I have many lovely friends who know and enjoy my reaction to Ms. Orman and find it amusing to send me interviews with and articles about her.  One such dear acquaintance sent me a piece from USA Today a few days ago that resulted, as usual, in an almost instant headache.

First off, the headline:

“Suze Orman: Why the Recession Is a Good Thing - Young people ‘have it so great it’s not even funny’”

“It’s not even funny” is not a phrase I want to hear from a 60 year old woman. For the record, neither are her constant “girlfriends” comments. But those two things, “it’s not even funny” and “girlfriend” (as in “girlfriend, I know what you mean, cuz girlfriend, I agree with you 100%, that was so wrong what he did to you, girlfriend, it’s not even funny!”) are admittedly two pieces of the English language that I would be happy to see used less often in general.

I know. I’m being petty.

But then she goes on to be genuinely … ooooh, GRR! Like these two bits:

Do you think you and other financial experts could have done a better job of anticipating the crisis?

I’m a personal finance expert. My expertise is not as an economist, not as a stock market guru, not as a precious metal predictor, or in interest-rate foreshadowing. My job is to look at what happened in the economy and what is going on in the world of finance and to tell people, based on fact, this is what’s happening now; this is what you need to do with your personal money. To that end, I think I was really far and above anybody else, and I got attacked for it.

Fair enough - good to read. She did say earlier that she ” … saw real estate coming down; I saw the market might be a little whatever,” whatever “whatever” means, but OK, at least she’s going on record that she’s not in the forecasting business. Except that later, she apparently is …

When will we recover from the current crisis?

I’ve gone on record that the year is 2015. What do I mean by that? We may come out of recession this year or next, but that doesn’t mean we won’t go right back into it a year or two later. We might see the stock market go up 30, 40 percent. That doesn’t mean it won’t go right back down. We may need help for longer than we think.

[...]

It’s not over when people simply say we’re out of recession. Tell that to somebody who can’t get a job and is underwater in their home. [The recession will be over] when there is hope for every class in America. Not just the upper and the middle but the lower class as well. Then Suze Orman will say this economy has turned around. The TV will spin it that it is turned around and hope that you will spend money. Do not listen when other people tell you your personal financial situation is OK. When normal human beings feel hope again, then Suze Orman will say this is complete. I don’t think that happens until 2015.

Pardon me? She got attacked for not predicting the downturn and feels a need to explain that away, but then in the same interview, decides that 2015 sounds about right? With the qualifier that “when normal human beings feel hope again,” she - in the Royal Third Person manner, of course - will say that it’s over?

I tell you what. I am also not an economist, stock market guru, precious metal or interest rate predictor, but here’s my prediction for the economy - hell, here’s my prediction for the whole world’s economic, political, intellectual and spiritual situation: When things are really good for everyone, they’ll be really good for everyone.

Sigh.

Ms. Orman has also changed her position on paying off credit cards at all costs, which I’m glad to see, mostly because of the biggest problem I see with gurus in general - one piece of advice does not fit all. I have read some of her books and understand that she really does want people to consider their own individual situations, but being as huge as she is becomes a double edged sword. People hear the easy fix and seem to go to great lengths NOT to consider their own individual situation.

Just to point out one example, a month or two ago I saw her on an episode of Oprah giving a piece of advice to a woman who had lost her job and received a lump sum severance package of several thousand dollars. She had a credit card balance that she could pay off with that severance and still have a couple of thousand dollars left over, and she asked Suze whether she should do that or keep the money in the bank to pay bills. If I recall correctly, she had no backup fund to cover expenses until she got another job, and no job prospects in the immediate future.

Now, rationally speaking, what would YOU think would be the logical course of action, if you had never heard Suze Orman’s advice to always, always, always, always pay off your credit cards?

That’s right - keep the money in the bank, pay the minimums, and make sure your bills are paid. That’s what Suze said to do, and the gasp of amazement from the crowd and the cutaway to Oprah’s wide eyed stare of shock was frankly quite depressing.

And to wrap up, one last point in the USA Today interview that got under my skin:

Do you think young people have it worse than any other generation, with their higher unemployment rate, high debt levels, and weak job market for graduates?

[...]

