Risky Loans: Harley Hits the Slick

Source: Business Week; October 27, 2008

Author: Matthew Boyle

Concept: Financing, Market Share

Brief Synopsis: This article discusses how Harley Davidson, in an attempt to gain market share against other lenders, used in-house financing to chase after subprime borrowers. The Harley-Davidson Financial Services (HDFS) now makes over half of all retail loans for Harley. With loan deliquency rates on the rise as early as last year, Harley is beginning to see trouble. Even though they cut production in response to slowing sales, they still continued to go after subprime borrowers. Now, Harley retains $54 million in loans and as a result, sales are still down and jobs are being cut.

My Thoughts: I believe Harley deserves what it gets. Obviously, continuously lending money to people who couldn't afford these $20,000 motorcycles was a big mistake on Harley's part. Not only that, but they actually promoted in-house lending by giving incentives to any dealer who directed buyers to Harley's financing services. If they were smart they would have let the banks do the lending--but then they wouldn't have been able to make as many sales. Stock shares have lost over half the value in the last two years because of these bad business decisions, and people are losing faith in the Harley Davidson company. Of course, Harley has always been known for shotty craftsmanship, and has had to spend much of the previous years building a better reputation for quality bikes--but that could be another article in itself. Might as well go buy a Honda!

A World Awash in Bonds

Source: Forbes.com

Author: Parmy Olson

Concept: Bond Issuance, Debt coverage

Brief Synopsis: This article discusses how governments are going to raise most of the money for the bailout by issuing bonds rather than raising taxes. For the most part, investors would be foreign buyers. However, at-home demand is still necessary and somewhat questionable. If demand doesn't cover supply the US will have to lower the price of the bonds, thus creating more debt in the long-run with greater interest rates as a result of lower prices. Basically, fixing one problem could potentially create three more unpredicted problems, including increased taxes in the end.

My Thoughts: I believe it is a good idea to issue bonds to raise money rather than raising taxes, but if this solution is only going to create higher taxes and a greater deficit in the long run, it hardly seems worth the trouble. As much as everybody would hate to see it, I think it would be more beneficial in the long run to raise taxes now, thus getting rid of the potential problems in the future that bonds would create.

Democrats Call For a Massive US Economic Stimulus Plan

Source: Reuters October 12, 2008

Authors: David Lawder

Concept: Economic distress, recession, stimulus

Brief Synopsis: This article discusses the current economic state of the United States and the recession that American's may soon be facing if something does not happen soon. Recently, an economic stimulus plan took place giving American's several hundred dollars hoping this money would be plowed back into the economy. Now, Democrats are planning on creating more jobs by boosting spending on the infrastructure including roads, bridges, and water projects.

My Thoughts: I believe this is a good idea, but I think it's good as just that-an idea. Sure it would be great to create new jobs, decreasing the unemployment rate and putting more money back into the economy. But the United States is already in enough trouble financially. My question is, who is going to fund this billion dollar project to restore the economy? We can only go more into debt by doing this and overall I do not feel that is really what the United States needs now. Granted, I don't have any better ideas, but this one just doesn't seem to make complete sense to me. Maybe that's just me though, but I'd like to hear their idea on how to fund this plan--maybe then I'd be more fully supportive of it.

Wachovia: A Split May Boost the Banking Industry

Source: Business Week October 6, 2008

Authors: Dean Foust

Concept: Asset value

Brief Synopsis: This article discusses the ongoing bidding for Wachovia between Citigroup and Wells Fargo. The article discusses how this battle between Citigroup and Wells Fargo could convince the markets that the banking crisis panic has gone too far by demonstrating there are still valuable assets from these failed banks that are, in fact, worth fighting for.

My Thoughts: I believe this article sugarcoats the entire banking crisis a little too much. Sure Wachovia may have some salvagable assets, but the company failed, as did many other banks. How can this legal battle over Wachovia lead to a bettering market. It won't. I do however, believe splitting Wachovia between Citigroup and Wells Fargo would be a great idea because some financial burden would be lifted off of the shoulders of all us taxpayers.

Getting Inside the Customer's Mind

Source: Business Week September 22, 2008

Authors: Burt Helm

Concept: Specific targeting

Brief Synopsis: This article discusses the data research shop Dunnhumby, a company that crunches the data from stores sales to determine what products are popular and what product retain customers. In this way, stores are able to cater to the local community. Recently, in this recession, Macy's has hired Dunnhumby to help with its store by store strategy.

My Thoughts: I believe catering each store to the individual community is the way to really satisfy customers. Consumers shopping at Wal-Mart in rural America don't want the same things that consumers in cities want. Therefore, it is necessary for retailers to cater to individual communities to be profitable. Insight to consumer buying habits can only better profitability and inventory turnover!