Comments on Fund My Mutual Fund: Another Payday Loan/Pawn Shop Breaks Out on Higher...

Mark, I think it all comes down to the American ps...

2008-07-10T19:26:00.000-04:00

Mark, I think it all comes down to the American psychology. we think we are well off and never have to worry because it's all been good for the last 25 years because of borrowing. Americans isolate themselves from struggles of the rest of the world, because "we're better" even though most of us are in worse shape than other countries because we have a chronic oil addiction.

what I mean is that when you keep pounding that the last 25years was all borrowed prosperity, I keep thinking that its not only the borrowing issue that exists, but also the corresponding pyschology. The borrowing ability will disappear, but the psychology is hard to eliminate. Americans don't want to go back to the days when we weren't the best and could buy anything

As I watch "Kudlow & kool aid" now, I see the American psychology in its finest, as he defends that it is merely a psychological recession.

Denial is the worst, but 1st step to solution and unfortunately, as you outline each day, we are in denial with the fudged data

"the lack of financial education that is prevalent...

2008-07-10T19:18:00.000-04:00

"the lack of financial education that is prevalent in schools"

Spot on TM.

as someone who just came out of the public school system less than 1 year ago and is in college, I am amazed of the stupid financial decisions young adults (future middle class Americans if there is a middle class in 20 years) make. Many of them would be in decent financial shape but make stupid decisions to put themselves in the person who would need thrift lending.

There's too many young adults my age who are the future of this country economically, who tell me they'll be rich someday, because if the keep saving money in the bank at the 3% rate, in 30 years they'll have 3X the money. Then I say, but that is a negative real rate, you are losing money, and I get silence and opposition.

It is quite sad.

I won't even get into the things I see kids do with a credit card within the first 3 months they have it. Talk about digging a whole quicker than a gravedigger.

Marcus:I agree with you for the most part. They d...

2008-07-10T18:52:00.000-04:00

Marcus:

I agree with you for the most part. They do provide a service to people who are bad at managing their money. My question is, if more and more people are using this service then where are we failing as a society? You, TM, and I were presumably lucky enough to either have parents who taught us how to handle money or took it upon ourselves at some point, because it definitely wasn't the US public school system that built our money management skills.

I haven't even touched on people who are making it and doing their best, but have something happen that they need some quick cash for (commonly some medical issue), so they do the only thing they can and get one of these loans (often using their car as collateral). I hope I'm never in a situation where I have to chose between getting tossed on the street or putting my car up for collateral for a 40% loan to the pay the rent, because if you miss 1 payment then you lose your car and now what? You can't get to work, etc...

So, while I agree with you I also understand the other side.

To make it a viable business you need to charge ve...

2008-07-10T18:34:00.000-04:00

To make it a viable business you need to charge very high rates because the default rate is quite high.

I just think a lot of people get trapped in a long cycle in these things - they go in thinking it will be one pay period and they end up going on and on and on, and cannot find an easy way to escape.

But that probably speaks more to the lack of financial education that is prevalent in schools. Much like mortgages - people usually don't know (fully) what they are getting into. If they don't read the fine print in the $300K mortgage I doubt they'll be reading fine print in the $1500 loan.

If payday operations charged 40% they'd be out of business in a month with the default rate of the customer base. I am wondering what people in places like OH that capped the rate at 28% who used to use these things now do.

I don't agree that they prey on the poor, they pro...

2008-07-10T18:21:00.000-04:00

I don't agree that they prey on the poor, they provide a service to the poor or people that have trouble managing their money. If you were lending out your money what interest rate would you charge for a short term loan to someone with lousy credit?

Once the rebate checks runout?? Obama is promisin...

2008-07-10T15:42:00.000-04:00

Once the rebate checks runout?? Obama is promising another $1k to everyone!

On a more serious note, I agree with your sentiment about these companies. I hate that they seem to prey on the poor, but they are definitely an opportunity.