Author: A.T.

Every so often over the past two decades, I’ve gotten a note and a sample copy from Arch Crawford. Arch is a personable guy who thinks out of the box. Out of the planet, actually. He is a financial astrologer.

Now, I recognize that the moon exerts a powerful gravitational pull on the water in our oceans — hence, the tides. And I recognize that you and I are 90-something-percent water ourselves. (Sure, Aunt Mary is all "piss and vinegar," but what do you think piss and vinegar mostly are?) I will even admit to having howled a time or two at a full moon.

But astrology? To me, "What’s your sign?" is a very handy shorthand way of saying, "Hi. I’m a really nice person. But a complete airhead."

The idea that the moon’s pull affects the stock market in any important, predictable way (by affecting human emotions) strikes me as only a little less unlikely than the idea that the pull of the planets would. Yet that is exactly what Arch Crawford has been pitching lo these many years in Crawford Perspectives: Quintessential Market Timing by Planetary Cycles and Technical Analysis Since 1977, a $250 monthly newsletter (6890 East Sunrise #120-70, Tucson, AZ 85750).

How Arch has managed to stay in business all these years, let alone thrive, is to me an Unsolved Mystery. Indeed, you can see him on "Unsolved Mysteries" one night soon (CBS — check your local listings).

That he has thrived seems clear. Last year, he abandoned his $300-a-month rent-controlled apartment in New York for Tucson, where his dwelling budget is ten times as large(forty-five hundred square feet on a golf course). One does not walk away from a rent-controlled New York apartment unless things are going very well.

And in the September 11, 1995, Forbes, a reprint of which accompanied the sample newsletter Arch sent me, there is Mark Hulbert — the arbiter of financial newsletter performance — admitting that "there is no getting away from Crawford’s excellent performance."

Now, let me be quick to say two things: Arch, who hales originally from Oxford, North Carolina, accepts all ribbing with not even a trace of annoyance or defensiveness. He is a modest, decent fellow. But in my view, most people would be throwing their money away to buy his newsletter.

In Forbes, Hulbert reports that from 1990 to 1995, "a portfolio that shifted between the Wilshire 5000 index and cash on Crawford’s signals gained 83.6%" versus just 78.7% with a buy-and-hold strategy. What’s more, "this market-beating performance was achieved with 12% less risk" — because when you’re out of the market, you are taking no risk of loss.

But in the real world, is it worth paying $250 a year for a newsletter and switching in and out of the market, generating commissions, suffering "spreads" — and paying taxes — just to do a tiny bit better than buy-and-hold? With a bit less risk? No.

Arch does seem to have a good feel for the market (however he does it). But, taking that Forbes example, how much time and trouble — and commissions, spreads and taxes — is it worth to earn 83.6% instead of 78.7%?

Even in a non-taxable account, you have to wonder.

Anyway, in the October 5 sample newsletter Arch sent me, the first I’d gotten from him in a couple of years, the headline was: WE BELIEVE A MAJOR CRASH IS NOW!! "As for now, the flow of cosmic energies max out on October 16-20 with a secondary hit October 31. Mars squares Pluto (vicious), Venus at midpoint semi-squares both. Mercury squares stationing Uranus, SURPRISE! Sun parallels Pluto, but oppose Mars in declination. Mars opposes a previous eclipse point. We believe the low for this period will come as MARS forms 135 degree aspects with both SATURN and NEPTUNE as they Square each other, all on Saturday, October 31. By the full moon on Wednesday, November 4, the worst is most likely done. Benefic Jupiter returns to returns to Direct forward motion on Friday the 13th. Things should look better under that influence."

When he wrote this, he was "200% short" — i.e., no long positions and margined to the hilt betting the market would fall. The Dow was 7726 on October 5, so being 200% short might have smarted as it rose to close at 8416 on October 16. "There are many BAD days during September and October," he wrote, "the worst of which is October 17-23." In fact, the market barely budged over those days, with the Dow closing at 8452 on the 23rd, having been a little higher in the days preceding. "Expect an eventual bottom close to the October 30 to November 2 weekend, as Mars forms a Yod or ‘Finger of God’ aspect with the exact Saturn/Neptune square."

In fact, the Dow was up 97 to 8592 on October 30, but you can’t be right every time. That he’s right even a little more than most is an unsolved mystery. But my guess is it has less to do with Pluto and Uranus than with the other analysis he does.

On Friday I reprinted the first part of a story I wrote 15 years ago about junk mail and the diamond necklace I won (but did not accept) in a mailing from Cheeselovers International — they of the crème de menthe cheese balls. Herewith its conclusion. (Please remember, all the numbers and addresses are as of 1983.)

Picking up from the question of whether any of the financial newsletters we find offered in our daily mail can make us money …

#Some undoubtedly can. But which?

“Would you pay $5 per month to find out whose investment advice really works?” asks an envelope. To which the sensible reply is, “No, but I’d pay $5,000 a month to know whose will.” For there’s the problem. It’s easy to find newsletters (or mutual funds or brokers or crapshooters) who’ve had a great couple of years; not at all easy to judge which will.

