Author: A.T.

I am not a cyclist (I get too interested in what I’m reading or watching on TV, and before you know it, I’ve dismounted), but it’s worth pointing out that — in the great sweep of things — my investing life has now basically consisted of two 15- or 16-year chunks. There was 1966 through 1982, when the Dow first pierced the 1000 mark (intraday) in 1966, and 16 years later, when it was at 777 in August of 1982 — for a net 16-year gain (not counting dividends, which were a lot higher back then) of minus 22%. And there was 1982 to this past summer, when the Dow rose from 777 to 8300, roughly plus 1000%.

One is almost tempted to think in terms of ebb and flow. Or to observe that this second, vastly preferable 16 years were double what you might normally expect of the market, more or less, simply making up for the prior 16. Like a long string of mostly heads after a long string of mostly tails.

Perhaps not an entirely inapt analogy, since the next 16 coin tosses are mathematically certain to be unaffected by the previous 16. (If I have flipped an astonishing 16 heads in a row, and I’m really “due” to flip tails, I will nonetheless be no more likely to flip tails on the 17th toss than heads.) And yet we are not just flipping coins here, and having now done our catch-up, it’s unlikely to me we will have another 16 years of double-barreled performance.

If things keep soaring, as they might, we’d be headed for trouble. Bubbles burst. Look what’s happened to Japan since 1990. If we plod along at what to some, spoiled by the last 16 years, will seem a very tepid pace, that would be swell. And if we get spooked, or some unfavorable things happen (inflation, labor strife, political unrest, Quayle in ’00 — the double-zero president), it could get ugly.

I don’t know where we’re headed, other than, very generally, over the long-term, UP. But I think these last 16 years have been extraordinary in part because they were catching up. The disinflationary 16 following the inflationary 16, is largely what it amounts to. A period of gradually falling long-term interest rates after a period of rising ones.

Happily, interest rates have room to fall further. Sadly, from the point of view of a turbo-charged stock market, not that much further.

Happy Halloween. I hate Halloween. I have always hated Halloween. But don’t let that spoil your fun. I was dressed as a ghost — an old sheet with a hole in it, suggesting perhaps that my mother cared as little about Halloween as I now do — sitting in the back of a station wagon loaded with kids. I think the tailgate must have been down (at 5, I was not into auto safety, let alone auto insurance reform, as I am now), and when the car started forward, I rolled off the tailgate onto the dirt road.

I’d like to tell you that, resourcefully, I reached into my sheet, whipped out a cell phone, and called a personal injury attorney. Instead, dazed but unhurt (but certainly I could have claimed emotional distress) I waited for the car to back up and retrieve me, and have hated Halloween ever since.

Actually, I’m not sure the car thing had much to do with my hating it. I’m one of those people who’s insecure about what he wears and thus goes for the khakis, Oxford button-down shirt and blue blazer most of the time, which wins no awards on Halloween.

I did have a brief period of years when, for one reason and another, I felt the need to go out in New York on Halloween and managed, finally, to find something (which I reused year after year) I felt comfortable with. I’d put on my tux . . . (Tuxedo renters, here’s a tip: next time you rent a tux you like, buy it rather than return it — just be sure it’s a classic style that never goes out of fashion and work out the price in advance with the rental company. Not only will you save time and hassle that once every year or two that you need it, you will also realize a terrific return on your investment. Buy it for $200, say, and realize a 40% tax-free dividend each time you don’t have to pay $80 to rent one. And, yes, in case it’s a brand new one you’d prefer to buy, Men’s Suits does sell tuxes.) . . . and then don a cheap dime-store pig mask which I had specially enhanced with a press-on dollar sign on the snout. I was, I explained to all the disheveled denizens of the night, a capitalist pig.

Want to do something to keep the economy rolling and this bull market alive? Call your senators and congressperson, as mentioned yesterday, and urge them to renew the president’s fast-track negotiating authority.

Trade wars brought on the Depression; freer trade has helped our economy boom. We are little more than 4% of the world’s population with some of the world’s very best products. The more freely we can trade with the other 96% of the world, the better we (and they) will do — and the greater the variety and the lower the cost of the items we get to consume ourselves.

So fast-track — which lets the administration negotiate credibly, subject to an all-or-none, up-or-down vote in Congress — is something every president since Nixon, Republican and Democrat, has favored and had, and something that has served us well. Yet it’s something “the special interests” [cue the melodramatic villain music] are doing a very good job of derailing. Certain specific industries fear trade agreements could hurt — and you can’t blame them for lobbying against fast-track. But for the country as a whole, the effect of trade agreements is very positive.

