Week and Wrap

Does anyone remember this sign above Municipal Part Stadium? I can remember Opening Day in 1977...we were in general admission seating. I saw more of a steel beam than I did of the four double plays the Brewers turned on the Tribe that day. Can you say Andre Thorton? What a great role model he was for kids as he still serves in various ministries in the Cleveland-Akron area today!

Market Watch (Five Day Trading Range)
XLF Financials weekly trading range 24.33 to 25.18 Friday close 24.76
XLK Technologies 24.32 to 25.42 close 25.35 BOUGHT 1/25s call
XLP Consumer Staples 28.05 to 28.51 close at 28.49
XLV Health Care 31.47 to 32.18 close at 32.12
XLB Materials 43.11 to 44.79 close 44.45
XLY Consumer Discretionary 31.78 to 32.60 close 32.49 MISSED 1/32s @ 2.15 Put
XLI Industrial 38.06 to 38.99 close 38.84
XLU Utilities 40.81 to 41.61 close 41.38
XLE Energy 88.52 to 85.02 close 86.00

Movement is the key for these SPDRs. Energy stumbled a bit this week in part to an price manipulation inquiry. As mentioned in previous articles...the stock markets in general are to a degree all about manipulation. Energy prices however allow a perfect time for a bit of DC style grandstanding... Look for energies for a 3-5% move up or down next week. (1) A number of the CNBC crew called the top of oil which invariably means that oil still has additional upside potential. The consumer may be taking on water, but evidently is not dead. However. depending on spending habits...for 10-15 % of the population the stimulus checks won't be enough. (2) That is part of the reason XLY should see some additional movement by January. Last, the weakened state of the U.S. dollar (Currency traders can say whatever they won't about the dollar's strength) is just taking a temporary breather. XLF (didn't someone say it was time to buy a couple of weeks ago?) was not helped out by KEY Bank's warning that losses could "double" ... this also did not bode well for RKH which has a beautiful downward movement on its 200 day average. Look for at metal prices next week. It appears that a sell off may be a bit over done at this point...(London Metal Charts are just ugly)..... VGPMX continues to hold its own! Is Zeus , AKS, and CLF still a deal? I would have to think so!!! Private equity investors are increasing a stake in CLF as I write. FSLR could well be an ideal candidate for a strangle. The volatility is there. Five day high of 278. Low of 252. Currently 267.

Race for the Cure
Is there a more noble organization? The number of people who have cancer is just crazy. In a recent conversation with Dr. Chad Jacobson (University Hospitals Rainbows Baby and Children's Hospital) I asked his what it the real cause? Genetics? Food supply? Environment? Dr. Chad suggested that all plays a factor. We pray for those who are battling cancer. At one point in time, we found ourselves listing about 6-7 people we knew... That's just crazy! We lost Aunt Sandra three years ago this summer...and I can assure you that she was the finest person I knew!

Tribe Talk
The Cleveland Indians have golden opportunity to pull themselves out of self-destruct mode by opening an 11 game road trip against the Royals. The Royals have a .389 winning percentage...and one would think it is the perfect team to start a road trip with... I'm looking forward to seeing Ben Francisco get some at bats, Casey Blake to get hot, and the rest of the squad to get out of their hitting funk. My original hope of being .500 by Memorial Day did not materialize. While it was a legitimate call. Early May appeared to be so promising, it now looks as the small leak in the dike may get plugged. June...yes June is another month. After all, the "real season" starts after All-Star Break right. Maybe .500 going into the break...that would be a great spot. Let's [ray that the rest of the Central does not build an insurmountable lead... Cliff Lee 8-1! Pride pulled the squad together last night.

Clicks
My latest SA article, What's New for Credit Card Companies helped earn an additional 550 clicks ( nine applications) to close as 10707. This number is well below my expectation level suggesting additional exploration into other sites for marketing content. New posting sites needed... Passive...semi-passive residual income ideas always welcome...

Sources Cited
1.http://articles.moneycentral.msn.com/Investing/JubaksJournal/TheEndOfTheOilStockRally.aspx
2.http://money.cnn.com/2008/05/09/news/economy/rebate_poll/index.htm?postversion=2008050912

Is Profit a Dirty Word?

The old saying was that profit isn't a dirty word... On Wall Street, if you take a chance to make a few bucks on a risk, then it should be rewarded... At least that's what capitalists have been doing for years. Here is where I am with a couple of items in portfolio one and two.

In my portfolio I have the following plays running Portfolio One:
SPDR Tech Call 1/25s (up 10% since purchase last week)
TRLG PUT 10/22.5s (down 5% since purchase)
COF PUT 1/50s (up 10% since purchase)
NCC PUT 10/8s (up 60%)
PQ Call 10/20s (up 25% since purchase)
NCC Call 10/8s (down 97% since purchase)

In the 403B Portfolio Two
I still have 80% of my assets in VGPMX (Precious Metals and Mining). VEURX (A beaten down European Stock Fund) and VEIEX (Pacific Rim...Emerging Markets) both have a 10% allocation. (This last two were made as of 5/21.

