Month: October 2008

Meet Mr. Market

Mr. Market was an imaginary character that was created by Ben Graham. Ben Graham wrote “The Intelligent Investor”, which is considered to be the bible of investing and happens to be Warren Buffet’s favorite investment book.

Ben Graham wrote that Mr. Market came to you every morning and offered to buy and sell certain stocks from you at a certain price. For him, Mr. Market was the collective representation of the entire stock market and was meant to be your servant. A servant that offers to buy and sell stocks at a certain price.

Mr. Market is not there to advice you about the stock market prices or tell you whether you are right or wrong, he is just there to make the deal for you.

In short, Mr. Market is the collective representation of all the buyers and sellers in the market and sometimes epitomizes the greed and fear that drive the entire stock market.

Mr. Market offers you a price, sometimes this price may truly reflect the value of the company, and at other times, the price may be outright silly.

The key lesson in this story is that Mr. Market only makes the trade for you, he doesn’t tell you whether the price is right or wrong.

This story helps you differentiate between the price and value of stocks. Look around you and you will find thousands of investors who invested in stocks just because others were doing so. And then they dumped stocks because others were doing the same thing.

Very often, you tend to think that if the market is paying such a low price for a stock, then it must really be worth that much. Nothing could be farther from the truth. The market is just the aggregation of thousands of greedy and fearful investors (many of who you even know in your personal life).

Do not let the opinions of such investors sway your decision making. Warren Buffet says, that you should be able to buy a stock, regardless of whether others like or dislike it. This is central to treating Mr. Market as just the deal maker and not the one who knows whether price is right or not.

Trust your own instinct and analysis, and when Mr. Market offers a good deal to you, take it. You may just know more than him.

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Capital One Standard Platinum Credit Card for Average Credit

Capital One Standard Platinum Credit Card is for people with average credit. Capital one defines people with average credit as someone:

  • Who has, or ever had a US credit card or personal loan.
  • Who has a credit limit of less than $5000 on a current credit card or doesn’t have a credit card at all.
  • Who may have been late in payment on one or more bills in the last six months.

The Capital One Standard Platinum Credit Card has an no annual fee but has a minimum finance charge of $0.50 in every billing period.

Other Fee

  • Cash Advance Fee: $10 or 3% of advance, whichever is higer.
  • Late Payment Fee: $15 if you owe less than $99. $29 for balance of $100 – $249. $39, if you owe more than that.
  • Over the Credit limit Fee: If your credit limit is less than $500 then you will owe a fee of $19. For a credit limit of $500 – $999.99, you will pay $29. For anything more than that you will pay a fee of $39.
  • Returned Payment Fee: $39

The APR

This credit card comes with a variable APR. That means that Capital One offers you a certain APR based on the going prime rate. However if the prime rate goes up, then Capital One has the option of increasing your APR as well.

The lowest purchase APR that you can get on a Capital One Platinum Credit Card is 19.8%. Now since this is variable, it keeps changing and you need to check the most current purchase APR after talking to Capital One directly. Right now there is an offer going in which your purchase APR will be 0 through your billing period till 02/2009

We have made every effort to ensure that the information here is accurate and up to date, however since these things keep changing, we encourage you to check the source of the full terms and disclosures. The fine print is not really all that hard to read!

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Capital One Platinum Max Credit Card for Average Credit

Capital One Platinum Max Credit Card is for people with average credit. Capital one defines people with average credit as someone:

  • Who has, or ever had a US credit card or personal loan.
  • Who has a credit limit of less than $5000 on a current credit card or doesn’t have a credit card at all.
  • Who may have been late in payment on one or more bills in the last six months.

The Capital One Platinum Max Credit Card has an annual fee of $19 and has a minimum finance charge of $0.50 in every billing period.

Other Fee

  • Cash Advance Fee: 0
  • Late Payment Fee: $15 if you owe less than $99. $29 for balance of $100 – $249. $39, if you owe more than that.
  • Over the Credit limit Fee: If your credit limit is less than $500 then you will owe a fee of $19. For a credit limit of $500 – $999.99, you will pay $29. For anything more than that you will pay a fee of $39.
  • Returned Payment Fee: $39

The APR

The Capital One Platinum Max credit card comes with a fixed APR of 16.9%. Capital One will not increase your APR for a period of three years from issuing the card.