The concept of a $135-a-year newsletter called the Hulbert Financial Digest, which tracks the performance of a variety of other newsletters, is to find the ones with the hot hands and climb on board while they’re hot, then deftly abandon ship (before everybody else does) when their hands begin to cool. Never mind that most of your gains, if you have gains, will likely be short-term and thus heavily taxed. It’s particularly important to bail out ahead of everyone else when a letter has developed a following. When 5,000 of you go to sell 300 shares apiece of some $13 stock — well, 1.5 million shares may be more than the market can absorb in one day without the price slipping a point or four. (Indeed, the hot hands get hotter, at least for a while, because their recommendations are frequently, in the short run, self-fulfilling.)

One of the hottest hands over the past five years has belonged to Dr. Martin Zweig, whose $245 Zweig Forecast is published every three weeks, with special bulletins when conditions warrant and a hotline you can call for daily comment. Marty Zweig is a smart and personable fellow. Whether paying him $245 a year will greatly improve your lot in life I cannot say. On the back page of each newsletter, there’s a listing of his open positions (the things he’s recommended you buy) along with the paper profit or loss you would have made on each one. At the bottom of the list is a figure for average profit: 12.9% in the most recent letter, although I don’t believe it takes into account brokerage commissions or taxes.

This figure doesn’t attempt to include all the wonderful profits you may have reaped from Dr. Zweig’s past recommendations — only the profit or loss on the position he suggests you still hold. It’s not a weighted average in any way — just the sum of sixteen profit and loss percentages divided by sixteen. What’s interesting to me is the temptation Dr. Zweig must be under not to recommend sale of the first two entries on his list, IBM, up 66% from where he recommended it in July 1982, and Walgreen, up 98.5%. In fact, a footnote shows he sold half these positions at significantly lower prices … but has not yet had the heart to recommend sale of the other half. In part this may be because he thought IBM, even when it hit 130, was still cheap (he had sold the first half at 83), and in part — if he’s human — because he hated to see that winner removed from the top of his list in every subsequent issue of the newsletter. Likewise Walgreen, which he had bought at 17. Half he sold at 25, but the other half he recommended holding even when it hit 40. Was it really, at 40, one of the sixteen best buys he could find for his subscribers — or would it simply have been a shame to have to drop it from his list? Without those two magnificent holdovers, IBM and Walgreen, the average gain before commissions and taxes on the other fourteen open positions in the issue of the newsletter I’m looking at would have been 3%.

It’s got to be a nightmare to have tens of thousands of people scrutinizing every investment decision you make, so I sympathize with Dr. Zweig if he held onto IBM and Walgreen to keep the back page of his newsletter looking good (and I have no proof that he did). The nightmare is in part ameliorated by the $245 a year each of those tens of thousands of onlookers tosses into the pot, but let’s not begrudge The Zweig Forecast that money. In 1981 and 1982 followers of Zweig’s recommendations would have gotten it back in spades and shovels and wheelbarrows. Zweig was great. In 1983 and at least the early part of 1984, they could have done about as well as Zweig in a Sealy Posturepedic. [That’s a mattress, kids.] However, for 1985 Zweig’s recommendations are likely to be extraordinarily good, as they were in ’81 and ’82; or else not so good, as they were in ’83; or else kind of rotten, as they were on rare occasion way back when. Who knows? The $225-a-year Option Advisor newsletter, reports Hulbert in his digest, was up a spectacular 97.9% in the first quarter of 1984. On the other hand, it was down 93.4% in 1983. So, if you’d invested $10,000 according to its recommendations in 1983, you’d have been down to about $660 by the start of 1984, and then that $660 would have doubled.

And how can we forget Joe (“I can never be wrong again”) Granville, whose market-shaking predictions you could have received for $250 a year, or when he was really hot, by watching the nightly news? Granville was great for a while, except that those who stuck with his advice would ultimately have been taken to the cleaners. (“My name’s Granville, not God,” he eventually shrugged.)

Howard Ruff has a newsletter. Subscribe and you get a free LP, on which Howard sings “If I Were a Rich Man,” “Hymn to America,” “I Walked Today Where Jesus Walked,” “My Way,” “Climb Every Mountain” and “The Impossible Dream” … and/or copies of all Howard’s outdated hardcover books. The newsletter is largely occupied with introducing additions to the Ruff family (he has 30 or 40 kids and grandkids), spurring readers to political action (he has his own lobbying organ), and promoting new or affiliated newsletters. He has great skills as a communicator and marketer, substantial skill as a singer and financial analyst.

He will start one newsletter with an anonymous, and possibly fabricated, letter so he can defend free enterprise and the profit motive (“Dear Howard: Why are you always trying to sell us other newsletters, coins, books and cruises? All you care about is getting rich. You’re greedy.”). He starts another by chewing out impatient subscribers who wonder why gold and silver still haven’t gone up. The mystery of it is that he actually has more than 150,000 fans paying $89 a year (and more) to cheer him on.

He’s the misunderstood multimillionaire underdog, fighting valiantly against the big bad Government, and the fact that his investment advice is sometimes good, sometimes not so good, is almost beside the point. It’s you and he against the establishment, you and he against the Russians, you and he against the welfare cheats, you and he against Congress (well, he’s got a point there), you and he against promiscuity, you and he against impatient, ungrateful subscribers.

