BAC PL

Be Prepared for S&P to Hit 350 by June 2010

The S&P is up just under 19% since your call in May. It's gone up for 7 consecutive months. Do you still stand by your 350 by mid-2010 prediction, or has anything changed?

Credit Card Companies Gone Wild and Other Economic Happenings

That you're surprised by the increase in credit card rates (it's happening across the board) is fairly strong evidence that you've not made the connection between these actions and the credit card legislation that's the prime mover.

Our Congress and President have decided that they know better than the free market, and have passed laws that eliminate differential pricing for riskier consumers. Essentially, the good credit risks will now have to fund the deadbeats. If that sounds like an idiotic move -- look at how the government's meddling in pushing mortgages to people who should never have gotten them worked out -- then you can understand how frustrating it is to people in the card industry, who are simply adapting to the new reality. Since when has the government interference made *anything* more efficient? How about never? Oh, and forcing low risk, healthy young people to buy more health insurance than they need is from the same bag of tricks.

The hits just keep on coming.

p.s. Regarding your response to the first commenter, look at Steve Case's Revolution Card.

Random Thoughts: American Express, Kraft, MGM

Even when the Blue card had the chip, virtually every in-person transaction (versus those conducted by phone or over the internet) still used the magnetic strip on the card.

The issue on chips for Amex - as well as Visa, MasterCard, and Discover - is that the terminals at point of purchase aren't set up to accept them. It's a little bit of a chicken & egg problem: Unless and until we have widespread adoption of chip reading technology on the merchant side, why should the payment networks embed chips? But if cards don't have chips, why should merchants upgrade their terminals to accept them?

Finally, ExpressPay is an RFID technology. Select Visa (payWave) and MasterCard (PayPass) cards also have this. It's being used for small ticket purchases at QSRs and drugstores. Not sure how the security compares to chips.

Be Prepared for S&P to Hit 350 by June 2010

Hi Ryan,

Saw this article and thought of yours. I suppose both could be right -- S&P rises to 1,200 by year end and then crashes to 350 by mid-2010 -- but more likely, these guys have a completely different outlook on the market than you. I hope they're right, for all our sakes.

www.cnbc.com/id/310653...

By the way, given your pessimism, what do you think of GLD?

Be Prepared for S&P to Hit 350 by June 2010

Hey again Ryan.

A troll meaning I'm arguing for its own sake, or have some crazy vendetta against you? No, not a troll. I'm just frustrated by the gaps in your logic. Here are some more to wrap your head around:

1. You see Advanta's demise affecting 1M small businesses, and you chose to focus on Advanta because it's affecting you ... and in your original article, you said: "Luckily, Freund Investing, LLC, has never relied on credit granted by companies like Advanta; unlike most small businesses." So, you've contradicted yourself. And how do you know about "most small businesses"? What data do you have on Advanta's 1M or so accounts? How many don't rely on the card, just like Freund Investing, LLC? How many have more than one credit card? How many cards does the average small business owner have? You don't know/you don't say.

As I said near the end of my second comment, I do think the economy is in the crapper. I agree that tight credit is a big problem. But while some of the problems Advanta faced are related to the economy (supports your logic), some are unique to Advanta (ignored by you).

2. Would you please provide either a link, or write another article, that backs up your claim that we're at Great Depression level unemployment, and that all these economists are wrong? I'm more than happy to admit that I'm wrong if you'd just provide some proof. If you wrote something that showed that these economists were full of it, you could be superstar. You'd be on TV and in newspapers. Do it, man! If you're so certain you're right, share the information, please!

3. I just don't think that a GM failure is as momentous as you do, I guess. I think both GM employees and companies within the GM universe are resilient. They can and will find work elsewhere, and find other things to produce or service. Perhaps I have an overly optimistic view of American workers & companies, but we probably have to agree to disagree on this point.

4. Japan. Well, I don't mean to be a broken record, but as with the Great Depression question, I'd also appreciate you spelling out better the connections you see between Japanese banks of the 1990s and the big global banks (primarily American, I presume) nowadays.

So, I engaged in a bit of ad hominem attacking earlier, which was probably unnecessary. But I was flabbergasted at your original article, and even more surprised that you doubled and tripled down. I've not yet seen anything approaching what you call "solid evidence," and that's what I hope you will provide. If you can do so convincingly, which I'd LOVE, then you might save me and others tons of money. I'm ready to be convinced -- show me the data!

p.s. Simply saying that we're on the cusp of another Great Depression doesn't constitute solid evidence.

Be Prepared for S&P to Hit 350 by June 2010

As it stands, the article is just plain poorly written. Poorly written by Chicken Little, no less.

Ryan -- If you have some sort of rational explanation for why the market (S&P or whatever) is going to be halved by the middle of next year, don't sit on it! A clearly articulated, logical argument for why you believe this to be the case would be welcome.

But what we you've written is a mess. Your conclusion is that the market is going down the crapper, and that wise investors should hedge. Fine. What's that opinion based on? Anecdotes:

- Advanta's demise is just the first domino. How have you determined that one small business credit card pure play is the canary in the mine, whereas any number of other business failures (during good times and bad) aren't a forewarning that the economy is going to nosedive?
- The real world economy is worsening at a rapid clip. Based on what? And what's a rapid clip? What makes this recession worse than others we've climbed out of? You know you're at odds with the consensus view of trained economists, right?
- GM is nearing bankruptcy. What does a non-competitive car maker weighed down by onerous union contracts have to do with Advanta, or small business credit?
- Most banks are insolvent. I don't think "insolvent" means what you think it means.

