Many of you saw the news today that JP Morgan Chase had decided to forgive the outstanding balances of its Canadian credit card holders as it exits its business in the country. When a bank makes a decision to effectively forego millions of dollars (plus interest) that is due and owing to it, many intelligent readers wonder: “What’s the catch?”
The answer to the question concerns the cost of collecting debt. The affected accounts concern debt that is mostly between one and three years old. Typically, the average collection rate if pursued through all legal recovery methods is 19% for debt over a year old. As in, if JP Morgan or some debt collector that purchases an assignment of JP Morgan’s debt rights were to try and collect every last penny of a $100 million debt portfolio, it would come out with $19 million.
Now, here is where things are interesting. … Read the rest of this article!
One of the advantages of holding a stock for a long time and reinvesting the dividends into the same company that paid out the dividends is that you become very receptive to the idea of falling stock prices. In fact, sometimes I think that only affluent or aspiring affluent private investors that are reinvesting the dividends are the only ones who truly appreciate how falling dividends can aid the income production process.
I want to use GlaxoSmithKline as an example because they are in the news today. The management has a long history of being honest and candid with investors, and actually, they usually get punished for it (that’s why it’s hard for me to get mad at management teams that speak in corporate jargon and describe all bad news as one-time events, because when investors actually hear negative news from corporative executives, they pout and lower the price of … Read the rest of this article!