Yes (to take one example I heard recently), NAFTA cost 50,000 auto industry jobs in Michigan. But in the same time period, Michigan gained 782,000 other jobs! (I haven’t double-checked the figures, but the gist, if not the footnotes, ring true to my ear.)

The next few days are critical. Congress is itching to adjourn, and if they don’t pass fast-track next week, it could be three years before they do, for a variety of political reasons. Not the end of the world, and maybe not the end of the bull market. But why shoot ourselves in the foot? If the president’s people negotiate agreements that don’t make sense, Congress will still have a chance to veto them . . . but all-or-none, as a package, which makes it harder for narrow interests to prevail.

Opposition comes from both Democrats and Republicans. It is winnable, but not if people fail to get energized and send faxes and FedEx packages and call. Just say: “Yes on fast-track!” Trust me: they’ll know. (Needless to say, you are more than welcome to reprint this comment and send it along with your own.)

You heard it on the radio or from a friend at work. Here’s how I knew the market was “crashing” Monday. I was in a lead-lined hotel ballroom . . . well, OK, maybe not lead-lined, but the cell phone wouldn’t work . . . and someone was introducing the president, who was there to speak to what’s known as the Democratic Leadership Council — the group of democrats currently chaired by Senator Joe Lieberman from Connecticut. There were hundreds of people in the audience (funny how the president can fill a room), and when the introducer got to the part about “thirteen million new jobs, low inflation, low interest rates, a record stock market” — I saw the president lean to DLC founder Al From and make a wry comment.

I’m no lip-reader, but it was apparent he was saying something like, “not today, it ain’t,” or some such. I figured the market was down at least 300 points.

Leaving the ballroom of the Omni Shoreham after the president’s excellent speech, and panels on the importance of his fast-track trade negotiating authority now threatened in Congress (call your congressperson!) and the importance of improving public education (call for more charter schools!), I made my way to the pay phones, which were packed, and — giving up on that — to the room marked Gentlemen. It was packed, too.

The Omni is a nice old hotel, and in the room marked Gentlemen was an attendant flooded at that moment with business, playing the room like a cross between an old railroad porter and a performer at the Improv. “Yes, sir!” he announced to the crowd. “Welcome to the only place in this city where anyone knows what he’s doing.”

Eventually I got the word that the circuit breakers (brakers, really, when you think about it) had kicked in, and I can’t say I was feeling very bad about it, except for one thing.

(I wasn’t feeling very bad because no healthy market goes straight up; because the circuit breakers were a good idea that would give people time to think; because some people who have no business being in the market might be sufficiently scared by this mild jolt to get out; and because while I had clearly lost some paper profits like everyone else, I had also made some paper profits on my shorts — and I tend to see the bright side of anything. It’s just an annoying habit I have.)

The one thing that did have me feeling bad — anxious — vaguely guilty — was the nagging suspicion that it was all my fault.

You see, the last time this happened, October 19, 1987, when the market dropped that famous 508 points, I was in Detroit on a book tour, grinning like an idiot on the cover of a book called The Only OTHER Investment Guide You’ll Ever Need (don’t bother: out of print). The book actually tacked of the possibility of a one-day 500-point drop and suggested the market was cruisin’ for a bruisin’, though that was not by any means its main focus.

Anyway, ten years later almost to the day — last Thursday, to be specific — I was back “in Detroit” with another book about money (bother! bother! please, bother!), again grinning like an idiot (and again concerned by the height of the market, though this was not by any means the book’s focus). I was “in Detroit” in quotes because I was actually in Washington. But this was the day of my two live Detroit radio “phoners,” where one is, in every respect except reality, in Detroit. And down the market plunged 186 points . . . followed by 130 and change Friday . . . followed by Monday.

Call it coincidence if you like. But I’m still feeling vaguely responsible.

As for the Big Picture, it seems to me two things are at work here. The first is that the market was too high, the gains too easy, the psychology too complacent. And if the bounce-back becomes a snapback and all investors learn from this is heightened certainty that all declines are simply buying opportunities, and that the market will never really hurt them, then we might have a worse problem someplace down the road.

