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whitepapers (95.08)

June 2010

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Municipal Debt

June 11, 2010 – Comments (6) | RELATED TICKERS: MBI , ABKFQ.DL , GM

I came across the Motley Fool article that really had me thinking.  Here are my random thoughts.   [more]

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What can we learn from Credit Card Companies?

June 11, 2010 – Comments (0)

Illegal?  http://www.thestreet.com/story/10779280/1/credit-card-issuers-used-profiling-fed-says.html

They sound like pretty good ideas to me.  There might be some insight here into choosing a stock.  This is kindof what we do by watching insider activity.  Maybe we should start looking at where some companies get their lines of credit?  Do these financing companies have a history of chasing yield without a consideration of risk?  We don't really have to do this ourselves.  We have Citron Research to do it for us.  http://www.citronresearch.com/ It's one of my favorite blogs.  I haven't tracked their performance but many of their calls on companies soon to go bust seem like no brainers.  At least after reading their commentary.

Cash advance activity: Some issuers used cash advances as an indicator of risk. One issuer indicated that, for some of its new cardholders, it monitored cash advance activity in conjunction with card purchases at certain type of merchants (for example, jewelry and electronic goods stores). According to this issuer, it has found such behavior among new cardholders to be an early warning of elevated credit risk.

Transaction velocity: Issuers indicated that unusually high transaction velocity (number or dollar amount of transactions in a given period) or even a change in velocity may reflect cardholder behavior that is indicative of elevated credit risk.

Merchant activity: Two issuers used shopping and merchant activity to assess risk. The information was used to divide cardholders into groups with similar characteristics. One issuer considered the performance of other customers within the category to make decisions on account terms for individual accounts.

Mortgage-lender-related activity: Two issuers considered the performance of the lenders where cardholders had mortgages. These issuers cut credit limits for some cardholders who had a mortgage loan from a lender with a badly performing mortgage portfolio or if the mortgage lender accepted very low minimum payments (pick-a-payment loans). Individuals with pick-a-payment mortgages had relatively high delinquency rates on their credit cards.   [more]

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