Filed under: Internet, Scandals, Citigroup Inc. (C)

In June, I wrote a nice rant about credit card offers I was receiving with the words “Remove contents before you discard.” I thought, and others agreed, that the offer implied that I needed to open the envelope to avoid the risk of identity theft.

Now Citibank is attracting controversy by mailing 3.5 million credit cards to department store customers who didn’t ask for them. The cards are being sent to customers who who have had inactive accounts for more than two years.

According to CNN, “A federal law dictates that banks can issue credit cards only when customers request them or they replace existing cards. Citi considers the cards replacements to the Macy’s cards already accepted by the customers.”

Calling new cards sent to customers have been inactive for two years seems pretty aggressive, and consumer advocates have expressed concern that the personal information of customers could be breached.

Citi is playing pretty fast and loose with the law here. Customers shouldn’t receive credit cards in the mail that they didn’t ask for and don’t want — and that is exactly what is happening here.

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Filed under: Business of sports, Economic data

There has been considerable debate about the role of momentum in sports. In a landmark study, Thomas Gilovich and several colleagues provided evidence that the “hot hand” in basketball was nothing more than a myth. Since then, there has been considerable research suggesting that many of the old saws about sports are untrue, and a movement toward more enlightened analysis has emerged, best exemplified in Michael Lewis’ book Moneyball.

In this weekend’s Wall Street Journal, Allen St. John wonders about the idea of “momentum” heading into baseball’s post-season.

He writes that “while much is often made about late-season momentum as a harbinger of playoff success, in reality the relationship between the two is small… The playoffs are truly a second season. Only once since the advent of the wild card has the team with the best regular-season mark (the 1998 Yankees) won the World Series.”

So if your favorite team has limped into the post-season, don’t worry about it! Occasionally, there are legitimate reasons to fret over lost momentum. If a team has experienced a disastrous September because of injuries to its top starters, that will be a problem heading into the post-season — not because of momentum, but because the pitchers are likely to remain unavailable!

I would argue that investors should look at the stock market the same way. Rather than buying into the idea of “momentum” in the stock market (I’ve seen no evidence that such a phenomenon really exists), think about factors that actually effect the business. Leave the cliches about “fighting the tape” and “moving averages” to the old wives.

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Filed under: Deals, Industry, Housing

Perhaps there are not enough good opportunities to “cherry pick” assets among U.S. mortgage lenders, so U.S. buyout firms Cerberus and JC Flowers have gotten approval to deal with the board of Northern Rock (LSE: NRK), the large and troubled U.K. mortgage bank.

The two funds would probably take different approaches. Flowers is interested in having Northern Rock continue to operate, but perhaps with many fewer employees. Cerberus is interest in the bank’s assets, which it believes it can get at a discount and then sell off to other institutions.

According to The Telegraph, British authorities “have said Northern Rock is solvent, but sources close to the restructuring warn that it is living on borrowed time.”

A buyout of Northern Rock could be a trial for whether similar deals could work in the U.S. There is little hope that the U.S. mortgage market will be better this year and may even stay depressed into 2008. Banks like Accredited Home Lenders (NASDAQ: LEND) are still not out of the woods. And, private equity and hedge fund interests may be the only buyers left for some of these companies.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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Filed under: POSCO (PKX)

With the dollar hitting record lows every day, how can you make money in stocks? The short answer is to invest in growing companies based outside the U.S.

This strategy has propelled my investment newsletter to outperform the S&P 500 in the first nine months of 2007. Specifically, stocks highlighted in The Cohan Letter — I highlight three stocks per month — are up an average of 17%, compared to a 7% rise in the S&P 500 since the beginning of the year. Which three picks have done the best?·

• Posco (NYSE: PKX) rose 48% from $92.70 to $178.77. Barry Summerlin highlighted this Korean steel company, which I suggested might do well in an August post — it’s up 46% since then;
• CVRD (NYSE: RIO) — the Latin American telecommunications company — rose 45% from $18.50 to $33.85; and
• New Oriental Education and Technology Group (NYSE: EDU) — a Chinese educational testing company — rose 34% from $43.75 to $65.66.

I don’t know whether these particular stocks have peaked, but if the dollar keeps dropping, they could continue to do well.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Filed under: Business of sports, Economic data

There has been considerable debate about the role of momentum in sports. In a landmark study, Thomas Gilovich and several colleagues provided evidence that the “hot hand” in basketball was nothing more than a myth. Since then, there has been considerable research suggesting that many of the old saws about sports are untrue, and a movement toward more enlightened analysis has emerged, best exemplified in Michael Lewis’ book Moneyball.

In this weekend’s Wall Street Journal, Allen St. John wonders about the idea of “momentum” heading into baseball’s post-season.

He writes that “while much is often made about late-season momentum as a harbinger of playoff success, in reality the relationship between the two is small… The playoffs are truly a second season. Only once since the advent of the wild card has the team with the best regular-season mark (the 1998 Yankees) won the World Series.”

So if your favorite team has limped into the post-season, don’t worry about it! Occasionally, there are legitimate reasons to fret over lost momentum. If a team has experienced a disastrous September because of injuries to its top starters, that will be a problem heading into the post-season — not because of momentum, but because the pitchers are likely to remain unavailable!