The second, though, is that most rational indicators are great. Inflation and interest rates — key factors in our prosperity — really are low, with little sign of a strong upsurge soon (though the tight labor market should not be totally discounted, and one day oil demand might again exceed oil supply . . . ). So that’s very good. And free trade (especially if you CALL YOUR CONGRESSPERSON TO URGE PASSAGE OF THE FAST-TRACK NEGOTIATING AUTHORITY EVERY PRESIDENT SINCE NIXON, I think it is, HAS HAD) is a big positive, as is our tremendous technological progress.

So there’s a lot to be excited about, just as there was last week. The difference is that the market, while perhaps still a good bit ahead of itself, offers better value than we’ve seen in . . . well, months. (Weren’t we just cheering ecstatically a few months ago when it got this high?) The real bargains, if you’re brave and you know what you’re doing, may now be in Asia.

One reason some neophyte investors are relatively unworried about the possibility of falling stock prices is, as a few have told me, that’s what they’re paying the mutual fund manager to do — spy the future and sell before prices fall too much.

What they don’t understand is this simple fact: most mutual funds are always pretty close to fully invested in stocks. It’s rare for an equity fund to have less than 90% of its assets invested in the market. So if the market drops 40%, so, in all likelihood, will the fund. (Well, conservative "low-beta" funds will drop less, aggressive "high-beta" funds will drop more.)

If you think the market is overpriced, it’s your job to pull out of the fund, not the fund’s job to pull out of the market.

Having said that, of course, there are lots of reasons not to hop in and out of funds, especially in a taxable account. Stock market money should be long-term money; 25% and 40% dips, should they occur (and they always used to) are just part of the game. If you’re in it for the long term, it’s usually futile or counterproductive to try to "time the market."

Still, with the U.S. market having tripled or so in the last five years, it wouldn’t be imprudent, especially within tax-free accounts, to switch a bit of money into an overseas index fund that invests in a market, like Asia, that’s gone on sale.

Two questions on deflation. The first, in appropriately deflated lower case:

w. buffett, j. templeton, and other well-respected investors are rumored to be buying us bonds. is the possibility of deflation, similar to the asian situation, the reason? do you think such a deflation is likely? if so, what might trigger it? are you buying bonds? thanks jbrimi

The second, from Professor Dana Dlott:

Have you ever given any thought to deflation? My concern stems from several events. First, a few years ago I bought a house a bit more expensive than I can afford. I reasoned, as do millions, with a little bit of inflation, I am in great shape.

About that time I read a biography of William Jennings Bryan. You may remember from history about the famous “Cross of Gold” speech and the “free-silver” movement. It was never explained to me very well in US History. This was during a period of deflation, which was common in the 18th and 19th centuries. The probable reason for deflation was the economy was expanding rapidly but the money supply, based on gold, was not. The ravages of deflation were terrible. If you owned a farm and had a mortgage, pretty soon the value of the farm dropped below your mortgage debt, which triggered the banks to foreclose. You were just working hard, farming and making money, and BAM there went the farm. It didn’t help the banks any, either, to have all this bad debt and farm land.

The “free-silver” movement was about using silver for coinage, to expand the money supply to counter this deflation. The “Cross of Gold” speech was about how the Wall Streeters and Washingtonians were crucifying the average person by keeping to the gold standard.

I wasn’t really worried about deflation because I reasoned the government could just print more money. But recent events have me worried again. First I heard an interview with one of the Federal Reserve Governors. He said to the Federal Reserve Board, the desired rate of inflation was zero. That was a bit of a shock. I was taught a little bit of inflation was good because people like getting annual raises and the money supply should expand a bit. If the targeted inflation rate is actually ZERO, then errors in this targeting could easily lead to deflation.

In addition, now I am reading the Producer Price Index has fallen for the 7th straight month. [This e-mail came in late August.]

Any comments or insights? Am I crazy to worry about deflation? Nobody else seems to worry about it, or even mention it. It would be disastrous for a lot of people in debt.

Well, my first comment and insight on deflation is that, yep, it would be disastrous for a lot of people in debt.

My second thought is that you can’t push effectively on a string, which is why lowering interest rates or printing more money can’t necessarily be counted on to stave off deflation. Interest rates in Japan have long been close to zero, but if people and businesses are scared to borrow, you can’t force them to. And printing more money doesn’t necessarily bid up prices because of what’s known as the “velocity of money.” The Fed can inflate the money supply by purchasing Treasury securities and “paying” for them with new out-of-thin-air dollars it’s printed. (These days, a lot of the “printing” would involve nothing more than electronic ledger entries.) But the behavior of individuals and consumers can counter that if they choose to sit on more of their money rather than spend it — to keep higher checking and savings account balances, and use new cash to pay down debt rather than bid up the prices of Cabbage Patch dolls. The velocity of money — the speed with which dollars fly around the system and the amount of transactional work each dollar does — slows down.

