If you are worried about your home going into foreclosure or you’re in foreclosure already, the U.S. Department of Housing and Urban Development offers the following tips:

1. Do not ignore the problem by letting things get worst.  The more you fall behind the harder it will be to catch up.
2. Be sure to contact your lender ASAP because lenders want to work with you and avoid foreclosure.  Many lenders have options to help homeowners.
3. Do not ignore warning of foreclosure.  Respond immediately to all mail and communications from your lender.  Ignoring the problem will not cause it to go away.  Most notices you receive by mail will have options to prevent foreclosure. Not reading your mail can cost you dearly.
4. Know your rights by reading your loan documents and know what your lender will do to foreclose your home.  Also, know the foreclosure laws in your state.

For more information visit http://www.hud.gov/foreclosure.

Last night on 60 Minutes was a very interesting segment on how the FDIC takes over failed banks.  The video below shows how a team of FDIC agents prepared to seize Heritage Community Bank outside Chicago. The team checks into a hotel under a fictitious name, CB and Associates, to prevent a run on the bank by depositors. The FDIC didn’t want anyone to know who they were or why they were in town.

Video: How the FDIC Takes Over a Failed Bank

Below is an interesting video of the world’s worst credit card ever by Continental Finance issued by First Bank of Delaware.  It’s interesting how people with bad credit get penalized with outrageous interest rates and fees.  These people already have no money and are being asked to pay more.  While the responsible people with good credit pay less.  It definitely pays to have good credit!

Video:  World’s Worst Credit Card Ever

In the late 1990s to early 2000’s when Internet stocks were blowing up, I went along for the ride and was exhilarated like most other investors.  Those were the good old days when everyone was making money.  

You didn’t have to know anything about investing in the stock market – just purchase some Internet stocks and you were almost guaranteed to make money.  Never mind if a company had no earnings, just buy it and watch your money double within days or weeks!  It was that simple.  

In the 3 years I spent investing in Internet stocks I invested about $40,000 and watched my portfolio (taxable and IRA) balloon to about $365,000 when the NASDAQ hit 5,000.   With my margin account, I had over $477,000 in stocks and felt my portfolio could hit $1 million in a matter of months.  Looking back, when the NASDAQ hit 5,000 (in March 2000) I should have sold everything because that was the beginning of the end of the ride! 

See screenshots of my stock statements before the downturn

Unfortunately, I ended up losing most of that money for 5 main reasons listed below:  

Reason one – I got greedy and started borrowing money to invest, using a margin account.  When the market started tanking, the value of my portfolio dropped faster with the margin account and I ended up having to sell fearing a margin call.  A margin call is when the value of your portfolio drops to a certain point to where the brokerage house wants their money back ASAP.  If you don’t sell your stocks to pay back the money or deposit extra funds in your account, the brokerage house will liquidate your stocks for you.

Reason two – I listened to the so-called experts and company executives in the news and on CNBC telling investors to hold on and to ride it out.   They all ended up being wrong. Looking back, many of the company executives pretty much lied so you wouldn’t sell their company stock.  They would paint a rosy picture of their company’s future, but many of them ended up bankrupt or were sold off.

Reason three – I got emotionally attached to my stocks.  There were many times I looked at my portfolio and thought about dumping all my stocks, but just couldn’t.  I liked my companies and I rationalized that it was just a market correction and soon the good old days would come back.  

Reason four – I didn’t want to send Uncle Sam a big tax check.  If I sold about $326,000 in profit, I would get killed with taxes.  I didn’t want to pay at least 40% (or $130,000) to Uncle Sam.  That would have been one hard check to write.  Looking back, I should have happily paid the money.

Reason five – Nothing goes up in a straight line forever.  A good friend of mine kept warning me that the Internet bubble would eventually burst and I should take some money out the market.   I wish I had taken his advice.

To this day, I’m still amazed that I rode the market all the way up and rode it all the way down, losing most of the money.  For a few years when I think about it, I would get this warm tingly feeling all over my body of anger at myself.  But today I’m over it. I’ve learned from my mistakes and hopefully I will not repeat them in the future.

