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FreundInvesting (97.17)

Be Prepared for the S&P to Hit 350 by June 2010

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May 27, 2009 – Comments (18) | RELATED TICKERS: GM , ADVNA , ADVNB

The vast majority of small business owners rely on credit to fund the operations of their businesses: to make payroll, buy supplies, and smooth out their operational cash flow.

Any disruption to the supply of credit to these firms can be very damaging to our economy. According to SmallBusinessNotes.com;

“America’s small businesses - some 20 million strong - are the strength of our nation’s economy. They account for 39 percent of the country’s gross national product, create two out of every three new jobs and produce two and one half times as many innovations per employee as do large firms.”

Well, those 20 million small businesses are about to find their supply of credit seriously disrupted. Why? As of May 30th, 2009, one of the largest small business credit card issuers, Advanta Corp. (Nasdaq: ADVNA and ADVNB), stated that all Advanta Business Credit Card accounts will be closed indefinitely. This includes purchases, checks and balance transfers to and from the accounts.

It’s important to note that this closure has nothing to do with the account holder’s credit score; the axe is coming down on all accounts.

So why am I telling you this, and what does it have to do with the S&P 500 hitting 350 mark? My business, Freund Investing LLC., is one of the millions of small businesses that is affected by Advanta’s decision. Indeed, I received my second reminder of the impending change from Advanta just today:

read the rest here (can't copy it all)...

18 Comments – Post Your Own

#1) On May 27, 2009 at 10:34 PM, Seano67 (21.00) wrote:

That's interesting (and I'm sorry for your business and other small businesses affected by this), but it's pretty ballsy to try and peg the S&P to a specific number over a year out based on one single incident like that.

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#2) On May 27, 2009 at 11:13 PM, TourPhare (39.31) wrote:

First of all I'm sorry about your business.

Secondly, don't take this personally but for the S&P to drop to 350 means for it to drop to the levels during 1987 (I wasn't even born yet) and also means that it will drop far lower than ever before seen in the last 20 years (not even during the Dot-Com crisis or the present one). Stagnation will most likely be the scene over the next year or so if bad news surfaces.

 

All the best to you and your business. Good luck!

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#3) On May 27, 2009 at 11:16 PM, alstry (99.60) wrote:

Freund....

as you may know...Alstrynomics has strong ties to small business.....it is why Alstrynomics has a much better perspective on current conditions than main stream economics.

Few are prepared for what is coming.....and you nailed a key issue.

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#4) On May 27, 2009 at 11:26 PM, ralphmachio (< 20) wrote:

I too am sorry about your business. 

I think the ultimate sign of an unsustainable economy is the need to constantly be in debt to do business. Our system is a series of loopholes that make the idea of responsible business practice obsolete. They intentionally complicate the situation to make the whole thing just not make sense. They create jobs that create nothing, such as accountants, or tax accountants. That is why our economy is doomed. Too many leaches.

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#5) On May 27, 2009 at 11:45 PM, awallejr (81.52) wrote:

Well having actually read your link it appears you are absolutely unaffected by the cancellation by your own admission.  ADVNA is shutting down because it was going broke.  How this equates to the S&P going to 350 makes no sense and I agree with Sean. 

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#6) On May 27, 2009 at 11:49 PM, FourthAxis (85.36) wrote:

I'd love to say boo hoo along with everyone else, but I just can't.  I started an LLC in CA this year, we're flush with capital, and looking to exploit the situation.  What are we hunting?  Probably assets like yours.  Which begs the question, why would an investment firm need credit based operating capital?

The thing I wanted to share with you though, is that perhaps the market will "crash" up.  Zimbabwe anyone?

Cheers

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#7) On May 27, 2009 at 11:50 PM, Tastylunch (99.53) wrote:

I'm in the same boat as a SBO myself although I dodn't use credit much.

Credit cards companies are proof in my mind that the free market doesn't apply to banks , I couldn't get away with 95% of the dishonest bs they pull.

Where did you come up with the 350 number? I'm expecting around 400 myself but figured it'd be in 2011-2 not 2010...I figure Wall Street won't care until it's way past obvious that Main Street has flatlined. They only seem to panic when their own butts are in the sling.Mish Shedlock's double dip recession is the hypothesis that makes the most sense to me at the moment.

Just curious about your rationale.