In a recession, it is my belief that companies will look to innovate. I picked up the SPDRs last week on a down trading day(I have a fundamental belief that it is where you buy that ensures profit...not always where you sell), and with a bit of luck will see this bad boy run through July. TRLG is a stock his has had its fair share of volatility. It traded as low as 13.5 this year, and up to about 26.00. Currently I am down but will look to increase this position as it will hit a resistance point in the near future. COF is a loser...it was down again today, and only saved by a durable goods order. There should be a shake out in this stock in the near future. Credit card companies will try to dump the dead beats customers, and retain the winners. Much easier said than done. PQ is a kicker...up 80% at one time, I let this slip back to a point where I am actually looking to increase this position as well... Lesson learned here...Profit is not a dirty word...should have taken the money. No sweat though, I am counting on another excellent quarter from PQ and an increased demand for domestic oil...and better profit margins. NCC call is D.O.A.. It is one of few losers I had...and thus deserves further analysis. My reason for selecting this stock in a strangle was quite simple. I got caught up in the hype of this company going belly up. While I still believe NCC will get the snot beat out of it this summer, I expected more pronounced volatility (that is the key in a strangle)...For my own self-interests, I would love to hear a story about the C.E.O. being investigated for misappropriation of company assets like Tyco's Dennis Kozlowski...but Raskind is a straight shooter and a pillar of the community. I'll have to rely on the greed and stupidity of the mortgage business, coupled with slowing revenue in other areas. (I'm sure Raskind and his former boss Daberko knew nothing about that huh?) And they couldn't wait to get into the "hot markets like Florida?" Maybe just maybe a Presidential VETO (which thus far is likely after all what does Bush have to lose) on the financial package that is sailing through Congress will shake this stock up a little more! The banks will refuse to renegotiate loan deals with distressed buyers(see my blog entitled Greetings from D.C.. Selfish? Nope...just a realist here! The financials will want a better deal...

IN Trade...
Mild disappointment with this lovely organization because I think McCain is a slam dunk in the Fall Election...Currently trading at 38.00. Unfortunately, I cannot use their credit card processor as U.S. companies have certain regulations that will not allow certain time of gaming activities on our cards. I will either send a money order...personal check...or a wire. I do not like the idea of giving anyone my bank account number.

Traffic Update www.creditmall.org
The Article I submitted for SA was published. (For those of you who are counting it is my sixth.) My traffic "hit" numbers as of 8:52 EST are 353 since Tuesday morning with a click through ratio of about 5% (decent for industry standards). However, I am disappointed in the placement of the article as Big Ben's Credit Card Moves was placed under the "Editor's Choice" column. What's Next for CC Companies was simply listed under my site. That being said, the article still appeared on Yahoo Financial Blogs. I am interested in finding other financial sites that will receive submission article for additional exposure. This is a concept that should be explored by all readers of this site.


Tribe Talk
At last report Eric Wedge was looking for a gun to end the misery. Hafner (injured)...at least that is the story for now...If it is not the bats it is the bull pen. It is difficult to watch a team squander so many close games...especially when the starting pitching is looking pretty solid. In my humble arm-chair manager opinion, some senior leadership is desperately needed. Like football great Knute Rockne said "Winning is a habit...unfortunately, so is losing." The Cleveland Indians should not be allowed to get into the habit of folding in pressure situations. Pretty soon, scouts will need to find a Roy Hobbs type to get the ball rolling... Maybe the Tribe should talk to Tony Gwynn to be our hitting coach...something.

Greetings from D.C.

Dear Readers,

I can honestly say that Steven Latourette (14th District, Ohio) is doing a nice job in Washington D.C. The fact that he went to exhaustive lengths to read and answer my letter of inquiry shows me that things are not totally broken in D.C..

I am glad that he is no the Financial Services Committee and has a pulse on the current situation. The fact that he and his fellow Congressmen are holding hearings on the BSC bailout by the Fed is a good sign, as he suggested that some heads might roll on this one.

Interestingly enough, the esteemed Congressman even mentioned the name of Ron Paul when it came to fiscal responsibility.

While I am not totally convinced of the legislation on housing, there seems to be an attempt to remedy the situation. I believe the President will have no problem vetoing the bill if it is too radical. The bill, when explained in LaTourette's terms suggested that banks and financials will face another series of write-downs before the government extends financial assistance to home buyers.

Of course we fall back into the argument that why do any of these home buyers deserve any help? And the response (if I am reading it correctly) is that there is a general concern that the financial deadbeats could have a domino effect on neighborhoods and effect property values. That's when all of us move to Australia to avoid the real fallout of busted home equity appraisals and a general devaluation of property.

The credit card companies are going to feel a pinch here as well. Not only is there impending legislation from Congress...and another set of hearings to take place. The Fed will also be made fully compliant to Regulation Z, or what we commonly refer to as TRUTH in LENDING. My fear is that this will create another paragraph on a disclosure statement that is already over-loaded with information. Maybe we need financial and legal training in our schools...

In closing, the Congress even supplied me with a direct contact number should I have additional questions or comments. The following is a scanned copy of the letter...

BD

COMMITIEE ON TRANSPORTATION AND INFRASTRUCTURE

RANKING MEMBER, SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

COMMITTEE ON FINANCIAL SERVICE

Dear Mr. Davis:

Steven C. Latourette

Congress of the United States 14^th District, Ohio

May 23, 2008

Thank you for passing along your thoughts on a number of issues that are critical to our economy. It was great to see you during your trip and I am happy to give you' my views on these

topics.