The lessons I’ve learned about investing in the stock market are:

It’s never a profit until you sell – If you invest in the stock market, whether it’s in individual stocks or mutual funds, it’s never a profit until you sell.  Looking at your portfolio and feeling happy that it’s worth a certain amount is great, but remember until it becomes cash by you selling, the money can vaporize almost overnight.

Have an entrance and an exit strategy – It’s easy to buy a stock, but for many people it’s hard to sell.  If a stock goes up and makes you money, you may hold on hoping it goes up further.  If a stock goes down, you may not want to sell at a loss and you might want to wait for a recovery that may never come.  

Set Stop Orders – In your brokerage account it’s a good idea to set Stop Orders to automatically sell a stock if it falls below a certain point.  This will protect your money from substantial losses.

Don’t be greedy – If you purchase a stock looking for a 30% return and you get it, sell it and be happy.  Why risk losing your nice profit?

Don’t become emotional, it’s all about business – Money is very emotional.  If you lose it, you will be unhappy, if you gain it, you will be happy.  Develop an investing strategy and stick to it no matter what.  If your strategy is to sell a stock that falls 15% below the purchase price, then stick to that strategy no matter what.  If you strategy is to sell if you earn a 30% return, then stick to it no matter what.  Don’t get emotional and deviate from your strategies.

Buy the best stocks – Many amateur investors look for cheap stocks or stocks that have been beaten up (i.e., the current auto stocks).  They figure they can get a lot of shares for cheap.  This is backwards thinking.  The fact is, you should look for stocks that are going up with great financial performance and don’t worry about share price or number of shares you can purchase.  Worry about the return on your investment.  (See Related Article: Find the Best Stocks Using Investors.com Screening Tools)

Never put all your eggs in one basket – Diversify your portfolio.  Never put all your money in one thing.  I’ve heard countless stories of people putting all their 401K money in their employer stock (Lucent comes to mind) and for years enjoyed watching their portfolio balloon, and then all of a sudden it’s wiped out, leaving them penniless. (i.e., the current Bernard Madoff story also comes to mind).

The video below is extremely funny but so true. The video clip is of  “The Daily Show With Jon Stewart” exposing the so called experts and executives who don’t know what they are talking about or just plain lying.   From Jim Cramer telling investors that , “Bear Stearns is not in trouble,” and “It’s time to buy, buy, buy” when the company collapses 6 days later to Merrill Lynch saying they don’t need any money when five months later they run out of money. 

Rick Santelli was suppose to appear on the show, however, he canceled so Jon Stewart did this segment exposing the people who don’t know what they are talking about, which includes Rick Santelli.

The Daily Show with Jon Stewart

It would be nice to say “No, the government should not continue to bailout AIG”; however, the US government has no choice but to bail out AIG.  This is because if AIG collapses, it will be a nightmare and would seriously damage the already fragile U.S. economy, and even the world economy. Most experts feel a collapse of General Motors would be a thunderstorm, while a collapse of AIG would be a category 5 hurricane to the U.S. economy.

AIG currently has more than 375 million policies with a face value of $19 trillion.  If the 375 million policyholders lost faith in AIG and rushed to cash in their policies at once, the entire insurance industry would tank.  Simply put, AIG is too big to fail.  There is also the fear that if AIG collapses, many people would be unable to obtain the same insurance from a competitor for the same price, which would cause many people to be shut out.

Unfortunately, no one knows when AIG will turn around and how much more money the U.S. government will have to pump into the company to keep it afloat. The government has rescued AIG four times in the last six months.

Last Monday AIG reported a $61.7 billion quarterly loss, the worst ever for a U.S. company. The US Treasury then announced the same day that it would provide A.I.G another $30 billion loan from the $700 billion financial bailout program, although the company already received more than $170 billion in taxpayer money.

