We’ve all heard about the dangers of credit cards. We all know someone (or are someone) who has gotten in debt a little too deep because of them.  Most debt counselor’s advice is to simply quit using them or cut them up and pay off the balance. Then when you’re out of debt, and can use credit responsibly, you can have your cards back. But my question is; when is it responsible to use credit? Most financial advisors, both Christian and non-Christian seem to agree that credit is a tool and when used responsibly it can help to increase your net worth. But that doesn’t seem to be working for most people. In fact, I think it’s clear that credit has financially bankrupted more people than it has helped.

I think that one of the major problems is that unlike other tools that we use, most people are not taught how to use credit wisely. Sure parents tell their children to beware the dangers of credit cards and warn them about instant gratification but they never teach them what situations it is ok to use credit in. There are plenty of thumb rules that attempt to answer this questions such as, “only use credit cards in an emergency”, or “credit is only ok to use if you’re buying something that will increase in value”. Unfortunately, these are only thumb rules, and pretty unstable at that. What constitutes an emergency? Does someone have to be at risk of losing a limb or is it ok to use financing if the sale on the TV that you really wanted is going to end soon. And how do you know if what you’re buying is going to increase in value? Over the last year we saw foreclosures across the country and people walking away from their houses because they owed more than the house was worth. Were their mortgages a good use of credit?

We see credit or debt discussed several times in the bible. But what we as Christians often forget, is that there are two sides to credit. There is a borrower, and a lender. Our lifestyles and roles as consumers have trained us to be borrowers without reminding us what a blessing it is to be a lender. I don’t mean to be a lender for profit, the way the banks and credit card companies do. But to be a lender to someone in need. Remember that God told Israel that he would bless them and make them lenders to many nations and borrowers from none (Deuteronomy 15:6). How can we reach out to those in need if everything we own is already owned by someone else? The purpose of credit is not to allow us to purchase what we want or when we want it. For Christians, the purpose of credit is to serve as a way to help others. We should be the lenders, not the borrowers. God desires us trust him for our needs and to be lenders or even givers to others in need (Matt 5:42; 6:31-32).

So, I would say that “yes”, credit is a tool. But not a tool like a hammer with which you may bruise your finger if you make a mistake. But more like a chainsaw, in the sense that if you use it incorrectly you may never recover. The sad part is, most people are holding it on the wrong end and will end up hurting themselves.

Supporting Verses about Debt

Others were saying, “We are mortgaging our fields, our vineyards and our homes to get grain during the famine.” Still others were saying, “We have had to borrow Money to pay the king’s tax on our fields and vineyards… We have to subject our sons and daughters to slavery. Some of our daughters have already been enslaved, but we are powerless, because our fields and our vineyards belong to others.”

- Nehemiah 5:3-5

A man lacking in judgment strikes hands in pledge and puts up security for his neighbor.

-Proverbs 17:18

Give to the one who asks you, and do not turn away from the one who wants to borrow from you.

-Matthew 5:42

Do not be a man who strikes hands in pledge or puts up security for debts;

If you lack the means to pay, your very bed will be snatched from under you.

-Proverbs 22:26-27

The wicked borrow and do not repay, but the righteous give generously;

-Psalms 37:21

The rich rule over the poor, and the borrower is servant to the lender.

-Proverbs 22:7

Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law.

-Romans 13:8

Watch any financial channel on television long enough and you will be bombarded with so many contradictory investment opinions that it will make your head spin. Do you ever wonder why so many educated and experienced investment professionals can use the same information to come to completely different conclusions? While it may seem like someone has to be off their rocker for people to disagree so drastically, what you may not realize is that each of those professionals subscribe to a different investment theory which radically alters their perspectives on the market.  These theories serve as a starting point and a guide while financial professionals analyze the value of a stock, and as you’ve seen they can lead them to very different opinions.

There are three major investment theories that investors tend to subscribe to. Notice that I didn’t say professional investors, most personal investors can trace their beliefs about the market back to one of these theories as well. See if you can tell which ones describes your approach to investing.

Investment Theories

(Note: These theories are used by investors to determine the true value of stock. While some of them also have management styles based upon those beliefs, the purpose of this article is mainly to inform you of the assumptions made in each theory, not to teach the management style.)

