As a small business owner i can't tell you how many offers I received Invariably they were touted as "cash management tools." now when borrowers are slowing payments and such to manage their cash the issuers are surprised?
[When a small business goes under - assuming the business was separated from the borrower's personal finances - the loss to the credit card lender is probably 100%.]
This is almost never the case. Nearly all of these cards require a personal guarantee.
How much of a difference will that make? Perhaps they should check with the home mortgage department....
Municipal Market `Fire in the Disco' Burns Borrowers
"Hospitals, airports, school districts and local governments around the country have been socked with spiraling interest bills on many of the $80 billion of insured variable-rate bonds. When units of MBIA and Ambac, the two largest bond insurers, lost the top ratings from Standard & Poor's and Moody's Investors Service last month, the institutions they insured did too."
An $83 million Sarasota health revenue bond saw its financing cost go from 1.75% to 9%.
"The interest rate on $44 million of bonds for the San Francisco Ballet more than doubled to 12 percent last month as Financial Guaranty Insurance, which insured the debt, was cut below investment grade. In San Francisco, the Asian Art Museum's rate on $120 million of bonds jumped as high as 9 percent from 1.75 percent at the start of June before sliding back to 7.75 percent."
You might be right on it not reaching $800 anytime soon.
I now see it stuck in the band between 850 - 950.
Luckily, I am in gold shorts denominated in currency that is not in the USD. So even if gold goes up in USD, my gold shorts can also go up since it's price is dropping relative to Euros and Canadian dollars... hope that helps.
Interesting Times writes:
I now see it stuck in the band between 850 - 950.
Luckily, I am in gold shorts denominated in currency that is not in the USD.
I do agree with the bottom end of the range although I think it is unlikely unless crude goes down to 130, am more inclined to think that it will go up towards 950 and more, once oil rebounds or the USD begins its decline again.
That strategy you employ is smart, bound to smooth out a bit of volatility
Thanks for your opinions and insight, would love to hear anymore ideas or news that you have.
Maybe not all small businesses, then. Just the ones that leech off of larger enterprises in the form of a "cafe" selling overpriced food. Why do people buy from such places? The same items at a supermarket - even if not bought in bulk - are a third of the cost. The U.S. economy needs far less of these lazy ass service jobs and far more sustainable service jobs (sustainable transport, etc.).
Elvis writes:
Pawn shops are in for four years of glory.
4 years of worthless inventory is more like it. If it wasn't for the fact this is going global I would be purcasing a lot of US assets for export right now.
The Vix is up even though equities are up. What does that mean?
It means put premiums are going up as fear increases. One could view this as a lack of faith in today's rally, or it could be all the fear is centered in the financials (which are still going down).
some huge percentage of small businesses start with financing on the owner's credit card. I've done it myself. Moving from the personal card to the small business card is no biggie, and God knows once you incorporate you are swamped with offers. But as I remember you are on the hook for everything, either way.
Also, remember that a small business is generally the owner's job, as well as his company, so ifthe business tanks, the owner is out of a job, and unless it tanks after many good years (which is pretty rare), being out of a job means more credit woes that just the lease space, the vendor financing, and the company car lease.
On the other hand, everybody's talking about this big horrible bear market. But again, it looks to me like we're really not setting new lows yet in the broader market (especially if you account for the NASDAQ):
Yal -
looks real enough - carrier movements aren't a secret. There used to be a Navy site that tracked ships - not sure if it is still on-line, seem to remember it being pulled due to 'security' concerns. Which is typically Bush League stupid, because nobody, but nobody, can hide a carrier battle group - and all the people that care where they are have their own means of determining that location without U.S. help.
Whereas there has never been a site that tracks missile subs, since part of their job is to disappear for a set period of time, as an insurance policy. MAD remains alive and well, after all is said and done, though the club has grown since the Soviet Union disappeared.
some huge percentage of small businesses start with financing on the owner's credit card.