If the economy kept running the way it was, you guys would have been broke for the rest of your life. Real estate was going up and up. You would never have qualified for real estate, and companies were shipping jobs offshore. So where were you going to get a job? The price of tuition was so high [that graduates] owed $150,000 in student loans. The price of milk and other prices were so off the charts. What were you people going to do? The stock market was at 14,000, so every time you put money into your 401(k), you bought less and less shares.

So the financial crisis is a good thing.

This is the greatest thing that has ever happened to youth. It gave you a wake-up call that your parents were living infinancial la-la land. They were just trying to impress everybody with money they didn’t have. Your parents and grandparents were trying to keep up with the Joneses without having a clue that the Joneses had $50,000 in credit card debt, and that’s why they could afford a third home.

Look, real estate prices are going to have to drop quite a bit more order for young people to get qualified for a new home, especially since credit is much tighter now. I’m not aware of any major news that jobs are being repatriated back to the United States. Tuition is still going up at a faster rate than inflation. I don’t even know what “off the charts” in terms of milk prices means, and telling people that essentially it was bad to be contributing to your 401(k) in market that she herself said “might be a little whatever” (certainly not a gloom and doom sentiment) is just an odd path for her to choose to take. But  ultimately, the real issues is that I doubt that it’s much of a wake-up call anyway. Our society is still incredibly irresponsible when it comes to personal finance education for children, and frankly, this downturn isn’t nearly serious enough yet to have the kind of shock impact that would truly change behaviors across the country. Not yet, anyway.

Kudos to her for her success, I really do believe she is goodhearted and has the best intentions. I have watched her a few times and sensed that she gets genuinely frustrated when people call and do thinks like ask if it’s OK to buy a $5,000 dining room set when their net income is $1,500 a month and they have a mortgage and two car payments. This interview, however, was just completely phoned in.

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This past week, our home in Colorado played host to my parents, up for a visit from a little north of Houston to spend time with their dearest daughter, adored son-in-law, and (OK, let’s be honest here…) their three grandsons. We had a great time over the holiday weekend and ventured out of our little burg a few times to check out the somewhat local offerings, and it really made me think about how especially in a slightly strained economy, there really isn’t a need to go jaunting off to points far and exotic.

Now, I’ll admit - we live in a “destination.” Colorado is a playground in all seasons, after all, and I am not kidding when I say that every single day there is a point where I look at the mountains and think, “I can’t believe I live here.” We don’t take advantage of everything our area has to offer by a long shot, but it’s nice to have so many options. Still, I’m willing to bet that in most places, most people probably haven’t really begun to scratch the surface of things to do in their own area.

So, what did we do? Plenty, and yet not enough. We had a 4th of July barbeque and fireworks in the neighborhood, went to the Colorado Renaissance Festival, the Cheyenne Mountain Zoo, and the Air Force Academy. We watched rented movies and went out to eat a couple of times, wandered a cute town in the area and drove through Garden of the Gods. We wanted to go to Cave of the Winds but our timing was off for the tours. We napped. We went to our town pool, made a yummy Tres Leches cake, played cards, and talked.

What did we not do? Spend hours in airports with tired, hungry kids, for one. I have to admit, I am not a fan of the whole airport experience. People without kids hate seeing children board airplanes, but let me tell you something - the people with the kids don’t get too excited about it either. Hours of packing, parking, shuttling, security line-ing, waiting, boarding, flying, deplaning, baggage-ing, transporting, hotel checkin-in-ing … it’s no picnic.

What we DID do was only spend one tank of gas in a week, bring sandwiches and have picnic lunches when we could, eat out at restaurants a couple of times, and stay in a hotel one night even though we were only an hour away from home (hotel pools and buffet breakfasts are somehow better than pools and breakfasts you can get at home).

If you have decided to cancel your summer vacation this year, I challenge you to look around in your area and see if there isn’t some fun in your own back yard. There may be festivals you’ve gone to in the past but haven’t checked out in a while, museums and local attractions that you are so used to seeing that you just don’t register them anymore, and new venues you may have missed. Clumping them all together in one whirlwind week can make it seem like more of a vacation too, and splurging on little treats that you would usually only indulge in on an out of town trip can liven things up a bit well.

Enjoy your summer!