You and he on exotic, arguably tax-deductible investment seminar tours. You and he assuring his next book, Making Money, climbs onto the best-seller list, thereby confirming his popularity and expertise. (“Buy the book sometime in the two weeks beginning May 14,” he offered 175,000 subscribers, and your newsletter subscription will be extended at no charge.)

The investment letters I do like don’t attempt to predict world events, the price of gold or even the course of the stock market, but provide the kind of fundamental analysis on overlooked or undervalued situations I don’t have time to do. And even then I don’t have a great deal of confidence in them, because picking undervalued stocks is a tough, tough game. Most people will be better off picking a seasoned mutual fund that picks undervalued stocks, like Mutual Shares Corporation.

Generally, when asked where to look for sound investment ideas, I suggest a subscription to Forbes. But that’s no good because no one expects to get rich fast reading Forbes. We want to believe there’s a simple, worry-free way to make 1,555% on our money.

And I don’t blame us.

A week or two ago I listed the addresses to write to if you want to stem the tide of junk mail and dinnertime sales calls. “Of course, do this and you may very well miss your chance to join the Cheese of the Month Club,” I wrote … promising to explain the next day.

And then “technical difficulties” prevented my telling you about the Cheese of the Month Club after all.

Well, all systems are now go, and for those of you with plenty of time to kill, I offer this story, written for Playboy, I think, 15 years ago. Reading it now, it strikes me that I may have been in a little bit of a foul mood when I wrote it. But except for a couple of [in brackets — 1998] comments, I’ve made no attempt to update any of it. A lot’s changed since 1983, and a lot hasn’t.

#

Free! 100 Shares of Stock in a Public Company

Seven hundred million trillion tons of junk mail are sent out across this country every year. I get half of it.

Much of it would make me rich if only I would listen. “More explosive price action ahead in low-priced stocks,” reads one envelope. “No-risk triple bonus offer enclosed!”

“Inside,” reads another, “find out how $8,750 grew to $405,125 in only 13 weeks!”

“Free!” reads a third, “Get 100 Shares of Stock in a Public Company With This No-Risk Offer.”

A hundred shares of stock free? Wow! I wonder which stock it is. General Foods? Hewlett Packard? Sears? The letter doesn’t say.

The way to deal with junk mail is not even to look at it. Anything that arrives with less than twenty cents postage or a computer-generated address label gets tossed out unopened.

Which is why advertising copywriters have begun reserving their most inspired moments not for the messages printed inside the envelopes but for the messages outside. Somehow, between the time that you bend your right wrist, claw-like, to clasp the top envelope in the pile cradled in your left hand … and the time, a moment later, that you flick that same wrist to send the envelope flying for the trash — somehow in that moment a message of such urgency and intrigue must be conveyed as to stun you in mid-flick.

Examples abound.

• From Mutual of Omaha: “If You Think $2 Doesn’t Buy Much Anymore, Look Inside … You’ll Be Amazed!” (Amazingly, they were selling insurance — and $2 didn’t buy much.)

• From Mother Jones: “URGENT REMINDER ENCLOSED.” (The deadline for Christmas gift subscriptions was fast approaching.)

• From an address in Washington: “Ted Kennedy hopes you’ll throw this away!!” (Out it goes.)

• Bulk-rate from “The Honorable Ronald Wilson Reagan, President of the United States.” (Oh, that Ronald Wilson Reagan.) Wonder what he could want. Out it goes.

• From the American Civil Liberties Union: “An Open Letter to President Reagan.” (Gosh! Letters from Reagan, to Reagan … Should I forward it?) Out it goes.

• From International Living: “You can now earn up to $80,000 TAX-FREE by living abroad …” (assuming you have the skills to earn $80,000 and don’t mind living abroad).

Some junk mail can be strangely personal — and not just because of the strange ways they stick your name, or variants thereon, into the advertising copy.

• From a doctor in San Antonio: “Are you over 40? [No.] You could be missing out on the best sex of your entire life! [Really?] To find out why, see inside. [Well, it can’t hurt to look.]”

• From Ovation Magazine, bulk rate, a “special invitation” from my cousin Andre Previn. As it is the first and only communication I have ever had from my spectacularly gifted cousin, verbal, visual or otherwise — I’ve never met him — and as my middle name is Previn (really — we’re cousins [and – 1998 – I still haven’t met him]), I am sorely tempted to open it. Out it goes.

• From a company in Illinois: “Do you have a system for getting organized that works?” They have a wall-sized calendar.

A hazard in throwing all this out unopened is that you won’t know what you’re missing. Take the envelope headlined: “Me? Sleep in a subway station?” Either some wonderfully creative real estate developer had hit upon renovating unused subway stations (in which case I was being offered a “great space, no view”), or this was an appeal to aid New York’s homeless. We’ll never know. And what are we to make of: “Demand a nuclear-free New York!” Was New York planning to join the arms race? Or was this about the Shoreham, Long Island, nuclear power plant? You’d assume the latter, but judging from the fine print — still on the outside of the envelope — you’d be wrong. It was about the stationing of missiles someplace upstate, when, of course, everyone knows they should all be stationed up in Somebody Else’s state.

