Previous Columns
9:00 AM EST, Friday, December 14, 2007: As second mortgage money has dried up, there has been an increase in consumer credit, i.e. money to people whose house credit is tapped out. This is worsening the quality of credit card debt, much of which will undoubtedly default. Capital One is the country's largest credit card issuer. It's already fallen dramatically.

This week CEO Richard Fairbank said a slowing economy may cause bad debts to exceed the company's forecast. Fairbank reiterated Capital One's prior estimate that failed loans next year will range between $4.9 billion and "the mid-$5 billions.'' That forecast may change if the economy worsens more than expected,. ... "Things can certainly get worse than we have encompassed in our range,' ...We are certainly, like everyone else, very concerned about consumer credit.''

As I've been harping, you don't want to own issuers of credit, like Capital One. Insurers are a different story. See yesterday's column. .... Capital One looks an interesting short.

My favorite financial author James Surowiecki has a piece in the December 17 New Yorker called "Paulson's Plan." He concludes:

Unfortunately, it’s also an example of the limits of such intervention. Although the plan will provide real relief for at least some homeowners, it’s more like a Band-Aid than like the major surgery that some of the hype makes out. That’s because at this point interest-rate resets are just a small part of the mortgage-market problem. Postponing rate resets doesn’t change the fact that too many people spent far too much borrowed money on houses with prices that were far too high, and that they are now stuck in homes that they can’t really afford and can’t sell. Even with the interest-rate freeze, foreclosures will keep rising. More important, problems in the credit markets are no longer limited to subprime loans; rather, they involve a wholesale reëvaluation of risk, fuelled by a deep sense of distrust in the way the financial system rates and values assets like mortgages. For these problems, there’s only so much that even the government can do. In 1907, J. P. Morgan was able to come to the rescue not just because he could get all the people who mattered into one room but because he was facing a clear problem with a clear solution. Those were the days.

Cramer's latest book is



You can read it in one sitting. I did last night. It's pitched to investment newbies. It has some useful recommendations.

His five bull markets:
1. Aerospace and defense
2. Agriculture
3. Oil and oil service
4. Minerals and mining
5. Infrastructure.

His 20 stocks for the long term:
1. Caterpillar
2. Goldman Sachs
3. ConocoPhillips
4. XTO Energy
5. Transocean
6. Hologic
7. Inverness Medical Innovations
8. CVS Caremark
9. McDonald's
10. Freeport-McMoRan
11. Hewlett-Packard
12. Corning
13. Google
14. International Game Technology
15. Pepsi
16 Procter & Gamble
17. New York Stock Exchange
18. Union Pacific
19. Boeing
20. Sears Holdings

His favorite aggressive growth mutual funds
1. CGM Focus Fund (CGMFX)
2. Dreyfus Premier Strategic Value (DAGVX)
3. Bridgeway Aggressive Investor (BRAGX)
4. Rice Hell James Micro Cap Portfolio (RHJSX)
5. Legg Mason Partners Aggressive Growth (SHRAX)

His favorite growth mutual funds
1. Buffalo Small Cap (BUFSX)
2. FBR Small Cap (FBRVX)

His favorite value funds
1. Putnam Small Cap Value (PSLAX)
2. Heartland Value (HRTVX)
3. Berwyn (BERWX)
4. Muhlenkamp (MUHLX)

I can quibble. But overall his recommendations are sound. Note: He doesn't recommend index funds. More on that on Monday.

End year tax planning: Do it now.
+ GRATs
+ Charity donations
+ Tax-loss harvesting. Sell losers. Buy look-alikes.
+ Give kids and grandkids money. You and spouse can give $24,000 a year to as many recipients as you like without incurring gift tax.
+ Pay tuitiion, dental and medical expenses directly for family members and friends.
+ Max out IRAs and 401(k)s.

Most importantly, get the kids and the grandkids into a mutual fund or an EFT.

Apple beat me to my latest brilliance: I bought Alan Greenspan's Age of Turbulence as a book. Its size is daunting. Then I think I'll listen to it on my latest (and third iPod):

$160 for 4 gigs of memory. A bargain.

Plug into my ears, slip into my pocket and listen to Greenspan. I tried to buy Greenspan on Audble.com. But those guys are idiots. They wanted far ($43+) more for a download than I paid for the hardcover ($21). I then bought the CD version from Amazon ($29.67). Wrong. The place to buy the audiobooks is -- drum roll -- Apple's iTunes store, which you access through the iTunes software on your PC or Mac. The numbers are still screwy, but the convenience is not. It's fantastic. No loading of CD by CD then synching onto iPod. Huge time and aggravation savings. I vote for Apple's iTunes.

Compact fluorescent bulbs. Our new house has lots of high-hat ceiling light fixtures. I replaced the incandescents in the basement with these

Cost $2.49. They give the same light as a 60 watt incandescent, but use only 13 watts of electricity. They work fine in the ping pong room. But for upstairs, I bought some of these:

Cost $8.49. They give the same light as a 75 watt incandescent, but use only 15 watts of electricity. I ran some tests over the weekend. I replaced some, then asked my wife and my builder to identify which were fluorescent and which were standard incandescent? They couldn't. They all looked the same. This is good news for the cheap at heart, like me. I buy my bulbs at Bulbs.com.

Other ways to save energy: Insulate your attic and your basement. Ride your bike to work. Buy a hyrid next time.

What happened to the squirrels?
There were churches in a small Texas. town: The Presbyterian Church, the Baptist Church , the Methodist Church , the Catholic Church and the Jewish Synagogue. Each church was overrun with pesky squirrels.

One day, the Presbyterian Church called a meeting to decide what to do about the squirrels. After much prayer and consideration they determined that the squirrels were predestined to be there and they shouldn't interfere with God's divine will..

In the baptist church the squirrels had taken up habitation in the baptistery. The deacons met and decided to put a cover on the baptistry to drown the squirrels in it. The squirrels escaped somehow and there were twice as many there the next week.

The Methodist Church got together and decided that they were not in a position to harm any of God's creation. So, they humanely trapped the Squirrels and set them free a few miles outside of town. Three days later, the squirrels were back.

The Catholic CHURCH came up with the best solution. They baptized the squirrels and registered them as members of the church. Now they only see them on Christmas and Easter.

Not much was heard about from the Jewish Synagogue, They took one squirrel and had a short service with him called circumcision. They haven't seen a squirrel since.

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.
Go back.