We have made every effort to ensure that the information here is accurate and up to date, however since these things keep changing, we encourage you to check the source of the full terms and disclosures. The fine print is not really all that hard to read!

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Capital One Classic Platinum Credit card for Average Credit

Capital One Classic Platinum Credit Card is for people with average credit. Capital one defines people with average credit as someone:

  • Who has, or ever had a US credit card or personal loan.
  • Who has a credit limit of less than $5000 on a current credit card or doesn’t have a credit card at all.
  • Who may have been late in payment on one or more bills in the last six months.

The Capital One Platinum Credit Card has an annual fee of $19 and has a minimum finance charge of $0.50 in every billing period.

Other Fee

  • Cash Advance Fee: $10 or 3% of advance, whichever is higer.
  • Late Payment Fee: $15 if you owe less than $99. $29 for balance of $100 – $249. $39, if you owe more than that.
  • Over the Credit limit Fee: If your credit limit is less than $500 then you will owe a fee of $19. For a credit limit of $500 – $999.99, you will pay $29. For anything more than that you will pay a fee of $39.
  • Returned Payment Fee: $39

The APR

This credit card comes with a variable APR. That means that Capital One offers you a certain APR based on the going prime rate. However if the prime rate goes up, then Capital One has the option of increasing your APR as well.

The lowest purchase APR that you can get on a Capital One Platinum Credit Card is 14.9%. Now since this is variable, it keeps changing and you need to check the most current purchase APR after talking to Capital One directly. Right now there is an offer going in which your purchase APR will be 0 through your billing period till 02/2009

We have made every effort to ensure that the information here is accurate and up to date, however since these things keep changing, we encourage you to check the source of the full terms and disclosures. The fine print is not really all that hard to read!

No related posts.

Capital One Platinum Credit Card for Average Credit

Capital One Platinum Credit Card is for people with average credit. Capital one defines people with average credit as someone:

  • Who has, or ever had a US credit card or personal loan.
  • Who has a credit limit of less than $5000 on a current credit card or doesn’t have a credit card at all.
  • Who may have been late in payment on one or more bills in the last six months.

The Capital One Platinum Credit Card has an annual fee of $39 and has a minimum finance charge of $0.50 in every billing period.

Other Fee

  • Cash Advance Fee: $10 or 3% of advance, whichever is higer.
  • Late Payment Fee: $15 if you owe less than $99. $29 for balance of $100 – $249. $39, if you owe more than that.
  • Over the Credit limit Fee: If your credit limit is less than $500 then you will owe a fee of $19. For a credit limit of $500 – $999.99, you will pay $29. For anything more than that you will pay a fee of $39.

The APR

This credit card comes with a variable APR. That means that Capital One offers you a certain APR based on the going prime rate. However if the prime rate goes up, then Capital One has the option of increasing your APR as well.

The lowest purchase APR that you can get on a Capital One Platinum Credit Card is 8.9%. Now since this is variable, it keeps changing and you need to check the most current purchase APR after talking to Capital One directly. Right now there is an offer going in which your purchase APR will be 0 through your billing period till 02/2009

We have made every effort to ensure that the information here is accurate and up to date, however since these things keep changing, we encourage you to check the source of the full terms and disclosures. The fine print is not really all that hard to read!

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What about the margin of safety?

There are just a handful of things thing that I remember out of the several finance classes that I attended during MBA.

In those days, we had a great professor teaching us derivatives and investments – Kshama Fernandes. In one of her classes, she said that “a lot of students come to me and ask about stock returns. They want to know how much a stock can return over a year, what are the best financial models to calculate expected returns etc. But so far, not a single student has come to me and has asked about risk”.

I don’t remember what went on in the rest of the class or what she taught about risk. Partly because I was upset as having missed the chance of being her first student who asked about risk and partly because around that time I was first introduced to Benjamin Graham’s “Margin of Safety” concept.

It seemed that he was saying, first look at how much  you can lose in the worst scenario and then go from there.

Basically Margin of Safety is a principle propounded by Graham and Dodd in their book Security Analysis and it is a central idea of value investing.

It looks at discovering stocks that have been neglected  by the stock market and are trading at a price that is much lower than their intrinsic value. Once you find such stocks, you should look at how much margin of safety you have. So if the stock is trading at half its intrinsic value, then your margin of safety is higher than, if it were trading at 90% of its intrinsic value.

