American Express Pays $300 For Best Customers To Leave

File this one into the nominations box for the highly coveted "Worst Business Decision of The Year Award." -- I'd say only Gatorade's rebranding to "G" has a shot of beating American Express on this one... Maybe. So, here's the scoop, American Express has decided to pay a bunch of it's best customers $300 bucks to leave. That's right... they are giving customers a $300 gift card to peace out. Good thinking, AMEX, that's one way to reduce the ole portfolio.

Ok, we all know what they are doing here. They are trying to entire some of their riskier customers (those revolving a balance and not making any purchases) to close up shop and move out. Of course, the problem is, the people who really are in trouble aren't going to be able to pay off their balance and move on with life. Nope, only the people with liquidity can do that... you know, the kind of people that AMEX would actually like to keep as customers?... DUH!

Adding an insult (to your intelligence) to injury (their business), AMEX company spokeswoman Faust, says:

"The intention is to help cardholders lower their debt and encourage responsible management of their credit," says Ms. Faust. It's being promoted as a means for customers to "simplify their finances."

Wow, that's freaking rich. AMEX is simply trying to help customers lower their debt and be more fiscally resonsible. A little odd, however, since AMEX has a big, fat fiduciary duty to their stock-holders, and no such duty to customers. I think it's far more likely they were just trying to get rid of deadbeats before they became charged-off deadbeats. Seems a lot more likely, eh?

To be fair, AMEX could simply just close all those accounts and not give out the $300 bucks. Guess they didn't want the bad PR. Irony is some funny shit.

But I will say, also, the Credit Card pictured above is the absolute best rewards card in world if you travel (and don't revolve balances). Extremely rich rewards. 

Dilbert's Dogbert - Keeping It Real!!

I can't tell you how many times I've screamed this at my tv in the last 3 months. Thanks Mr. Dogbert, we love you!

Please Pay Your Bills

Dear Consumers,

I realize that the economy sucks. Many of us had a large portion of our net worth wiped out in the last 18 months. For some, that was a 45% haircut to their investment accounts, IRAs and 401Ks. For others, it may be a 30-40% paper loss on their house. There are those who took a job they were overqualified for, or underpaid, just to make sure they can pay the bills. And there are those, most unfortunately, who are still unemployed in a job market that may be the worst any of us have ever seen. I've certainly experienced a lot of this myself, and it isn't fun.

However, I am now becoming fearful. Not fearful that things won't turnaround anytime soon, because, honestly, I already have chalked that up as a given. What I am fearful of is a cultural shift. A complete lacking of accountability and responsibility that we've just never seen as a nation. President Obama, who I do like tremendously, has spoken far too often of 8 years of poor leadership and an uncontrolled, greedy Wall St. that forced exotic mortgages to the unsuspecting masses. Yes, corporate leadership at the big banks looked the other way. There was an opportunity to generate loans and profits at rates never seen before. CEOs and executives racked up millions (some even billions) in bonuses and stock appreciation, with very little penalty when things blew up.

While these are probably true, we, as people, simply can not wash our hands of all the blame. We all knew, KNEW, that you shouldn't take out a mortgage for a home you can't put 20% down on. That's how it always was, and probably always should be. We all knew, KNEW, that house appreciation has always barely outpaced inflation, and anything materially in excess of that is a bubble. We knew 25 year olds shouldn't be home owners, and most certainly shouldn't be land lords. And lastly, we knew... we knew... we knew... that taking out 2nd mortgages, option ARMs, and god forbid, negative amortization mortgages, were all ridiculously risky...

But, we signed on the dotted line anyways. We had the fever. Mr Jones' house was up 20% last year, and already 20% this year. We have to get in on that action!! We can't miss out!! Well, as we've seen before, bubbles always pop. Always.

Now don't get me wrong. I'm not only a Bubble president, but I'm also a client... I worked for the very institutions that invented CDSs, option ARMs, negative amortization, and the 3rd lien. I also invested in them, salivating for the profits that these instruments would generate. Furthermore, I purchased a home in my 20's (thanks 80/15/5!!), and even purchased one last year without yet even having a job (also 80/15/5... YAY!!)... How arrogant. How stupid... How GREEDY!!!

But I've learned my lesson. Hopefully we've all learned our lesson. A negative savings rate in the US is what has caused China to grow at 7-9% every year for years. A negative savings rate isn't something the government can cause through failed policies and it isn't something Wall St. can create through exotic financial smoke and mirrors. Nope, the only one who can spend your money (my money) is you (and me). It was our fault... "our bad"... oops. Shame on us.

