The Bottom: More Thoughts

I recently did a little thinking on "Where is the Bottom of the stock market?" Here are some more thoughts, mostly from articles by Bill Bonner. He says,

major bottoms don’t happen at the beginning of a recession; they happen at the end of one…when an economy is ready for another big growth spurt.

In the discipline of optimization, a distinction is made between "local minima" and a "global minimum;" that is, some local canyons are pretty deep, but somewhere out there is the very deepest canyon. These are bottoms in space. But what about time? If this recession lasts a couple years, then we might see some short term (local) "bottoms," as well as the long term, deepest (global), bottom.

Bonner also says to keep your eye on the earnings if you want to watch for "the bottom"

when [stocks] are cheap… when they sell for 5 to 8 times earnings, not 10 to 15 times.

He also has some insight in a less quantitative sense:

Most important, a real, major bottom doesn’t happen when you’re looking for it... You’ll be able to see it coming…after you’ve forgotten to look.

Bonner has a prediction for the bottom:

When the Dow gets below 5,000 we might be tempted to buy. Until then, it’s sell… sell… sell.

By the way. I don't buy all of Bonner's libertarian policy views, but some of those libertarian economists do tell it like it is on the numbers.

Sources:

Contrarian Profits, We’re a Long Way from the Bottom of this Bear Market, Bill Bonner, July 15, 2008.

Contrarian Profits, Watch the Dow Hit 5,000 After This Bear Market Bounce, Bill Bonner, October 14, 2008.

Bank of America Credit Card Scam 2

I little while back I wrote about a B of A credit card minimum finance charge scam.

Recall, they sent a notice out saying they would start charging a $1.50 minimum finance charge, UNLESS they received a written request to reject the charge. Recall that I heard about this from a friend who also has a pseudo liberal Working Assets Visa. At the time I wrote that blog entry, I hadn't even found the small print describing this fee, which I thought was buried in the Privacy Statement.

Well, I found the notification of the finance charge, and Bank of America has a reason for assessing this finance charge:

We added a Minimum Finance Charge to your account primarily due to a change in our business practices.

Well NO KIDDING. They've changed their business practices to ... collect a finance charge.

Bank of America has also changed its Monthly Minimum Payment. Before, there was a cap on the minimum payment required each month. Now, the minimum payment is simply a fixed percentage of the outstanding balance. OK, I can live with that. But, again, the reason they give is a bit pathetic:

As a result of federal guidance, we are changing the minimum payment calculation on your account.

This surely is intended to make it sound like the government is forcing B of A remove the cap on the minimum required monthly payment. However, the reality is probably more like the following. Credit card industry lobbyists bought off Congress to "modernize" the credit card laws and create more "flexibility" so they could compete in the global economy. Then, the credit card regulators were lobbied to change the regulations to remove the cap on the minimum payment. In response, the regulators revised their guidance, allowing credit card companies to remove the cap on the minimum payment. This might even be a part of the bankruptcy reform law, in which the credit card holders receive a favor from big brother, designed to help them keep up with paying down their debt and avoid bankruptcy.

A year or so later, the credit card company, B of A in this case, turns around and tells the public, "As a result of federal guidance," we're going to add a little more pain to your life.

Surely, if the people were in charge of this country, they wouldn't let this kind of thing happen.

How to Reject the Finance Charge:

By May 1, 2007

WRITE TO:
B of A
PO Box 15088
Wilmington, DE 19850

Identify yourself and your card number

Say: "I reject the minimum finance charge of $1.50."

Senate House Minimum Wage: Make Tax Cuts for Small Business

The House and Senate struggle over the minimum wage bill can be easily resolved. The Senate feels it has to tack on $8.3 billion over ten years on business tax breaks. Limit those tax breaks to small businesses, and call it a compromise.

Source:

JIM KUHNHENN, Associated Press Writer, January 24, 2007.