" of money into the financial system have not turned the US economy around.

He told Congress Thursday: "put money into the hands of households and firms that would spend it in the near term." This is likely to take the form of tax rebates and direct assistance.

And all the candidates-well most of them---want it too. Or at least they want something upbeat that will stimulate voters. John McCain lost Michigan, it is said, because he was too negative. Mitt Romney won because he promised to wave a magic wand, repeal Globalization and make Detroit what it one was.

Dream on.

Do you need more time to deal with your mortgage problems? Try filing for Chapter 13 bankruptcy and you could buy yourself a few more months - at least that's the strategy that people are now using in Las Vegas. Bankruptcies have hit new highs, particularly in Nevada, as the housing market has crashed leaving many out in the cold. Those seeking bankruptcy protection for their housing woes may also benefit from future laws aimed at empowering bankruptcy attornies with the ability to reduce the amount owed on mortgages - similar powers to what they can now do with unsecured debt...

From The New York Times:
John Rao, a bankruptcy specialist and lawyer with the National Consumer Law Center in Boston, said he saw a spike six months ago in Chapter 13 filings because of consumers’ mortgage problems.

Professor Lawless, a bankruptcy specialist, also saw a connection between foreclosures and Chapter 13 filings. “The new law has contributed to a higher percentage of Chapter 13s, but the mortgage crisis undoubtedly plays a role,” he said. “Distressed homeowners traditionally file Chapter 13 to save their homes.”

In Las Vegas, Judge Bruce A. Markell of United States Bankruptcy Court has seen a larger percentage of Chapter 13s lately. But an increasing number are “placeholder” filings by consumers who have no possibility of affording their mortgages’ resetting interest rates, he said.

Unless a creditor is very diligent, a Chapter 13 filing stays a foreclosure for two or three months, Judge Markell explained: “The placeholder filing buys you time to time to maneuver, to find another location.”

The President has called for another economic stimulus package in order to assist in helping the economy get back on its feet. The problem is that we are here because consumers and lenders were irresponsible and putting more money in their hands will not necessarily solve the problem. In fact, it may compound it. Sure, more money may lead to more consumers spending money at retailers but it is likely that they will leverage this money even more in order to get themselves into more trouble and debt. In the end, this would likely be a short-term solution to a long-term problem that seems to happen every 15 years or so in our market.

From the New York Times:
President Bush called on Friday for about $145 billion worth of tax rebates for American families and incentives for businesses to provide “a shot in the arm to keep a fundamentally strong economy healthy” and avert a slide into recession. The president said the package “must be big enough to make a difference” in an economy as large as that of the United States, meaning it should be worth about 1 percent of the gross domestic product, putting it at $140 billion to $150 billion, Treasury Secretary Henry M. Paulson Jr. said later.

Many people are claiming that the worst may be over after this next wave of poor earnings; the VIX has reached historical highs, writedowns have peaked, consumer confidence hit a low, and many people are calling for capitulation. However, many others insist that there will only be more writedowns to come as the credit crisis spreads into commercial real estate and consumer credit. We have already seen substantial writedowns from JPMorgan and others in consumer credit cards while many large commerical projects are being sold off or put on hold due to the lack of funds. This thing could last a lot longer...

From Forbes:
Banks have written down more than $100 billion since the summer. Yikes. Now the bad news: There are still billions worth of potentially toxic securities sitting on the books. The additional $1.3 billion write-down disclosed by JPMorgan on Wednesday was just the latest loss big banks have reported in the fourth quarter. Merrill Lynch (nyse: MER - news - people ) is expected to report a sizeable write-down when it reveals fourth-quarter numbers on Thursday, by some estimates in the neighborhood of $15 billion. Bank of America (nyse: BAC - news - people ), Wachovia (nyse: WB - news - people ) and other big lenders report next week and are also expected to write down billions of securities holdings.

Student debt is soaring out of control as tuition costs rise and assistance continues to fall. The disturbing trend is forcing many students out of school and forcing others into a lifetime of debt repayment. Middle-income students are often the ones left out to dry in the process as the low-income students often receive Federal aid and high-income students don't need anything. A new plan in New York calls for middle-income students' families to contribute no more than 10% of their annual earnings to tuition costs. Right now, many families are paying far more than they can afford to put their children through school. Perhaps other states should consider similar plans before we start sending a whole new generator of debtors into the workforce.

From Zwire.com:
Believing that middle-income students too often get the shaft when it comes to financial aid, New York State Senator Ken LaValle (R-Selden) has unveiled an initiative that would throw a lifeline to families facing certain debt from college costs, but with the proviso that students who benefit remain in New York State for five years. Under the legislation, those families whose total net taxable income falls between $60,000 and $150,000 per year would not have to contribute more than 10% of their annual earnings to tuition costs and other related fees, LaValle said, but not before they have exhausted their possibilities for obtaining money from other state and federal aid programs, such as Federal Pell Grants and the NYS Tuition Assistance Program.

The European Union has adopted a series of new rules aimed at giving consumers more and better information that makes it easier for them to make informed decisions about consumer credit and loans. The new rules would make the total cost of the loan clear and establish a standard for calculating interest rates. Moreover, consumers would have to be informed of the reasons why a loan is refused. These rules are a great start for the EU and the US should follow their lead and adopt several of their own rules designed to increase transparency for consumers.

From ChinaView.CN:
The European Parliament(EP) Wednesday approved new rules governing consumer credit across the 27-nation European Union (EU). In welcoming the approval, MEP Malcolm Harbour, who serves as a spokesman on the internal market for a political group in the parliament, said the new rules "will give consumers more and better information, making it easier for them to take informed decisions." Under the new rules, the total cost of loans will be clear and there will be a standard method of calculating interest rates. Consumers will also have to be informed of the reasons if a loan is refused.