Video: AIG Receives Billions More

How did AIG get into this mess?  Contributing factors were as follows: the company used its triple-A rating from the insurance part of its business to run a risky hedge fund, which wrote hundreds of billions of dollars of credit default swaps without hedging itself, or buying protection against the prospect that it would be forced to pay up.

What’s a credit default swap? Credit default swaps are insurance contracts sold by banks, hedge funds and others that promise to cover losses on various securities in the event of a default. They are usually purchased for mortgage securities (we all know what happened here), corporate debt, and municipal bonds. Buyers of credit default swap insurance policies pay premiums over a period of time in return for peace of mind, knowing that losses will be covered if a default happens. Credit default swaps work similarly to someone taking out home insurance to protect against losses from fire and theft.  

When AIG’s credit ratings were downgraded last September, the insurer’s trading partners demanded more collateral, but AIG didn’t have the cash. The US government, worried by the bankruptcy of brokerage firm Lehman Brothers a day earlier, gave $85 billion to keep AIG afloat which went to satisfy the trading partners’ demands for more cash.  

Video: Credit Default Swaps Explained

Who is AIG? American International Group, Inc., (AIG) via its subsidiaries, provides insurance and financial services in the United States and internationally and has 116,000 employees. It operates in four segments:

1. General Insurance – underwrites various business insurance products, including large commercial or industrial property insurance, excess liability, inland marine, environmental, workers compensation, specialized forms of insurance and excess and umbrella coverages.
2. Life Insurance and Retirement Services – offers individual and group life, payout annuities, endowment, and accident and health policies, as well as retirement savings products consisting of fixed and variable annuities.
3.  Financial Services – provides aircraft and equipment leasing, capital market transactions, consumer finance, and insurance premium financing.
4. Asset Management – investment-related services and investment products, including institutional and retail asset management, broker-dealer services, and spread-based investment products.

I am ecstatic that the new Obama administration is finally going to do something about the American Healthcare System, which is a complete mess.  Over a year ago when I saw the movie “Sicko“, produced by film director Michael Francis Moore, who also produced “Bowling for Columbine” and “Fahrenheit 9/11”, it made me very angry.

If you haven’t seen Sicko, I highly recommend seeing it. Sicko is a documentary that highlights the problems and catastrophes with the American Healthcare system. The film profiles several ordinary Americans whose lives have been disrupted, shattered and in some cases ended because of the healthcare catastrophe.

The film highlights that the crisis doesn’t only affect the 47 million Americans who are uninsured, but the millions of other citizens who pay their premiums only to get strangled by the bureaucratic red tape.

Sicko details how the American healthcare system came to be such a mess and highlights countries around the world where all citizens receive free healthcare, including Canada, Great Britain and France. The film also shows how 9/11 rescue volunteers who now suffer from debilitating illnesses have been denied medical attention, however, the suspected terrorist held at Guantanamo Bay, Cub prison receive free healthcare.

Michael Moore’s healthcare proposal is as follows:

1. Every American must have full, uninterrupted healthcare coverage for life.
2. Private, for-profit health insurance companies must be abolished.
3. Profits of pharmaceutical companies must be strictly regulated like a public utility.

Hopefully, Sicko has awaken the American public as to how terrible our healthcare system is and that change is needed.

Trailer for Sicko

Michael Moore is urging people to videotape and post their healthcare nightmares on YouTube to help convince Congress that radical change is needed.

Resource Links: 
California Nurses Association
http://www.calnurse.org/
The FealGood Foundation
http://www.fealgoodfoundation.com/
Guaranteed Healthcare
http://www.guaranteedhealthcare.org/
Health Care for All
http://www.healthcareforall.org/
HealthCare-NOW!
http://www.healthcare-now.org/
California State Senator Sheila Kuehl
http://www.sen.ca.gov/kuehl
National Health Care for the Homeless Council
http://www.nhchc.org
OneCareNow
http://www.onecarenow.org/
Physicians for a National Health Program
http://www.pnhp.org