Junk mail can depress you — what can you expect from an envelope marked “Urgent” and sent from the World Mercy Fund? — but there’s actually quite a lot of celebrating going on. The amazing Mutual of Omaha offer referenced above was in celebration of Mutual’s 75th anniversary. The Visiting Nurse Service of New York was recently looking for $90 donations in celebration of its 90th anniversary. A company selling quartz watches for just $2 (“this is not a misprint”) was doing so — all this explained on the outside of the envelope — “to celebrate the 10 millionth watch sale of the famous New York jewelry firm of Abernathy & Closther.” Surely you know the firm.

I love the ones marked Personal and Confidential down by my name and Blk Rt in the upper right. And, of course, I get a lot of animal mail. It is very hard to resist.

“Inside: an urgent appeal to stop the killing of 6,000,000 animals … Open At Once.”

Six million animals? How endangered could they be if there are six million of them? What are we talking here — hogs? chickens? Oh, God … okay, I’ll open it.

The appeal proved to be from the Kangaroo Protection Foundation. One might think this largely an Australian issue, but apparently it’s all our fault for lifting the ban on kangaroo skin importation. We did so, according to the letter, “under intense pressure from the Australian government,” which, democratically elected though it may have been, obviously knows nothing about the wishes of the Australian people who are, the letter says, all furious over the kangaroo harvest.

The compromise I worked out with the KPF — having opened these letters, one must rationalize one’s non-response — was this: I would send no money, but neither would I ever eat or wear anything even remotely marsupial. Why should I? I have more than enough other delicacies available by parcel post.

From the Collin Street Bakery: “What Bordeaux is to wine and Maine is to lobster, Corsicana, Texas, is to fruitcake — the New York Times.” The bakery’s so darn proud of that fruitcake, a four-color mouthful of it peeks out at you through a Texas-shaped plasticene window. These are, furthermore, guaranteed fruitcakes (I couldn’t resist: I opened the envelope). If you or your friends have ever tasted better, your money is refunded. Bob McNutt, Bill McNutt and Bill McNutt III stand behind that promise, and Gene Autry and the Kuwait Oil Company are among the list of Distinguished Clientele. We’re talking serious fruitcake here.

And from Cheeselovers International (never mind how I get on these lists): “If you find a 3-inch PINK SLIP in this envelope, you have won a diamond necklace in our $1,000.00 Sweepstakes.”

I don’t wear jewelry, but that is only because I’ve been waiting to win a Cheeselovers International diamond necklace. I opened the envelope.

The letter begins: “Dear Cheeselover, before you look at a single cheese — search through this envelope. If you find a 3-inch colored slip, it may be your lucky day. And if the colored slip you find is pink, it means you have won a genuine diamond solitaire necklace. To claim your prize, just follow the directions on the pink slip. [The cheesewriter seems awfully confident that I’ll find a pink slip.] Then — once you’ve calmed down (if you are a winner) — look at our delicious cheeses.” (Special this month: the Creme de Menthe Cheese Ball, “the most sophisticated cheese spread of all.” Move over, Velveeta!)

Well, it did take me a while to calm down, let me tell you. Because naturally, like everyone else who got this mailing, I found a pink slip. But I never bothered to claim my free necklace (which cost $2 for shipping), because I had a feeling the diamond might be smaller than the one I’d been dreaming of.

Actually, I was lucky to be offered a diamond necklace of any size. (Hey, fella, what more do you want?) My August Cheeselovers letter had declared prominently across the outside of the envelope: NOTICE OF REMOVAL. I risked being struck from their mailing list if I didn’t order some cheese. The next month I got an envelope that said: “GOODBYE. This may be the last letter you receive from us.” And now, a month later still, and still having ordered no cheese, they were giving me a diamond necklace.

The diamond, I discovered someplace in the mailing, was a 17-facet quarter-point stone. Say, hey, Jose! A little calculation (there are 100 points in a carat, a carat is a fifth of a gram, a gram is 3.5 hundredths of an ounce) produced a gem weighing nearly 18 millionths of an ounce. Diamond dust.

But if diamonds are not a great investment, and if getting them free for $2 apiece from Cheeselovers International is not the best means of acquisition, there’s no lack of mail to tell you what is.

Here’s an envelope that promises to tell “How you could have made 1,555% — without being an investment expert!” Of course, the implication that investment experts make 1,555% is almost as absurd as that by opening this envelope and signing up for this service, you will, too.

The headline on the back reads: “How a $10,000 investment became more than $165,000 since 1975!” A footnote beneath the text next to the chart on the back of the envelope confesses that this was a “hypothetical” $10,000. But it would’a grown to $165,000 if only this service had discovered and promoted its magic formula back in 1975. There follows the SEC-inspired disclosure that “Past results are not necessarily a guarantee for equivalent future results” — the understatement of the age — particularly since, in this case, the “past results” were hypothetical.

(You tell me what happened over the last ten or twenty years, and I’ll construct a surefire strategy that would have worked magnificently if only you had followed it. One such involves buying stocks whenever a pre-merger NFL football team wins the Super Bowl, and shorting them whenever an AFL team wins. As Professor Steven Goldberg has pointed out, far more remarkable than this coincidental correlation would have been someone’s predicting it. No one did.)