That said, I think deflation is unlikely and that, yes, the Fed’s tools are potent indeed. The world’s learned a lot since, and from, the Depression, most particularly about the money supply and the importance of avoiding trade wars.

(Trade wars are one thing that could trigger deflation. Gloom and doom — we are emotional animals, after all — are another. Picture a period of falling profits brought on by global overcapacity, layoffs, increasing competition for work leading to underbidding, people getting scared and selling at any price to pay off their debts and raise some cash, which leads to lower stock prices and more gloom and, as Franklin Delano Roosevelt said: “All we have to fear is fear itself.” So it certainly could happen. And it’s wise to have some of one’s money in a deflation hedge like Treasury bonds. But I, for one, being an optimist, don’t see this as likely.)

The Fed must always talk about a sound dollar and shooting for zero inflation. This gives people confidence in the future and reason to make the kinds of long-term arrangements and investments that build the future. Because interest rates sit on top of inflation expectations, this kind of talk from the Fed keeps interest rates low.

People forget: From 1880 to 1965, there was no such thing in this country as a home mortgage over 6%. Treasury bonds yielded from 1% to 3%.

With the prime rate at 8.5% and long-term Treasuries yielding a bit above 6%, the Fed has tremendous room to stimulate the economy with lower rates if deflation fears became more widespread.

In an ideal world, the Fed would have people a little worried about inflation and a little worried about deflation, but basically confident that the dollar will be sound, prices stable, and that the Fed will and can do whatever’s required to keep it that way. And, yes, I suspect the Fed would be secretly pleased with a wisp of inflation — a sort of hidden psychological/social lubricant that keeps people happy — so long as they were publicly perceived to be fighting it.

So, finally, what about buying bonds? If Buffett and others are, it would be because it’s so much more attractive to earn 6% on your money for a year or two than, say, nothing — let alone to lose 25%. Now, you may say the U.S. stock market couldn’t possibly go down 25% (or 40% or 60%), and you may be right. I still own lots of stocks for which I have high hopes, too. But for the market to fall 25% from 8000 would bring the Dow back to 6000, a level so impossibly high it was barely dreamed of by most people two or three years ago.

Clearly, though, Warren Buffett et al. are not selling all their stocks to go into bonds, and neither should most of you.

(Nor need you buy 30-year bonds, which expose you to interest-rate risk. Unless you do want to make an aggressive bet on falling interest rates — in which case you should consider long-term zero-coupon bonds to get the most oomph from your bet — it’s probably wisest for most people to stick to Treasuries that are 3-5 years from maturity. You’ll get almost as high a return on your money with a lot less interest-rate risk.)

The future is bright, even if most mutual fund holders are likely to be deeply disappointed over the next decade, given the sort of annual returns they’ve been telling pollsters they expect to earn.

One last thing. Did you know that The Wizard of Oz was actually about William Jennings Bryan and the Cross of Gold (follow the yellow brick road) and such? I was astounded to learn this, but as I hope to elaborate for you one of these days — unlike, say, the Procter & Gamble Satan thing — it appears to be real.

I actually have nothing against America Online. On balance, I think it’s pretty great. But there are those who do have a nit or two to pick. Well, revenge is at hand. Not that AOL is likely to leave this loophole open long after reading this (which you will also find I’ve used as my November column in WORTH). But “if you or anyone you know” has ever been annoyed by AOL, “I urge you to get pencil and paper ready,” as they say.

Here’s the deal. When you boot up AOL and get hit with that ad for AOL’s Visa card — which you have to click “OK” to get past — fake ’em out. Accept the offer. At least that’s what one rich friend of mine did.

When his no-annual-fee card came, he signed up for the “automatic pay” feature, which automatically debits his checking account at Chase at the last possible moment and pays off his balance. Then he took one of the “convenience checks” they sent — a convenient way to get yourself deeper in debt at the introductory rate of 5.9% for six months and 17.9% thereafter — and wrote it to himself for his $20,000 limit, depositing it to his interest-bearing checking account at Chase.

