Personal Finance - Credit

I'm taking a break from my stock market portfolio to talk about credit this morning.

The banks seem to be on a mission to raise credit card rates, close accounts, and generally, make as much money off folks as they can.

Now, I love the concept of capitalism so I do not argue against their right to do this. However, you need to protect yourself as you can, and in this day and age, that also means protecting your credit score. Let me give you an example.

My wife has had a Bank of America credit card for nearly 20 years now. Due to our particular circumstances, this card rarely was used - we considered it primarily an emergency card - a very temporary place to throw charges on in case of major car repairs or family news requiring travel, for example. We have not used it for over a year, and last week she tried putting a small charge on it, simply to have used it. Imagine her surprise when she was declined, and found out BoA had cancelled the card, without informing us.

The company would not reinstate the account, although of course they asked if she wanted to apply for a new card. This was hurtful to our credit for two reasons.
First, she has had this account for a very long time - longer than any of my accounts! Part of your score is determined by the duration of your credit relationships. Closing this account probably shaved 10 to 30 points off our score.
Second, closing the account lowered the amount of credit we have available by $18,000. Our ratio of debt to debt capacity got raised - which will also lower our score.

Recent signs have the economy improving in the short term, but there are still some issues in the banking system that need to be worked out. Lending standards may be tight for years in the future - and your credit score is solely responsible for if you can get a loan, and if so, how much, and at what rate that loan will be for. Here are a couple tips:

1. Use each of your cards at least once a year.
2. If you are going to close an account, all else being equal, first close the account that you have had for the shortest amount of time.
3. Make sure you pay your cards on time. One late payment on ONE card can kick off mandatory rate increases on ALL your cards.
4. Check your credit history at least once a year, for free, at http://www.annualcreditreport.com/. There are three credit bureaus, and you can check each once per year for free. Make sure you go to the site listed above, as others may charge you for accessing a credit report. Each of the three may have slightly different information, so it is worthwhile to check all three, but consider staggering them throughout the year, maybe one each four months. (for most people, checking all three may not be necessary - unless you have been informed any of your personal information has been stolen)
5. Open your "junk mail" - make sure it is not something from your existing accounts, changing your account terms. Many banks are raising interest rates (for an interesting video about BoA raising a lady's rate from 13 to 30%, and her reaction, see http://www.youtube.com/watch?v=jGC1mCS4OVo) and you do have an option. If you do not need the account, you have the right to close the account and keep the existing rate until you pay it off under the original terms. Be aware this may affect your credit score, however, as it will change your debt ratios...

If you have questions, please leave a comment. I'll do my best to reply to all.

Regards,
Trond

Port 24 update and real-world trades

Well I did not get a chance to post yesterday but I made some changes in the Port.

I sold the last 400 BCRX, bought 2000 PGNX and 1500 ALTH, and sold 10 MELA calls (Nov $10s, for $0.40).

BioCryst is close to either getting an Emergency Use Approval or not. I would miss the price spike, but I also will miss the cratering if it does not get it. This Port is not for extreme trading -- I will definitely focus on biotechs (simply because that is what I follow for the most part) but the covered call strategy works perfectly by buying into biotechs, selling calls against the premium generated by trial or approval hype, and then selling BEFORE the actual date.

In my real-world IRA, I have been buying NBIX ($2.74), PZG ($1.27) and MNKD ($5.13). All of these are, in my estimation, good for a double or more in the next 12 months.

The Port stands as follows:
2000 AOB
2000 NBIX
1600 ELN
400 DNDN
4900 ARNA
2500 SGMO
2000 MELA (10)
2000 PGNX
200 AMAG
1500 ALTH
Cash: $5,231.55

Regards,
Trond

Port 24 update

Options expiration was yesterday and I was only exercised on 600 Dendreon shares. Elan, Sangamo, American Oriental, Arena, and Electro-Optical calls all expired with the premium as 100% profit.

Dendreon was a little disappointing, as I hate to see any shares of this company go, even in a ficticious portfolio. I had sold the $35s at $0.84, and then bought them back at a profit ($0.20), and then sold the $28s. It closed at $29.51 and so they were called away from me; I now have only 400 shares left (just under 10% of the Port).

I have to say I am a little surprised at Dendreon's strength. The addition of two new Board members (one, Ian Clark, the upcoming CEO of Genentech North America) certainly fueled speculation about the Rest-Of-World partner for Provenge being Genentech.

For me, the only real news of interest coming up is the amended BLA scheduled for mid-November. And the aBLA itself really is not newsworthy as they announced it a month ago. But - the sensitivity analysis should be included and hopefully made public. This sensitivity analysis is important to me because it will show the continued strength of Provenge over time. In April, the final results of the IMPACT trial showed a statistically significant reduction of risk of death of 22.5% over the placebo group. This 8+ month (results were released in April but the results were based off data cut off in January) should show an improving hazard ratio over and above the 22.5% aleready seen. I would like to see 26%+.

Elan will be having their quarterly earnings call on 10/21, but will be upstaged slightly on the 20th when Biogen releases Tysabri numbers for Q3. I expect to see continuing, although not blowout, growth in the patient count. However, I also expect Elan to announce they will swing to profitability in either Q4 or Q1 2010. We should see real growth in revenue from the EDT branch, and unfortunately we probably will not hear any real news of the Alzheimers platform on this call.

In my real money IRA, I have been buying GenVec (GNVC) and MannKind (MKND) for the first time and more Elan (ELN) and Sangamo (SGMO). I am very excited for GNVC but the move started earlier than I thought it would: I started buying at $0.76 per share and it already touched $1 this last week.

I'll be adding a couple watchlist stocks, mentioning now only that Allos (ALTH), AMAG Pharma (AMAG), and MannKind (MKND) should deliver 50-100% returns in the next 12-24 months.

Regards,
Trond