For $96 a year, you get to see whether a strategy that would have worked over the past eight years is the right one for the next eight. What’s more, there’s “No emotional involvement. No guesswork. No worry.” Just follow the monthly advice. Like connect-the-dots, only at the end you’re rich. What’s more, if after two months you’re not pleased with the newsletter (how can you assess its performance after two months?), you can get your money back — less the $16 you paid for the first two issues and any money you may have lost following its advice.

Or perhaps you’d rather “Profit by Learning Politicians’ Dirty Little Secrets,” as another envelope invited … “a Unique New Publication for the Sophisticated Investor,” just $275 a year. Isn’t that great? Here you have scores of sophisticated reporters for The Economist and The Wall Street Journal struggling to come up with the occasional secret, and these two guys (two guys write it) come up with a newsletter full of dirty little secrets month after month after month.

But why spend good money to get rich — hey, a dollar’s a dollar — when the very next envelope in the pile promises a free report on HOW TO ACHIEVE FINANCIAL INDEPENDENCE IN THE NEXT THREE YEARS? I ache to open the envelope. Pressing real tight, I can even see the words IRON-CLAD GUARANTEE showing through from the inside. But you know my rule about junk mail. Out it goes.

Because really, if you sift long enough, you will eventually come upon an envelope that will not only make you rich, like the others, and at no cost to you, like the one above, but without your even having to open it. Like this one bulk mailed from Howard Lake, Minnesota, emblazoned: “The Dow will pass 2300 … Silver will hit $95/oz … The prime rate will sink to 8% … Housing values will gain 30-50% … all within 18 months!” The envelope goes on to promise “10 more profitable forecasts for 1984-85 from the fastest-growing investment analysis service in America,” but the four on the outside of the envelope more than suffice. Just sell everything else and buy silver.

Too easy? Nothing worthwhile comes free? Okay, go ahead and pay the subscription fee ($150, The Money Advocate).

The rub comes when one of your $150 newsletters is saying one thing and another, the other. (Or when both are saying the same thing and both prove wrong.) This happens all the time.

Who’s right? you wonder — and, as if by telepathy, comes, bulk rate, a buff and maroon envelope headlined just that way. “Who’s right?” It enumerates contrasting predictions by Howard Ruff and Harry Browne (gold will zoom; no it won’t); Vern Myers and James Blanchard (deflation is unstoppable; 30 to 35% inflation’s around the corner); the Aden Sisters and Mark Skousen (gold’s going to $4,000; don’t hold your breath). Gee! All these preeminent experts, strangely full of praise for each other and frequently touting each other’s pricey monthly poop sheets — “Who’s right?”

“At last, you can find out! (see inside).”

One examines the envelope in hope of unmasking this arbiter of investment prediction, this forecaster’s forecaster, this Edgar Cayce of international finance, but there’s no return address. So we’ll never know who it is unless we open the envelope, and you know the rule.*

[*One set of envelopes I do consistently open comes from American Express’s Travel Related Services Company. I open them to see just how far the concept “travel related” can be stretched. No fewer than three such travel-related offers came in one day’s mail not long ago. One was for a $540 Vidal Sassoon Infinity Necklace (sorry, I get all my jewelry from Cheeselovers); another offered goblets engraved with my name and crest; the third offered a dozen crystal paperweights, presumably to keep my papers from flying all over while I’m off traveling.]

Swamped by all this stuff? “Too bad, Tobias,” reads the caption of a cartoon showing through the window of an envelope designed to catch me in mid-flick — “I told you reading 43 newspapers would warp your mind!” This would appear to be the beginning of a pitch for a news-digest newsletter, not to be confused with a newsletter-digest newsletter, several of which solicit with equal enthusiasm. The style of the cartoon is suspiciously like one that shows through the window of another envelope, in which I am apparently in the midst of a tax audit. “Tobias,” says the auditor, “you should be proud to be a taxpaying American.” “I am! I am!” I apparently say, but a little balloon above my head shows I am thinking I could be just as proud on half the taxes.

Personalized junk mail cartoons! I’ll bet they don’t have them in Russia. Does this mean ten years from now we’ll be watching cable TV and the cable box atop our set will insert our names into the audio whenever the commercial broadcaster leaves a coded blank? (“You deserve a break today — Tobias — at McDonald’s.”) And will that spell the end of junk mail as we know it?

These are heavier questions than I mean to ask or dare to answer. The question I should address — no snap either — is whether any of these financial newsletters can make you money.

Some undoubtedly can. But which?

[For the conclusion, come back Monday. You’re late for work!]

 

GROWTH IN CREDIT CARD DEBT

1997	$505 billion
1996	$473 billion
1995	$420 billion
1994	$347 billion
1993	$273 billion
1992	$245 billion
1991	$232 billion
1990	$212 billion

Estimates based on total revolving credit debt.

