Need information in Finance: June 2007

Wednesday, June 27, 2007

"Markets dodge a bullet, this time

"Markets dodge a bullet, this time
from MarketWatch.com - Top Stories
NEW YORK (MarketWatch) -- Stocks bounce back, courtesy of one of those late-day rallies (again). Has the market dodged the bullet?"

Subprime lending: Abuse as usual

Sent to you by Sudipta via Google Reader:

Subprime lending: Abuse as usual

via Business and financial news - CNNMoney.com on Jun 27, 2007

It would appear that subprime lenders have yet to learn from their mistakes. According to a consumer advocate group, abuses persist industry wide, despite the recent subprime mortgage meltdown.

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on Business and financial news - CNNMoney.com
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Biggest-ever study for cervical cancer vaccine

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Biggest-ever study for cervical cancer vaccine

via Business and financial news - CNNMoney.com on Jun 27, 2007

GlaxoSmithKline announced the results of the biggest-ever study of a cancer vaccine Wednesday, in the hopes of bolstering the competitive strength of its Cervarix against Merck's Gardasil.

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Results due from Bed Bath & Beyond, Paychex, Red Hat

Bed Bath & Beyond Inc., Red Hat Inc. and Paychex Inc. are on the docket for quarterly financial reports to be released Wednesday evening.

Treasury to study regulatory-system overhaul

The Treasury Department is planning a sweeping review of regulations on financial-services providers and plans to release a set of reforms by early next year, Treasury Secretary Henry Paulson said Wednesday.

Nike shares surge on positive U.S., European outlook

Nike Inc. shares surged Wednesday after the sneaker giant reported product orders rose at their fastest pace in at least four years, driven by better-than-expected gains in the U.S. and Europe.

Help me give away $2,000 in scholarships using P2P lending — by this Monday, 6/11

[Update]: Please join these two Facebook groups *today* (Monday, 6/11) in order to help iwillteachyoutoberich readers win two $1,000 scholarships. Details below.

Summary of this post: Help me give away $2,000 in scholarships by joining two Facebook groups by this Monday, June 11th.

More detail: P2P lending lets you lend and borrow directly from people based on trust (e.g., Prosper.com and LendingClub) with insanely better interest rates. LendingClub is a new organization that I’m interested in. If we have the most people join the LendingClub Facebook group by this Monday, June 11, we’ll win $5,000.

If iwillteachyoutoberich readers help win by joining the most, I’ll give away a $1,000 scholarship to a college student who reads iwillteachyoutoberich, a $1,000 scholarship to a recent grad, and I’ll loan out $1,000 using LendingClub. (I’ll keep the other $2k to pay the taxes / save / go to Vegas.)

To help win…

That’s it!

More details, along with what I spoke to the LendingClub CEO about, below.

* * *

I just ran across something really interesting and I’m encouraging you to give it a try. Many of you have heard of Prosper.com, which lets you loan and borrow directly from other people. You get higher interest rates because you’re going direct and bypassing the bank marketing, security, and other infrastructure costs.

LendingClub lets you borrow and lend money directly to people in your own network. I spoke to Renaud Laplanche, the CEO, about his model. “We can provide a 3% better return by cutting out the middlemen activities that money banks spend on their supply chain: security, bank, real estate, marketing to get the deposit and then to spend the loan.”

In other words, because it’s direct, they can offer better returns. Check it out (my explanation below):

To lend money:

To borrow money:

Now I’ve written about teaser bank rates before. To be really clear, LendingClub is not a bank and they don’t offer FDIC insurance. If you lend, you could lose your money (although they do credit checks and report to credit bureaus). If you’re going to lend or borrow, I would start off with something modest like $100 and see how it goes. But I’m more excited about these innovative new models that cut out the middlemen and let us play around with small amounts of money. For me, it’s not really about the extra $20 or $200 I could make using these models, but playing around with a new model that seems interesting and promising. 5 or 10 years from now, maybe P2P lending will seem like a no-brainer.

I asked Renaud why anyone should use LendingClub. “Launching on Facebook was, for us, a way to make that point very clear,” he told me. “We want people to borrow and lend based on trust. You have networks, you have groups, and we can match people who are not only friends, but friends-of-friends or belong to the same network.” What kind of network, I asked? “Well, you have fellow alumni, people in the same geographical network, the same professional network…all of these things make you much more comfortable, that you’re not complete strangers.”