Fundamental Analysis- Those who subscribe to this theory believe that the true value of a stock is determined by the company’s future earnings. They use fundamentals (or fundies) to attempt to determine if the companies expected earnings are higher than the company’s current earnings. If so, the price of the stock should go up. Several factors are taken into account including (1) the financial strength of the company, (2)the industry the company is in, (3)the board of directors/who is running the company, (4)new-product development, and (5) the overall economic growth of the economy.

This is probably the most popular approach to investing and because of this, an entire arsenal of tools have been created to help investors to choose stocks without having to do the dirty work of calculating statistics and researching company history. If you use a stock picking tool and you’re not sure what principals it uses to find the best buys and sells, chances are it was designed with this theory heavily in mind. A major pro of this method is the intimacy that proponents have with the companies they invest in.  If a fundamental analyst does his own research then chances are he knows the ins and outs of every company that he’s invested in and can defend his logic to the end. The cons are that no matter how well he knows the company, the stock market price is still set by the public who most likely doesn’t know the ins and outs of the company and won’t always take that into account when buying shares. Another Con is the fact that so many programs have emerged based on this theory that many professional and private investors are not doing their own research and simply trust what their software tells them.

Technical Analysis – This theory is based on the assumption that the market value of a stock is determined by supply and demand in the market. Subscribers to this theory believe that all the information needed to calculate the real value of a stock is found in the market as a whole and not in the expected earnings or the intrinsic value of the corporation’s stock. Technical factors evaluated include the total number of shares traded, the number of sell orders, and the number of buy orders over a period of time. Technical analysts construct charts which plot past price movements and allow them to observe trends and patters in the market as a whole as well as in a company’s stock.

This method is famous for the elaborate charts used. If your investor’s office or his computer screen is covered with charts with hundreds of x’s and o’s forming a graph, then he is utilizing this theory. Other charts include candlestick graphs, Bollinger bands and Fibonacci charts. Opponents of this theory (or proponents of other theories) claim that technical analysts aren’t truly analyzing anything but are trying to predict the future while proponents of technical analysis can back their beliefs with some impressive results. Pros include the fact the technical analysts usually end up doing their own research even though most of them don’t make their own charts (there are plenty of online sources for these). Most techies are also very familiar with market history, overall buy/sell patterns, and major movements in the market. The cons are that technical analysis can sometimes be presented as a hard science when the fact is; patterns can change without notice and as any professional investor can tell you “past performance is not a guarantee of future returns”.

Efficient Market Theory – This theory is sometimes referred to as the random walk theory. This theory states that buyers and sellers in the market always consider all the information available before buying a stock and therefore the market is completely efficient. Because of this, buys and sells are determined by an individual based solely on his assumptions of what others will do. If he believes that others will buy a stock causing the price to rise, he tries to beat them to it and ride the wave up just to try to beat them to the sell. Any news or tax law that might affect a stock’s price is quickly absorbed by investors trying to seek a profit. Thus, the true value of a stock is determined by its market value.

Efficient Market Theory proponents basically believe that movements in the market are based on chance. You will win some and you will lose some and none of it is due to market patterns, company strength, or any predictable pattern. A popular belief that tends to follow this theory is that it is impossible to beat the market over the long run. Like flipping a coin, you eventually end up with the same number of heads and tails. You might as well just buy and hold because you are just as likely to lose your money as you are to make more. It is important to note that this is the only theory that holds to this belief. Both technical and fundamental analysts believe that a well trained and educated investor will be more profitable then someone who is just guessing. You may come across articles that show that a private investor just randomly picking stocks can do as well as a professional money manager using whatever system he subscribes to. This is a prime example of belief in and efficient market. The pros of this theory are that in the long run, the market does tend to go up in value so if you’re right and you break even with the market, then chances are you will ultimately come out ahead. The cons are that subscribing to this theory will most likely cause you not to seek out a professional advisor (because why pay someone for something you can do yourself) and if you’re wrong, you will end up missing out on higher returns or even losing what you started with due to lack of information.

Evaluation

So which theory is correct? Personally, I subscribe to all three. While I do believe that there is an unpredictable aspect to the market, I also believe that the strength of the company and the market’s past performance play a part in getting people to invest in a company and therefore affecting its stock price.