PROFITS AT THE GROCERY STORE

Mark Langenderfer
Chicago, IL
Age: 32
Occupation: Plant Manager
Credit Cards: 3

“I got my first credit card in college and have never, not even once, paid any interest or finance charges on any of them.” His Private Issue Discover card offers a nearly 2% cash rebate; his Driver’s Edge VISA rebates 2% toward any new car purchase. So Mark has found something better than bank ATMs. “Chicago area grocery stores will give you up to $50 in cash with any purchase. For example, you can buy a pack of gum for $1, charge $51 to your card, and get $50 cash. This is the same as withdrawing $50 cash from your ATM, but you get the cash a month in advance. Plus, with the 2% rebate, I get a dollar added to my rebate check every time I do this.” So the gum is free.

THE WARRANTY WORKED!

Lynwood Brawn
Edinboro, PA
Occupation: Computer Consultant
Credit Cards: 9

“I used a GE gold MasterCard to buy a Gateway 2000 Telepath modem for $195 plus $10 shipping. The modem died on October 10, 1994, with less than a month to go on the gold card’s ‘warranty extension’ (it doubled the manufacturer’s warranty). I called to report it, expecting a hassle. No hassle. The card company sent me some forms, I filled them out, and the check came within a week.”

(I’m still gasping in surprise at this one.)

FLIES FIRST CLASS

Eli Broad
Los Angeles, CA
Age: 52
Occupation: Mogul

SunAmerica Chairman Eli Broad bought a painting a couple of years ago for $2.4 million — with his American Express card, to get the frequent flier miles. (Is it possible you have an American Express card and haven’t signed up for the Membership Rewards program? Gadzooks! You are throwing money out the window! Call at once — 800-297-3276. You can also use that number to see how many miles you’ve accumulated and check to be sure they have your correct frequent-flier numbers.)

NO BLACK-OUT PERIODS

Gary Saxer
Agoura Hills, CA
Age: 44
Occupation: Designs Trade Show Presentations

“I think credit cards are great! I use them for almost every purchase I make — I can go for weeks on $200 in my wallet and not use it up. I now have a Travelers Bank card with TravelerMiles [800-932-8472] that offers me $100 in airline fare for every $6,000 I spend. I can use up to $400 in these credits toward ANY ticket on ANY airline, as long as I book through their agent (which has been as good as any I’ve used). And I get 5% of my travel purchases BACK if I send in the receipts after the trip. This service costs $39 a year. I pay my bill in full every month and get a record of my purchases that comes in handy at tax time and when I need to find out when I bought something for warranty repair.”

Tomorrow: Anything But Credit Cards — I Promise

 

STATUS SYMBOL — OR ALBATROSS?

• More than 25% of households with income below $10,000 carry credit card debt
• More than 40% of households with $10,000-$25,000 in income do
• More than 50 million households carry credit card debt — average balance: $7,000
• Credit card debt of the average person going bankrupt: $17,544
• Americans going bankrupt last year: 1.4 million
• Versus 20 years ago: 8 times as many

STATUS SEEKER

Ram Samudrala
Palo Alto, CA
Age: 26
Occupation: scientist

“In Buddhist philosophy, one of the four noble truths takes the form that desire is the cause of all suffering. I would modify it thus: desire for material goods beyond your means is a cause of suffering.” Ram racked up $18,000 in debt but is now methodically paying it off. He got his first cards in college, he says, “because they served as status symbols. I had a roommate who struggled to get a card, but on my 18th birthday, I applied for an Amex and AT&T Universal Card and got them both, much to the consternation of my roommate. In fact, AT&T Universal sent me five cards.” In other words: Be careful what you wish for.

TWISTED BY CARDS

David Manuel
New Orleans, LA
Age: 27
Occupation: Urban Planner
Credit Cards: 1

“I got my first credit card when I was 19; it was a Visa with a $500 limit. For the first year or so, I paid it off every month. Then I started paying most of it … half of it … I began getting offers for other cards with higher limits and lower rates, so I kept taking them. I also hit on the trick of accepting a card with a low introductory interest rate, say 5.9% for the first six months, and transferring all my balances to that one card. Then, before the intro rate ended, I got another intro rate from a different card and moved the balances again. The only problem was that my total debt was increasing. By the end of graduate school, I had twelve Visas and MasterCards, with a total credit line of well over $100,000. I owed $12,000 before I’d ever gotten a real job. We’re all too dependent on credit that’s just too easy to get. I’ve become terrified of incurring any debt at all. I pay for everything with cash or debit card, and have become obsessive about tracking every penny. I feel almost nauseated when I spend money on a large purchase and worry about it for weeks afterward. I feel like I’m going to end up one of those people with $2 million dollars in a savings account but who eats cat food and government cheese and won’t turn on any lights. I think I’ve developed an unhealthy attitude to finances in general.”

I think so, too. For many people, a debit card is actually a better solution. It looks just like a credit card, but it works only when there’s cash in your checking account to cover it.

 

TWO REASONS NOT TO KNOW YOUR CARD’S INTEREST RATE

1. You never carry a balance.
2. You care more about the bank’s financial success than your own.

BOUGHT HIS HONDA INTEREST-FREE

V Lakshman
Norman, OK
Age: 26
Occupation: Engineer
Cards: 4

“I came to the United States as a graduate student in 1993. Thanks to a fellowship, I had enough income to qualify for a bank credit card. Having noticed that without a car there was precious little that one could do in Columbus, Ohio, I set upon a single-minded course — to buy a used car. I had no money and didn’t want to pay interest. The solution? I used the rent money to buy a $600 Honda Civic. Then I assembled a support community of 10 other international students. I would give them rides to the grocery store and pay for their purchases with my credit card. They paid me in cash for the groceries. The clincher: I got a 25 day grace period for which there was no finance charge on purchases. I used the first month’s cash to pay the rent; cash from later purchases paid for earlier credit purchases. In a few months, I saved enough money from my fellowship to be all caught up, and never paid a penny in interest.”

