This Credit Card Company is a Buy!

Piyush is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

The September unemployment report was recently released and came in better than expected; this was well received by the market. The unemployment rate slid to 7.8%, this was the lowest in the last four years. Over the last month, 114,000 jobs were added to the existing number. It?s a well-known fact that with a higher employment rate, both disposable income and consumer spending increase.

US Consumer Spending data by YCharts

Upon taking a look at the economic indicators, we can see that consumer spending has increased by nearly 26% in the last year. The fact that people are spending more, makes me bullish on payment industry players like Discover Financial Services

(NYSE: DFS)
.

Discover Financial is the fourth largest credit card service provider in the US. The company also services personal and student loans and additionally provides deposit products, but its core business remains credit and debit card servicing. The company has a geographically well diversified payment network which extends to 185 countries around the globe.

Discover Financial in its recent quarterly results reported an EPS of $1.21 which was nearly 18% higher than the market estimates. Sales via credit cards rose to $27.2 billion which was up 4% compared to the year ago quarter. The net interest margin swelled to 9.44% rising 0.18% and the net interest income rose to $133 million, which was an increase of 11% compared to last year?s quarter.

PULSE, which was acquired by Discover Financial in 2005, provides the parent company its electronic fund transfer services. In the current quarter, PULSE saw a massive 25% increase in revenues compared to the same period last year. Additionally, since 2010, PULSE has added 129 card issuers to its network, and it is due to this reason that nearly 85% of the ATMs in the US accept PULSE.

In a bid to beat market competition, and establish a competitive advantage, Discover Financial Services has entered into an agreement with eBay

(NASDAQ: EBAY)
. The deal would allow PayPal users to pay for their retail purchases at stores accepting Discover cards. Likewise, Discover card users would be able to use their cards for online purchases. Both companies would charge their users each time they use this service. Analysts believe that this deal would be a cash cow for both companies, as their respective users would now have the added flexibility to make retail and online purchases using the same service.

DFS data by YCharts

The company shares its market space with Visa (NYSE: V)

and MasterCard (NYSE: MA). When looking at the stock returns of the three peers, over a period of 1 year, we can see that Discover Financial has been the best performer with 68% returns. Evidently, good financial results and the deal with eBay is driving the share price of Discover Financial Services.

Discover Financial Services has the highest net profit margin amongst its peers. Additionally, the P/E and PEG ratios indicate that the company is the most undervalued investment option amongst the three. Analysts expect the EPS growth in the next five years to be around 10.7% and with an ROE of nearly 27%, financial metrics of Discover Financial Services look great to me.

The rise in the consumer spending will only drive up the revenues of DFS. The company has outperformed its peers and has reported stellar quarterly numbers. The deal with eBay is expected to be a huge positive for the company, and will be the key growth driver for Discover Financial Services. Additionally, the financial metrics suggest that the stock is still undervalued, and it is due to these reasons that I am bullish on Discover Financial Services.

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Source: http://beta.fool.com/piyusharora/2012/10/25/huge-upsurge-expected-stock/13832/

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Apple Wins Hollow Touch Screen Patent Victory Over Samsung

Apple is seeking to ban U.S. imports of Galaxy Tab, Galaxy Nexus, Galaxy S II and Galaxy Note. In the end, the ITC may pay attention to U.S. Appeals Court ruling in favor of Samsung which stated that an injunction is proper only if the patented invention drives sales and is not proper if the patent represents a single feature of a multi featured device.

Source: http://www.forbes.com/sites/greatspeculations/2012/10/25/apple-wins-hollow-touch-screen-patent-victory-over-samsung/

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Markets Are Up

stocks

Markets are up nicely early in the US trading session.

Earlier today, we learned that weekly initial jobless claims fell to 369k, which was better than the 370k expected.  However, last week's number was revised up to 392k from 388k.

The September durable goods orders report came in better than expected largely due to aircraft orders.  The headline number jump 9.9 percent, which was better than the 7.5 percent economists were looking for.  Excluding transportation, orders climed 2.0 percent versus expectations for a 0.9 percent gain.

