Friday, April 08, 2005 12:22:55 PM
STRATEGY: New Bankruptcy Law & Trading Part III
Does the flap of a butterfly’s wings in Brazil set off a Tornado in Texas? – Sensitive Dependence on Initial Conditions or better known as The Butterfly Effect.
We’re all affected financially, socially, and politically by someone living in poverty or filing for bankruptcy. I also doubt that our habit of consumption would change much before we hit the bottom. Our need to consume is nothing new. Our original need to consume is to survive. “It was the ability to do so, which was new”, according to historians McKendrick, Brewer, and Plumb’s book, The Birth of A Consumer Society.
This ability is now given to us by the Fed’s easy monetary policy and the credit card companies alike. Before we hit the bottom, what do we do to get the credit to continue our consumption? If we can no longer get it from the lenders, we can always turn to the sub-lenders, the check cashing companies or the pawn shops where no credit reports or tax returns will ever be required.
Among other businesses that may thrive under the new law, the check cashing companies and the pawn shops should be the sector to keep an eye on. Again, I don’t condemn or condone; I’m only a trader in this instance. According to the findings from yesterday’s release of infoUSA’s Sales Genie Business Survey Report, check cashing business is the 2nd highest growth sector in the last 5 years. It’s growth rate of 62.78% is only next to Locksmiths’ 66.79%, but check cashing companies’ growth had been more consistent.
I found Locksmith business intriguing. It should be another interesting research. For now, here’s a group of check cashing and pawn shop companies. I ran the group together first just to see if there’s any correlation. And here’s what the first chart looked like.
It looked sort of noisy, so I filtered out 3 that didn’t seem to correlate well with the others. This next chart gave me a clearer view of the group. They appeared to be moving together quite well, and they all seem to drop all of a sudden in the beginning of March.
According to Associated Press, http://tinyurl.com/3topu, on March 3, FDIC issued new restrictive guidelines limiting how these check cashing and pawn shops’ lending services are provided. The sell-off was due to the new guideline that discouraged issuing loans to customers who have had outstanding debt for a total of 3 months within the past year. And, it’s still uncertain how the new guidelines may affect the check cashing business’ long term financial status.
While the sell-off may provide good buying opportunities, I wouldn’t touch them under such uncertain circumstance. Market dislikes uncertainty. Nonetheless, it should be an interesting study for any student of the market.
Speaking if infoUSA, few would think of investing in the telemarketing companies. For many, the telemarketers are probably on the same public enemy list as the pawn shops.
Does the flap of a butterfly’s wings in Brazil set off a Tornado in Texas? – Sensitive Dependence on Initial Conditions or better known as The Butterfly Effect.
We’re all affected financially, socially, and politically by someone living in poverty or filing for bankruptcy. I also doubt that our habit of consumption would change much before we hit the bottom. Our need to consume is nothing new. Our original need to consume is to survive. “It was the ability to do so, which was new”, according to historians McKendrick, Brewer, and Plumb’s book, The Birth of A Consumer Society.
This ability is now given to us by the Fed’s easy monetary policy and the credit card companies alike. Before we hit the bottom, what do we do to get the credit to continue our consumption? If we can no longer get it from the lenders, we can always turn to the sub-lenders, the check cashing companies or the pawn shops where no credit reports or tax returns will ever be required.
Among other businesses that may thrive under the new law, the check cashing companies and the pawn shops should be the sector to keep an eye on. Again, I don’t condemn or condone; I’m only a trader in this instance. According to the findings from yesterday’s release of infoUSA’s Sales Genie Business Survey Report, check cashing business is the 2nd highest growth sector in the last 5 years. It’s growth rate of 62.78% is only next to Locksmiths’ 66.79%, but check cashing companies’ growth had been more consistent.
I found Locksmith business intriguing. It should be another interesting research. For now, here’s a group of check cashing and pawn shop companies. I ran the group together first just to see if there’s any correlation. And here’s what the first chart looked like.
It looked sort of noisy, so I filtered out 3 that didn’t seem to correlate well with the others. This next chart gave me a clearer view of the group. They appeared to be moving together quite well, and they all seem to drop all of a sudden in the beginning of March.
According to Associated Press, http://tinyurl.com/3topu, on March 3, FDIC issued new restrictive guidelines limiting how these check cashing and pawn shops’ lending services are provided. The sell-off was due to the new guideline that discouraged issuing loans to customers who have had outstanding debt for a total of 3 months within the past year. And, it’s still uncertain how the new guidelines may affect the check cashing business’ long term financial status.
While the sell-off may provide good buying opportunities, I wouldn’t touch them under such uncertain circumstance. Market dislikes uncertainty. Nonetheless, it should be an interesting study for any student of the market.
Speaking if infoUSA, few would think of investing in the telemarketing companies. For many, the telemarketers are probably on the same public enemy list as the pawn shops.
David
#board-3693
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