There is no question that the increased actions of the Federal Reserve need to be closely monitored by Congress. The Bears Steams package has become the symbol of this increased role and there are many questions that my colleagues and I have on this subject. In fact, Republicans on the House Financial Services Committee, of which I am a senior member, have called on Chairman Barney Frank (D-MA) to hold a full committee hearing on the Bears Steams deal and to examine what role the Fed is going to have in this recent economic slowdown. Additionally, I agree with my colleagues like Rep. Ron Paul (R-TX) that we need to take action on the devaluation of the dollar and address the overall lack of responsible saving that has plagued our country at both the corporate and personal level. That last point certainly plays along with your desire to see greater financial education at all levels in our schools.

As you may know, the House recently moved a substantial housing package that we believe will bring stability to the market, without exposing taxpayers to undue risk. The most important part of the package gives the Federal Housing Administration (FHA) the ability to insure up to $300 billion in restructured mortgages.

This voluntary program will call on lenders to reduce a particular mortgage and in return would get a federal guarantee on the reduce mortgage agreement. This will allow the borrower to have a lower fixed payment and hopefully give them enough relief to stay in the house. This program will be for primary residence owners only and the government will get a percentage of the profits when prices rebound and owners choose to sell. While the overall number appears high, the Congressional Budget Office has estimated the real cost over the life of the program should only be around $2.7 billion.

Another piece of legislation that should be included in the overall housing package that will be sent to President Bush contains $15 billion in grants and loans for states and local authorities to secure and maintain foreclosed properties. This will provide relief to responsible borrowers that continue to stay current on their payments. There is no reason these folks should lose significant

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Page 2

value on their property, because they are surrounded by foreclosed properties.

Finally, Rep. Carolyn Maloney (D-NY) has introduced a credit card reform package that will look to implement tighter underwriting standards and increase disclosures to consumers. We have only had hearings on the matter thus far, but there is a chance we could markup a bill on this subject in the near future. It is also important to note that the Fed is working on reforms to Regulation Z, which provides guidance and regulation to the credit card companies.

Again, thank you for your kind words and support. Please contact C,J. Lennon in my Washington D.C. office at (202) 225-5731 at any point in the future. As my staff designee on the House Financial Services Committee, he would be happy to discuss any of these issues with you personally as we move forward.

Steven C. LaTourette

Member of Congress

SCL/KO

Americans and Credit Cards

The Wave has Broken

For banks who rode the credit card wave to riches on the backs of sub-prime borrowers, it is time to find another revenue source. It appears that the consumer may be tapped out. "Consumer sentiment as measured by the Reuters/University of Michigan index fell sharply in early May, to 59.5 from April's final reading of 62.6." (1) This poll surprised analysts who expected only a .1 percent in drop from April. The stimulus checks, which were intended to "jump-start" the economy have gone or will to to one of three sources: 1. Gas Stations 2. Service Credit Card Debt or 3. Service Mortgage debt. Regardless of amounts, stimulus checks have not had a positive influence on consumer sentiment.

According to Dean Calbreath in San Diego. "On average, Americans owe $2,342 per person on their credit cards alone, according to TransUnion, a Chicago-based credit tracking firm. Credit card usage has been climbing since the housing market went south, since homeowners can no longer use their equity to finance major purchases." (2) Some savvy collection agencies have used more aggressive techniques to claim portions of stimulus checks before they are spent. (3)
At one time, increased use of credit cards would have been a bullish sign for companies. However, banks are now scrambling to limit exposure to "bad" borrowers.

Ye of Little Faith
Banks are increasingly unwilling to extend "risky" credit due to an increased recessionary sentiment. This is part of the reason banks have backed away from the student loan business.
According to the Fed's Loan Officer Opinion Survey from April " On net, about 25 percent of domestic banks—up from around 15 percent in the January survey—expressed a diminished willingness relative to three months earlier to make consumer installment loans. About 45 percent of domestic banks—up from around 30 percent in the January survey—reported tightening lending standards on consumer loans other than credit card loans. " (4) While the Fed has gone to great lengths to increase liquidity, it appears bank have little faith in that liquidity to the consumer.

The Good News
These figures suggest that banks will be fighting for customers who are a good credit risk (700 or above credit score), as opposed to those who fall into the sub-prime category. As banks continue to play a shell game with the best customers, consumers who have good credit may be the winners in the end. A survey of www.creditmall.org suggests that every bank wants a consumer who is deemed as a good risk. All credit card underwriters are after customers with the best credit score. Good credit scores are rewarded better now, than almost any other time in history.

Here are some of the following offers banks have extended to consumers with excellent credit:

1. Credit cards from 6 to 15 months with 0% APR
2. Credit Cards with no annual fees and special offers.
3. Credit Cards with lowest APR on balance transfers.
4. Credit Cards that save on gas purchases.

Here are the offers banks are "giving" to consumers with poor credit:

1. Prepaid Credit Cards.
2. Credit Cards for those who have poor credit. (Be sure to read the fine print.)
3. Secured Credit Cards.
4. Student Credit Cards. (Be sure to read the fine print.)

In conclusion, credit card companies are in a mad scramble. Companies are tightening lending standards to those who have questionable credit histories. There is a growing gap between the types of credit card offers that are available for those who are deemed as a good risk as opposed to those who are in the "Sub-prime" categories. There had never been a better time to be a consumer with excellent credit. It is about time that those who have the best credit are rewarded.