You overreached with this article, Ryan. I'm actually not all Pollyanna about the economy myself. You might be right in the end. But you have to back up your doomsday title with some well worded arguments. The way it's written right now -- you're like the horrible American Idol singer who doesn't realize how bad he is.

Be Prepared for S&P to Hit 350 by June 2010

I think you've overstated Advanta's position within the small business credit card space. How can you make the statement that 20 million small businesses are going to find their credit "seriously disrupted" by the demise of an issuer that's not even in the top 5 of small business credit card issuers (cf. Nilson Reports)? And what do credit cards have to do with making payroll? Puh-lease.

What if I told you that I'm going find it hard to keep awake now, because my source for caffeine, RC Cola, is going out of business? You'd laugh in my face. RC makes a delicious cola, but what about Coke and Pepsi? And can't I also get caffeine from coffee or tea? Similarly, I would say that you can get a small business credit card from dozens of bank issuers, large and small. Furthermore, you could still use a consumer card that serves the exact same function. Finally, you could get a regular line of credit or small business loan.

This analysis is so weak that you've given me a headache. It's like you've adapted a credit card story from that horrible Butterfly Effect movie with Ashton Kucher:

1. Crummy small business credit card issuer goes belly up ...
2. Which causes 20 million small businesses in the US major problems (even though only a small portion of them use Advanta, and despite the fact that they can now take their business elsewhere) ...
3. Which hurts the whole US economy ...
4. Which causes the S&P 500 to drop more than 50% to 1990 levels?

Really man, really?? All because a poorly run niche small business credit card issuer fails? And people are investing money with you? Now THAT is scary.

A Summary of Q1 Bank Earnings: World, You Just Got Hustled

I'm sure your analysis is scintillating, but a little bit of prioritization would help your articles tremendously. Organization and brevity are your friends ... if you hope to have people read and follow you.

Also, a straight on headshot would be an improvement over you wearing a goofy Nationals cap, laying on a woman's lap. Just saying.

Interested in Bank of America? Consider the Preferred Shares

You said: "At Bank of America's option, the preferred stock can be bought back by the company for $1,000 a share on or after 1/30/13"

But the prospectus says: "The Preferred Stock is not redeemable by us at any time." Right on the first page.

Whag gives?

AmEx's Pain Likely Discover's Gain

Frank -- We get that you love DFS. When did you get in (hopefully not last year!), and what's your prediction for 6 and 12 months for DFS?

How Much Credit Is Too Much? Where AmEx Went Wrong

@ mdmrjsds:

Good points. The only thing I'd add is that, beyond the need to grow the business by expanding the target, there's another strong rationale: merchant acceptance. Expanding Amex's footprint gives the company a stronger argument (network effect) when it is negotiating with retailers to take the card.

How Much Credit Is Too Much? Where AmEx Went Wrong

@ mojo:

1. The fact that Citi is a large card issuer is a far cry from saying that cards are its core business. Listen to one conference call, and you'll know what I mean. The amount of time that management, and the analysts, spend discussing cards is dwarfed by the focus on the banking operation. Back to my point: The author would do better to compare pure-plays (MBNA (pre BAC), Cap One, Advanta, DFS even), than Citi. Whether or not C is a large US player (forget about the rest of the world), the type of comparison he's making calls for like to like. What % of C employees do you think are actively focused on the card business? 5% maybe?

2. You're mistaken again. This is simple logic, man. Look at the charts and think: If you have a young, low income, thin credit file type of card applicant, do you grant him/her a large line? Of course not. And what if you have a high FICO, 6 figure applicant -- doesn't he/she merit a higher line? Sure thing! That, very generally speaking, is why Discover has lower lines. Seriously, Discover could (and should!) be very tight with lines if it's granting credit to low income/thin credit file consumers. In a sense, I'm almost agreeing with you and the author, actually. For any given cardmember, the limit should be "right," however you define that to be. But best underwriter? What does that even mean? If you give miniscule lines, no one defaults, or the default loss is minimized. But being "hardest to get" does not make DFS the best underwriter.

By the way, you make me laugh. It seems like you're implying that's there's something desirable about the hard-to-get Discover card. So ... the ultra-rich are tossing their Amex Black cards for Discover cash back? LOL. Even among us normal folk, who wants to pull out a Discover card at a nice restaurant? Might as well pay with food stamps.

How Much Credit Is Too Much? Where AmEx Went Wrong

SeekingAlpha sucks again. How do these things get on Yahoo Finance?

1. Without checking your numbers, I'll grant that the MBNA > McDonald's comment is okay, as MBNA was a pure-play issuer. But comparing Citi to Wal-Mart and Microsoft is dumb. Citi's card issuing business is a tiny part of its whole operation.

2. It's Jamie Dimon, not Dimond. What's next? Warren Buffet?

3. You're missing some important decimal points in your charge-off table.

4. Your big point, that AXP has handed out larger credit limits to its card holders is conjecture not based on fact. It's possible, given the scenario, but you've provided no proof.

5. Discover's credit limits are low because they are targeting the low FICO, high risk sorts of people.

6. How can anyone trust advice from someone who is long DFS? LOL

Is Visa Really Priceless?

So the main point the author is trying to make is that having a lot of shares outstanding is a negative, right? By this logic, a stock split would be an incredible sell signal? And if Visa did a reverse stock split to get to the exact same number of shares as MA, which would raise the per share price through the roof, that would somehow change the value of Visa? This argument does not hold water; the market cap is the market cap. What a half-baked load of crap.