I'm also told that some significant percentage of small businesses used HELOCs. That's just being smart, since the interest rates are lower, and home prices double every 10 years. I heard that on the radio just yesterday, in an advertisement sponsored by the NAR.
there is now talk starting again about foreign central banks stopping large purchases of US debts (Bretton Woods 2).
What happens if they do? Can one of our resident thinkers describe the most obvious consequences?
It looks to me that dollar should fall, interest rates rise. These factors would mean high inflation, but how would this interact with the deflationary credit destruction?
During 2007 as the mortgage mess began to stink, credit card companies seem to redouble efforts to sign up customers. There were even news releases about record numbers of accounts and record size of total debt - and the CC companies seemed to regard this as a good thing. I didn't understand that attitude then and I don't now.
""but how would this interact with the deflationary credit destruction?""
I'm just barely able to lift my head out of my coffee this morning, but my first tendency is to echo Egon Spengler of Ghostbusters, "Sorry, Venkman. I'm terrified beyond the capacity for rational thought."
To my mind, foreign CBs halting Treasury purchases would have a very slow tightening effect on credit. It's already happened, very recently for months at a time, with little effect.
It would be only if huge amounts of Treasuries were dumped on the market, would interest rates skyrocket.
I'd say this would only exacerbate the deflationary credit spiral. Because interest rates would be so high, almost no one would be able to afford credit. Then you've got a contractionary environment, just like what Paul Volker brewed up in 1981.
the CC companies seemed to regard this as a good thing. I didn't understand that attitude then and I don't now.
Where you see a person making bad choices, they see a highly profitable customer.
The most profitable customers for CC companies are the ones barely making ends meet but still making payments. Each late payment is a profit opportunity.
As long as they stay there and don't eventually decide to stiff them.
As a number of commenters already have observed, small business credit cards always are personally guaranteed and based on the applicant's personal credit score. They are not reported to credit reporting agencies, however, until/unless one falls behind or defaults. Past dues are turned over to collectors much more rapidly as well.
What happens if they do? Can one of our resident thinkers describe the most obvious consequences?
It looks to me that dollar should fall, interest rates rise
If FCBs increase their buy of US sovereign debt the opposite of what you suggest should happen - dollar should strengthen, long rates should fall & credit should once again get looser.
That is IF the FCBs & SWFs have enough clout to actually move the market - the gamble is if they intervene but with a weak hand (insufficient commitment no move the needle) THEN you could see confidence deteriorate & the dollar fall, rates skyrocket in spite of intervention.
I seriously doubt they will act unless they have KNOW they can move it. That's always been the BOJ SOP.
BTW - Setser has been saying all along the Asian & Gulf SWFs, FCBs & other 'official market participants' never went away. Its the foreign private sources of capital that are on strike. They have a completely different motivation (they don't want to lose money while the FCBs & SWFs don't seem to care so long as intervention maintains their domestic job growth).
Its a wild card you always have to keep in the back of your mind.
As an FYI - I've been solicited a gazillion times for biz card cc's - but they all want a personal co-sign. Screw that - I'll just use my personal cc's then. I never saw the advantage of a small biz cc unless the liability is kept behind the 'corporate veil'.
As a result my personal cc is my banker. Higher rates but no hassles, no questions. Most folks I know do it that way unless their company is worth many millions in actual hard assets the cards don't require a co-sign.
This is another example of how stupid bankers & their 'customers' had become - easy money makes people dumber, I'm convinced of that after seeing all this unfold.
Yikes. Let me comment as a small business owner (I am a patent attorney, a partner in a very small firm). So far I have been through two slow downs - the tech melt down and this one. This one is quite mild compared to TMD (so far) but I have had two clients go bankrupt this year.
During the TMD my clients were falling like flies. The lucky ones were bought out, but plenty just went under. My accounts receivable were looking quite ugly as well. Of course anything owed to me by a company that went bankrupt was simply gone. But even if a company got bought out, it might take many months for me to get paid. I had to absorb losses and it took time. I am not complaining - I was counting my blessings watching the small tech firms I was working for. Just describing the situation.