Implications for the Credit Card Industry: A Wipe Out?
V, MA, DFS, and to a lesser extent AXP will see less people applying for plastic in the United States. While V and MA offer the services end of a card, tighter standards from banks will make it more difficult for consumers to get plastic. This will influence the N. American business operations. Also, the United States is the most profitable market as well. Banks that have a substantial exposure to credit cards may have problems as well. Bank of America (BAC), J.P. Morgan Chase (JPM), Citi (C), American Express (AXP), and Capital One (COF)must refine business models and evaluate the criteria of a good customer in light of new recessionary type data. Like other banks HBC has hedged its bet by asking "at-risk" borrowers to pay a one time acceptance fee. This organization also enters cardholders into a lottery type drawing...(5) While National City Bank's (NCC) credit card business is limited, there is good reason to believe that it's bottom line will not be helped by this division of business.

Tribe Talk...
Ben Francisco...can you fault him for a big E at the critical moment of a game? Regardless it is darn tough way to lose. Now a big...did I say big...HUGE series with the White Sox. This is a great opportunity to make up some lost ground in the AL Central. It could be a huge swing in momentum... Speaking of swinging...someone should make sure that Travis "The Whiffer" Hafner is not using Indiana Jones' whip to hit the ball... at least some contact dude! I was less than excited to see Borowski come back. Maybe he will surprise me.

Traffic Experiment
This latest blog post on S.A. should serve as a baseline in directing traffic to websites. Should this endeavor prove success...it should serve as a spring board for future entrepreneurial efforts. Currently, the counter is a 10256 at credit mall. Good numbers would be a hit count at somewhere in the area of and additional 1500+ by Friday...that is if I am published again.


Sources Cited
1. http://www.forbes.com/markets/feeds/afx/2008/05/16/afx5018916.html

2.http://www.signonsandiego.com/news/business/calbreath/20080525-9999-1b25dean.html
3. http://blog.stopccdebt.com/?p=130#more-130
4. http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200805/fullreport.pdf
5. http://www.msnbc.msn.com/id/23257741/page/2/

Sources Referenced
1. http://www.cccsso.org/default.asp?pg=Statistically%20Speaking
2. http://news.yahoo.com/s/nm/20080524/bs_nm/buffett_us_recession_dc

Lest We Forget: Freedom Isn't Free

Memorial Day 2008
Lord of Hosts, Hear our Prayers...Lest We Forget, Lest We Forget...

This weekend is a special post for all of those who have served our country...and would rather be cooking out, visiting relatives, or planting a garden...but are pushing daisies instead.

American soldiers stepped up when they have been asked to step up, gone where they have been asked to go, and yes... sacrificed when they have been asked to sacrifice. As a history teacher, I encourage students to understand the love of God, country, and duty that defines our servicemen.

A recent trip to Washington D.C. took us to the Iwo Jima Memorial. There stood a group of ancient warriors. Some with hearing aids, most with canes, but all of them with the same burning spirit of service and love for this country.

The Vietnam Wall, told the story of the 10,000 day war...few though know the personal stories on each soldier who was sent there, or the slow trickle of names and bodies that returned from that far off land earned a spot on that wall. It was nice to see that families, friends, students, teachers, and strangers commemorated the lives of those men.

The Korea War Memorial was much the same. The Forgotten War. An appropriate name, a few blurbs in the history books and a monument is about all people know about this one of course unless you watch re-runs of M.A.S.H., and that is only the Hollywood version of the truth.

For students, the World World War II Memorial was the favorite. "What are all those stars for Mr. Davis?" "Each star represents 100 soldiers who died in this war. Right around 4,160 stars there." "You mean 416,000 American died?" "Yep" Thank God, Grandpa Davis wasn't one of them. With a wife and four children at home, he left the hills of West Virginia and joined the U.S. Army. He carved his name into the mountain side...maybe as a lament to his family...maybe just a way to leave his mark on this earth if he didn't come back. Thank God he did! As a boy Grandpa held me on his lap and told me stories as he chewed on the Redman Tobacco chaw. "I was in Okinawa" he said. I'm glad he returned. If he didn't there wouldn't be an Aunt Belinda or Aunt Patty.

I would tell you about the World War I Memorial, but there isn't one. I imagine there isn't enough political clout left for their generation. It's too bad too, because this war marked the emergence of the United States as a world power. I think at last count there are three or four survivors of WW I left. As a boy, Mr. Ed Oliver from Maple Heights, Ohio would tell me stories about his experience in the United States Navy. Later, there was a man in Walton Hills named Komodic who was rumored to have been in a German U-Boat during WWI. His strange tattoos seemed to tell a story all of their own.

Arlington National Cemetery, was the high point of the D.C. trip. Row upon row of white headstones. Some from the Civil War, and every war fought since. One student asked "Why does the U.S. Army guard a Tomb of the (with) Unknowns in it?" There was no simple reply to this one..." Those bones...whatever is left of them, represents every soldier who died and whose bodies were never recovered. Not only did those soldiers lose their life, but they also lost their identity. Since there was no family to claim these bodies, the United States Army said they would be the extended family of these servicemen." Maybe just maybe it could be Great-Grandpa Bradley's brother (Bert Bradley). He went to war and never came back.

