Water Cooler Finance: Insiders, Door Busters And Debt Contagion

Although Thanksgiving festivities made last week a short business week, it wasn't short on new developments for the markets and economy. While retailers did manage to squeeze a reasonably good profit out of Black Friday, this good news was tempered by Ireland's near financial collapse and yet another Wall Street shakedown. And of course, a week wouldn't be complete without some celebrity fiasco as well. (Did you spend more than you intended on Black Friday? Read 5 Traps That Make It Hard To Save On Black Friday to find out why.)

In Pictures: 10 Ways To Budget When You're Broke
Retailers Emerge from the Red
This year's post-turkey shopping day was marked with the usual "door buster" deals and general retail one-upmanship, but unlike last year, consumers really took the bait. According to the National Retail Federation (NRF), the number of consumers who hit the stores on Friday and over the weekend jumped 8.7% over last year and spent an average of 6.4% more money. Shoppers also spent more on discretionary goods and luxury items like jewelry, which the NRF is reading as a good sign of consumers' increased confidence in the economy. It's some good news in what's been a rough few years for retailers. Overall, it's looking like Black Friday helped put retailers "in the black" this year.

Ireland Gets a Loan
On Sunday, the European Union Finance Ministers officially announced they would provide Ireland with financial assistance in the form of an emergency loan in order to "safeguard its financial stability." The package is worth 85 billion euros - 17.5 billion of which must come from Ireland's own Treasury and National Pension Reserve Fund - and comes with very specific guidance on how it is to be used. However, the EU's bailout move hasn't halted fears that Spain and Portugal will be the next to fall to the debt contagion that first began with Greece in April. (To find out what happened in Greece, read Greece: By The Numbers.)

Insurers Boxed In
The Department of Health and Human Services also released its final ruling on the rule that mandates how much of an insurer's revenue must be spent on patient care. According to the rule and under U.S. President Obama's new Affordable Care Act, insurers must spend at least 85% of their revenue on medical care or activities that promote patient health; this means only 15% can go to such things as administration, salaries, bonuses and marketing. The regulation goes into effect in 2011; if insurers don't spend the required amount, they will be forced to provide rebates to policyholders or to their employers. (Get some tips on finding a high-quality healthcare plan in How To Choose A Healthcare Plan.)


Yet Another Wall Street Shakedown
If we could get through one week without another allegation of fraud in the financial industry – now that would be news. However, just when things seemed to be settling down, the FBI executed search warrants at three large hedge funds last week, and issued subpoenas for documents to several others. What now? The FBI believes it's the old game of insider trading, peddled by "expert networks." This exchange of information in itself is not illegal – under Regulation Fair Disclosure, any information that is disclosed to the public (and not just select Wall Street analysts), is fair game. However, in some cases, investment firms may be going too far, and gleaning nonpublic information from company insiders. According to the Associated Press, it'll be a tough case for the FBI to pursue; at time when so much information is available through such a vast number of electronic and online channels, it can be very hard to separate public and nonpublic information. (Learn more in Defining Illegal Insider Trading.)

Critics Dash "Kardashian Kard"
What could be better than having celebrity debutante Kim Kardashian lend her name and image to a prepaid credit card? For marketers, it seems like a slam dunk, but for those who don't have Kardashian's funds, it's a financial nightmare. According to the New York Times, ever since sisters Kim, Khloé and Kourtney Kardashian appeared on the prepaid MasterCard in early November, critics have been decrying its high fees, lack of consumer protection and the fact that all these poor features are targeted at a teenaged audience. Although celebrity cards are nothing new, Consumers Union, the nonprofit publisher of Consumer Reports, has raised concerns that the cards are essentially preying on a demographic that is very susceptible to celebrity advertising, and too inexperienced to look too deeply into the $7.95 monthly fee, $1.50 ATM fee and $1.50 fee to speak to a representative. (Learn more about the drawbacks to these types of cards in Prepaid "Credit" Cards: Convenience At A Cost.)

The Bottom Line
Thanksgiving week brought both good and troubling news; as things in the U.S. begin to look better, Ireland's acceptance of financial assistance reminds us that debt contagion continues to spread. As we head into the holiday shopping season, expect retail to figure prominently in the financial news. Politics should also have a high billing, as U.S. President Obama enters the second half of his term.

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