If the bank and the credit card company had chosen that time to lower my credit lines, it would have been twice as ugly. I run a quiet little practice here, without taking on big chunks of debt, normally. But when both losses and cash flow problems hit within a matter of months, it is a rare firm that isn't extending deep into its lines of credit.
[There were even news releases about record numbers of accounts and record size of total debt - and the CC companies seemed to regard this as a good thing. I didn't understand that attitude then and I don't now.]
They were excited about the changes in the BK laws, thinking that the means test, etc. would bolster collections.
My last check of the stats and conversations with BK attys suggests that little has changed.
first from a Treo?
Yeah, but what's in YOUR wallet?
oh vikas, you'll bury us all
As a small business owner i can't tell you how many offers I received Invariably they were touted as "cash management tools." now when borrowers are slowing payments and such to manage their cash the issuers are surprised?
Assuming that the creditors don't make the owners personally guarantee?
Times have changed.
Since setting up an LLC for some contracting that I did, I have doubled the number of trees killed on my behalf.
Global warming could probably be solved by congress setting up a Do Not Send Credit Card Solicitations site.
So an Amex Plum card is harder to get than a centurion now?
I haven't read the fine print anytime lately, but I would be surprised if the business owner(s) didn't have to personally guarantee the card debt.
The Vix is up even though equities are up. What does that mean?
[When a small business goes under - assuming the business was separated from the borrower's personal finances - the loss to the credit card lender is probably 100%.]
This is almost never the case. Nearly all of these cards require a personal guarantee.
How much of a difference will that make? Perhaps they should check with the home mortgage department....
OT but interesting
Municipal Market `Fire in the Disco' Burns Borrowers
Municipal Market `Fire in the Disco' Burns Borrowers
"Hospitals, airports, school districts and local governments around the country have been socked with spiraling interest bills on many of the $80 billion of insured variable-rate bonds. When units of MBIA and Ambac, the two largest bond insurers, lost the top ratings from Standard & Poor's and Moody's Investors Service last month, the institutions they insured did too."
An $83 million Sarasota health revenue bond saw its financing cost go from 1.75% to 9%.
"The interest rate on $44 million of bonds for the San Francisco Ballet more than doubled to 12 percent last month as Financial Guaranty Insurance, which insured the debt, was cut below investment grade. In San Francisco, the Asian Art Museum's rate on $120 million of bonds jumped as high as 9 percent from 1.75 percent at the start of June before sliding back to 7.75 percent."
BB - followup from previous thread re: gold
You might be right on it not reaching $800 anytime soon.
I now see it stuck in the band between 850 - 950.
Luckily, I am in gold shorts denominated in currency that is not in the USD. So even if gold goes up in USD, my gold shorts can also go up since it's price is dropping relative to Euros and Canadian dollars... hope that helps.
and just how much is a personal guarantee worth on unsecured debt?
@ interesting times
what vehicle are you using for gold shorts not in USD? I don't know about that one.....Thanks...
randy - look at these ETFs in the Toronto Stock Exchange
HGU - Gold Ultra Bull
HGD - Gold Ultra Bear
Also, if you're interested in shorting oil, I recommend:
HOD - Oil Ultra Bear.
HOU - is the Ultra Bull.
Disclosure - I currently hold the HGD
Good luck!
Interesting Times writes:
I now see it stuck in the band between 850 - 950.
Luckily, I am in gold shorts denominated in currency that is not in the USD.
I do agree with the bottom end of the range although I think it is unlikely unless crude goes down to 130, am more inclined to think that it will go up towards 950 and more, once oil rebounds or the USD begins its decline again.
That strategy you employ is smart, bound to smooth out a bit of volatility
Thanks for your opinions and insight, would love to hear anymore ideas or news that you have.
Much obliged.
I had two cards for my last business. I was personally liable for the debt.
Good riddance to small businesses!