In our visit to Arlington, it was duly noted that there were servicemen from places like Fallujah, Iraq and the foothills of the Himalayas, in Afghanistan. That's where Major Steve Reich died. He was a member of the 160th Special Operations Ariel Regiment or (S.O.A.R). The last time I saw Stephen Reich was when I was going into 8th grade. I guess that would put him in 6th. He was the kind of kid who loved reading books. Military type stuff especially. That kid could have gone to any school in the country...a left handed pitcher...with a state championship under his belt said it all. He chose West Point. Steve is still the all-time strikeout leader on record. Did a stint in the minor leagues with the Orioles organization, but followed his heart as a Blackhawk helicopter pilot. There is no doubt in my mind that he is the kind of kid who could have eventually become Senator or President. He definitely would have been better than the only other President born in Connecticut!

I guess if I were to remember Steve...I would think back to the days of out boyhood. A baseball glove...that's what I would think of when I remember Steve... Thank you Steve, and every other veteran who made the ultimate sacrifice.

Little Boy Blue
by Eugene Field (1850-1895)

The little toy dog is covered with dust,
But sturdy and stanch he stands;
And the little toy soldier is red with rust,
And his musket moulds in his hands.
Time was when the little toy dog was new,
And the soldier was passing fair;
And that was the time when our Little Boy Blue
Kissed them and put them there.

"Now, don't you go till I come," he said,
"And don't you make any noise!"
So, toddling off to his trundle-bed,
He dreamt of the pretty toys;
And, as he was dreaming, an angel song
Awakened our Little Boy Blue---
Oh! the years are many, the years are long,
But the little toy friends are true!

Ay, faithful to Little Boy Blue they stand,
Each in the same old place---
Awaiting the touch of a little hand,
The smile of a little face;
And they wonder, as waiting the long years through
In the dust of that little chair,
What has become of our Little Boy Blue,
Since he kissed them and put them there.

The Triple Play: Six, Four, Three

The Triple Play:  Oil Addicts, Credit Crunch, and Deflation 
In baseball, a triple play is the most coveted event for the defensive team.  
One, two, three, and the inning is over.  It can save a pitcher,show case a
team’s defensive abilities,shut down the offense, and most importantly win
the game.  Unfortunately, it appears the United States is on the offensive
end of this triple play.  

The Line Drive to Short:  Oil Addicts
Goldman Sachs raised its forecast for the second half of the year to
$141.00 a barrel. (1) Now, it appears that this may be on the low end of
expectations.  The United States is a nation of oil addicts.  We cannot
kick the habit.  Currently, we are in a period where we will either one,
check ourselves into rehabilitation by pushing the green energy themes and
conserving the resources we have, or we will let the oil addiction kill us.  
With hat in hand, President Bush implored the Saudis to pump more oil.  
Thus far, the Saudis have responded with a mere 300,000 barrel increase.
Mean-while,it is duly noted that large oil producers such as XOM, BP,andCOP
are returning windfall profits to shareholders in the form of dividends.(2)  
Other companies like PQ and DNR are bound to hit a profit well beyond
expectations.  While big oil receives a moral scolding from Congress, one
cannot fault those who are making the best out of a supply and demand issue.
In the 1970s and 80s, Green Energies never got the attention they deserved.  
By the 1990s no one cared as gas (adjusted for inflation) was near decade
lows. Without foresight, and minimal amount of profitability, Green
Energies remained a dream.  Only now, when the addiction hurts are we
turning to think of renewable resources.  Be warned though, there are a
number of .com type losers amid a winners.  TAN may well be the safest play
here, while other investors have been handsomely rewarded with home-runs
like FSLR. 

The Play at Second:  Credit Crunch
Bill Fleckenstein pointed out that the housing bubble, and devaluation in
housing prices are only one of the dominoes that are falling in this chain.  
John Paulson made a bundle betting against the sub-prime mortgages before
they collapsed. With this point in mind, Paulson believes that housing
prices still have another 10-15 %to fall. (3)  As pointed out in earlier
articles, financial institutions are still exposed to a ridiculous number
of home equity loans; loans on homes which are currently losing value.  
If the borrower goes belly up then the lender is left holding a home that
is worth less than the amount owed.  Anyone who touts XLF should have
their heads examined.  As far as credit cards go, there are several
problems with current business models.  At one time, it was the goal to get
a consumer in debt, and keep them in debt.  The idea was to milk out re-
payments as long as possible creating continual cash flow.  However, two
problems now exist.  Companies are now entering a hyper-competitive
situation where one credit card company is willing to take each another’s
best customers(See Creditmall.org). Companies are rolling out offers such
as 15 months with 0% APR in desperate attempts to attract good customers!  
This situation does not bode well for issuers like COF who in the end,
will be left holding bad debt of financial deadbeats. Throw in inflated
prices for basics such as milk and gasoline this is a recipe for disaster.   