If you read that carefully, you will realize that one of the important tenets of this principle is how much money can I lose? Only if you are certain you can’t lose more than you are comfortable with, you should go ahead and calculate returns and see how much you can make on that stock.

So you go from risk to return and not just talk about return.

This is a fascinating concept and one, that is easy to understand and difficult to follow. What principles do you follow while selecting a stock?

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Continental Finance Blue Mastercard credit card for bad credit

Continental Finance Blue MasterCard credit card is a credit card for people with bad credit. This card is meant for people who have gone through rough credit times or are looking to start building their credit history. We take a look at the fees and other aspects of this credit card.

Credit Limit

Continental Finance Blue MasterCard credit card has an initial credit limit of $300. However, due to the initial fee that is charged on the credit cards, the available credit, for the credit card is just $50.

Initial Fee

Initial fee is fee that is charged by the banks when they issue the credit card. So, as soon as the credit card is issued to you, this fee appears on your monthly outstanding balance.

  • Account Processing fee: $200
  • Annual fee: $50
  • Account Maintenance Fee: $144 ($12 will be charged on your account every month)

The above fee will reduce your available balance when you first receive the credit card (with the exception of account maintenance fee). This is fee that you must pay in order to get this credit card. There are some other optional fee that we discuss now.

Other Fee

In addition to the above, there are some other type of fees that you may have to pay as well.

  • Cash Advance fee: 3% or $5 when you take a cash advance.
  • Authorized user fee: If you add a user to your account apart from yourself $30 will be charged
  • Credit Limit Increase: You will be charged $25 every time your credit limit is increased
  • Replacement card fee: Every time you ask for a replacement card, $15 is charged to you.
  • Foreign currency fee: Every time you make a transaction in a foreign currency 2% of the transaction will be charged to your account.
  • Late payment fee: You will be charged $35 for a late payment.
  • Overlimit fee: If you overspend your card, you will be charged $35.
  • Returned payment fee: If you make a payment that is returned, then you will be charged $35.
  • Courier Delivery fee: If your card is couriered to you it will cost you $25.
  • Duplicate statement fee: If you ask for a duplicate statement, it will cost you $5
  • Internet Payment fee: If you opt to pay your card through the internet, it will cost you $4 per payment.

The above fee is all optional, so if you don’t avail the particular service, you will not be charged.

The APR

For the Continental Finance Blue Mastercard credit card the initial APR is 19.92%. We say initial, because if you default on your payments, your account overshoots or in a few other conditions, the bank has the authority to increase your APR.

Conclusion

Now that you know the fees and APR of this card, you are in a much better position to compare it to your other options and see what’s best for you. We hope that this summary helped you in making your decision and takes you one step closer to your search for the right credit card for you.

We have made every effort to ensure that the information here is accurate and up to date, however since these things keep changing, we encourage you to check the source of the full terms and disclosures. The fine print is not really all that hard to read!

No related posts.

Continental Finance MasterCard credit card

Continental Finance MasterCard credit card is a credit card for people with bad credit. The Continental Finance Mastercard credit card comes in a Gold credit card and a Classic credit card. The difference in the two is the APR that Continental charges.

This card is meant for people who have gone through rough credit times or are looking to start building their credit history. We take a look at the fees and other aspects of this credit card.

Credit Limit

Both the Gold and the Classic credit card have an initial credit limit of $300. However, due to the initial fee that is charged on the credit cards, the available credit, for the Gold credit card is $75 and the available credit, for the classic credit card is just $50.

Initial Fee

Initial fee is fee that is charged by the banks when they issue the credit card. So, as soon as the credit card is issued to you, this fee appears on your monthly outstanding balance.

  • Account Processing fee: $200
  • Annual fee: $25 for Gold and $50 for Classic
  • Account Maintenance Fee: $144 ($12 will be charged on your account every month)

The above fee will reduce your available balance when you first receive the credit card (with the exception of account maintenance fee). This is fee that you must pay in order to get this credit card. There are some other optional fee that we discuss now.

Other Fee

In addition to the above, there are some other type of fees that you may have to pay as well.