CR,
the LA Times is not the WaPo. We are concerned about your readers ´cause nobody saw this.
LA Times complaints department
Anyonymouse, whatcha have against them? Did a small business beat up your family?
Thanks for your opinions and insight, would love to hear anymore ideas or news that you have.
BB | 07.07.08 - 10:25 am | #
No problem BB.
I'm just a scavenger like most others here... living off the scraps of a failed economy.
OT, but I saw this morning that "subprime" made the dictionary. Along with "Texas Hold 'em" - the pairing of which seemed rather appropriate.
Alas, the jury is still out on "Tantafication."
On Deadline: Breaking News & Must-Read Stories
Alo,
Maybe not all small businesses, then. Just the ones that leech off of larger enterprises in the form of a "cafe" selling overpriced food. Why do people buy from such places? The same items at a supermarket - even if not bought in bulk - are a third of the cost. The U.S. economy needs far less of these lazy ass service jobs and far more sustainable service jobs (sustainable transport, etc.).
Pawn shops are in for four years of glory.
Elvis writes:
Pawn shops are in for four years of glory.
4 years of worthless inventory is more like it. If it wasn't for the fact this is going global I would be purcasing a lot of US assets for export right now.
The Vix is up even though equities are up. What does that mean?
It means put premiums are going up as fear increases. One could view this as a lack of faith in today's rally, or it could be all the fear is centered in the financials (which are still going down).
MOT,
Are you calling pool cues and band saws worthless? I bet MscGyver would beg to differ.
Can anyone tell me what part of the booming American economy of the past decade wasn't built on debt, speculation, and imaginary property?
anyone knows if this is accurate:
CV Locations
NYSE 202 new lows and 6 new highs.
Something fishy about this rally.
some huge percentage of small businesses start with financing on the owner's credit card. I've done it myself. Moving from the personal card to the small business card is no biggie, and God knows once you incorporate you are swamped with offers. But as I remember you are on the hook for everything, either way.
Also, remember that a small business is generally the owner's job, as well as his company, so ifthe business tanks, the owner is out of a job, and unless it tanks after many good years (which is pretty rare), being out of a job means more credit woes that just the lease space, the vendor financing, and the company car lease.
Something fishy about this rally.
On the other hand, everybody's talking about this big horrible bear market. But again, it looks to me like we're really not setting new lows yet in the broader market (especially if you account for the NASDAQ):
INO Futures and Commodities - Indexes - S&P 500 INDEX (E-MINI) Dec 2009 (E) (CME:ES.Z09.E) Price Chart and Quote
People look at the DOW too much. It's a poor metric for the overall market IMO.
Yal -
looks real enough - carrier movements aren't a secret. There used to be a Navy site that tracked ships - not sure if it is still on-line, seem to remember it being pulled due to 'security' concerns. Which is typically Bush League stupid, because nobody, but nobody, can hide a carrier battle group - and all the people that care where they are have their own means of determining that location without U.S. help.
Whereas there has never been a site that tracks missile subs, since part of their job is to disappear for a set period of time, as an insurance policy. MAD remains alive and well, after all is said and done, though the club has grown since the Soviet Union disappeared.
some huge percentage of small businesses start with financing on the owner's credit card.
I'm also told that some significant percentage of small businesses used HELOCs. That's just being smart, since the interest rates are lower, and home prices double every 10 years. I heard that on the radio just yesterday, in an advertisement sponsored by the NAR.
there is now talk starting again about foreign central banks stopping large purchases of US debts (Bretton Woods 2).
What happens if they do? Can one of our resident thinkers describe the most obvious consequences?
It looks to me that dollar should fall, interest rates rise. These factors would mean high inflation, but how would this interact with the deflationary credit destruction?
During 2007 as the mortgage mess began to stink, credit card companies seem to redouble efforts to sign up customers. There were even news releases about record numbers of accounts and record size of total debt - and the CC companies seemed to regard this as a good thing. I didn't understand that attitude then and I don't now.
