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I sent a copy to my senator and congress
person. I don't know if it will help any. The bank lobby really did
a job here.
----- Original Message -----
Sent: Wednesday, August 31, 2005 9:56
AM
Subject: Re: [RT] new law effecting stock
mkt
Thank you for the informative post Ben. Let's all please
refrain from expressing *any* political or socially political comments about
what the post says and limit comments to the points made re the impact on
consumer spending, banks, the economy and the markets.
Thanks,
Bob
At 12:08 PM 9/1/2005 -0400, you
wrote:
Part 2: Yesterday, I covered the Dow Jones Industrials and the
sizeable drop that it could see within the
next 6 to 9 months. In
today's commentary below, I address an important event that dramatically
increases the odds of such an occurrence unless Congress and our politicians
change things soon.
2005 ... The year of the Black Christmas?
Millions of Americans are going to have a huge
surprise before Christmas ... a big enough surprise to have them make a huge
cut back in Christmas spending.
The event will surprise you ... it is
the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
If your first thought
is that it will not apply to you, and only to those who are involved in
bankruptcy
conditions ... think again.
The new law has hidden provisions that
will effect every American with a credit card who has been making the
minimum payment amount in the past. This provision, by law, will have the
banks change the minimum current payment of 2% of the balance to 4% ...
changing the pay off period from 20 years to 10 years.
When
consumers get their 100% increase required minimum payment in November’s
statement, available
discretionary income will be sucked out of retail purchases and into the
banks.
If I had to
estimate it, this new change in minimum required payments will drain a
minimum of 2.4 Billion Dollars of Christmas shopping purchases (November and
December payments) and a reduction of discretionary income of 14+ Billion
per year not taking into account increases in interest rates being
charged. This is based on 2002 total outstanding U.S. credit card debt
statistics. Now, 3 years later, it has to be significantly more. The effect
on retail store profits, the stock market and the economy will be a very
negative event.
Information about Americans with Credit
Cards ...
Currently, 92% of Americans carry 5 to 6 credit cards
in their wallets, and 55% have 7 to 8 cards in their wallet.
About
20% of credit card users are “maxed out” and cannot charge more. These
consumers, with no money will be forced to make double payments. This has to
be some new form of banking insanity, as this will certainly force many of
these consumers into bankruptcy ... but only after October 17th. when the
new bankruptcy law doesn’t allow them to erase the charge card debt ... and
requires them to pay it off during their lifetime. This will have a long
term negative effect on the economy.
For banks, it requires them to
keep the amounts due on the books because technically it has to be paid, as
guaranteed to the banks by the new law. This will create fictitious balance
sheets for banks that make assets look wonderful when the likelihood of them
actually receiving the payments are small.
Currently, the average
credit card debt per person is estimated at $8,652. A minimum 2% payment
used to be $173.04 ... the new minimum payment will be $346.08. This happens
just in time to create a Black Christmas for retailers. This is the average
debt, so who have $20,000 in credit card debt will go from $400 to $800 per
month. (Total U.S. minimum monthly payments as an aggregate amount would
increase 1.2+ Billion/month.)
I spoke to one subscriber who told me,
its okay for everyone in my State of Massachusetts because all our homes are
protected under the Homestead Act for $500,000 of assets.
Wrong again
... Last April 21st. The new law quietly changed that. Homestead exemptions are now capped at
$125,000, regardless of what the law of your state is, unless you've resided
in that state for at least 40 months.
What about someone’s car if they might be filing for
Bankruptcy after October 17th.? The new Chapter 13 law requires one to pay the full loan amount ...
not the current value of the car if you want to keep the car. This will apply to loans less than two and a
half years old as of the date of filing. Similar new rules apply to any other property
classified purchases within the last year prior to filing.
Some folks I have talked to said,
"that anyone filing bankruptcy is a bum and deserves everything they get!".
But, here are the facts ...
Most filing bankruptcy are not trying to cheat
the system. The average person filing earns a little over $22,000 per year
and the majority had a long period of unemployment before filing for
bankruptcy. Consumer's Union reported that 85% of the elderly had medical or
employment reasons for the bankruptcy. Single, divorced mothers with
children struggling to survive make up a large percentage of bankruptcies.
What ever happened to our “Kinder, Gentler Nation”? Whatever
happened to empathy and helping those who are truly in need. We spend
Billions of dollars in government give aways to other countries and neglect
our own people at home. This is indeed a sad loss of compassion for
this country.
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