Think of an investment like a car that you’re test driving. The fundamentals are the structure and integrity of the car. They let you know what the car is made of, if there is any rust, what kind of engine it has and if all the systems are in place for the car to run well. But that doesn’t tell you everything you need to know. The technicals are the gauges and warning lights on the dashboard. While driving, it’s a good idea to keep an eye on them to make sure the car is responding as expected and that conditions aren’t approaching that would damage the car. If a check engine light comes on but all other lights and gauges are reading normal, chances are that you will keep driving but will keep a closer eye on your dashboard for anything else that indicates a problem. However, if your check engine light comes on, your engine temperature starts reading high and you lose oil pressure, chances are you will immediately pull over and get out of the car. It doesn’t matter how well the car was made or how it was expected to perform, the fact is that all other indications are showing that the car is not a good buy. Now think of the randomness of the market like the wind. You don’t know when it’s coming, what direction it’s coming from, or how hard. It also doesn’t affect the structure or systems of the car but it does affect how it handles, (just like the random market conditions don’t affect the structure of a company or the past market patterns but it can affect future gains and losses in a portfolio). A new driver may be surprised and not know how to interpret even a slight breeze and may have to pull over and get out of the car while a seasoned driver could probably drive through a wind storm without ever leaving his lane.

So to answer the question,” which theory is correct”? Well, all of them and none of them. If any of them were right all the time wouldn’t everyone just flock to it and let the others die out? And if they were always wrong the probably wouldn’t have lasted long enough for us to talk about. The fact is that proponents of all three theories can strongly defend their strategies because all of them tend to be right at one time or another. It can be extremely hard to track which one is more accurate because successes and failures can vary even among investors that subscribe to the same theory.

In Conclusion

If you like to do your own investing then I would recommend reading up on these theories and how they relate to the market. Even if you don’t agree with one or two of them it’s wise to learn about them just so you don’t end up pushing aside some valuable insights that you may not find anywhere else. If nothing else, knowing a little about each theory may help you to identify the financial crackpots on television.

If you prefer to let a professional handle your accounts, I would advise talking to him about which theories that he subscribes to and give him a chance to defend his point of view. Remember, nothing speaks louder than results. Be sure you ask his about his past performances using his methods and how he adjusts his strategies as the market changes. Of course there are plenty of investors out there that subscribe to more than one theory,  as well as investors that don’t understand any of them, so listen closely to what he is saying and be sure he can quantifiably defend his position.

So next time you turn on the business channel and hear two commentators arguing over the best investments, listen to what they are saying and see if you can discern what viewpoint they used to come to their conclusions.

I have to admit. For years before I had a solid budget and financial plan I understood how important they were. I liked the idea of knowing where every penny I had was going and the idea that I could track how much I spent each month. But until a couple of years ago I never bothered to take the time to get everything together. Part of the reason was because of the hassle. I used credit cards, check cards and cash and it was just too much of a pain to write everything down. At one point I bought an early version of Quicken and made an attempt but it was no good (the attempt, not the program). Even though it would download my credit and bank transactions, I still had to track the cash on my own. The other reason was the fact that I was in the Navy and away from my computer so often that every time I sat down to work out a budget, I had to almost completely start over. Not to mention that keeping a budget in US Dollars was hard enough without trying to keep track of what I was spending in a different currency several times a year.

While I was working on my degree in finances I made sure to read a few finance books that were written from a Christian perspective and that was how I came across the concepts of ownership and stewardship. I had never considered the idea that God owned everything and that I was simply managing it for him. For several months I did a self-study on stewardship and I came across a couple of verses that really stood out to me.

Do you not know that in a race all the runners run, but only one gets the prize? Run in such a way as to get the prize. Everyone who competes in the games goes into strict training. They do it to get a crown that will not last; but we do it to get a crown that will last forever. Therefore I do not run like a man running aimlessly; I do not fight like a man beating the air. No, I beat my body and make it my slave so that after I have preached to others, I myself will not be disqualified for the prize.

-1 Corinthians 9:24-27

Paul was writing this to the Corinthians regarding the gospel and how he lived his life but it reminded me that we will all give an answer for the way we lived our life (2 Corinthians 25:19) and we will be rewarded in heaven for our actions here on earth (Matthew25:21).  It also made me realize the meager efforts that I had been making to keep track of my spending were inexcusable.

While personal money management may only consume a small part of our time, our stewardship responsibilities should always be in the forefront of our minds. For many of us, if we were stewards for anyone else, they would no doubt take everything we had and give it to a trustworthy steward. Fortunately, God has mercy on us and, in my case, allowed me the chance to turn things around before it was too late.