Missed Information:
""but how would this interact with the deflationary credit destruction?""
I'm just barely able to lift my head out of my coffee this morning, but my first tendency is to echo Egon Spengler of Ghostbusters, "Sorry, Venkman. I'm terrified beyond the capacity for rational thought."
To my mind, foreign CBs halting Treasury purchases would have a very slow tightening effect on credit. It's already happened, very recently for months at a time, with little effect.
It would be only if huge amounts of Treasuries were dumped on the market, would interest rates skyrocket.
I'd say this would only exacerbate the deflationary credit spiral. Because interest rates would be so high, almost no one would be able to afford credit. Then you've got a contractionary environment, just like what Paul Volker brewed up in 1981.
SKF also up despite the rise in the indices.....
the CC companies seemed to regard this as a good thing. I didn't understand that attitude then and I don't now.
Where you see a person making bad choices, they see a highly profitable customer.
The most profitable customers for CC companies are the ones barely making ends meet but still making payments. Each late payment is a profit opportunity.
As long as they stay there and don't eventually decide to stiff them.
As a number of commenters already have observed, small business credit cards always are personally guaranteed and based on the applicant's personal credit score. They are not reported to credit reporting agencies, however, until/unless one falls behind or defaults. Past dues are turned over to collectors much more rapidly as well.
What happens if they do? Can one of our resident thinkers describe the most obvious consequences?
It looks to me that dollar should fall, interest rates rise
If FCBs increase their buy of US sovereign debt the opposite of what you suggest should happen - dollar should strengthen, long rates should fall & credit should once again get looser.
That is IF the FCBs & SWFs have enough clout to actually move the market - the gamble is if they intervene but with a weak hand (insufficient commitment no move the needle) THEN you could see confidence deteriorate & the dollar fall, rates skyrocket in spite of intervention.
I seriously doubt they will act unless they have KNOW they can move it. That's always been the BOJ SOP.
BTW - Setser has been saying all along the Asian & Gulf SWFs, FCBs & other 'official market participants' never went away. Its the foreign private sources of capital that are on strike. They have a completely different motivation (they don't want to lose money while the FCBs & SWFs don't seem to care so long as intervention maintains their domestic job growth).
Its a wild card you always have to keep in the back of your mind.
As an FYI - I've been solicited a gazillion times for biz card cc's - but they all want a personal co-sign. Screw that - I'll just use my personal cc's then. I never saw the advantage of a small biz cc unless the liability is kept behind the 'corporate veil'.
As a result my personal cc is my banker. Higher rates but no hassles, no questions. Most folks I know do it that way unless their company is worth many millions in actual hard assets the cards don't require a co-sign.
This is another example of how stupid bankers & their 'customers' had become - easy money makes people dumber, I'm convinced of that after seeing all this unfold.
Yikes. Let me comment as a small business owner (I am a patent attorney, a partner in a very small firm). So far I have been through two slow downs - the tech melt down and this one. This one is quite mild compared to TMD (so far) but I have had two clients go bankrupt this year.
During the TMD my clients were falling like flies. The lucky ones were bought out, but plenty just went under. My accounts receivable were looking quite ugly as well. Of course anything owed to me by a company that went bankrupt was simply gone. But even if a company got bought out, it might take many months for me to get paid. I had to absorb losses and it took time. I am not complaining - I was counting my blessings watching the small tech firms I was working for. Just describing the situation.
If the bank and the credit card company had chosen that time to lower my credit lines, it would have been twice as ugly. I run a quiet little practice here, without taking on big chunks of debt, normally. But when both losses and cash flow problems hit within a matter of months, it is a rare firm that isn't extending deep into its lines of credit.
[There were even news releases about record numbers of accounts and record size of total debt - and the CC companies seemed to regard this as a good thing. I didn't understand that attitude then and I don't now.]
They were excited about the changes in the BK laws, thinking that the means test, etc. would bolster collections.
My last check of the stats and conversations with BK attys suggests that little has changed.