The Throw to First:  Deflation
On a much grander scale, the real story becomes deflation. What is the
value of a U.S. Dollar?  Stopping short of the gold standard (see Austrian 
School of Economics), as a collective lot the global economy is coming to
terms with the question to what a dollar is actually worth.  The fact the 
U.S. government(under the auspices of the Federal Reserve) are printing out
ridiculous amounts of money.  The Saudis then might have the answer, and
now we are feeling it at the pump.  Note that Ben Bernanke worked feverishly
stop an all out run on the financials by helping engineer the BSC bailout.(4)  
There was no mere coincidence that Secretary of Treasury Paulson was in Asia
giving extra assurance that the bonds (U.S. government debt)is still safe.(5)  
Congress is still figuring out another way to keep this Ponzi Scheme rolling
with still more
money for the troubled housing sector.  Housing and Financial Services
Chairman Barney Frank floated the idea of a $300 Billion dollar aid package.  
The plan would allow the Federal Housing Administration “So it could back
more affordable,fixed-rate loans for borrowers currently too financially
strapped to qualify.” (6)
   
Play Ball?
While some prognosticators are calling a bottom to the financial rain out
facing the United States, it appears as though we are heading into extra
innings.  Whether the Fed, Congress, Economists, or analysts are willing
to call it, we are in a Recession.  And as Yogi Berra said “It Ain’t over
til it’s over!”  As an investor,it is critical to take advantage of the
situation at hand. Look for a continued rise in oil prices.  Beneficiaries
will include APA, BP, XOM, COP, and smaller businesses such as DNR and PQ.  
A cheap dollar will increase exports, as it appears that X, AKS, CLF, and
ZEUS may have additional legs.  Stocks with high exposure to consumer credit
such as COF will go down swinging!  Homebuilders like XHB are still sitting
the bench due to a cash crunch and an over-abundance of vacant housing.              

Sources Cited

1. http://www.moneymorning.com/2008/05/21/with-oil-nearing-130-kicking-the-oil-addiction-looks-like-the-sole-u.s.-hope/  
2. http://articles.moneycentral.msn.com/Investing/CompanyFocus/BigOilsBigProblem.aspx 
3. http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/TheMarketsWorstIsYetToCome.aspx
4.  http://www.businessweek.com/bwdaily/dnflash/content/mar2008/db20080314_993131.htm?campaign_id=rss_daily
5.  http://www.chinadaily.com.cn/china/2007-03/07/content_822110.htm
6.http://www.washingtonpost.com/wp-dyn/content/article/2008/05/09/AR2008050901349_2.html

Open Letter to Congressman Steve LaTourette: Hand Delivered 5/16/2008

5/14/2008

Dear Congressman LaTourette,

I wanted to personally thank you for doing suchan excellent job representing the 14^th District of Ohio. Your honesty, integrity, and abilities as a leader are duly noted. You will continue to receive my support during future elections. As a constituent, I wanted to make you aware of several issues which need to be addressed:

1. The Federal Reserve, although a quasi governmental entity, has excessive control over fiscal policies in the United States . As a historian, I note that the role of the Fed has changed considerably since its original inception during the Washington Administration.

That being said, the concerns are three-fold. (A) It appears that the Fed’s reckless policies are undermining the financial well-being of the United States . Since M3 is no longer reported, it appears that that there is no concern in the devaluation of the U.S. dollar. (B) The Fed has extended a line of credit to Wall Street brokerage firms and banks. While this policy has added short-term stability to financial markets, long-term it is the equivalent of corporate welfare. Companies which make poor financial decisions deserve to go bankrupt. (C) The U.S. government and taxpayer need real collateral in any type of loan situation. We should not be left with the garbage packed in the various SIV’s. Accepting weak collateral is outright poor fiscal responsibility!

2. I appreciate your efforts to address the mortgage crisis in the United States . The government should have a limited responsibility in formulating a bailout for those who became speculators during the housing boom. It is not the responsibility of government in any way shape or form, to subsidize those who were burned in the PONZI SCHEME of three and five year ARMS. To bail this class of “gambler” out would send the wrong message to those who have lived within their means. However, should any group be addressed, I believe it would be displaced workers. Some of these individuals may have fallen upon hard times. Maybe some type of loan re-structuring might be in order.

3. In my recent article entitled “Big Ben’s Credit Card Moves: The Good, The Bad, and The Ugly”, I noted that an industry which was once controlled by organized crime “LOAN SHARKING”, is now a business controlled by banks. While I am a strong advocate for individual responsibility, the fact is that credit card companies and underwriters are the equivalent of Mafia musclemen who literally destroy consumer credit. That being said, there should be a degree of tighter underwriting standards. Secondly, there needs to be a clear path where consumers can eventually pay these ridiculous fees off. It is also duly noted that The NO CHILD LEFT BEHIND ACT fails to address any type of financial training for students who must navigate the treacherous waters of fiscal responsibility once they are out of school. Sure some students may be able to quote Shakespeare, understand Quantum Theory, and maybe even identify the vision of our Founding Fathers in the U.S. Constitution. However, give the average high school graduate a credit card let alone a bank loan, and all HELL will break lose.

In closing, thank you once again for being such an excellent representative for the 14^th District. We appreciate all the efforts you have put forth to make this a successful trip for the students and staff from our school.

Respectfully Yours,

Brian A. Davis

Education: Are We Truly Educating Our Students?

No Child Left Behind?

O.K., most people really don't know what goes on inside a school except on open house night, parent teacher conferences, or report cards.

In the past eight years, there have been major changes in the way schools are run. While there is a degree of tax payer money that is now subsidizing private schools, there are other issues which must be addressed.

