Do not let the Fed’s cut diversion fool you.

[jk]

Re: Do not let the Fed’s cut diversion fool you.

jk, what is your opinion?

i think the ka is still ahead. looking at my portfolio, i'm invested like the ka is MOST LIKELY still ahead, but perhaps not. if i were sure the ka were ahead i would hold less gold, figuring i'd pick up more, cheaper, on a big all-assets-down sell-off. but i hold a lot of pms, 26% of my portfolio, including about 1% as calls on gdx and paas. if i were sure the ka was behind, i'd hold 30%. if i were sure it was ahead, i think i'd go down to 20%, because i couldn't be THAT sure. i should say, however, that i have a chunky nominal put position, and some shorts as well, to protect me if we indeed have yet to traverse the ka and to cushion my losses on the pm's in that event. if i were sure we were into poom i wouldn't have the puts and shorts, and i'd have big em and commodity positions- which i don't have.

[is that enough equivocation, jim? i think about harry truman's remark about wanting a one-armed economist, who couldn't say "on the one hand, this, on the other hand, that." i identify, instead, with one of those hindu guys with 8 arms.]

[zoog]

Re: Do not let the Fed’s cut diversion fool you.

Eric, I've been looking for proof that this happens (pay off the card, reduce your FICO) but cannot formulate the right search.

Have you any links?

There was a Gary North article on it some time ago as well but he seems to have removed it.

I've never been able to find any research confirming this either. Certainly the pay-full-balance-each-month, get labeled a "deadbeat" part is well-known. I believe I first heard that in an old Frontline from 2004 called Secret History of the Credit Card.

BEN STEIN: The credit card companies hate people like me, who pay off our bills every month. And I know that because I ran into a fellow I went to high school with on the street, and he told me he worked for a credit card company. And I told him about how much I use credit cards and how I pay them off every month, and he said, "Oh, we hate you. We hate you guys. We call you deadbeats."
NARRATOR: "Deadbeats," in the upside-down world of the credit card business, are the people like Ben Stein, who pay off their bills on time. The industry's best customers are the 90 million Americans who don't pay off their credit card debt. They're called the "revolvers."

http://www.pbs.org/wgbh/pages/frontline/shows/credit/

I've been a "deadbeat" on my credit cards for a few years now, although I've had school loans and car loans to slowly pay off with interest. Haven't checked recently but a couple years ago my FICO scores were in the upper 700's. This suggests to me that any negative effect of denying the credit cards their interest income may be minimal. YMMV. Perhaps having no interest payments whatsoever would be a different story.

[Jim Nickerson]

Re: Do not let the Fed’s cut diversion fool you.

i think the ka is still ahead. looking at my portfolio, i'm invested like the ka is MOST LIKELY still ahead, but perhaps not. if i were sure the ka were ahead i would hold less gold, figuring i'd pick up more, cheaper, on a big all-assets-down sell-off. but i hold a lot of pms, 26% of my portfolio, including about 1% as calls on gdx and paas. if i were sure the ka was behind, i'd hold 30%. if i were sure it was ahead, i think i'd go down to 20%, because i couldn't be THAT sure. i should say, however, that i have a chunky nominal put position, and some shorts as well, to protect me if we indeed have yet to traverse the ka and to cushion my losses on the pm's in that event. if i were sure we were into poom i wouldn't have the puts and shorts, and i'd have big em and commodity positions- which i don't have.

[is that enough equivocation, jim? i think about harry truman's remark about wanting a one-armed economist, who couldn't say "on the one hand, this, on the other hand, that." i identify, instead, with one of those hindu guys with 8 arms.]

Thanks, jk, I believe you to be a balanced sort of investor, so as I read your remarks, "equivocation" did not cross my mind. But looking at the way you're allocated, it, to me, supports what you say about believing Ka is still if front of us.

[GRG55]

Re: Do not let the Fed’s cut diversion fool you.

i think the ka is still ahead. looking at my portfolio, i'm invested like the ka is MOST LIKELY still ahead, but perhaps not. if i were sure the ka were ahead i would hold less gold, figuring i'd pick up more, cheaper, on a big all-assets-down sell-off. but i hold a lot of pms, 26% of my portfolio, including about 1% as calls on gdx and paas. if i were sure the ka was behind, i'd hold 30%. if i were sure it was ahead, i think i'd go down to 20%, because i couldn't be THAT sure. i should say, however, that i have a chunky nominal put position, and some shorts as well, to protect me if we indeed have yet to traverse the ka and to cushion my losses on the pm's in that event. if i were sure we were into poom i wouldn't have the puts and shorts, and i'd have big em and commodity positions- which i don't have.

[is that enough equivocation, jim? i think about harry truman's remark about wanting a one-armed economist, who couldn't say "on the one hand, this, on the other hand, that." i identify, instead, with one of those hindu guys with 8 arms.]

Some time back EJ gave us one of his few detailed investment posts, laying out the pros and cons of liquidating positions (particularly pm's) in advance of the Ka (even when you KNOW its coming) and why he was planning to hold his pm's throughout. I go back to my printed copy of that regularly these days, as we try to figure out what's really going on in these crazy markets.

[Andreuccio]

Re: Do not let the Fed’s cut diversion fool you.

Some time back EJ gave us one of his few detailed investment posts, laying out the pros and cons of liquidating positions (particularly pm's) in advance of the Ka (even when you KNOW its coming) and why he was planning to hold his pm's throughout. I go back to my printed copy of that regularly these days, as we try to figure out what's really going on in these crazy markets.

My recollection of that post, (assuming I'm thinking of the same one), is that the pros and cons he laid out had more to do with the transactional costs of PM's and the difficulty of accurately timing exactly where we are in the Ka-Poom cycle.

[Andreuccio]

Re: Do not let the Fed’s cut diversion fool you.

To hedge, he recommends what iTulip has always recommended, with some interesting additions.

I'm curious what, specifically, iTulip has always recommended.

I remember reading in one recent post of yours that the iTulip recommendation is get out of debt, save money, diversify out of dollars. (If memory serves.) Is there anything beyond that that forms part of the official iTulip recommendation?

[Andreuccio]

Re: Are VISA and MasterCard adding fire to the credit crunch?

There are many merchants who sell items or services that are technically a "future deliverable". A future deliverable is something that gets delivered over time. In the case of publishers, they traditionally sell 1 year subscriptions to the Wall Street Journal, your home town newspaper, magazines like Business Week, an investment newsletter, or newsletters on various other topics. Selling yearly subscriptions has been a basic to the cash flow of these companies.

It used to be that VISA and MasterCard allowed merchants to take orders for future delivery as far out as 1 year, and sometimes longer. However, quietly ... during the past year, VISA and MasterCard changed the rules and fine print to say that these merchants were no longer allowed such practices.

In fact, their new regulations state that a company may only charge for a period of 90 days or less.

Um, this won't affect my iTulip subscription, will it?