Renaud noted that if you lend a bank your money (i.e., put it in savings), the high-interest ones pay you about 5%. The crappy ones pay you 0.5%. But the banks then turn around and charge about 12% for personal loans, giving them a huge 7%-11.5% spread on your money. He added that the default rate for banks (or the amount of people that don’t pay back their loans) is less than 1%, “so why are they charging so much?”

What to do

A group on Facebook is running a promotion to get people interested in LendingClub. You don’t have to buy anything or even sign up (although I would encourage you to poke around). If we all join two groups on Facebook, we could win $5,000, of which I’ll give away $1,000 to a college-student iwillteachyoutoberich scholarship, $1,000 to a recent-grad iwillteachyoutoberich scholarship, and I’ll loan $1,000 on LendingClub and report back on how it went. I’ll keep the rest to pay taxes / save / travel.

Note: I’ve already set up an account through LendingClub and as soon as it’s verified, I’ll be loaning $500 through the site to test it out.

Here’s how can help iwillteachyoutoberich readers win $5,000:
1. First, join my facebook group, IWillTeachYouToBeRich P2P lending = reduce stupid bank fees
2. Then join the LendingClub facebook group

That’s it!

Note: You must join both! By joining both, they can see who sent the most people to the LendingClub facebook group.

The next hot overseas markets

For years investors have piled into economies like China and India in search of outsize returns.

Wall Street worries about oil, manufacturing

Concerns about the health of the manufacturing sector, higher oil prices and the Federal Reserve's stance on the economy left stocks largely directionless in Wednesday's trade.

Chrysler joins green group as Cerberus fights CAFE

Chrysler Group said Wednesday it has joined a group of companies and environmental organizations pushing the federal government to enact laws aimed at curbing greenhouse gas emissions.

Tribune shares weaken as questions on deal swirl

Shares of Tribune Co., which is slated to be taken private later this year, have been steadily weakening in recent weeks, falling well below the $34 deal price as analysts struggle to decipher the meaning of the drop.

Dollar falls further against yen after durable-goods data

The dollar continued to lose ground against the yen Wednesday, falling to as low as 122.21 yen after reports that orders for durable goods were weaker-than-expected.

Playing emerging markets growth in developed countries

Rather than investing directly in emerging markets, three global fund managers at Putnam Investments prefer to buy developed country stocks benefiting from the red-hot growth in developing countries.

Personal Finance Daily -- June 27

For folks who toil in soulless offices under life-sucking fluorescent bulbs surrounded by sharks and donkeys alike, the prospect of working for yourself at home in a cozy den free from the turmoil of the communal water cooler and close to loved ones is alluring. If only the reality of that dream were anywhere near the truth.

Wells Fargo promotes John Stumpf to CEO's post

Wells Fargo & Co., the San Francisco regional banking giant, said Wednesday that veteran executive John Stumpf's been promoted to CEO, replacing Dick Kovacevich.

Take advantage of these bargains in the biotech basement

Five major indexes that we track to monitor the health of the overall market is still collectively flashing a "bull market" signal -- and the weakest of the group is pointing to strong bargains in the biotech sector.

Will corporate bonds succumb to subprime contagion?

A new wariness in the bond market is raising questions about whether risk aversion could slow the corporate bond spree, which this year has driven junk bond issuance to heady levels to finance the private-equity leveraged buyout boom.

"Wednesday's Tech Winners & Losers

from TheStreet.com by twocents@thestreet.com (Mark Martinez)
CommScope's acquisition of telecom supplier Andrew helped prop up tech stocks."

Bears in control

Bears in control
from Business and financial news - CNNMoney.com
A disappointing reading on durable goods orders and worries about the buyout boom sent stocks lower Wednesday as investors geared up for the Federal Reserve's two-day policy meeting."

Well, we got 5th place

We got 5th place and a $300 consolation prize in the LendingClub contest, taking me back to memories of competing in the flag-football Toilet Bowl in junior high (and losing). No, in all seriousness, I’m thrilled that we were able to get a Facebook group of 376 people together over the weekend. I’ll use the full $300 for an upcoming iwillteachyoutoberich scholarship.

Thanks, everyone.

[Edit]: Oh, also, Renaud (LendingClub CEO) asked me to check if any of my readers are interested in blogging for blog.lendingclub.com. If you’re interested, email me with your blog URL and a short introductory email, and I’ll introduce you to Renaud. The position is for 30% time (~13 hours/week) and is paid.