Common as Dow Jones:

The Lex Luthor bailout:

Hahahahahaha….

-Nik

Sorry I haven’t been updating much, I’ve been SUPER busy with finals this semester but thank god they’re almost over! I’ll be back in full swing by the end of this week, I can’t wait to get back to trading.

In the meantime, have you had a credit card company drastically higher your interest rate? Got a notice that terms have changed AFTER they’ve actually changed? That’s all about to come to a stop as the latest regulation on credit card companies passed today. Here are some key points from the bill (thanks to the Wall St. Journal):

Existing balances: Issuers cannot retroactively change the rate on an existing balance unless the account is 60 days delinquent.

Payments: A consumer payment above the minimum applies first to the balance with the highest rate.

Teaser rates: Issuers cannot raise rates for the first year after an account opened. Promotional rates must last at least six months.

Bills: Issuers must send a bill 21 days before the due date.

Over limit: Issuers cannot charge over-limit fees on credit cards unless the consumer has signed up to allow such transactions.

Minors: For consumers under 21 years old, a company must get the signature of a parent or another to take responsibility for the debt, or it must obtain proof that the under-21 consumer can repay credit.

Disclosure: Cardholders must get 45 days notice of change in terms.

Fees: Issuers cannot charge fees to pay by mail, phone, and electronic transfer or online, except for expedited service.

Gift cards: All gift cards must have at least a five-year life.

Look out for BULLY BANK VERSION 2.0 - launching VERY soon!

Cheers,

Nik

The S&P 500 has staged a dramatic rally since it’s lows on March 9th and is now actually bordering on being positive for 2009. Corporate earnings have come in a lot stronger than anticipated and banks are starting to loosen lending standards. China’s economic stimulus plan is kicking up manufacturing in the country and the U.S. consumer is showing some signs of strength. Housing prices continue to fall but at a lesser pace while existing home sales are ticking upward. New construction is still a gray area and unemployment remains at high levels with most firms saying they’re not ready to call people back to work.

GDP in the first quarter shrunk at a 6.1% annualized pace, a little better than the 6.3% contraction we saw in the fourth quarter of 2008. Businesses were very effective at drawing down inventories last quarter, which means manufacturing will tick up in this quarter, making the GDP reading for the current quarter a lot better - although still negative.

Two challenges still remains: The need that banks have for extra capital and the effects of the real economy. Stress test results are scheduled to be released on Thursday after noon, initial reports say at least 10 of the 19 banks tested will need fresh capital. The preferred method of raising this capital should be converting preferred shares in to common shares, which would likely wipe out the value of existing common shares. Some of the bigger banks might be able to raise private capital if prices are super low, although this is unlikely.

The effects of the real economy on business have not fully manifested. If unemployment remains high, housing prices will continue to fall and consumers will continue to default on all types of loans at a higher pace. The first real shock to the economy was the failure of the financial system, the second shock should be the effects of high unemployment. High unemployment creates a cycle of default that is hard to break out of, consumers cut down spending and have problems paying back loans, banks and businesses see results deteriorate, this leads to more layoffs and the cycle goes round and round. Although our economy is proving to be extremely resilient, it’s holding up because of government spending, not real and sustainable factors.

I think if you missed the rally it’s way to late to get in, however we might still have room to go up. The stress test results should shape the markets until we see real economic data that points to a recovery. I’m remaining very cautious to not get caught up in this rally, it could very well change direction on bad stress test results, or more bank failures. Simply, we’re not out of the woods yet but I do believe the free fall in the economy is over.

Cheers,

Nik