[lug] Credit - was: [Letting folks pay from the web.]

[Nate Duehr]

On 2/2/2010 4:13 PM, Jonathan Corbet wrote:
>> Apparently as a software developer, I
>> represented too large a risk for them despite the fact I rarely used
>> the card and always paid it off.
>>      
> I doubt it was credit risk.  The problem (for them) is that you rarely
> used the card (thus generating few commissions) and you always paid it
> off (thus generating no interest).  You weren't making them money, so
> they lost interest (so to speak).  My understanding is that we're
> likely to see more of this kind of stuff - or the imposition of more
> annual fees - as new regulation makes some of the other abuses
> impossible.
>    

Agreed, but I disagree that they're "abuses".  The card companies are 
just doing what they've always been required to do by their BoD and 
Shareholders.  Attempt to make a profit. And make profits they do.  But...

The real problem here is that their Shareholders demand GROWTH during a 
down-turn and most investors are pricing stock prices at some 
"comfortable" multiple times the growth rate... no one cares if the 
company made a profit... that's dull.  They want the profit to grow 
every single quarter.

That's an utterly stupid way of thinking, but it's what every stock 
price picker book on the market of even the most conservative sort, will 
tell you to do.  Try telling idiots that think their 401K should be up 
20% year over year during a recession... when the 401K is made up of 
MUTUAL FUNDS (hint: Diversificatoin only works when only a FEW companies 
go down and the others go up... when they ALL go down, so-called 
"Diversification" will LOSE you money...).

The shareholders shout "more, more, more!" even if indirectly through 
Mutual Fund managers... and the companies have no choice but to 
comply... or be sued by their shareholders...

Then add a recession where the shareholders REALLY start to holler that 
they want performance... it's a never-ending cycle.

"Value" investing will start to come back into vogue as another dip 
happens... in fact, if you ask me the recession wasn't hard or long 
enough (assuming it doesn't have the bottom fall out again as soon as 
governments stop printing money to throw at the problems) for people to 
really reset their expectations properly... we'll see...

My personal "Cheeseburger Index"... or "How much did it cost me to buy a 
cheeseburger" that I use to gauge inflation is showing we're already 
headed in an upward direction on that, even if the money big-wigs are 
playing with the numbers... It's relatively easy for a single person 
feeding themselves to spend more than $10 at McDonalds these days... and 
that would have been a rather obnoxious pile of food for one person to 
eat a few years ago...

Nate