He’s got it down to a science by now. He deposits the check the day after the billing cycle ends, so it takes a month even to show up on his Visa bill, and then another month or so before, at the last moment, Chase automatically zaps the $20,000 back to Visa, paying his balance in full before any interest begins to accrue. (With most cash advances and convenience checks, interest begins to accrue right away. Not so, as of this writing, with the AOL Visa card.) Then he writes himself another check for $20,000 and starts all over again.

As a result, at no cost whatever, he gets:

• The interest on $20,000 that he keeps in his Chase account more or less all year — about $1,000 worth.

• A waiver on the $25 a month Chase would charge for his account if he didn’t maintain a high average balance — worth another $300 a year.

• Some 20,000 “points” every two months redeemable for time on AOL at a penny a point — 10 free months (unless they hunt him down like a dog and find some excuse for canceling his account, but I’d hate to see their legal bills if they did).

I must tell you I sympathize with AOL in this. Whatever they’ve done wrong, they’ve done a lot right for $20 a month. But in my friend’s case, they’re more or less paying him $1,300 a year to use the service — and giving it to him free for what should soon amount to the end of time.

As so often happens in this space, the really good stuff comes from you. The comment I wrote about my frustrating credit card experience — being charged a $20 fee for being 3 days late on a $55 payment, and then being chastised by the customer service rep, to boot — elicited lots of feedback, a sampling of which I shared yesterday. But near the end of this stream of messages came one from a person I’ll call Deep Plastic who really seems to know. It seems GM isn’t the company that issues or services the GM Visa card. Deep Plastic works for the company that does:

I read with a great deal of interest your experience with the GM Gold Card. As an employee of Household Credit Services (the bank that underwrites your GM Gold Card), I can assure you that you are not alone in your “Credit Card Billing Rage.”

In 1996, telephone representatives waived more than $40 million dollars in late fees – income that flows directly to the bottom line. As a result, Household now insists that at least one of the following four criteria be met in order to waive late fees:

1. You must indicate in your original conversation that you never received a statement the previous month, or;

2. You must have at least $2,500 in purchases within the previous 3 billing cycles, or;

3. You must have accrued at least $30.00 in finance charges within the previous 3 billing cycles, or;

4. Your account must have been opened within the last 6 months.

If none of the criteria are met, the reps generally are not allowed to waive the late fee. Essentially, your account is considered unprofitable, and as such, Household isn’t too concerned if you threaten to close your account.

As a courtesy to you, I am going to credit your account for the late fee. You will see a credit on your next month’s statement. In exchange, I will ask that you please let your readers know that it isn’t GM who manages the credit card. They only handle the rebate points. All credit card functions are handled by Household. I own GM stock, and I’m tired of the bad rap GM gets for the stupid policies of Household. (I say stupid, because it takes Household approximately 4 days to post a payment to an account once the payment is received. Household does not back-date the payment, therefore a late fee is assessed even though 90% of the time they had the payment on time). In Household’s defense, they have added so many new portfolios in the last couple of years, their systems are just simply overwhelmed.

Also, in the event you use any of the information here, please do not use my name or E-mail address. I am attempting to put my husband through grad school, and I really need the job!

Other credit cards that Household manages very badly: the Ameritech Complete Card, the Ameritech Platinum Card, the Pacific Bell Savings Card, and the U.S. West Savings Card.

Tomorrow: Getting AOL to Pay YOU

The first thing to say — as you’ll read in what I found to be some fascinating detail tomorrow — is that it’s not GM we should be primarily mad at. But I didn’t know that when I wrote about being charged $20 for being two or three days late on a $55 payment. (It turns out I may not even have been late — the company we should be mad at just likes charging the $20.)

You didn’t know it either when you responded. And boy, did you ever respond. A sampling (with some good general advice from Dorothy Mallonee at the end):

Don Hauge: You are so lucky to be able to vent publicly. If that had happened to me, I would have been just as mad, but I wouldn’t have been able to tell thousands of people about it. At least when you vent, someone at GM might actually read about their own stupid policy and change it. When I vent, the only one who hears it is my wife.

I am indeed lucky to be able to vent publicly. One of the great things about the Internet is that it makes it easier for all of us.

Dr. Tom Novinger:

You paid the $20?

You paid the $20?

You paid the $20???!!

How could you? Didn’t we grow up in the sixties, when we were all protesting over things like free speech, free love, taxes and the war in Vietnam?