The very nature of testing is a good idea. Schools, students, and teachers need a degree of accountability in their job, as does every other profession in the United States. (Except CEO's and boards of directors who appear to get paid and even rewarded for driving companies into the ground.)

Teach to the Test
While there are many criticisms of the NCLB Program, I would like to draw the reader's attention to the lack of fiscal responsibility taught to students. It is becoming quite apparent that financial responsibility is not being taught to anyone who attends schools throughout the United States. Sure students may be able to quote Shakespeare, regurgitate Quantum Theory, and even understand the intricacies of the Electoral College...but give a recent grad from high school or college a credit card and all @#$% breaks loose.

While I do not contend to much of a conspiracy theory type, I have concluded that either:

1. Educators from all over The United States are too worried about passing the test to give practical education classes.

2. Or, people are being kept stupid so the F.I.R.E. Economy can take advantage of everyone.

Are We Truly Educating Our Students?
In a day and age where personal bankruptcies are at an all-time high, alternative energy appears to be the wave of the future, and geo-science/exploration should be pushed harder than ever before in school, I find it troubling that many schools find themselves worried about issues that may not be as practical in the real world. Creative approaches and thinking outside the box is needed more than ever. After all, it has been America's ability to invent and innovate which have brought so much prosperity to this country. If Eisenhower and Kennedy could pledge to put a man on the Moon (in essence a race against the Russians in science and math), we should reconsider the direction we will take the next generations of Americans. Anything less would fail the American people.

The Light at the End of the Tunnel: The Financial Freight Train, Credit Cards Companies Clipped, Cash Call, Credit Crunch,

Light at the End of the Tunnel?

Most people think the light at the end of the tunnel is a good sign, however if you are going to be run over by the light...it is time to run the other way!

The Financial Freight Train
It is hard to believe, but for weeks some of the network pundits (with a straight face) have been calling the bottom in the stock market financials. Analysts for Cashin' In on Fox have gone as far as recommending XLF. CNBC has done the same by pounding the table on a basket of financials. At the end of the day, it is important to remember the guests on those shows are SALESMEN who are selling their wares to a weary public.

Cash Call
While some were calling a short-lived dollar bottom, it only takes companies like AIG to report cash problem and off sells the market. (1) This only comes on the heels of the previous quarter's losses. And for investors, the light at the end of the tunnel starts looking more and more like a train that is going to run stock holders into financial ruin! The tremors of AIG will continue to be felt through out the financial world as C was singing a similar tune today! Readers are reminded that BSC and NCC found themselves in a similar situation, and look what happened to investors who were left holding the bag! ABC reported the grief counselors were needed at BSC to help employees cope with the dramatic losses suffered during its recent financial meltdown. (2) Is WB or COF heading down the same path?

Credit Crunch
Interestingly enough consumer saw unleaded gasoline hit $3.75. While UGA appears to be a safe play here, the only question becomes "How much higher can it go?" According to an analyst on CNBC gas could hit $6.00 a gallon next year at this time. The analyst went on to say that Americans will pay it, after all it is all about supply and demand. No doubt he is long on oil. While the analyst is correct, it became apparent that he is ignoring the economic impact on entire segments of the US economy. If gas drags the economy to a slow-down status, then it is light out for any type of recovery in the housing market. Yet Cindy Perman of CNBC believes the consumer will make it through this "rough patch." (3) Most of the people who fill up their own gas tanks may beg to differ! We are reminded that consumer spending is responsible for 2/3 of the U.S. economy. When that money is spent on necessities such as fuel and food, it does not allow a lot of wiggle room for growth areas. Stimulus checks be darned!

Credit Card Companies Clipped
If Europe has been the trend-setter for regulations that eventually hit U.S. shores. V, MA, and DFS may have reason to be concerned. In January, European commission ruled that MA's interchange rates are illegal. (4) Now HR5546 Bill a.k.a. the Credit Card Fair Fee Act appears to be headed to the Senate where it should meet little resistance. (5) There is no doubt that anti-trust fears impacted the volatility of the sector this week. Please see Clayton Act.

Last week's article Big Ben's Credit Card Moves: The Good, The Bad, and The Ugly cited www.creditmall.org (6) as an excellent source for credit cards deals. Some of the best rates included 0% APR for 15 months. While the good credit risks justifiably receive the best credit cards, there is now some suggestion that underwriting standards are now tightening on other lines. Furthermore banks are being vilified by some of the "loan shark" type practices which guaranteed that people who were in debt almost certainly stayed in debt. (7) This could well be a case of too little too late, as the government may be poised for additional actions to protect consumers. This would mean a fundamental change in credit card business models. Revenue sources for a number of financials will be tested once again. BAC, COF, AXP, DFS, JPM, C, ADVNA.

Talkin Tribe!
Congratulations to Cliff Lee the first Cleveland Indians pitcher to hit the 6-0 mark since Greg Swindell in 1988. However, I am certain that Swindell had better run support in his starts. More amazing is Lee's .82 ERA! That's just amazing! I am liking Jason Michaels' move to Pittsburgh for cash and a player to be named later. Awesome come from behind win last night against Toronto!

