What's Next?

by Larry Levin



In a file titled "The next shoe to drop," we read on Forbes.com that banks are jacking up rates on credit card holders for no reason other than "periodic review." Is this telling us that banks believe their trillions$$$ outstanding on revolving credit are as bad as their CDO portfolios? Or are these banks just forcing customers to pay for their incredibly bad mortgage losses, via stealth interest rate increases? Call your credit card company today and make sure you're not about to pay for their misdeeds!

"Bank of America told thousands of its cardholders in recent weeks--even those with good payment histories--that they faced a rate hike from 9% to as high as 28% if they didn't pay off their balances at the old rate and stop using their cards. The bank, the largest credit card issuer, since its 2006 acquisition of MBNA, says it's all part of its "periodic" review of customer credit risk." "Periodic review" my fanny, they should call it what it is: "Just because we can" increases!

"Consumer advocates cried foul. It's one thing for card companies to raise rates on customers who are behind in their payments or whose credit scores decline greatly, but quite another for on-time customers with no apparent black marks against them to be put in the higher-rate camp.

"Bank of America gives card holders the chance to opt out of the higher rate by paying the account off, but such a request must be made in writing. 'Consumers need to be aware of what is going on,' says Curtis Arnold, founder of cardratings.com."

Whoa. Just a few years ago, card companies were stumbling over each other to increase new accounts, offering all sorts of incentives, like zero-interest periods and lavish rewards programs to get people to sign up. Then again, so were mortgage brokers.

What's next? How are those who overindulged in the idea of using their home equity as an everlasting-gob-stopper of ATM-cash machine doing now? Sadly, it seems like many are dipping into 401-k retirement accounts in order to keep-up-with-the-Jones'. It looks like the government has taught us well: NEVER cut back on spending, just find new lines of credit no matter how debilitating.

Maybe we should all keep two sets of books like the government's "off balance sheet" debts; government employee pension funding, Medicaid, war funding, and Social Security to mention just a few. Enron was just following the government's "off balance sheet" example, but this is a topic for another day.

According to the AP, as home prices fall and banks tighten lending standards; more people are doing the same thing: raiding their retirement savings just to get by and spending their nest eggs to gas up SUVs, and pay their mortgages.

"People who take out a loan or withdrawal are adding to a looming retirement crisis over the next 30 to 40 years," said Eric Levy, a partner at global consulting firm Mercer. "And what implications will that have (for) our economy?"

Some of the nation's largest retirement plan administrators, such as Great-West Retirement Services and Fidelity Investments, are seeing double-digit spikes in hardship withdrawals and increases in loan requests, a sharp departure from levels that traditionally varied little. Administrators say consumers are using retirement savings to pay for unmanageable mortgages, maxed-out credit cards, and costly utilities and groceries.

However, I still find it difficult to square how we consumers are "struggling with costly utilities and groceries;" after all, the Fed and Wall Street still say that energy and food price increases are not "real" inflation.

But at the same time the Fed and Wall Street refuse to acknowledge inflation; many Americans refuse to acknowledge their spending problems. These Americans are following Congress's blueprint for success: when in financial straights borrow more - never cut spending.

"What we're talking about is people spending their retirement now and lowering their standard of living when they retire... People aren't willing to make some of the tougher choices in the short-term to make a better future for themselves," said Stuart Ritter, a certified financial planner with T. Rowe Price.

Yep, sure sounds like Congress...and all the Presidential hopefuls...to me. All of this reminds me of a quote in the prettiest Southern drawl, "I can't think about that right now. If I do, I'll go crazy. I'll think about that tomorrow." - Scarlett O'Hara, Gone With the Wind.

Real Time Trading Signals*for

Trade Date: 2/20/07

E-Mini S&P Trades*
(before fees and commissions):


1) PP buy @ 9:25am at 1334.75 = +.75 & b/e

2) ENGF sell @ 11:35am at 1329.00 = -1.75 (1 lot)

3) FT sell @ 11:45am at 1333.25 = +1.00 & +2.00

4) OTF sell @ 12:15pm at 1333.00 = -1.75 & -1.75

5) MD sell @ 12:45pm at 1330.75 = -1.75 (1 lot)

6) OTF sell @ 1:35pm at 1332.00 = +1.00 & -1.50

7) FT sell @ 2:25pm at 1331.50 = -1.75 & -1.75...-7.25 points

E-Mini Russell Trades*
(before fees and commissions):



1) Buy @ 11:05am at 687.4 = -1.0 (1 lot)

2) Sell @ 12:16pm at 686.6 = -.4 & -.4

3) Buy @ 12:20pm at 686.0 = -1.0 (1 lot)

4) Sell @ 12:37pm at 685.7 = +.4 & -.7

5) Sell @ 1:12pm at 685.3 = -1.3 (1 lot)

6) Buy @ 1:57pm at 686.5 = +.7 (1 lot)

7) Buy @ 2:12pm at 685.3 = +.4 & b/e

8) Sell @ 2:29pm at 685.3 = -1.2 & -1.2...-$590.00


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