Sonia

Consumer Credit and the Credit Check Hurdle

In times of slow inflation the lender gets a steady return from interest and the borrower the benefit of ownership and capital appreciation - a good deal for both parties. The congressional mandate that people who could not afford to repay must be allowed to buy caused the bubble - overbuilding, skyrocketing prices, and the inevitable crash. Housing prices will recover over time, and people who can afford their payments would be wise not to walk away and ruin their credit. I don't blame employers for checking out credit scores. If we'd been able to do this back in the 70's and 80's it would have saved us from employing trouble and from renting to deadbeats, with all the resulting problems.

Bernanke's Dark Kingdom

Nutty idea. If the Fed is done away with, Congress will have the keys to the printing press - and everybody's life savings would soon become worthless. Remember how Germany inflated its way out of paying reparations after WWI? People who did not have wealth in gold or outside the country wound up taking a wheelbarrow of paper money to the store to buy a loaf of bread. Workers were paid twice daily so they could buy food before the mark lost more value. Congress would have a great time printing money to fund every pork barrel notion they and their lobbyists could come up with - and the money we have saved all our lives would become worthless.

The Death of Buy and Hold Is Greatly Exaggerated (Part 1)

Good article! PEG for the market as a whole is a clear indication of tops and bottoms - time to fold and walk away., or buy quality stocks at bargain prices.

When Will Housing Prices Return to Previous Highs?

The housing crisis can only get worse. A friend in Ohio hoped to get a first and second mortgage with "blended" interest up to 11% modified, but was told that Bank of America/Countrywide and National Mortgage are not modifying mortgages or interest and will not refinance. Her income from commission as a real estate agent has collapsed, both from declining sales prices and lack of sales, and she cannot make the payments. The 2 bedroom condo she put 20% down on 14 years ago would not sell for 90K on the courthouse steps - but she owes $140K on it. When she and hundreds of thousands of people in the same situation across the country give up and walk away, the avalanche of foreclosures will bury the banks.

A PA in Dallas recently took a pay cut and her husband, a computer tech, was laid off. Her income is sufficient to pay the mortgage and his unemployment to buy groceries. But if she is laid off there will be another house for sale on the courthouse steps.

Why can't the government use TARP to refinance mortgages at present appraised value?

Credit Distinctions: Revolving and Transactional

If deadbeats are given a $1000 publicly funded credit card, who will pay the losses? We taxpayers. Bad idea. Both rates and availability of credit should be capped.

Those of us who pay our balances every month and get cashback or miles are going to lose, but fewer people will be suckered into mounting debt. Card companies deluge any name they get their hands on with offers ( my grandsons in high school and my cat have all received credit card offers,) then jack up interest rates to 26%, 30%, or more, pretend to be astonished when people default on the ever increasing debt, and expect the government (the taxpayers) to bail them out.

What did the credit card companies expect the end would be? Reminds me of our banks lending money at high interest to South American countries in the '80's, then lending more every year so the countries could "pay" that interest, and more to pay the interest on the interest... each CEO hoping he'd retire before the inevitable crash.

Where the Big Money Is Betting Big

Rental property is a goldmine for young people who can do the repairs, painting, and cleanup when tenants move out, and put up with the hassle. We sold ours in the 90's and are thankful to be out. It is not for seniors. Before buying rental property, talk to landlords and understand what you are getting into!


On May 16 09:02 AM Ransome wrote:

> Big money is dumb money. A market is made by smart money. It is projected
> that this new and rising market will hit $200 a barrel by the end
> of the year. Dumb money moves in. Near the plateau, smart money moves
> out while momentum defies gravity for a while longer.
>
> Small molecule development is vastly different than large molecule
> development which has approximately four or more major hurdles to
> conquer not found in small molecule development.
>
> Mergers are a sign of weakness, especially in the pharmaceutical
> sector. Guarantees 5 years of internal turmoil.
>
> Gold is an inflation hedge. Did we add to the money supply or did
> we replace bad securities with good money, a zero sum game. Any chance
> the debt encumbered consumer will increase demand?
>
> Real estate: Buying five houses and managing the rentals is a way
> for seniors to survive. The price of admission is still dropping
> and they are still making people that need a place to live. Fewer
> will qualify for a mortgage.

Credit Card Catastrophe: Congress Can't Help

Used wisely, credit cards are both convenient and profitable. My Discover card pays 1% cashback and Capital One Visa, 1 1/4% carhback. I put everything including my grandson's college tuition on these cards, pay off the balance each month weeks before the due date by on line transfer from our bank, and get a receipt on line. The companies make certain money from the merchants, so everybody's happy. The banks are self defeating when they charge outrageous interest rates. The escalating balances and fees mean borrowers can never hope to repay, and end by filing bankruptcy, losing the banks what is owed. Fixed low interest rates on cards, with credit limits based on credit history, would benefit both banks and borrowers.

