What I didn't know until I watched "The Card Game"

I previously announced this documentary in this post.

Couple of points I gleaned from watching the Frontline Documentary

• Banks use computer programs to clear the larger checks and debit charges (such as mortgages, car payments, student loan payments, etc) before the smaller charges.  This results in overdraft charges for each of the smaller checks or debits vs. a single large charge.  Sometimes this may result in 7, 8, or 9 overdraft fees in a single day for small amounts. A sample statement showed that each of these may be $35 (up to $280 in one day?).
• "PayDay" loan companies charge up to around 460 percent APR for their 2-week loans.
• Banks are not required to post the APR for overdraft fees because it falls outside of the "truth-in-lending act."
• The government and the financial industry agree that a "cap" cannot be placed on interest rates.  Doing so, would destroy the free-market system to decide how much risk a borrower would be.

Where are you in relation to the "Peak Age of Financial Reason"?

David Laibson and his co-authors have studied whether there is an age at which you peak out with financial reason.  The logic is trying to determine how sophisticated your financial life should and can be.

One strategy for example is to simplify your financial life after you have peaked because you may no longer be able to handle complicated investments and scenarios.

What is this age?  What should you do? 

Click here to read the article.

Documentary on Credit Cards airing 11/24/09 at 9 PM

If anyone is interested in watching this potentially interesting documentary of the Credit Card industry, tune in to their local PBS station or on-line.  Click here for more information.

How much farther can Gold prices go?

I heard a report that the bullish sentiment has been high for a number of days now. I found a report by Mark Hulbert that says the previous four Gold tops at bullish sentiments of around 57 to 65 percent with a subsequent drop in prices of up to 24.8 percent. Currently, the sentiment number is 68 percent (note that it is above the recent highs).

Obviously, any market can remain overbought for extended periods of time, but usually not for very long. Remember that when a lot of people are already bullish, the contrarian view is that there isn't much money on the sidelines left to drive up prices and thus, prices will fall. Looking at gold charts, a short-term correction would take it to just above $1,000 per ounce. This would make it about a 10 percent drop.

Click here for the Mark Hulbert article

Disclaimer: I don't directly control any investments in gold.

How much of $10 trillion will get the market going?

I came across this article in the LA Times by Tom Petruno where he reports that $10 trillion sitting in bank savings accounts, CDs, and money market funds.

Typically these accounts do earn only a paltry amount and if you take into account erosion from inflation and taxes, your return is usually a negative amount. This is actually a reported reason for the run-up in commodities. It isn't worth letting cash sit and lose money and so people are taking the risk in some of the commodities markets (such as oil and gold).

According to the Investment Company Institute, there was $3.339 trillion in money market funds (click here for that report). In reviewing the weekly flows in "long-term" funds, you can see that money is flowing out of equity funds and in to foreign equity funds and bond funds (click here for that chart).

My thought is that even though there has been a run-up in the equity markets and major indices, imagine what will happen if sentiment improves and the money starts to flow from money market funds and in to equity markets? If and when that happens, everybody needs to fasten their seat belts!

I couldn't find the article in the LA Times, but it is listed in an alternate website that you can read by clicking here. The main point of his article is to how to maximize the return of your idle cash.

For more information on the Investment Company Institute, click here.

NG Traveler: How to avoid dying in an airline

I still get National Geographic's Adventure Magazine for free. Of course, the obvious way to avoid dying on an airplane is to just not get on one. But if you must, click the link below and read this Blog's recommendations. The one's that I like are as follows:

• Get out of the plane immediately if it crashes. Don't wait in line.
• Dress for a fire. Don't wear sandals or open-toed shoes. Don't wear synthetic materials. (I add: Don't wear high-heeled shoes)
• If you're concerned get the "Evac-U8 Smoke Hood from DuPont" (not sure if this will get through security)
• Count the rows from your seat to the nearest exit.
• Seat belts are good. Turbulence can hit anytime. He reports a 747 flight that hit turbulence and there were footprints on the ceiling.
• Choose your airline carefully. Consider avoiding those on the European Union's "black list" that can be found at the following site: http://ec.europa.eu/transport/air-ban/list_en.htm

Click here for the full post.