|Jonas Max Ferris|
Question: I hear that it is now free to obtain your personal credit reports. How do I go about doing that? Is there a way to also get my credit score without paying a fee? How do you recommend using this service and using the information I receive? — John
Jonas Max Ferris: You heard right. Thanks to the Fair and Accurate Credit Transactions Act (FACT Act), the major credit reporting agencies (Equifax, Experian and TransUnion – herein collectively referred to as “The Man”) have to give consumers a free credit report every 12 months. Your credit report is a file containing your payment history with creditors including current balances, available credit, and relevant information like bankruptcy fillings.
Previously, getting the important reports for no charge required living in certain states or having credit denied. Of course, The Man was more than happy to charge you for access to a secret data file about you that often contained errors or other information that could lead to increased borrowing costs – home, auto, and consumer loans, including credit cards, at the top of the list.
Don’t feel bad for the credit reporting agencies, they still make billions charging corporations that want to extend you credit (or even just hire you) for your info. The word blackmail comes to mind. The free reports were rolled out region by region starting December 1, 2004 and finally reaching the northeast on September 1, 2005. Now, there is no excuse not to get your free report.
One way to get your free report is to go to AnnualCreditReport.com. DO NOT go to the number of very similar web sites that tout free credit reports (some run by The Man – the very companies who now have to give it up for free). For example, FreeCreditReport.com is run by Experian and doesn’t really offer free credit reports (so much for truth in advertising). You will need gobs of personal information to verify your identity to get your free report. Have several credit cards or loan account numbers handy, and don’t be surprised if the numbers don’t match and they can’t prove your existence without a lengthy call. You will need to setup with each of the three credit reporting companies to see each of their files on you.
Do not use your credit cards to pay for any optional services The Man pitches you along the way, like credit monitoring, scores, debt analysis, etc. Make sure you don’t inadvertently sign up for various marketing pitches from The Man.
There is good reason not to use the AnnualCreditReport.com website. The Man does not email you your credit report, nor let you save the file easily, although you can print it. Hidden in the terms it states, “Credit reports, credit scores and debt analysis will be available for a term of 30 days”. This means if you log back in 31 days later to do some more research on your report or check something it will not appear. Print your report immediately after seeing it online.
If you miss the 30-day window, don’t be afraid to try using one of the other ways to get a free report: claiming you have reason to believe your report is wrong because of fraud (hey it’s a legitimate hunch…). If you're unemployed and looking for a job, you can also get a free credit report off the one-per-12 months cycle..
You don’t need internet access to get your reports. Call 1-877-322-8228 to request them by phone. This way you will have a hard copy mailed to you by The Man a good option if you don’t have a printer attached to your computer. Another sneaky trick is to stager the requests and get one from each of the three reporting agencies each four months rather than all three at once. So you are always checking out recent changes to your reports.
A credit score is a simple number used to grade the often lengthy information on your credit report. It is not free. Today, many companies just use the credit score to set interest rates on your loans, rather than sift through the pages of payment data on your accounts. You may find the information useful, but I think you can get by with the free report.
Once you have your report, take steps to fix any mistakes by following the instructions provided. Generally you will have to send a letter explaining your side of the story.
Try to use up as little of your available credit as possible. Having good credit can save you tens of thousands of dollars in interest over the life of your borrowing. People spend hours price shopping to save $30 on a TV, but often ignore their credit standing and how much interest they pay as a result. Improve your credit and then use it to get the best deal you can on loans.
Question: I bought Merck shares earlier this year at an average cost of about $30 per share. Should I hold, buy or sell? Thanks. — Maureen
Jonas Max Ferris: If you own you should hold, if you don’t own you may want to consider buying.
I have no way to predict just how high the total cost of Merck’s Vioxx liability will be and it is certainly possibly the company could be ruined. On the flipside, if Merck gets through these dark days relatively unscathed the stock could be a double over the next few years.
Merck pays a near 6% dividend over $3 billion worth each year. Just cutting the dividend would free up gobs of cash to settle claims. Merck could probably handle total costs of perhaps $10 – 20 billion with no major trouble long-term for the stock from current prices (around $27).
At these prices, Merck is like the tobacco stocks at the early stages of the great tobacco liability settlements cash rich and capable of handling undue financial hardship that would destroy lesser business. The main difference is Merck generally makes products that make life better for millions of people unlike cigarette makers.