Could the Dow Sink Another 50% by 2012?

There has been so much negatism that I'd guess we've seen the bottom, but there are steps we can take to protect ourselves. My son, whose house is half paid for and had a 5.25% mortgage on 15 years, has refinanced at 4.8 for 30 years to reduce his payments in the event that he loses his job. With the much lower payments he could deliver pizzas and not lose his home. Make a game of "how fast can I pay off the credit cards?" Buy quality stocks in essential industries that pay stable dividends, and reinvest the dividends. When you walk a middle course between gloom and euphoria, life is good!

Punishing the Savers in a Savings Poor Country

Yes, savers are getting hit. Consider tax free municipals as an alternative. I've had GO and A+ or better munis for thirty years, on the theory that if they're good enough for rich people they're good enough for us. While the rates paid aren't outstanding, taking the nontaxable total off the top of taxable dividends and other income has saved us from going into a higher tax bracket and handing more money to the government to misuse. A couple of bonds have gone sour over the years, but overall have been a far better investment than supposedly "safe" blue chip stocks. Inflation is a worry, but bank interest today is a sick joke. It's wrong that people who worked all their lives are shutting off the heat they can't afford while fat cats are getting rich -- what executive is worth 3 million or more a year?

Bank Liabilities: Why the Discussion Isn't Explicit

I'd never heard of this - thank you for the education!


On Mar 07 11:26 AM Hari Seldon wrote:

> The banks were playing what organized crime would call a Bust Out
> Scheme.
>
> During the process, the perpetrator builds up a history of good behavior
> with timely payments and low utilization. Over time, they obtain
> additional lines of credit and request higher credit limits. Eventually,
> the account holder uses all available credit and stops making payments.
> Overpayments with bad checks are often included in the final stage,
> temporarily inflating the credit limit and resulting in losses higher
> than the account credit limit.
>
> AIG would be a classic example of this. All other large banks are
> guilty as well. Small local banks are victims in the scheme.

PepsiCo: Dividend Stock Analysis

PEP also owns and profits from FritoLay. People aren't going to give up inexpensive discretionary items such as potato chipa and Doritoes. The kids I see everywhere are carrying bottled water - and no, I don't think they're refilling the bottles from the tap (I do, my grandchildren don't.) PEP is one of my stable of stalwart horses to ride for years to come.

Stewart vs. Cramer: A Cheap Shot

Don't we wish we'd taken Cramer's advice to get out of all financials - his famous rant - in the summer of 2007! His advice to get 20% out of the market last fall could also have saved us a bundle. Sure, some of his advice on individual stocks has been bad (Chesapeake, etc.) but he is honest, and any advice to buy stocks in a vicious bear market had to be bad. He was clearly taken aback by Stewart's attack and didn't defend himself as he could have. I'll continue to watch and enjoy his show.

Credit Card Cancer

An thought provoking article! It's true, we do consider unused credit card balances as "Rainy day funds" - a life saver when the car breaks down and needs extensive repairs while we're on a trip. The problem (as in the housing crisis) is the proliferation of credit to folks who cannot repay. We received a dozen or more offers every week for years, and offers addressed to Samantha - our cat. If I'd filled in her application with a pawprint I suspect she would have got a card. The companies covered their losses by charging 26% or more on balances that would never be paid, but it all looked good on paper, so the CEO's enjoyed fat bonuses. Now the chickens are coming home to roost.

V Bottoms and the Twin-Peaked Bear

Every bear market in the past had a nadir that was not recognized until long after the upturn began. Every bull peak was not recognized (or acted on by the vast majority of us) until it was long over. Now the water has gone out of the harbor and all the boats - the stocks we hold - are moving down, financials worse than others. Selling the big losers and buying more stable craft - KO, PEP, JNJ, PG, WMT - at present low prices should bring in steady dividends and gains when the tide of money waiting on the sidelines flows back in.

It's a Winter Warming Spell - But More Snow Ahead for Markets

Good analysis. Also, consider the impact of "Mark to Market" on non-financial companies suffering a reduction in disposable earnings because they have to divert income to bolster pension plans shrunken in nominal value by the falling DOW and S&P. If the market rallies and/or "Mark to Market" is modified (or declared politically incorrect,) the nominal value of pension funds goes up and companies won't have this forced diversion of income. There are so many factors in the equation it's hard for investors to know what to do. If stocks are the frying pan, bonds may be the fire.