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Source: http://feedproxy.google.com/~r/businessinsider/~3/7bj0ODluHaw/stock-market-update-25-2012-10

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Earnings Misery Sinks Stocks

Dupont fell by 9% after the chemical giant reported a decline in fourth quarter earnings and said it would cut 1,500 jobs. The damage was much more severe in Radio Shack during the morning, but the stock turned around and closed 7.5% higher, despite swinging to a third-quarter loss.

Source: http://www.forbes.com/sites/greatspeculations/2012/10/23/earnings-misery-sinks-stocks/

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How The Government Spends Your Tax Dollars [CHART]

The Presidential debate on foreign policy recently discussed much about the tax dollars spent on defense. The question of how much to spend on the defense of the United States is always a huge debate. Democrats tend to lean to the side of "Peace Through Diplomacy" and believe that too much is spent on defense. Conversely, Republicans tend to foster the idea of "Peace Through Strength" and want to continue to increase advances in military strength.  

However, the conversation of how much we spend on defense brings up another question. Exactly where do all of our tax dollars go? The chart below is the 2011 Budget year of expenditures as a percentage of the total budget. 

taxes


It is clear that more than 50% of current budget expenditures go to Social Security, Medicare and Defense expenditures. However, before those that believe in "Peace Through Diplomacy" start pointing out that we spend too much on defense it is important to put the current levels spending into context. The next chart shows the historical percentages of the budget that each of the four main components make up.

taxes


We have continuously reduced defense spending at every turn to try and find "cuts" in the budget. You can see where defense spending increased during the Vietnam War, the Reagan Administration spending was done to bring the economy back online, and the current conflict in Iraq and Afghanistan. Yet following each period of increased spending - the defense budget was cut and now stands at the lowest level of spending in history as a percentage of the total budget. However, Medicare and Social Security have continued to consume greater portions of every tax dollar raised.

When putting the current level of defense spending into context it now brings us to a different conversation. There is more that comes out of defense spending than just being the "biggest stick" on the planet. The GPS on your phone, blue tooth technology, digital storage, advances in the speed of wireless communications, etc. all came from defense related research.  Furthermore, we have killed our space exploration program which also fostered enormous growth in technology, innovation and medicine.  NASA, is such a small percentage of the total budget that the savings are insignificant, however, the losses of future advances is likely to be far more costly.  The following video by Neil deGrasse Tyson should make you stop and think.


While both sides can certainly make valid arguments about defense spending - here is something else to think about. How much is too much?  How much is not enough? That question, unfortunately, won't be known until its too late. In a world today where there are global threats not spending enough on defense could yield unintended weaknesses in national security. While it is in the best interest to always exhaust diplomacy in solving global issues - it is not in the best interest of the nation to be at a military disadvantage as a result of neglect should diplomacy fail. 

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Source: http://feedproxy.google.com/~r/businessinsider/~3/U8HpcVCTRQI/chart-where-your-tax-dollars-go-2012-10

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Hasbro's Surprising Bet

The following video is from Monday's MarketFoolery podcast, featuring host Chris Hill and analysts Jason Moser and Michael Olsen, CFA. In this segment, the focus is on game maker Hasbro

, which reported better-than-expected Q3 earnings thanks in part to its board-game division. Perhaps even more surprising than Hasbro's solid quarter is the company's decision to bring back Furby. (Yes, that Furby.) Listen in on the guys' frank analysis of whether this will pay off for Hasbro and its shareholders.

The Steve Jobs Betrayal

You may already know that in the final year of his life, Jobs revealed a stunning betrayal ? and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate ? and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

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Source: http://feeds.fool.com/~r/usmf/foolwatch/~3/_mdBREmFstM/story01.htm

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Donald Trump Refuses To Release His Own College And Passport Records

Donald Trump

While Donald Trump had no problem demanding that Barack Obama reveal details about his passport and time at college on Wednesday, the billionaire business mogul proved rather less forthcoming when it came to a request for information about himself.

Trump announced on Wednesday that he would donate $5m to a charity of Obama's choosing, if the president handed over his "college records and applications, and passport application and records".

But when the Guardian contacted Trump's office to ask for Trump's college and passport records, it was accused of "trying to be funny" and the request was deemed to be "stupid".