  • Cash Advance fee: 3% or $5 when you take a cash advance.
  • Authorized user fee: If you add a user to your account apart from yourself $30 will be charged
  • Credit Limit Increase: You will be charged $25 every time your credit limit is increased
  • Replacement card fee: Every time you ask for a replacement card, $15 is charged to you.
  • Foreign currency fee: Every time you make a transaction in a foreign currency 2% of the transaction will be charged to your account.
  • Late payment fee: You will be charged $35 for a late payment.
  • Overlimit fee: If you overspend your card, you will be charged $35.
  • Returned payment fee: If you make a payment that is returned, then you will be charged $35.
  • Courier Delivery fee: If your card is couriered to you it will cost you $25.
  • Duplicate statement fee: If you ask for a duplicate statement, it will cost you $5
  • Internet Payment fee: If you opt to pay your card through the internet, it will cost you $4 per payment.

The above fee is all optional, so if you don’t avail the particular service, you will not be charged.

The APR

For the Continental Finance Mastercard Gold credit card the initial APR is 9.75%. Whereas for the Continental Finance Mastercard Classic credit card, the initial APR is 19.92%.

We say initial, because if you default on your payments, your account overshoots or in a few other conditions, the bank has the authority to increase your APR.

Conclusion

Now that you know the fees and APR of this card, you are in a much better position to compare it to your other options and see what’s best for you. We hope that this summary helped you in making your decision and takes you one step closer to your search for the right credit card for you.

We have made every effort to ensure that the information here is accurate and up to date, however since these things keep changing, we encourage you to check the source of the full terms and conditions. The fine print is not really all that hard to read!

No related posts.

The real trouble with buying low

About an year ago, I had bought a stock which was at its all time low, while the market was trading at its all time high.

The trouble with buying that stock so low was that it was just so difficult to convince myself that it is just a market anamoly that the stock is doing so badly when the rest of the stock market is doing so well.

One year down the road, the stock has reduced to one-fifth in its value.

The real trouble with buying low is that you can never guess what ‘low’ is. What seemed like a bargain an year ago looks like bad judgment now. A look at the company’s numbers still doesn’t explain why the stock is doing so bad.

The company itself is in good shape and even though profits have declined last year, the stock price has declined exponentially and has fallen way below what is reasonable for a company with its earnings and financials.

So, once again the question arises. Is it a good idea to buy some more of this stock? I still think it is, this is a market anomaly and the stock is trading much cheaper than what its real worth is. Does that mean, it will not reduce to one-fifth in value over the next one year? Who knows.

When we look back at the current economic crisis, it will be either as a great stock market buying opportunity or the beginning of a deep recession or even depression.

If we are going to get into a deep recession, then this move will turn out to be really bad. If it is not, then this is a great buying opportunity.

I am not able to see a situation of a prolonged recession, so I am going to go ahead and buy the stock today. What I will not do henceforth is to buy stocks when the market is trading at its all time high, even if the stock is at its all time low.

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What is a credit default swap?

Credit Default Swaps are going to become a household name all over the world for the wrong reasons. They will be known as the instruments that caused the second great financial crisis of the 21st century (after the dot com bust).

The total value of credit default swaps market is estimated to be around $58 trillion (Sep 2008).  To put that in perspective, the size of the global GDP was $54 trillion dollars in 2007. So, these instruments have a notional value which is greater than the GDP of the whole world!

Take a second to digest that.

Credit Default Swaps are derivative instruments which derive their value from the credit instrument they have been written for. The purpose of a credit default swap is to transfer the risk of the credit instrument from one party to the other.

A bank that has given out a mortgage to someone bears the risk of the default on mortgage payment. By using a Credit Default Swap instrument, the bank can transfer this default risk to the seller of the instrument.

A hedge fund, bank or any other financial institution will offer to sell the credit default swap to the mortgage issuing bank. The mortgage issuing bank will pay a premium for the credit default swap, much like an insurance premium.

If there is no default on the house loan, the bank has paid the premium for nothing. If there is a default, then the bank is protected as the seller of the credit default swap bears the risk.

This sounds much like an insurance product, but the key difference is the lack of regulation on credit default swaps, whereas insurance products are generally well regulated.

As long as house prices kept going up, everything was fine, but when the prices started to fall it set in motion a chain reaction which brought everything down like a pack of cards.

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