CASH BACK ON THEIR SUBURBAN

Van-Martin Rowe and Barry Storch
Pasadena, CA
Occupation: Antique-store owners
Ages: 49 and 39
Credit Cards: 2

“Barry and I wanted to purchase a new Chevy Suburban in his name. I had a General Motors gold MasterCard where as much as 10% of certain charges could be credited toward the purchase of a new GM product. I told GM we were a same sex couple and asked if Barry could use the credits I accrued. They were very nice and told me that as long as I got a second card issued in his name, on my account, he could.”

That saved them $1,100 on the Suburban. What’s more, they charged the entire purchase to another credit card and got 42,000 frequent flyer miles. Because they pay their balances in full each month, the Suburban came interest-free.

And just how did they manage to persuade the car dealer to put the whole thing on a credit card?

“We checked with the credit card before we went in and they told us that if they accepted credit cards for products at their business they had to take our card for the purchase price. We pointed out to the dealership that since they had accepted our card for a deposit when we placed the order they must take it for the full purchase.”

I think it may have helped that the Suburban they bought was so popular at the time, people were on waiting lists. In other words, the vehicles weren’t being discounted much, if at all, from the full sticker price, so there was probably plenty of margin for the dealer to take a hit on the fee he would have to give up to the credit card company. I remember the one time in the last 25 years I bought a new car (back in 1992, when I felt sorry for Detroit), I tried to put the whole thing on a credit card and — because there was a lot less margin in the deal for the dealer — he wouldn’t let me. We had this crazy backward negotiation over the deposit. He wanted me to seal the deal with a deposit on my credit card. Fine with me, I said — proposing a $20,000 deposit. He kept trying to lower the amount of my deposit, I kept trying to raise it. We settled at a very low number. Maybe I should have tried harder.

Don’t Forget to Vote Today!

 

If you saw yesterday’s PARADE or read Friday’s comment, you know I’ve been thinking about credit cards … much of it with help from you.

The U.S. is lousy with credit cards. As of 1996, 119 million of us had nearly 1.4 billion of them. They broke down approximately as follows:

Bank-issued cards (Visa, MasterCard)	383 million
Oil-company-issued cards	111 million
Phone-company-issued cards	171 million
Retail store cards	622 million
Travel & Entertainment cards (Amex, etc.)	31 million
Other	64 million
Total Cards	1.382 billion

Herewith, some more real life credit card snapshots:

PAID OFF EVERY CENT

Diane Miller
Tampa, FL
Age: 43
Occupation: Small business owner
Credit Cards: 3

Diane Miller began as a receptionist for a local fencing company in 1977 and soon became indispensable. Increasingly, the owner was absent. When creditors started calling, Diane began using her MasterCard to pay them, figuring she’d be reimbursed. Oops. Before long, she had maxed out her card and exhausted her savings. It might have been a decent reason to declare bankruptcy, but in 1992, with the help of some understanding suppliers, she bought Master Fence instead, quadrupled its sales, and paid off every cent. Today, she uses three cards and enjoys the rewards they offer – she already got a free rowing machine and is working on a TV – but pays them off each month in full.

REFUSED TO GO BANKRUPT

Louis and Andrea Cantu
Colorado Springs
Ages: 28 and 25
Occupations: Works for a check printer; Mother of two
Credit Cards: 0

You may have seen these folks on MTV’s outstanding special, “No Money, Mo’ Problems,” a documentary produced by Linda Ellerbee. I’ve pulled out some of their dialog:

Andrea: “We never planned for the unexpected. There was never a reserve anywhere. And that’s where we went wrong financially. If I had $50 in my pocket, I would never say, ‘OK, let me cover everyone’s dinner.’ But if I had the credit card, I just smacked it down.”

Louis: “You get that first credit card at 18 and it’s almost like Christmas when it comes in the mail and you open it up and the first thing you want to do is go use it.”

The Cantus got so deep in debt – $16,000 – that they had to move in with Andrea’s parents. A credit counselor told them it would take them about four years to pay off the debt. He made them bring in all their credit cards, says Andrea – “Physically bring them in, and cut them up. That was so hard for me!”

Louis: “A lot of couples our age, instead of going to a credit service, just file for bankruptcy. That was never an option.”

Andrea: “Louis said, ‘We borrowed that money; we’re paying it back.'”

Today, they are paying it back. Andrea drives Louis to work at five every morning (they can’t afford a second car). “I have nothing to show in my home for my credit card,” says Andrea. “It was just wasted. What we get now, we really appreciate. If you can get through the financial fight, it really builds you up. Because then you start enjoying what you have instead of worrying about what you don’t have. Spending money is an addiction. You don’t need to keep up with the Joneses, you need to keep up with yourself.”

