Hanoch

Why Credit Cards Are Gouging Customers - Because They Can

"They need to hike fees to remain solvent? Come on."

Wow. That is an interesting statement.

First, since when are companies in the business to "remain solvent"? Isn't the goal to maximize profits?

Second, in a free and competitive market, prices (including the price of credit) are set by supply and demand, not by the whims of sellers or buyers. This is basic economics.

Third, no one is forced to assume a credit card loan and anyone who chooses to do so knows (or should know) going in that rates are variable and could go up. It makes absolutely no sense to castigate a contracting party (here the credit card company) for exercising its contractual rights.

Does True Competition Among Credit Card Issuers Exist?

I do not see how the author concludes that it is "clear" that the credit card companies don't compete. Given the number of issuers, and the incessant battle for market share, I don't see how that is possible.

Moreover, the statement that "we want the whole credit-card market to shrink" strikes me as odd. Who is this "we"? This is a market economy in which decisions are made by individuals, not some collective "we". If I feel a credit card suits my purposes, then I use it; if not, then I don't. I don't need some policy wonk making decisions for me.

Why Credit Cards Are Gouging Customers - Because They Can

Maybe you don't have an "agenda", but surely you must have a point to make; it eludes me. And how, exactly, does a company "gouge" someone "who they know cannot and will not" pay?

Harley-Davidson in the Mire and Likely to Stay There

A few points are worth noting. It is obvious enough that sales of expensive motorcycles are going to suffer in a big way in the current economic environment. Thus, I wouldn't be surprised if things got a good deal worse for HOG in the short term.

However, it also has to be recognized that HOG has one of the best brands in the world and an extremely loyal group of purchasers. Given the current diminished sales, It seems logical to expect that, when the economy does turn, there is going to be a good deal of pent-up demand for these products coming from purchases that were deferred during the recession.

Rail Traffic, Another 'Reality' Indicator, Is Down

It seems that whidbey has the better of the argument versus Alan Young and skwestorange. I am sure, as they say, it is true that most manufactured items are not shipped by rail. But the commodities that are shipped by rail are the most basic components (metals, coal for energy, etc.) necessary to produce those manufactured products. Thus, the decrease in commodity shipments would seem to indicate less demand from the companies who use those commodities to make manufactured goods. It would probably be useful to look at trucking volumes alongside this data.

Credit Card Interchange Fee Datapoint of the Day

It is not at all that clear to me that there is some sort of anti-competitive problem here. There are a number of credit card options available on the market (e.g., Visa, Mastercard, Amex, Discover). Further, the merchant is free to accept or reject the issuer's terms. An example of this is merchants who do not accept Amex cards due to the higher interchange fees. Thus, if a merchant did not want to accept the issuer's terms that prices for cash and plastic purchaser be the same, the merchant need not accept credit cards. Obviously, almost all merchants feel the terms are acceptable.

I would be more inclined to agree with your suggestion if there were actual collusion among the card issuers on this term. However, I tend to doubt that is the case.


On Jul 20 12:11 PM jimmy46 wrote:

> The basic problem is that Visa & Mastercard

Credit Card Interchange Fee Datapoint of the Day

nym:

I don't think it is a problem; rather its more a matter of personal preference. I use a credit card rather than a debit card mainly because if something goes wrong with the transaction (e.g., a product is defective, a merchant accidently double-charges, the merchant doesn't accept a return, etc.), it becomes Amex's headache, not mine. I just report the problem, and they take care of it without any money coming out of my pocket. There are also other perks that I like such as an automatic doubling of the product warranty, etc. (maybe you can get stuff like that on debit cards, I don't know). Is it true that there are no interchange fees charged to the merchant with debit card?

Credit Card Interchange Fee Datapoint of the Day

There is a big advantage to consumers in using plastic over cash in terms of convenience. Personally, I don't like carrying large sums of cash around to pay for things, nor do I like constant trips to the bank or ATM to get more of it. Time is valuable. Moreover, I like a credit card statement each month as a convenient way to let me know how much and where I am spending. Thus, the credit card companies provide a valuable service for many consumers and, obviously, no service is free.