Being lucky enough to vent publicly, I figured I’d protest that way. And then catching up on the past week’s Wall Street Journal, I saw something to suggest that my friends the trial attorneys — who do some excellent things for consumers despite the things for which I criticize them — may soon put a stop to crazy late charges. “Attorney Finds a Way to Battle Bill’s Late Fees” (October 6) describes Washington, D.C., attorney Philips Friedman’s attempt to fight late fees by using contract law. The idea is that being late with a payment is a violation of your contract — but contract law limits the damages to the actual harm done. And it would be very hard for a credit card company to argue that my being a few days late on a $55 payment has somehow cost them $20.

T.F. Gazda, “steelworker & consumer”: It seems I’m going through “deja-vu” reading your newsletter here…. I’ve had the exact-same experience — but with DISCOVER CARD (you know, “the card that pays you back”). I’m HAPPY to say that DISCOVER CARD SERVICES have a much more palatable group of “customer service team members” . . . in every case where there was a “slip up” (of my accord), they reversed the charges willingly. Their card is the ONLY one I use! THAT’S a GREAT COMPANY!

I don’t have ANY respect for GM or its products . . . being in the steel industry, I’ve seen our prices (steel sheet) DECLINE over the past 10 years, while it seems GM’s prices have increased at a rate greater than inflation, & they BEAT ON US for lower prices (“what about inflation fellahs?” . . .). I’ll NEVER EVER buy a GM vehicle, just for this reason. That company is BULL-HEADED & too big & working with management’s-style of the 1960’s (or was it the 1760’s? ) . . . . Fred Flintstone must be their CEO . . . I’m just so aggravated by their LACK of true customer focus that I had to put it on record . . . . I own a Dodge & a BMW. General Motors WILL lose — they just can’t see it yet (dinosaur company). Unload your stock in them. Get a Discover Card ASAP, & cut your losses on that silly GM card . . . . GM isn’t WORTH it — & there are far-better cars on the road.

Well, I’m keeping my stock, but with more qualms (though as you’ll read tomorrow these turn out not to have been GM customer service reps at all).

Rafal: I had the same thing happen to me when I missed the pay-by date on my MBNA Platinum Plus card by a single day (I had been out of town for about 10 days and had forgotten to pay the bill before leaving). Not only did I get charged the $20 or $25 late fee, I was also charged a ludicrous amount of interest (MBNA uses some horribly evil method for computing interest expenses). One would have thought that for a card that advertises itself as a step above a gold card, they would be willing to bend the rules for a cardholder with a pristine payment history. Guess that’s where the American Express people still have their niche well carved out. American Express allows you to call in payments, which has saved me on occasion when I realized that the payment was due in 2 or 3 days. I simply made out a check, dropped it in the mail, and at the same time called Amex to let them know it was on the way. No hassling with late fees, no guilt, and everyone’s happy. For this alone, I’m willing to shell out the annual fee on my Amex Gold card (and the fact that Amex is still one of the most pro-customer credit companies when it comes to disputes and other billing oddities. This has saved me from unscrupulous mail-order merchants once or twice).

Alan Silverstein: Today’s GM Credit Card Rage column was identical to the experience with my GM Gold card when I called to protest the same late fee. I pride myself on a virtually perfect credit rating and was not about to let “late mail” cause me to have to pay $20 when one payment came in a day late. I too got on with a GM service rep — and I am nice by nature in situations such as these, rare as they are — and immediately found the same confrontational attitude as you did. I have dealt with many service reps over the years on a variety of credit card issues (this new “late charge” that the industry has been levying caught me by surprise, as it apparently did you as well). Regardless of the other issuers, I have found that only with the GM service center have I almost immediately been put on the “defensive.” Virtually all other card issuers will let you slide when it is apparent based on your history that any lateness is clearly an aberration, and is not recurring. Not so with GM. I immediately closed out the card, with the service rep almost “daring” me to do it. I have also advised many an underling to relay common customer difficulties to higher-ups, but have always felt that these messages fall on deaf ears. I lost my points, but I will not buy a GM product until I see that they have “reformed.”

In light of what you’ll read tomorrow — these are not GM reps or GM’s policy — it’s amazing GM has allowed its reputation to get hurt so badly with this.