Tomorrow: More

 

Way back in June, I asked whether any of you would be willing to have your photos on the cover of PARADE. I needed “credit card stories” — real life thumbnails that would help me make vivid for PARADE’s 41 million households the pitfalls and possibilities of credit card use.

You were terrific, time has marched on, and Sunday, if your local paper carries PARADE, several of you will see your beautiful selves on its cover or in its pages.

But as generous as PARADE’s editors were in allotting space to this story, many of your stories didn’t make the cut. Which pained me, because many of them were so interesting or instructive — or just compellingly “real.” (How often do we get to look into a stranger’s wallet?)

For example:

In 1985 Paul and Cher Jakubowski had about 20 credit cards. They were living large but didn’t think they had a problem. Indeed, they were paying more than the required monthly minimums on all the cards — and feeling “smugly responsible” about that. They both had good jobs (he’s a tech support manager, she’s a pre-school teacher), and one of the last things these Texans worried about was money. “Whenever we needed something,” says Paul, “we called for a credit increase. And since the bank(s) always gave it to us, we figured we could afford whatever they’d ‘give’ us.”

One month, though, one of the bills looked awfully high. Paul asked Cher how much she had “spent on the credit cards.” (That’s how they thought of it at the time — they “spent on the cards” rather than on the goods and services the cards bought.) “About $350,” guessed Cher. But Paul got out his calculator and found that her spending had totaled over $800 that month. His own had topped $600.

“Now, I’m not a stupid person,” says Paul (whose Mensa Membership number is 1134149), “but some things come slowly to me. Even though no one had ever taken the time to teach me about money, I could tell that spending $1,400 when we would have estimated $750 was out of line.”

He bought one of those early computer software money-management programs (using a credit card!) and was amazed. “Once I got done setting it up and looked at our ‘Net Worth’ for the first time,” he says, “I lost my breath. We had a NEGATIVE Net Worth! I couldn’t believe it.” But there was no arguing with the dismal picture it painted. They went on a budget. “It felt awful not to be able to buy whatever we wanted whenever we wanted and just sign our names. It was excruciating to cut up all but two credit cards. That was almost like putting a beloved pet to sleep — our self image was so tied up in the ‘status’ they conveyed.” Fortunately, both their careers continued to progress, and after three or four years, the cards were paid off.

Today, they keep just two credit cards, a Discover Private Issue that they use for everything they can, and a Visa for the rest. They charge everything possible — from groceries and gas to college tuition. Discover’s 2% cash rebate comes in March of each year.

“The financial freedom we now enjoy is in stark contrast to where we were, and where we would be today if we had not come to our senses and put our affairs in order. Today, a budget is about possibilities, not constraints, and credit cards are mere tools to achieve those possibilities rather than status symbols of an irresponsible way of life.”

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If you can, check out this Sunday’s (November 1) PARADE.

Next week: some more of these stories.

 

Not to say politicians aren’t entitled to their opinions, but should they state them so forcefully?

Who can forget Ross Perot’s flat-out assertion that NAFTA, if passed, would lead to a “giant sucking sound” as our jobless rate soared? Over and over again he said this. And with such disdain for anyone not bright enough to see it!

The thing about Ross: It’s just all so obvious to him. A giant sucking sound.

Of course, NAFTA and GATT have been in place for some time now and the jobless rate, at 4.6%, is near its lowest rate in decades. And still Perot calls everyone who disagrees with him (on any issue) a moron.

And here’s another, even more important example:

As Newsweek‘s Jonathan Alter pointed out a couple of weeks ago, there was not a single Republican vote for the Clinton economic plan in 1993. Not one. (It was a plan that, among other things, raised taxes on the highest-income Americans to help balance the budget and get interest rates down.)

The Republican chorus: It would wreck the economy. “It will kill jobs and lead to a recession,” Alter quotes Newt Gingrich as having said. Phil Gramm said there was “no possibility” we would see any economic growth if taxes on the best-off were raised. “This plan will not work,” said Republican budget-expert John Kasich.

Every single Republican voted no … and five years later we’ve added 16 million jobs, balanced the budget, seen interest rates fall, and watched the stock market double.

There are millions of good Republicans … even including some in Congress. But I’m scared when the leadership has gotten so polarized, when the battle has taken on such … fervor.

Religion is, of course, a wonderful thing. But, especially when it gets mixed up in governance, it can go too far. Queen Isabella boasted, 500 years ago, “I have caused great calamities. I have depopulated provinces and kingdoms. But I did it for the love of Christ and his Holy Mother.” Ouch.

Not for a moment to suggest that any Republican leaders actually approve of snipers murdering doctors or bombing clinics, or thugs beating, burning and crucifying homosexuals. But the influence of the Christian right on the Republican party has, in my view, become disproportional. If only every moderate Republican would run to the polls November 3 and vote overwhelmingly Democratic, this one time, to send the Republican leadership an unmistakable message: America must not become a theocracy controlled by wealthy televangelists. (They should have their say, of course, but not control of the party unless their views are shared by a majority of the party – which polls suggest they are not.)

Then we could go back to electing good Republicans, of whom there are many, right along with good Democrats.