KSG1) The two most amazing things about the decline on Friday were that it was the worst Friday ever (down 45.80 in S&P futures) after an up Thursday, and that the Chairman, who talked at Harvard on Wednesday about the soundness of the economy, apparently didn't have the number in hand, as I have always treated his utterances as if he knows the next announcement at least three days in advance. The Kennedy School once bought a million + cache of vintage refreshments and presumably a similar effect must have caused the lapse. Of course, the teenage employment aspect is just one more fly in the ointment of the usual random numbers that greet the employment report, sure to be reversed on a statistical basis by the next random number which starts out with a strong bias from regression to mean effects for levels.

2) No wonder Visa and Master Card are up 100% over the last year. Apparently they're predicting 20% a year growth in credit card use as other countries and affinity groups increase their use of credit. Its now "debit or credit" rather than "cash or check." I was particularly interested in all the companies catering to the credit card companies as they would stand to grow as the epyphytes do on Google. Such companies as Total System Services and Heartland Payment Services, Fidelity National Information Services, which do the paperwork for the credit cards. The analysts make much of the fact that the credit card companies don't take the risk on their transactions but pass it on the banks. And certainly the paperwork companies would seem to be doubly removed. They seem like good buys relative to their growth prospects, and the adage that they do lead in the recessions and lead in the recoveries should be tested as should the similar phenonenon for brokerage companies. I was fortunate to be thrust into this line of thinking by having my credit card stolen when a park office would only issue me a $10 permit if I paid by credit card. The next day someone used my number for a four-figure purchase. Apparently thieves have cameras that can scan the front and back of credit cards. They have to go up against the security companies that can match every transaction at a cash register to a photo ID, even months later. The ingenuity of the credit card thieves, as underlined by a recent article in Boardroom Reports, is impressive.

Even more impressive to me was the followup that the biggest credit card company came up with. When I called, an agent offered me a big loan at 1.75%. After putting me through 15 minutes of identifcation they noted the fee was 3% sign-on. When I remarked that I would have appreciate they telling me that at the beginning (I never lose my temper, after 10,000+ competitive squash matches), they immediately dropped it to 1% and offered to qualify me for a bigger loan. They put me through a five-question credit scoring test based on cash flow and occupation ("speculator.. I mean, executive").

The flexibility they show in price discrimination, and reducing consumer surplus, and gaining a customer with a short term premium was impressive. Combined with their projected 20% a year growth, as "credit or debit" rather than "cash or check" becomes the new mantra, they seem to have many of the elements of a good business.





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