I would argue that investors should look at the stock market the same way. Rather than buying into the idea of “momentum” in the stock market (I’ve seen no evidence that such a phenomenon really exists), think about factors that actually effect the business. Leave the cliches about “fighting the tape” and “moving averages” to the old wives.

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Filed under: General Motors (GM), Employees, United Parcel’B’ (UPS)

United Parcel Service Inc. (NYSE: UPS) plans to set up a pool of money that will be run by the Teamsters. The capital will become the new health fund for employees at the company. First, UPS will pull out of the Central States Pension Fund, which handles benefits for a number of trucking companies.

According to The Wall Street Journal (subscription required), “the move would shed an annual expense that reached $1.4 billion in 2006, up 14% from a year earlier.” The plan is not unlike the one that General Motors Corp. (NYSE: GM) has negotiated with the UAW.

These deals are good for the companies, but are they good for the unions? They do often get job guarantees for their members as part of the contract. But, the new funds can lose value, and their ability to cover employee health care costs. Several years ago, a fund established for Caterpillar Inc. (NYSE: CAT) employees ran out of money.

Big labor may believe that it is doing a good job for it members who are in the workforce now. But, it may not be doing them any favors as they get older.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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Filed under: POSCO (PKX)

With the dollar hitting record lows every day, how can you make money in stocks? The short answer is to invest in growing companies based outside the U.S.

This strategy has propelled my investment newsletter to outperform the S&P 500 in the first nine months of 2007. Specifically, stocks highlighted in The Cohan Letter — I highlight three stocks per month — are up an average of 17%, compared to a 7% rise in the S&P 500 since the beginning of the year. Which three picks have done the best?·

• Posco (NYSE: PKX) rose 48% from $92.70 to $178.77. Barry Summerlin highlighted this Korean steel company, which I suggested might do well in an August post — it’s up 46% since then;
• CVRD (NYSE: RIO) — the Latin American telecommunications company — rose 45% from $18.50 to $33.85; and
• New Oriental Education and Technology Group (NYSE: EDU) — a Chinese educational testing company — rose 34% from $43.75 to $65.66.

I don’t know whether these particular stocks have peaked, but if the dollar keeps dropping, they could continue to do well.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Filed under: Mutual funds, Books, Personal finance

In the most recent issue of Money, Walter Updegrave answers a reader’s question about whether, given the prevalence of low-cost market-tracking index funds, a financial adviser is really necessary.

Good question! Updegrave explains the benefits that a financial advisor can provide: How much do you need to save? Which index funds should you buy? What about rebalancing?

He’s not wrong about any of these ideas, but the reality is that, if your retirement savings are as paltry as most Americans, the benefits of paying a fee-only financial advisor (the only kind you should work with) are likely to be completely our of proportion with the benefits.

If you have $5,000 to invest and spend even $100 on a financial advisor, that’s the equivalent of a 2% front-load. That can be pretty hard to overcome, and it’s unlikely that a financial advisor will provide enough benefit to make it preferable to going it alone after doing your own research.

If you’re a young worker just getting started on the whole idea of retirement planning, a financial advisor is probably a luxury that doesn’t make any sense.

Here are some great books that you can get at the library that should make up for it: Yes, You Can Get a Financial Life!, The Only Investment Guide You’ll Ever Need, and The Money Book for the Young, Fabulous, and Broke.

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Filed under: General Motors (GM), Employees, United Parcel’B’ (UPS)

United Parcel Service Inc. (NYSE: UPS) plans to set up a pool of money that will be run by the Teamsters. The capital will become the new health fund for employees at the company. First, UPS will pull out of the Central States Pension Fund, which handles benefits for a number of trucking companies.

According to The Wall Street Journal (subscription required), “the move would shed an annual expense that reached $1.4 billion in 2006, up 14% from a year earlier.” The plan is not unlike the one that General Motors Corp. (NYSE: GM) has negotiated with the UAW.

These deals are good for the companies, but are they good for the unions? They do often get job guarantees for their members as part of the contract. But, the new funds can lose value, and their ability to cover employee health care costs. Several years ago, a fund established for Caterpillar Inc. (NYSE: CAT) employees ran out of money.

Big labor may believe that it is doing a good job for it members who are in the workforce now. But, it may not be doing them any favors as they get older.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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Filed under: Mutual funds, Books, Personal finance

In the most recent issue of Money, Walter Updegrave answers a reader’s question about whether, given the prevalence of low-cost market-tracking index funds, a financial adviser is really necessary.

Good question! Updegrave explains the benefits that a financial advisor can provide: How much do you need to save? Which index funds should you buy? What about rebalancing?

He’s not wrong about any of these ideas, but the reality is that, if your retirement savings are as paltry as most Americans, the benefits of paying a fee-only financial advisor (the only kind you should work with) are likely to be completely our of proportion with the benefits.

If you have $5,000 to invest and spend even $100 on a financial advisor, that’s the equivalent of a 2% front-load. That can be pretty hard to overcome, and it’s unlikely that a financial advisor will provide enough benefit to make it preferable to going it alone after doing your own research.

If you’re a young worker just getting started on the whole idea of retirement planning, a financial advisor is probably a luxury that doesn’t make any sense.

Here are some great books that you can get at the library that should make up for it: Yes, You Can Get a Financial Life!, The Only Investment Guide You’ll Ever Need, and The Money Book for the Young, Fabulous, and Broke.

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