Check Out Intrade...
Selling futures on issues outside the financial world...purely fascinating! Another great opportunity for people to put money where their mouth is!!! (8)

Sources Cited:
1. http://biz.yahoo.com/ap/080509/wall_street.html
2. http://abcnews.go.com/Business/story?id=4476286&page=1
3. http://www.cnbc.com/id/24543379
4. http://www.creditslips.org/creditslips/2008/01/european-commis.html
5. http://www.opencongress.org/bill/110-h5546/show
6. http://www.creditmall.org
7. http://seattlepi.nwsource.com/money/362550_singletary10.html
8.http://www.intrade.com//?request_operation=main&request_type=action&checkHomePage=true

Bernake and Credit Cards: Creditmall.org The Good, The Bad, and The Ugly

Bernake's Credit Cards
A loan shark is defined as an individual who lends money at excessively high rates. (1) Unfortunately, a business that was viewed as a tentacle of organized crime has now become common place through various practices of U.S. Banks and their credit card divisions.

Citing another pressure point in the U.S. economy, the Federal bank regulators are developing a swift action plan against abusive credit card companies. Fed Chairman Ben Bernanke trumpeted a reform agenda on credit card policies. The Fed approved a proposal that would generally prohibit credit card companies from increasing the annual percentage rate on a customer's outstanding balances. Bernanke’s proposal would also ban credit card companies from reaching back to prior billing cycles when calculating the amount of interest charges in the current cycle, a practice known as double-cycle billing. (2)

Evidently, the threat of revolving credit card debt poses a significant risk to consumers. While credit card companies do not like additional government scrutiny, bank billing policies have become too aggressive. This does not mean the consumer gets a free ride here. However, if credit cards are going to be the future platform of electronic transactions, then there needs to be a degree of uniformity between banks.

A recent visit to www.creditmall.org (3) validated some of the basic concerns in the revolving debt model utilized by the credit industry. Credit Cards can fit into three categories: The Good, The Bad, and The Ugly.

The Good... (People with Good Credit)
Depending on the credit rating, a number of credit cards are willing to business on very favorable consumer terms. For instance, a trip to credit mall suggests that there are nearly 100 companies that are willing to extend credit at 0% APR from three all the way to fifteen months! After all, the best credit risks deserve the best cards. Aside from low interest, credit cards are available in other reward categories such as cash, gas, and travel. (4)

The Bad... (People with No Credit)
Students find themselves in a unique situation. While bad credit is viewed as a bank risk, no credit in some circles is viewed as too risky. Interestingly enough, most cards for students (5) all had an initial six months with 0% APR as well. However, the terms of this deal are much different. For instance one offer shows “Two Cycles Average Daily Balance" method when determining finance charges. Wikipedia explains this as "The sum of the daily balances of the previous two cycles is used, but interest is charged on that amount only over the current cycle. This can result in an actual interest charge that applies the advertised rate to an amount that does not represent the actual amount of money borrowed over time, much different that the expected interest charge." (6) In layman's terms, an unfavorable borrowing situation.

The Ugly... (People with Bad Credit)
Consumers with poor credit need plastic as well. And there are several banks which offer them. However, the terms as one would guess are unfavorable including some with no introductory rates. Most of these cards come with a hefty membership fee, an APR that is in the Ozone Layer, and a number of penalties that would make a consumer's toes curl. (7)

Implications
Many banks have loosened credit card underwriting standards at a time when consumer debt is spiraling out of control. There are a number of banks who have given credit cards to customers who do not deserve plastic. While this practice is accounted for in most bank business models, it may have a devastating impact on the economy down the road. Now, it appears that government intervention will impact the bottom lines of most, if not all credit card lenders, and major issuers such as DFS, MA, and V. Many individual banks who underwrite credit cards may see a revenue source dry up. This may effect earnings for BAC, JPM, C, COF, and a number smaller banks such as ADVNA, KEY, NCC, RBS, and STI. (8) After all, everyone wanted a piece of this "action". At the end of the day, The Fed calculates that Americans carry $951.7 billion in revolving credit debt. That is a figure which should not be taken lightly! (9)

Conclusions

In conclusion, Bernanke's comments on Friday were a warning shot for
the entire credit card industry. Abusive "loan shark" type lending
practices must cease, and stricter underwriting standards must be applied
forconsumers.  Banks must adjust their revolving credit business model.  
This willhave a negative impact on earnings short term.  Long term, it will
be a good publicrelations move.  In the end, there must be a higher degree
of self-policing throughoutthe entire credit card industry.  Failure to change
means additional regulations inthe future. (11)  In the end, no decent
business would want the title of “Loan Shark.”

Sources Cited
1. http://dictionary.reference.com/browse/loan%20shark
2. http://news.yahoo.com/s/nm/20080502/bs_nm/usa_creditcards_fed_dc
3. http://www.creditmall.org/card_categories/student.asp
4. http://www.creditmall.org/selected_categories/low_intro_rates.asp
5. http://www.creditmall.org/card_categories/student.asp
6. http://en.wikipedia.org/wiki/Credit_card_interest
7. http://www.creditmall.org/card_categories/poor_credit.asp
8. http://finance.yahoo.com/
9.http://www.baltimoresun.com/business/balte.bz.credit03may03,0,6084576.story
10. http://image.minyanville.com/assets/FCK_Aug2007/File/christy/mj1.jpg
(New York Times)
11. http://www.rttnews.com/sp/todaystop.asp?date=05/02/2008&item=90&vid=0