That being said. There are two ways out of this.

1) "It was the bank's fault... they should have never overextended me so much credit... It was the government's fault... they should have had better laws to protect me. I'm not paying my bills. Screw them... Let them foreclose... I'll just go rent a luxury condo for some great price, because the owner is equally screwed. So what if my credit score goes down? Better than eating a $100K loss on my house!!"

Yes, I hear you. I've thought these very things. The problem with this is, if everyone does it, housing prices will absolutely collapse (like, another 75%). Banks and other companies with large Accounts Receivable will all go bankrupt. The government will no longer be able to save us, as government debt will lose it's AAA rating. The government will have to pay at higher rates, with money they are printing (not like taxes are paying for this - a workforce with 10-15% unemployment certainly can't afford a tax hike, can it?)... Resulting in hyper-inflation and a crushing of real growth. All empires before ours have eventually collapsed. We just don't have the competitive spirit and values that made America great. Now we're lazy and entitled. Guess it was just our time... Are you ready for that?

2) "Time to pay the piper... no more crazy spending, no more buying stuff we can't afford. Credit Cards get chopped up. Debt gets paid down. Take a job bartending on the weekends, even though I have my MBA. Work my ass off... Pay my bills"

God, that sounds horrible. That's a sacrifice. The next 3-5 years would be horrible if I did that. HORRIBLE.

Yup, but I have news for you. It's going to be HORRIBLE either way. But at the end we can be the next collapsed dynasty, or the first to kick and scream it's way back to greatness. It won't start with government. It won't start with Wall St. It starts with you... It starts with me.

Denny's Free Grandslam Is Truly Super... Super-Risky

During the Superbowl, I spent much of my time evaluating the commercials and trying to decide what was working. I was checking Google Trends, to see what people were searching for. After the first quarter, the most popular search was for David Abernathy, the guy from the cars.com commercial. I didn’t even think that ad was that good, but I guess it peaked some curiosity. Doubt it stuck, though, or worked. No one is buying cars. To further my research, after good commercials, I’d go to the websites, to see if they still functioned. After the Visio ad, the Visio site was down. And after the Denny’s ad for a Free Grand Slam breakfast, their site was down as well. And a little while later, after Google Trends updated, “Denny’s Grand Slam Breakfast” was the number 1 search in the land. So, guess it worked… sort of. Cause this may end up being the most expensive promotion of all time.

As of this morning, CNN.com had a story giving some of the details on the results of the campaign. Denny’s served up free Grand Slam Breakfasts to patrons in 1,500 locations in the US, Canada and Puerto Rico… for 8 hours! Sounds like, on average, these breakfasts normally cost about $6 a piece. One restaurant said they had 2,400 eggs in stock that day for the promotion. So, let’s do some math (HOORAY – MATH!!): 

Yup, Denny’s spent around $12 MILLION dollars on a breakfast promotion. And given their margins are maybe 20% if they’re lucky, that means they’d have to sell an incremental $60,000,000 (!!!) dollars worth of breakfasts this year to pay for the thing. And I’m excluding all the other costs like putting the ad campaign together.

Was this a good idea? Gosh, I think it’s a great brand campaign, I really do. And I think Denny’s could really thrive at a time like this, given the amount of value you get for $5.99. But DENN has a Market Cap of $180 MM dollars. How on earth do you spend $12 MM bucks on a Superbowl ad when you’re company is only worth $180 MM? Furthermore, Denny’s had a total global revenue in Q3 of $940 MM in their last reported year, so they need to increase their revenues by 7% just to break-even on the ad, and this is during the biggest recession since the depression? Umm… sounds a little risky, fellas.

But, I do like free breakfast. Yay privately funded stimulus packages!! Hope it pays of for them. Could mean a lot more free stuff for us. 

Bruce Springsteen Is Going to Disneyland after Superbowl?

At the end of his Superbowl performance, Bruce Springsteen yelled out "I'm going to Disneyland!!" - I guess, his attempt at humor, and not him taking some ad dollars to pimp Disneyland. That's a sickening thought.

Funny thing though, Disney owns ABC, and the Superbowl is on NBC. So, Springsteen may have gotten himself in some hot water. Generally doing a product placement for a competitors product in front of a billion people is frowned upon.

Oh, and him nailing the camera with his crotch at full speed was pretty funny too. Glad I wasn't wearing the 3D glasses for that.