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#8) On May 27, 2009 at 11:52 PM, FourthAxis (85.36) wrote:

Wait, now I'm reading your site...

"It is therefore important to never use leverage to invest, nor to invest in entities that are heavily leveraged."

Again, best of luck.

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#9) On May 27, 2009 at 11:59 PM, alstry (99.60) wrote:

Most of you Fools don't understand the point of this important blog.

Freund looks like it is in great shape and this will have little impact on its business.

Avanta is the 11th largest credit card issuer in America.  It is cutting off all of its customers from credit.

It is not just Avanta cutting off credit....it is practically every credit card issuer....and the impact will be HUGE.  Avanta alone has over 1 million customers.....and its impact will be huge...

Pretty soon when unemployment goes up so high that few are paying taxes....your taxes will be forced to double or triple just to make sure you are safe...

to my California buddy.....pretty soon 500K families are about to be cut off from welfare and thousands of prisoners released from jail....with no jobs to go to.....how many private police officers do you think will need to be hired to protect you from the inevitable distress?????

You know its coming.....

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#10) On May 28, 2009 at 12:10 AM, biotechmgr (99.49) wrote:

This is part of the vaporization of credit, which is now coming in chunks like this one. Wow, this event is like an atom bomb in the credit system, in size and scope (no survivors, no distinction of credit worthiness).

Totally agree with the level of decline in SPX based on everything I see in the continuing deflation even though many enjoying a respite in the bear rally.

It's gonna be bad...

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#11) On May 28, 2009 at 12:21 AM, awallejr (81.52) wrote:

"Most of you Fools don't understand the point of this important blog."

Oh I do. Read his bottom link to his website and between the lines.

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#12) On May 28, 2009 at 1:43 AM, cents4dollars (< 20) wrote:

The market hitting 3500, not probable, it appears this link and the message are designed to drive profit by a panicking comsumer. 

I have fail for it before, so one really needs to ask is this an opinion or some kind of ad, wih goals of moving the market in one's subjective direction. 

 

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#13) On May 28, 2009 at 2:27 AM, tsknight (< 20) wrote:

Advanta as a bank sucked. It had a lousy business model and was more likely to trap the small business in it's credit schemes. I own a small biz and I've felt the pinch, but wheels roll on. I do biz with many banks. Some I gave up on. RBS sucked. Citi, I only do biz with if I have to and I'm about to tell them goodbye too. Chase, Wells & B of A are somewhat more reliable and supporting of small biz. Fact is, banks are no longer reliable as 'Service Banks'. They are just a pocket.

Consider this, to 'talk' to my bank I have to talk to 5 different bankers. One for Mortgages, one for personal, one for business, one for education loans,  and one for investments. They have no clue about my business and they don't care as long as they make the interest off my hard working ass. I've gotten plenty of those little notes lately --- reducing credit limits, raising interest rates, re-evaluating lines of credit. All after we bailed them out with billions. And I pay all my notes on time with A1A credit.

The 'stimulus' is a joke and a farce on all of us. Small biz suffers, everyone suffers. When they could have just given us the low interest loans to consolidate, move on, purchase and hire. Instead we bumble along in the Age of Incompetence.

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#14) On May 28, 2009 at 10:08 AM, FreundInvesting (97.17) wrote:

awallejr

what do you mean "Read his bottom link to his website and between the lines"?

The poins it that Advanta is representative of a much larger issue of small business credit reduction across the country.

And I don't rely on the credit from Advanta at all; so no need to be sorry.

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#15) On May 28, 2009 at 10:16 AM, FreundInvesting (97.17) wrote:

point**

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#16) On May 28, 2009 at 10:36 AM, awallejr (81.52) wrote:

Freund I wish you all the success in your investment business, but cents4dollars read between the lines.

 

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#17) On May 28, 2009 at 10:45 AM, FreundInvesting (97.17) wrote:

That's not why I wrote the article. I only accept clients through current clients who know how I operate. I wrote it because I believe it to be true and I don't see the mainstream media telling the truth... ever. This is a real-world example of what's going on, and I feel others needed to have a dose of reality injected into their thoughts.

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#18) On May 28, 2009 at 9:08 PM, awallejr (81.52) wrote:

Well I will give you the benefit of the doubt then, but I still don't see the connection between one company going belly up and the S&P hitting 350.  Seems to be a bit of a reach.

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