Reuters Money

Consumer product database in jeopardy

You may think the government’s wheels always grind slowly, but they can spin fast when a government action runs afoul of business.

After years and years of providing but an iceberg’s tip of the information possessed by the agency, the tiny U.S. Consumer Product Safety Commission in March opened the door to a new world for its constituents: American consumers. The agency launched a publicly searchable database that catalogs product incidents experienced in homes across the nation.

But now the database that gives the public access to safety incidents on everything from microwaves to baby monitors is on the verge of being defunded, potentially dealing a blow to consumer safety.

The purpose for the database was to add an unprecedented level of transparency to a process cloaked in secrecy. We still don’t really know what goes on behind the scenes as the government and business haggle over the terms of the recalls you eventually hear about. But you can — in almost real-time — see what folks are saying are product dangers.

Here’s an excerpt from a recent incident documented by a consumer about a microwave that seems to have gone a bit haywire: “Unit turned itself on when we were out of the home. When we got home we heard a fast beeping and the keyboard was locked, the microwave was hot to the touch and the only way to shut it off was to unplug it … ”

It’s not unlike reading the comments on Internet complaint boards, except the government is required to give every company named in an entry 10 days to issue a response before the incident is made public. In the case of the microwave, the company chose not to comment. Some companies do respond, often explaining that the described episode was a fluke or user error. Then it’s up to the consumer to decide how to process that information.

The value is that consumers can see if others have had they same problems they are experiencing. The database can be used for research when making a purchase for anything from a high chair to a dehumidifier.

Gridlock could gut stock returns

The widely anticipated gridlock that could stall Washington after the election isn’t so good for financial markets after all, says Sam Stovall, chief investment strategist for Standard & Poor’s Equity Research. The popular-with-strategists view, that a divided Congress would protect investors from having to swallow damaging legislation, is wrong: “History says the opposite is true: Gridlock is NOT good,” Stovall writes in his investment letter.

For more than 110 years, the average return when there was a Democratic president and a split Congress was not a return at all, but a loss of 3.7 percent. When both houses of Congress and the White House were all dominated by the same party, the average return was 7.6 percent. It seems that watching Washington bicker and stall doesn’t engender investor confidence.

Yet other historical indicators point to a good 2011 for stock market investors. The best year in the political cycle for investors is typically the third year of a president’s term: Prices have moved up in 94 percent of those years, averaging a 17 percent annual return. And “we’re in the sweet spot right now,” Stovall told Reuters. The best quarters in the stock market typically come in the fourth quarter of a mid-term election and the first two quarters of that post-election year. That all points to nice returns for the end of 2010 and 2011.

But maybe not for next week. Investors are widely expecting Republicans to win the House and pick up a few seats in the Senate, but not enough to gain them the majority there. If that happens, the old “buy the rumor, sell the news” homily could kick in, and the first market reaction to the election could be a disappointment.

Will Social Security be there for today’s young workers?

Social Security reform is a touchy subject these days for Thomas Brown and his grandparents.

“If I broach it with them, they are against any sort of legislation that would do anything to change Social Security,” says Brown (pictured below), a 28-year-old financial adviser with Pivot Point Advisors in Houston. “They depend on it, but when I look at my retirement plans, I don’t factor it in. The new way of thinking is that Social Security won’t be there — you have to plan for your own retirement.”

I write frequently about the future of Social Security, and pessimistic views like Brown’s always show up in the comments below my stories. Indeed, Gallup reports that six out of ten pre-retirement Americans don’t think Social Security will be able to pay them a benefit when they retire; those age 18-34 are even more pessimistic, with 76 percent saying they’ll get nothing from the system.

The doubts aren’t difficult to understand. “If you listen to any number of the news outlets, they’ll tell you the system is going broke,” says Brown. “Every year I get a mailing from Social Security detailing what I can expect in benefits, and they say themselves that it will be bankrupt around 2040 and that they are going to be paying out more than we’re paying in. So it’s not fear, it’s math.”

But Social Security isn’t going bankrupt — far from it. The system was intended — and has always been — a pay-as-you-go system, with taxes collected from workers used to pay current retirees. But Social Security also is sitting on a $2.5 trillion Social Security Trust Fund (SSTF) that has been stockpiled to fund the looming wave of baby boomer retirements; that fund is projected to be sufficient to pay benefits until about 2037.

Pessimism about Social Security among the young isn’t new. “It’s a very longstanding trend,” says Virginia Reno, vice president for income security at the National Academy of Social Insurance. “It was true in a survey we did in 1979, and another in 1991. There are good reasons — older Americans have given more thought to retirement resources. They have looked into it more.”

Then there’s that threatening annual benefit statement we all receive from Social Security. (You’re reading that carefully every year when it arrives in the mail — right?)

How to avoid credit card fees

John F. Wasik is a Reuters columnist and author of The Audacity of Help. The opinions expressed are his own.

Gearing up for those back-to-school, pre-Labor Day sales? The first thing you need in hand isn’t a shopping list, it’s a sound personal credit policy.

If you plan how to use credit before you hit the stores, you’ll save yourself a lot of money when the bills come due, Should you pay your bills in full every month, you’ll not only avoid finance charges, your credit will effectively be free for that month net of membership and other fees.

What if you don’t pay the balance in full? Don’t allow banks to “pad” your bills with late fees. New Federal Reserve Rules that go into effect August 22 give you some protection, but you still need to be vigilant. The Fed’s new rules cap some of the more obnoxious credit-card fees. Here’s how they work:

• Credit card issuers can’t charge a penalty of more than $25 for late payers or violating the account’s terms.

• You can’t be charged a late fee that exceeds the dollar amount associated with the violation. Card issuers, for example, can no longer charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20.

• Not using the card? The new rules ban “inactivity” fees.