Tony Levelle: I once worked for a major credit card company writing technical manuals. They treated their workers worse than anyone I’ve ever seen. Stress illnesses were endemic. A friend went to the doctor with headaches, nausea, and constant vomiting. This was so severe that she was dehydrated by the time she made it to the clinic. “Oh,” the doctor said, “You must work at (major credit card company). I’ve seen several people with these symptoms.” Anyway, I feel that bashing credit card companies is a Good Thing. Keep it up. They won’t change, but I’ll feel better.

Perhaps it’s just this stress that led Deep Plastic, tomorrow’s source, to crack.

Rich: These people are idiots sometimes. Don’t they realize that the average dolt (that deserves to pay the $20) will not even have the common sense to call up and complain? It would be in their best interest to just waive it for anyone that calls. Meanwhile, I’m still waiting for Nation’s Bank to send me a letter. Last month they sent out a statement saying that their Blockbuster Visa card would no longer be giving the 1% in Blockbuster Bucks. They are doing this to “improve service” and are “investigating other alternatives.” Yeah, right. Lunacy abounds.

John Dobrinski: I spent six months trying to get GM to remove a several hundred dollar charge on my card that was done by an unknown person charging an airline ticket. I could not believe the incompetence of the customer service dept. The GM card customer service also has three different departments throughout the country so when you call the 800 number you might get any one of the three offices. They also do not give out their last names or phones so you cannot get hold of the person again. By the way, when I wrote to GM in Detroit complaining I was told the card is not affiliated in any way with GM.

True, except that GM made the deal with the company that services the card, and GM has its name and logo plastered over everything. If it’s the GM card, it’s the GM card. If they really have no control over the servicing company, they were nuts to sign a deal like that.

Rich Stehnach: My wife and I have purchased two Oldsmobile Silhouette minivans using the $4400 in credits earned from our GM Gold Card. With GM’s decision to limit us to $500 a year instead of $1000 a year in earnings, we certainly no longer feel as compelled to spend our next $50,000 on GM products. It’s clear to me but obviously not to GM that they’re probably viewing the billions that GM Card holders have accumulated in credits as a huge liability rather than the potential trillions in sales awaiting them an asset. The shortsightedness of corporate America should never be underestimated.

MK: We also once had a payment arrive late to the GM card, (I think in ’95) and indeed at that time a simple phone call did waive the interest and fees. You are correct in getting this steamed over the $20, and the fee is not only unjustified, but stupid for GM and the GM card.

All this illustrates a basic truth about life, and why the free market is only the “best system on earth,” and not a “perfect system.” You see, we all live on a planet that is by and large populated by idiots. If 90% of potential consumers of anything are willing to put up with unreasonable fees, or exorbitant prices, or shoddy workmanship, or poor quality, then the providers of the product or service can probably do all right only selling to them. We each have a duty, at least as fundamental as participating intelligently in our democracy, to participate intelligently in that most democratic of all human systems — the free market. When anyone of us forgoes our responsibilities as consumers, we diminish all the other consumers in our society by misallocating resources towards expensive or shoddy or unjustified goods and services.

You see? You’re not just fighting fer yer own twenty dollars, Jimmy (picture Ma Joad borrowed for a Frank Capra movie on credit card rip-offs, with either Jimmy Stewart or Henry Fonda in the role), yer fightin’ fer all the people. But while it might not be as noble as all that — the point of Adam Smith’s invisible hand is that you don’t have to be noble, you can just be out for yourself — it’s true: a market works best when information is clearly disclosed and consumers are intelligent in assessing it.

Bill Fletcher: Not only do they now clip $20 for a “late fee” — but don’t look now . . . some cards have removed the – once 10 day grace period – once 5 day grace period – so there is now NO grace period. This is with both of my credit cards. And I am getting the statements only two weeks before the due date. They can easily hold the posting of the payment one or two days so it’s getting very hard to even get them the payment on time if you have the time to run from the mail box to your checkbook and back again (and who does have the time). I’ve made my calls to them — Bank of America and Wells Fargo — and my “Sean” said “we’ve had to do it because people are taking advantage of the grace periods.” Need I say more?

I think Bill refers here not to the ordinary grace period — no interest charged if you pay your bill in full by the due date, which most cards still allow — but an extra little grace you’d get to avoid charges if your payment came in a few days after the due date.

Rick Lafford: I’m like you in that I tend towards used cars and drive them mostly to the end. My current is a 1990 Camry bought from National in 1992 for $11,000. Still going strong at 173,000 miles.

