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Friday, December 21, 2007
Rise in bad credit-card debt bodes ill for Target
The economy is in a recessionary mode for sure. And at the same time prices are rising dramatically. If you want to know at least part of the reason you should do a Google video search using the search term "death of the dollar" and you will see what is causing the economic downfall. I started predicting that this would happen two years ago and of course nobody wanted to pay any attention to my words. Not only is oil a major problem now but it is also going to get a lot worse. To make matters worse, all of the imports from foreign countries is now causing even more economic damage to the U.S. We need to remember that every time we buy
a foreign made product that purchase adds to the GNP or Gross National Product of the nation that produced it and at the same time increases our trade deficit. This is the result of NAFTA, GATT and all the other "free trade" pacts and treaties we have made with other countries.

It will have to end and do so quickly and it will because as the dollar goes into free fall against other currencies American labor will become very cheap for foreign buyers of our products and the cost of things made in their own countries will inevitably rise as it is now doing.

Only when MADE IN AMERICA becomes cheaper than made in China will our factories start moving back home. Nobody knows at this time how long it will take for that to happen. Companies will be forced to re-invest in America in order to compete sooner or later but it will take so long that it will be too late to save the American economy from tanking.

The following story is only the tip of a huge iceberg coming straight at us and our fate will be akin to that of the Titanic when it hit an iceberg. It sank and so will we. No longer will we be able to afford the affluent lifestyle and gadgetry that we are used to and now take for granted. And it isn't a question of when will it happen. It is happening now.

Rise in bad credit-card debt bodes ill for Target
With more charge-offs, the retailer's portfolio is looking riskier - at just the wrong time.

By CHRIS SERRES, Star Tribune

Last update: December 20, 2007 - 9:36 PM

Target Corp., continuing to feel the effects of the general economic downturn, reported a sharp increase in loan write-offs within its $8 billion credit-card portfolio.

A day after Target delayed a decision about whether to sell its credit-card receivables, the company said Thursday that net "charge-offs" -- loans written off as not being repaid -- rose to 7.05 percent of receivables in November, up from 6.42 percent in October. Charge-offs have increased 25 percent since the end of August.

Another potentially risky sign is that customers are paying off their debts more slowly, which often leads to higher defaults, financial analysts said. In November, the sum of all customer payments totaled 13.95 percent of the discount retailer's receivables, down from 15.86 percent a year earlier.

"The economy is in a rough state already, and people aren't paying off their balances," said Red Gillen, senior analyst with Celent, a Boston-based financial research and consulting firm. "All the signals point in the direction of higher charge-offs."

Though a Target spokeswoman said the rise in bad debts was largely seasonal and anticipated by the retailer, it likely will make potential acquirers of the portfolio more cautious, analysts said.

Target announced a review of the possible sale of its credit-card portfolio in September, and had planned to make a decision by the end of the year. But Wednesday, it said the review is taking longer than expected because of "current market conditions." Target says it will make an announcement early next year.

"When you see charge-offs going up this quickly, you're not going to get top dollar," said William Ryan, an analyst with Portales Partners, a New York equity research firm. "At this point, they're better off cleaning this up than selling it."

However, Target officials said there is no reason for alarm. Despite the recent increase in write-offs of bad debt, the retailer's credit-card portfolio is still in better shape than it was in 2004, when write-offs as a percentage of receivables stayed above 8 percent for almost the entire year.

Historically, Target has seen an increase in bad debts in November, as cardholders borrow more to fund holiday purchases, followed by a decline after the holidays, as people pay off their balances.

"What we're seeing right now is not surprising or disturbing," said Susan Kahn, Target's vice president of communications. "It's consistent with our expectations."

Target shares fell $1.36 Thursday, to $50.21 a share, from $51.57.
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