Marketplace Money on Memorial Weekend

The Money team wishes you all a great Memorial weekend! Whatever you’re up to, and wherever you are, please take a moment to remember the men and women of the armed forces. We’ve been spending some time with them and their spouses recently, and we’ve found that life in the military these days is every bit as tough as you might imagine, and it can make the most basic personal finance issues horribly complicated.

Tess took a trip down to Camp Pendleton to meet with Marines in a helicopter squadron, whose commanding officer recently pioneered a financial literacy program for his troops. One innovation – posting personal finance tips on the bathroom stall walls! They do not believe in wasting time in the Corps. We also gathered some military spouses at Vandenburg AFB to talk with Tess about the particular personal challenges that arise when a spouse goes overseas. They say that changing jobs and moving house are two of the most stressful things that human beings can do: some of these people do both every two years.

Top of the show this week; the Consumer Financial Protection Bureau’s latest attack on the forces of financial darkness – prepaid cards. They used to be part of the banking netherworld, but now they’ve gone meanstream. Stacey Vanek Smith has the story. And Jeff Tyler follows up on his Money Matters story this week, talking about the pros and cons of “gateway stock” investing, and how to buy a real, genuine actual stock certificate.

Tess talks letters with Paddy, and Nancy Marshall Genzer reports on the long term unemployed. She met a woman whose been out of work for 18 months, but unlike many long term jobless people who can fall into depression and worse,  this lady is determined to fight back.

Memorial day is the start of summer, of course, so stand by to see lawns near you cluttered with all sorts of junk, as your neighbors go full swing into yard sale mode. Yard sales may seem like a smart way to clean out your closet and make a little cash, but commentator Kristina Wong says it ain’t that easy. Yard sales are quite the frugal thing to do, and that may be one reason why some people avoid them at all costs. Wisebread’s Meg Favreau talks with Tess about why some people refuse to embrace their inner tightwad, and suggests some ways to get comfortable with the concept of frugal living.

That’s our show! Write me, and let me know what you think.

 

From the Marketplace archives: Airline fees

Did you read that some airlines will no longer let passengers traveling with small children board first, giving preference to business/first class and elite frequent flyer passengers first? As well as those who bought priority boarding or have a premier airline credit card?  As the summer travel season begins and a lot of people travel with kids, this latest grab by the airlines is guaranteed to raise some hackles in economy class. It reminds me of the classic radio piece that Rico Gagliano did on airline fees a few years ago. Check it out. 

Fool me twice…

A groom wannabe in NYC is suing his former fiancée — who broke off their engagement twice in two years — arguing that she should pay back her share of rent and the deposit he put down for their wedding. He wants the $19,000 back from their bank account, $28,000 in rent, and half of the $27,000 in nonrefundable deposits for which he’s on the hook for their wedding for 150 guests. The filing doesn’t say what will become of the wedding gifts.

This week on Marketplace Money

We’re not big fans of games of chance on Marketplace Money, but we’re only human. Just like you (maybe) we daydream from time to time about winning big – in the lottery, at the track…or even on a game show. This week Tess Vigeland cuts the line at The Price is Right, to talk to people who’ll stand all day in the L.A. sun , hoping they’ll be picked to play – and win. Come on down, and find out what it takes!

Of course, if you win on a game show, you have to pay taxes on your laurels. What? You didn’t know? Good thing we talked to Luis Barajas! He has the lowdown on what to do in the even you’re a winner at pretty much anything that involves a prize.

Are you wary of Wall Street? It’s hard not to be, what with the goings-on at JP Morgan and the meltings-down across the pond in Europe. Tess talks with Senior Producer Paddy Hirsch and CBS Moneywatch’s Jill Schlesinger about the market’s recent ups and down, and Jill advises a caller on where to put your money if you want to avoid Wall Street. And speaking of being skeptical of the financial services industry, have you ever heard one of those investment company advertisements promising fat returns and wondered…EIGHT PERCENT?!? Who’s getting that kind of return in this market? Well, Chris Farrell has the answer.

How do you get to work? Car? Bus? Bike? How long does it take you? Twenty minutes? Two hours? Commutes are a grind – but if you think yours is bad, consider the supercommuter. Andrea Bernstein of WNYC reports on the people who take hours – and usually a jet – to get to the coalface.

You may, of course just commute to your neighborhood coffee shop and set up your laptop. If so, please don’t give other patrons that look – you know the one – if their laughter of chat happens to break your concentration. That’s what happened at Lulu deCarrone’s café. Her response? No more laptops. Find out how that worked for her.

We take a trip up north to the beleaguered northern California of Stockton, which still tops the nation’s foreclosure rate and is teetering on the brink of bankruptcy. Capital Public Radio’s Marianne Russ reports on what it’s like to live in a city where services have been cut to the bone.

We have a commentary from Wired columnist Lore Sjoberg on the danger that Apple’s latest retail strategy represents to humankind. And an illuminating  conversation with Robert Feldman, author of the Liar in Your Life, about telling fibs on your resume. His advice: DON’T DO IT!

Yours truly

paddy

 

JP Morgan’s tramp stamp

Marketplace bureau chief Heidi Moore has the ultimate explainer on how JP Morgan got egg on its face this week. Part of the devilishly complicated equation that led to the bank’s $2 billion in losses was the poorly conceived use of an index of credit default swaps.

An index of financial weapons of mass destruction???! Has your head just exploded? If so. I apologize. But allow me to explain just what an index of CDS is.

And index is a pretty simple thing – it’s just a record of how a basket of securities performs over time. If that’s too obscure for you, try this – imagine a basket filled with goods. They’re the same items you get at the supermarket every week – a dozen eggs, pint of milk, pound of kale, six pack of Guinness (OK, tmi). Every week you get the same ten things, but every week, because of certain variables, they add up to a different amount. Divide that amount by ten and you get an average. Now plot that average over time on a graph. Voila – your own personal grocery index.

You can put anything in that basket – a certain 30 stocks for example, gives you the Dow Jones Industrial Average. You can put a bunch of bonds in there. And you can put credit default swaps. CDS are insurance policies, protecting against the default on a company’s debt. And the cost of those policies varies from day to day. So you can pop 120 of them into a basket, do your math, and get an average.

Once you have that average, you can make bets on which way it’s going to move. And traders do this all the time. They wager on the direction of the Dow, futures indices, currencies, bonds – anything and everything. The JP Morgan trader they call the London Whale did exactly that, in spades. He made big bets that the CDS index would go one way, but it went the other. And he lost a lot of money as a result.

Where are we spending?

We got news this week that consumer borrowing surged by $21.4 billion or 10.2% in March to $2.54 trillion, the highest increase in 10 years. Total consumer borrowing now stands at almost the same level as before recession and is up more than 4% from the post-recession low.
So what are we spending our money on?
Student debt – no surprise there – and cars. The Fed said this week that non-revolving credit, which includes student and auto loans, increased by $16.2 billion to $1.74 trillion.
Bloomberg reports that demand for cars is so high now that US automakers are adding overnight shifts and cutting workers’ vacations. U.S. auto sales are on pace for the best showing since 2007 and a third straight year of at least 10 percent gains.

Assets

If you’ve eve heard the word “assets” used in business, but wondered what it really means, here’s a Whiteboard explainer.