So why did I ever fall for that GM rebate-on-new-cars-only card in the first place? I guess it was the 5% that got me. Not my brightest move — though you never know. One of these days I might go crazy and buy a new car. Do they still make Buicks? When I was growing up — well, you should just have seen the looks on all our faces that day when my Dad brought home a brand new Buick. (Well, it was the 50s.)

And finally, more good advice from Dorothy Mallonee: “I feel qualified to comment, both as someone who’s had a fair amount of congress with customer service personnel as a consumer, and someone who’s been on the other end of the phone. I was a service rep for ‘the telephone company’ for 13 years, and have spoken to — and, I hope, helped — a fair number of customers.

Some pointers:

1. Know what you want. Your best bet is to make clear not just that you’re angry, but what action will satisfy you. Be reasonable, of course, but stand firm.

2. Everyone has a boss. Although this varies by organization, the front-line people are often all too eager to kick you upstairs. The first-level supervisor usually does not want you to escalate. Play these cards for all they’re worth, and never hesitate to escalate ever higher.

3. Co-opt the person you are dealing with. Use every cheap trick you know to create the illusion that you and your new ‘friend’ are a ‘team’ trying to reach a mutually-agreeable goal. [This also works well if you ever find yourself the hostage in a kidnapping. — A.T.] For example, shamelessly use plural pronouns to discuss ‘our problem’, and ‘what we can do about it’.

4. Keep venting to an absolute minimum. You have no idea how anger can affect people who have to listen to it many times during the day. It frightens some people and others simply become angry in turn. Anger sounds very personal to the rep on the other end of the phone line, even though you know the rep is usually just a functionary with little more control over the situation than you have. So vent, but use your dog or your co-workers, and try to keep your interaction with the rep as calm and business-like as possible. The points you score with your booming voice or your razor wit will rarely carry the day. [You mean sarcasm doesn’t make people love me? Uh, oh!] Stay focused on the problem and your expected solution.

Tomorrow: Deep Plastic Reveals All – The Inside Story

Thursday in this space you will find the inside story of the GM Visa card (and some others serviced by the same credit card service company). Deep Plastic reveals all.

But wait. It seems people are not only angry with GM. They’re angry with Ford, too.

Writes Edward M.: I have read your comments on the $20.00 late fee on your GM card. But that is nothing compared with what Ford has done to me and other likewise situated credit cardholders. They have canceled their rebate program as of the end of this year. Now, they have a right to cancel their program, but not to the present owners to whom they have agreed to honor this program! If they want to cancel this program, I do not feel that they have a right to renege on their agreement to existing cardholders who are using it to accumulate credits for five years. I have complained to the State of Florida, Dept. of Consumer Services, who have written Ford Motor Co. four or five times. Ford has not even had the courtesy to respond once. I am now trying to find a lawyer who will file a class action suit to force this firm to live up to its agreements.

Writes Jim L’Heureux: With a Ford Visa card, I’ve been getting the 5% rebate good towards a new car for just about 5 years now and have almost maxed out at $3500. Just recently Ford announced it would end the program on Jan 1 1998. In addition, rebates will be rescinded after a five year period. For example, rebates I earned in 1992 will be deducted from my "account" after the five year anniversary of those charges. I think the rebate expiration feature has been in place the entire time, I just didn’t care because I would continually "renew" them with new charges.

This leaves me with a big dilemma. I had planned on replacing my ’87 Escort in a few years. I thought that I would be able to get a new car at a fairly reasonable cost with the rebates included. Now I have to weigh the declining value of my rebate vs the expected lifetime of my Escort. Any suggestions for making that decision?

I have actually considered buying a new, low-end car on Jan 1 with my rebates and then reselling it immediately. Obviously, I could not realize the full value of my rebate, due to taxes and the "used" nature of the car. However, at least my rebates would be utilized. I would pick a low-end car to limit the amount of taxes and the "used" car discount.

What do you think?

A: Buying and reselling immediately won’t work and is too much effort . . . unless you can find someone who’s basically in on the deal from the beginning. Your cousin or a co-worker wants a new car (you’re too smart; you’ll buy a used one — perhaps even his). So you let him pick out the one he wants, agreeing that you’ll take title to it to use your $3,500 (but it will be his cashier’s check that pays for it). Then you’ll transfer title to him. The cost of that in fees and taxes will depend on where you live, but should still leave you a good "profit."

But literally buying a car and then trying to sell it to a stranger? You’ll get killed.