The biggest sin in the pharmaceutical business is over marketing drugs. Leading to people taking medications that probably could have done without (and avoided the negative side effects, including death). This is bad behavior, but it ain’t selling cancer in a carton. If the merchants of death the cigarette companies didn’t get sued into oblivion, I doubt Merck will.
Question: Is the dividend tax going to be eliminated or kept? — Curt (Jackson, MS)
Jonas Max Ferris: It’s a goner. The president simply wasn’t tough enough to pay for this tax reduction with spending cuts. Instead he took the easy way out and played the old Laffer Curve card that tax cuts will pay for themselves with increased productivity and growth with an “unfair to double tax” and “more companies will pay dividends” chasers.
While some income tax cuts (notably from very high levels) do lead to higher government revenues, passive taxes like those on capital gains and dividends won’t lead to the type of changes in behavior that offset the cuts.
While some corporations have increased dividends partially because of the tax cut, many more are either hording cash, using cash flow to take on more debt, or buying competitors out just like in the 1990s when dividends were taxed like income. What little increased revenues the government saw as a result of these investment-oriented tax cuts were fleeting; scurrying to sell while the tax rates are temporarily low cutting into future IRS revenue.
This is not to say cutting taxes are bad because cuts lower government revenues, just that some tax cuts have to be paid for with spending cuts. What little chance the dividend tax cut had of being permanent (or getting cut even further) vanished when the combined total cost of the war in Iraq and Hurricane Katrina related spending started to look like it would break $500 billion to say nothing of other major spending proposals.
In such an environment (did I mention the president’s approval rating, almost as low as the dividend tax rate?) a tax cut that largely benefits the wealthy (at least directly, although others benefit indirectly) is going to be one of the first to go. It is only a matter of time before a Democrat gets some traction with a comment like “the 2,000 families who lost a son or daughter in Iraq saved less from the cut in taxes on dividends combined than the president’s own family did.”
Question: I am looking to invest in a company that produces the influenza vaccine. With the uncertainty of the Bird Flu on the horizon I think this could be a good area to invest in. Which company should I steer towards? — Jeremy
Jonas Max Ferris: The gut reaction to your question is “how dare you try to profit from the misery of others!” Of course, if more people tried to profit from the flu, there would probably be more vaccines and solutions and less death. There are several competing pharmaceutical options for impotence because nobody gripes when Pfizer makes a few billion hocking Viagra. At $100 or so a month, I can assure you there will never be any pill shortages (pardon me) in this area.
The most direct investing angle on an avian flu catastrophe real or imagined is Roche Holding, who profits from sales of the antiviral drug, Tamiflu. While there is no vaccine for the scary type of bird flu, from an investor point of view Tamiflu might as well be called Birdiflu, as sales are rising as birds are dropping.
Unfortunately, this stock is difficult to buy in the U.S. because the Swiss company does not have the sort of ADR program that is easy for most to buy. Although, you can buy the actual foreign shares in some brokerage accounts.
Several mutual funds own the stock, notably Fidelity Select Pharmaceuticals (FPHAX), at least the last time they reported holdings. Another option is iShares S&P Global Health (IXJ), an exchange traded fund, which has around 5% of the portfolio in the stock because of the company’s large market cap not the bird flu angle. In general a pharmaceutical oriented mutual fund is a good way to go when there is a health scare.
Don’t get too excited. Roche may have to license the drug to others at low margins, buckling to global pressure that they are profiteering from the flu.
There are some indirect ways to profit from the bird flu. If there was a real panic, people may stay at home and avoid contact with others. This would help online retailers like Amazon (AMZN) as brick-and-mortar stores become known as brick, mortar, and flu retailers.
Question: Which sector(s) do you think might provide a better-than-average return over the next year? — Randy (New Orleans, LA)
Jonas Max Ferris: In the “Our Favorite Funds” report from the MAXadvisor Newsletter we rate each mutual fund category for likelihood of better than average returns over the next 1 to 3 years.
Because of recent strength in many fund categories like utilities, natural resources, international diversified, emerging markets, and others (all formerly rated above average), I’ve had to downgrade our formerly attractive categories, such that today only a few are expected to outperform going forward.
Currently, the stock fund categories that should outperform include large, mid, and small cap U.S growth stocks, telecom, healthcare, Japan, and Asia region. While all of these areas can be targeted with mutual funds, both actively managed and index, some are styles, not sectors as you asked for. Consider healthcare, particularly pharmaceuticals.
For more Jonas Max Ferris, tune in to "The Cost of Freedom" Saturday morning at 10am ET.