JPMorgan Chase has become the latest bank to fall victim to consumers unable to pay their credit card bills. The bank announced that its earnings are down to $3 billion from $3.9 billion after a $1.3 billion subprime-related writedown. The move follows Citigroup's huge $18.1 billion writedown after higher than expected credit costs due to increasing defaults on consumer loans and credit cards. And this may only be the surface of the problem according to many analysts...

From NBC:
JPMorgan Chase became the latest bank to disclose the rising toll from the US mortgage crisis and increasing consumer loan losses, saying fourth quarter earnings sank 21 per cent following a $1.3bn subprime-related writedown. The subprime damage at JPMorgan, while significantly less than at rival Citigroup, still drove earnings down to $3bn, or 86 cents per share, from $3.9bn, or $1.09 per share, last year. Citi disclosed an $18.1bn writedown on Tuesday and said it lost nearly $10bn in the fourth quarter. It reported higher than expected credit costs do to increasing defaults on consumer loans.

A new mortgage act gives a tremendous tax break for homeowners. Now, homeowners can refinance their mortgages and pay no taxes on any debt foregiveness that they receive. Many of the beneficiaries of this new law already avoid taxes by qualifying as a short sale, but the law will still help a select few save money and is worth researching. Consult your local tax professional for more information on whether or not you can qualify!

From IndiaPost:
Homeowners found three attractive tax breaks among their holiday presents, thanks to the federal Mortgage Forgiveness Debt Relief Act of 2007, which was enacted in December. Forgiven debt may be free from income tax. The first tax break concerns forgiveness of debt, which occurs when a lender forgoes repayment of principal and/or interest the borrower owes. Typically, discharged debt is considered ordinary income to the borrower for income tax purposes. The new law allows taxpayers to exclude this amount and thus escape the tax liability. "When you're worried about making your payments, higher taxes are the last thing you need to worry about. So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive," President Bush said in his remarks upon signing the law.

The government is again overhauling taxes and this time there is a change that will greatly benefit those in lower tax brackets - they won't have to pay any capital gains tax! Obviously, the largest benefactors are retirees that will be able to cash their investments out for free if they fall within these tax brackets. Those with relatives in low tax brackets can also gift investments to them to sell tax-free. The best summary of this rule online right now is over at the CPA Journal for all of those interested in this great new opportunity.

From PFBlog:
Yes, for the next three years (2008 to 2010), taxpayers in those two tax brackets [10% and 15%] won't have to pay anything for long-term capital gains and qualified dividends. The tax rate on such income for those of higher income, will stay at the prevailing rate of 15%. For short-term capital gains and disqualified dividends, all taxpayers still have to pay tax at the marginal tax rate just like other ordinary income.

It is becoming increasingly apparent the the U.S. economy may be in trouble unless some major changes are made. Consumers are taking on more debt than ever before in order to fund their spending habits while lenders are being bailed out and acquired by foreign companies. Meanwhile, a mortgage crisis has broken the back of the largest source of funds for most Americans. When consumer debt rises to $15.4 billion in the same month that Citigroup is bailed out by foreigners for $7.5 billion then we know we are in for some problems - especially when Consumer Confidence hit an all-time low...

From SeekingAlpha:
It took a few years, but some key factors are finally exposing the dangerous delusion of the credit-fed lifestyle and how it affects the U.S. economic outlook.

• Debt is up, and consumer confidence is down
• Sovereign-wealth funds are coming to the rescue of drowning U.S. lenders
• Two wars and broken social services mean the national balance sheet will get much uglier
  

The sub-prime credit disaster and subsequent brake-slam of the international finance industry are tossing momentum back and forth from the highest levels of the economy down to the lowest-paid workers. Unemployment is also up, and you can bet that driving around to look for a job gets a lot more urgent when gasoline costs upwards of three bucks a gallon.

U.S. consumers managed to set several records this year: More bankruptcies than ever before, more foreclosures than ever before, and ironically more online spending than ever before. This past holiday season resulted in $29.2 billion in spending online alone as credit cards offer consumers more and more credit. Brick-and-mortar stores showed sluggish growth, however, as more and more business went online and consumers felt the credit crunch. So, why weren't online stores affect? Perhaps online sales - that don't involve an actual cash transaction - make it easier to spend money... Either way, it is important for consumers to keep their online spending in check in 2008!

From Fibre2Fashion:
comScore Inc released its final update of holiday season e-commerce spending for the 2007 holiday season (November 1 – December 31). $29.2 billion was spent online during the holiday season, marking a 19-percent gain versus the same period last year. "This year’s online holiday shopping season has concluded with a record $29 billion in spending, a 19-percent gain versus year ago," said comScore Chairman Gian Fulgoni.

Bankruptcies are expected to be up sharply again during the beginning of this year if history repeats itself. It is increasingly important for consumers to realize the ramifications of bankruptcy before going through with the process. Bankruptcy remains on your credit report for ten years and can make it extremely difficult to obtain future loans. As a result, it is important to explore other alternatives such as debt settlement or credit counseling as a way to get out of debt while avoiding bankruptcy. Debt settlement is a process that can reduce what you owe by up to 40% while helping you establish a payment plan. Meanwhile, credit counceling is a process that entails putting together a budget and paying off what you owe over time. Either program is often a better option than bankruptcy that should be explored!

From Journal Gazette:
Last year, post-holiday bankruptcy filings spiked in the first quarter to more than 185,000 – a steep increase over the year before. If the general rule about history repeating itself bears out, we should expect another surge in the beginning of 2008.