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One thing that never really came up was the actual meaning of the day. Declaring our independence from the tyranny of England and all of that stuff … never talked about it. Of course we all knew the origin of the holiday, but two hundred years later, let’s face it - Independence Day is about fireworks, barbecues, baseball, parades, concerts, and flag shaped cakes.

So this year as our family does the cookout thing (I’m thinking “make your own shish kabobs”) and then sets up chairs in the driveway to watch the fireworks our town will be sending up just half mile from the house, I think it’s OK to think about independence in a slightly different way.

Independence from debt. A friend of mine has been using Dave Ramsey’s program to get out of debt and although his personality personal grates on me, it’s working for her and I’ve been so happy to see her post on Facebook when she sends off another check to close out another chunk of debt. She and her husband have had to make some lifestyle changes temporarily in order to pay off their debts, but the liberation she obviously feels is so uplifting. How much of your current monthly income is going towards debts for things you ate, wore or experienced months or even years ago?

Independence from marketers. It’s been amazing to me how many advertisements we apparently don’t see in our household since we ditched cable and went to antenna only television. The decrease in show availability has translated to watching more videos and PBS, which further limits our exposure to advertisements. I personally love commercials - I love the funny ones, and I love breaking the unfunny ones apart - but I don’t miss being completely inundated. Still, we see plenty. I would love to see Americans have independence first and foremost from pharmaceutical ads, and then I’d love to see some better disclaimers on all other commercials. Take, for example, the Dove commercial where they show you what you’d look like under black lights if you bathe with some non-Dove soap … looks like you’re covered in chalk, right? Except that it doesnt. It’s an artist’s rendition, completely bogus. That irritates me, and before you say, “just turn off the TV,” the same claim is repeated in print ads.

Independence from medical insurance insecurity. Not going to get political here, but our system is BROKEN. It is ridiculous that 40+ million people in our nation are uninsured. Some of them may be uninsured by choice, but I’d be willing to bet not the overwhelming majority. I have had conversations with insurance brokers who fully agree that the insurance industry is out of hand, spending an increasing amount of their expense budgets on administrative costs as opposed to claims. Health insurance is not the same thing as auto or property insurance - we shouldn’t have to shop around trying to compare the tiniest details of coverage between several companies when it comes to our care and the care of our families. I read an article from the New York Times should have never needed to be written - check out this bit about a man who purchased group insurance through his employer only to find out that it didn’t actually cover his care during two heart procedures:

He and the hospital say they were surprised to eventually learn that the $150,000 hospital coverage in the Aetna policy was mainly for room and board. Coverage was capped at $10,000 for “other hospital services,” which turned out to include nearly all routine hospital care — the expenses incurred in the operating room, for example, and the cost of any medication he received.

In other words, Aetna would have paid for Mr. Yurdin to stay in the hospital for more than five months — as long as he did not need an operation or any lab tests or drugs while he was there.

Absurd.

In all three of these cases, we as consumers pay money into a system that we really have no control over. We pay our debt interest, cable/satellite fees, and insurance premiums into a system that in a lot of ways has just run amok. We pay the corporations, they pay the lobbyists, the lobbyists get the government to let them do whatever the heck they want to us. Indirect taxation without representation, but at least we do have a little control over how much we contribute to the madness.

This July 4th, I wish for you financial independence. And really great barbeque.

Remember Schoolhouse Rock? I loved Schoolhouse Rock when I was a kid. Still love Schoolhouse Rock. Enjoy ….

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Still, Americans are an optimistic lot in general and even amidst unemployment carnage, foreclosures and worries about inflation or deflation (depending on who you read), the stock market has been on a streak that implied that the worst was over - and maybe 401ks weren’t going to be completely decimated.

There’s a problem with that, though. Even after we came to the general realization that the economy of the last several years was essentially a fraud, we are still willing to believe that a three month stupendous rally is “real” and then we freak out when it shows any sign of pulling back. From USA Today:

The recent pullback, which has sliced 5.6% off the Standard & Poor’s 500 index since its June 12 recovery high, has etched fresh worry lines into the faces of Wall Street traders, many of whom are starting to whisper the dreaded “C” word: correction.