The merchants complain about the interchange fees, but I have to think dealing with increased cash payments would involve additional costs to the merchants over electronic credit card networks, from the time it takes to process them at the register, from losses due to human error and employee theft, from the time it takes to manage and account for the cash, from increased security needs, and so forth. In addition, it would seem that merchants likely generate higher sales volumes when they accept credit cards. A customer without cash in his pocket is much more likely to buy something on the spot when a merchant accepts credit cards rather than go through the hassle of finding an ATM or going to a bank and then returning to the store. So, while it is easy to the measure costs of interchange fees in a vacuum, it seems, to get a more accurate read on this issue, you need to know how much the merchants are benefiting from accepting credit card payments.

Teen Retail: Sell in May, and Go Far, Far Away

"the current unemployment rate for men and women between the ages of 16 and 19 is 21.5%"

This figure is not very useful unless you know the pre-recession unemployment rate. One would expect the unemployment rate in this demographic normally to be far higher than the overall unemployment rate.

NYT Butchers HOG

I find it difficult to put hope in overseas markets, at least in the short term. From everything I have heard, foreign economies are in even worse shape than the US. Eventually, that has to show up in HOG's sales figures.

It is hard to imagine people are buying Harleys in the current environment. Moreover, as the economy continues to deteriorate, it seems likely that more people will be defaulting on their Harley loans, which Harley can no longer securitize. Ultimately, my concern is the company is not going to have the cash flow to meet its fixed operating expenses and increasing debt burden.

Harley-Davidson Gives Investors Ample Cause to Be Cautious

There is a lot of pessimism in these posts, undoubtedly some of which is warranted. I wonder, however, if the pessimism goes too far. At the end of the day for H-D, it is all about selling motorcycles. According to H-D's data, retail worldwide unit sales are only down about 10% in 3Q 2008 compared to 3Q 2007. Certainly not outstanding but, given the macro environment, it doesn't seem that the company is mortally wounded.

AmEx Taps the TARP; Not the Same AmEx Buffett Bought

There is no doubt AXP is subject to more credit risk than in the past, but I think the fear is overblown. Certainly AXP will suffer in the near term due to the current economic conditions, but couldn't one say that about nearly every company at this point? It seems to me, when you buy a business, you have to expect to go through rough times as well as good. The questions are (1) whether the business model is fundamentally strong, (2) whether management is talented and trustworthy, and (3) whether the company has the staying power to outlast the current economic downturn. It seems the answers to those questions are yes.

American Eagle Outfitters: What Went Wrong?

I don't profess to be a financial expert, but it is difficult to understand how one could justify selling AEO at this point. The company seems to have very good management, at least per its past track record. The company has $6.60 in equity per share and very little debt. The company has consistently returned over 20% on its equity. Assuming depressed earnings for 2008 of about $1, you still have an earnings yield of about 10% at the current price. Moreover, I cannot see any reason (at least from this post) why that earnings figure should not improve, perhaps significantly, when the economy emerges from the current down cycle. In addition, not too long ago, the company chairman bought several million dollars of stock when the company was trading in the low twenties. I would think he is in a much better position to judge the true long term value of the company better than outsiders. Thus, unless I am missing something (and I may be) I think selling AEO at this price would be a mistake, at least if you have a long term perspective.

Credit Card Breakdown: AmEx Disappoints, as Predicted

VCASHCOW--No remorse here. In my view, even assuming a pretty horrible year, AXP is worth at least 50 (likely more), and I have been using this opportunity to add more. Thanks for the advice though. Time will prove one of us wrong.

Credit Card Breakdown: AmEx Disappoints, as Predicted

I couldn't disagree more. American Express is one of the best managed companies in the world, with a franchise that is virtually impossible to replicate. Its growth prospects are tremendous as nations like China, Russia and India continue to develop, and demand for Amex's products continue to spread and grow globally.

Yes, from time to time, the economy turns downward and that affects Amex's (and virtually every other company's) bottom line. It is hard to imagine that anyone was seriously surprised by Amex's results. But for an investor, rather than a short term trader, current economic conditions are not the deciding factor in valuation. That comes from a long-term perspective. The fact is, over the last ten years, Amex has nearly doubled its earnings, significantly increased its return on equity, and reduced its share base.

I have little doubt that, in a year or two, people will look back at 2008 and kick themselves for not picking up shares of one of the world's premier companies at a bargain price.