"I tell you what, he'll provide them to you when you provide yours to him," said Michael Cohen, executive vice president at the Trump Organization and special counsel to Trump, in what began as a friendly encounter.

I readily agreed to the deal, and offered to provide my college records and passport-application records to the Trump office for inspection. That seemed to prompt a change of heart.

"But what's your point? Mr Trump's not the president of the United States and he's not running for the presidency," Cohen said. "And pretty much all you need to do is go to one of the thousand different books that Mr Trump has been featured in or has written and so on, and you could learn more about him than you know about pretty much anybody on the planet."

Trump has authored and co-authored at least 18 books, including: Trump: The Art of the Deal; Trump: How to Get Rich; and Trump: Surviving at the Top. Unfortunately, none of Trump's oeuvre graces the bookshelves at the Guardian's New York office – an oversight which is in the process of being rectified.

Cohen went on to accuse the Guardian of not taking the story seriously. (Nothing, of course, could be further from the truth.)

"I think what you're doing is you're, whether you're trying to be funny, intentionally or not, actually it's a stupid request on your behalf," he said. "It's trying to poke fun at the fact that the president of the United States is the least transparent president that we've ever had. He may be the least transparent politician we've ever come across.

"And I tell you what, why don't you do this, since you want to be so clever. Why don't you turn around and say if Mr Trump releases all of his records to you, you will donate $5m to the charity of his choice?"

I pointed out that I did not have $5m to hand. "I'm afraid that you shouldn't be asking the same request then," Cohen said.

Your reporter protested that if Trump was demanding that others producer their records, it was only fair that he produced his own. Cohen said: "Do you not think Mr Trump has been scrutinised his entire life?"

Surely, I countered, Obama, as president of the United States, had also been subject to considerable scrutiny?

"No, actually Mr Trump does not [think that]," Cohen said. "I tell you what, since you want our records, do it under the terms Mr Trump has. Make a donation to Mr Trump's favourite charity."

I agreed to a donation, but said that it would probably not amount to $5m.

"OK then, $500,000," Cohen said.

Not being able to put my hands on even so modest a sum as this, I attempted to steer the conversation back to the original suggestion – that Trump would turn over his records in exchange for mine, for free. Cohen promised that he would "take it up with Mr Trump".

"And by the way, while we're at it, I'd like to have all your authorisations under HIPAA, for all your medical records as well," Cohen said.

Happy to oblige, I asked for an address. But Cohen hung up.

So, sadly, we are probably not going to get Donald Trump's college records and passport-application details. Unless someone has a spare $5m lying around...

This article originally appeared on guardian.co.uk

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Source: http://feedproxy.google.com/~r/businessinsider/~3/hul5pzIAm-c/donald-trump-refuses-to-release-his-own-college-and-passport-records-2012-10

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Facebook Stock Price ?Soars? To About Half Of What It Was Worth At IPO

When describing Facebook’s stock price, the words of the day appear to be “soar” and “surge,” when they should probably be “reality check.”

“Facebook Shares Soar” declared Bloomberg, which said the company had “posted a record surge after reporting sales that topped analysts? estimates, allaying concerns over its ability to make money from mobile ads.”

“Facebook?s stock price soared … [More]

Source: http://consumerist.com/2012/10/24/facebook-stock-price-soars-to-about-half-of-what-it-was-worth-at-ipo/

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Earnings Misery Sinks Stocks

Dupont fell by 9% after the chemical giant reported a decline in fourth quarter earnings and said it would cut 1,500 jobs. The damage was much more severe in Radio Shack during the morning, but the stock turned around and closed 7.5% higher, despite swinging to a third-quarter loss.

Source: http://www.forbes.com/sites/greatspeculations/2012/10/23/earnings-misery-sinks-stocks/

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Earnings Misery Sinks Stocks

Dupont fell by 9% after the chemical giant reported a decline in fourth quarter earnings and said it would cut 1,500 jobs. The damage was much more severe in Radio Shack during the morning, but the stock turned around and closed 7.5% higher, despite swinging to a third-quarter loss.

Source: http://www.forbes.com/sites/greatspeculations/2012/10/23/earnings-misery-sinks-stocks/

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