The drop is the biggest for stocks since the March 9 bear-market bottom. Investors who drove the market up 40% after the March low on hopes the 18-month-old recession was loosening its grip are rethinking their bullish outlook amid signs the recovery will be less robust than anticipated.

[...]

“The market,” says hedge fund manager Patrick Adams of Choice funds, “is coming to realize that the economic news is better but not good.”

[...]

Stocks have come under pressure because of fears that the government’s massive stimulus to stabilize the economy could result in a huge debt burden that will cause a surge in inflation and borrowing costs, says Adams. Both outcomes threaten the recovery.

First of all, I doubt that traders have any more worry lines on their faces than they did before. Traders are gamblers, and the market is their game. They know that a 40% increase in the stock market in three months is absurd and there WILL be a correction (a drop 0f 10%) at some point. They also know that it won’t necessarily be because the economy is slumping - at a certain point, it’s logical to take your money off the table and collect your profits, and if enough people start to do that at the same time, which can become a wave of trading if the market starts to drop and they don’t want to lose the gains they’ve waited so patiently for over the last three months.

Second, using the word “investors” in this context is pushing it a little. Again - three months. Although the technical definition of an investor is someone who purchases assets in the hopes of making money off of them, the generally accepted extension to that is that an investor is more of a long term person or entity. An investor would look askance at a market that was going up at the fevered pitch rate that the S&P has been running over the last few months.

A speculator, on the other hand, would be drooling, and that’s what we as a society seem to not be able to grok. Just like so many things - weight loss, six pack abs, thousands a month in income from buying and selling houses, a huge flat screen TV - we Americans want results immediately. We don’t want to wait, we have no patience, we seem to love freaking out. To be fair, the media really likes to freak us out too, taking every opportunity to declare disaster, but we gobble it up.

And finally, “the market” has never thought that the news was good. Traders can make money whether “the market” goes up and down, and fears about the stimulus program spiking inflation and borrowing costs have existed since whispers of the possibility that a stimulus might be necessary started making the rounds. Making it sound like this is a new fear is irresponsible. If anything, the market’s weakness is that it tries to anticipate and reacts to everything, “imperfect information” that can lead to swings far greater than what fundamentals would account for, and there is absolutely no way analysts haven’t been taking into account the dumping of a trillion or two dollars into the world market.

Bottom line - we will see corrections, we always see corrections. Corrections exist to … correct. They are not a bad thing, especially after a 40% rise in three months. The sky is not falling …

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With more homeowners facing the threat of losing their homes to foreclosure — and more defaulting clients to cover — mortgage insurance companies are stepping in to help them stay put. “As a mortgage insurance company we stand in the borrower’s shoes,” says Michael Zimmerman, senior vice president of investor relations at MGIC Investment, a mortgage insurer.”If the borrower loses the home to foreclosure, we have to pay.”

It’s brilliant! I’ve always hated private mortgage insurance (PMI), a requirement if you take out a loan for more than 80% of the appraised value of your home. It’s a relatively pricey addition to a monthly payment, so I’ve always done whatever I could to avoid it. Fortunately (or unfortunately, depending on how you want to look at it), increasingly creative financing options and generous appraisers came through when I was going through a divorce and I was able to refinance without PMI, and even last year when I refinanced out of that “divorce” mortgage - an interest only with a teaser rate that allowed me to not have to sell my house - we were able to avoid paying for mortgage insurance.

Now that I’m trying to work with a my bank on refinancing the terms of our mortgage since my job went bye-bye, I almost wish we had mortgage insurance. I’d be on the phone first thing in the morning asking if they thought they could try getting through the obstructionist maze of “oops, your fax didn’t get here,” and “yeah, we’re really busy and we’ll be sure to assign you to someone soon,” and “we’re just calling you for the fifth day in a row to let you know that we have no new information for you, please don’t call us.”

If you have private mortgage insurance, the name of your carrier should be in your loan documents. If you don’t have private mortgage insurance and are trying to renegotiate the terms of your mortgage, it might be worth a mention to your bank - the next time you call them even though they told you not to call them - that in case they hadn’t noticed, there is no insurance backing up your loan besides the home itself. Not in a mean, threatening way, of course, just as a friendly point of note that without private mortgage insurance, they’re going to take even more of a loss on a foreclosure if they don’t work with you. Soon.

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