There is another verse which strikes me every time I read it because I know I was in the same situation and deserved the same outcome.

“There was a certain rich man who had a steward, and this steward was reported to him as squandering his possessions. And he called him and said to him, ‘What is this I hear about you? Give and account of your stewardship, for you can no longer be steward”

-Luke 16:1-2

If you were like I was for much of my life, I would encourage you to go outside your comfort zone and put in the time needed to develop your abilities as a steward. In the next few posts I will be offering advice on how to start down that path. True Stewardship is something that applies to every area of our lives and while we will mainly be talking about it from a financial perspective, the basic understanding of it will radiate throughout your walk with Christ.

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Recently, the Los Angeles Times published a story about the 4 new pennies being released this year in honor of Abraham Lincolns 200th birthday. In the article it mentions;

given the rising price of zinc and copper, it costs about 1.4 cents to make a penny

This raises the question, why do we even continue to make the penny. According to the Wall Street Journal, until around 1999 it had cost about 9/10 of a cent to make a penny. That comes out to about $400 million of profit or seigniorage as the Mint likes to call it.

With numbers like these, it was understandable why we were using the nations zinc and copper to produce a coin that most people don’t even keep track of. But now, with the creation of pennies costing us around $1.6 billion to mint each year (above what they are worth), what is the point of keeping them around? The world would function just fine without them.

Several people have suggested that it would be more difficult to buy with cash without using the penny but I don’t think that would be so. The final price of a product, tax included, would be figured as usual then rounded up or down to the nearest $.05. With the use of credit/debit card for purchases, most things are paid for without cash anyways. And when you consider the fact that gasoline is priced to the tenth of a cent and pretty much anything incurring interest deals in fractions of a penny and everything works out fine, I can’t see any reason to keep it around. Heck, it might even be better to round to the nearest $.10 and get rid of the nickel as well. Then we could use the metal to mint $1 and $5 coins that would stay in circulation for 30 to 40 years instead of paper bills which only last 13 – 18 months.

If anyone knows somthing that I don’t, please let me know. I’m sure there are other factors but I also know that we would not be the first country to do this. Several European countries have eliminated their $.01 (and in some cases thier $.02) pieces and just operate as I’ve explained above.

I received an email this morning, which I was asked to pass on. It was written by personal friend and American patriot, William Federer. For those of you who are unfamiliar, he is the author of 16 books including “Americas God and Country” which sits on the bookshelves of many politicians and judges today. He also ran for congress twice in Missouri against Dick Gephardt, one of the most powerful, pro-choice, Democrats in the house. He is a strong Christian and a historian who has dedicated his time and resources to writing and teaching about Americas Christian heritage and has appeared on hundreds of radio and television interviews nationwide. You may know him from his “American Minute” daily radio broadcast which is heard around the country and read online by thousands. His books have been used by politicians, leaders, teachers, students and have even been used in the defense of Christianity in court cases. You can find out more about Bill, his books, and his not-for-profit organization here.

 I have known Bill personally for a little over a year but he has been a personal friend of my families for over ten years. Most of the work he does is free of charge including his public speaking arrangements. He has given away thousands of books and CD’s over the years. There is currently a dire need to have intelligent, educated and dedicated people like Bill on the front lines of politics and culture, fighting for true Christianity and our rights in America today. His letter is posted below.

Letter from Bill Federer:

You may remember I campaigned for Congress against the Dick Gephardt!

Well, I want to update you on what I have been doing these last four years!

I have been a voice for conservative principles, speaking on American noble history on over 1,600 radio and television interviews in every State of the Union, including CSPAN, FOX, NPR, INSP, TCT, Coral Ridge Hour, SALEM Radio, BOTT Radio Network, USA Radio, American Family Radio, Phyllis Schlafly Live, G. Gordon Liddy, Armstrong Williams and others.

I have spoken in person in over 100 cities, from the U.S. Capitol in Washington, DC to Mount Rushmore, to San Diego to Seattle and Boise to Tampa. (Let me know if you want me to speak at an event: wjfederer@gmail.com)

The American Minutes, which you may know are sent out to thousands via the Internet, are broadcast everyday on over 100 radio stations, and internationally on a worldwide television network.

I also have a weekly 30 minute television program on the TCT Network, broadcasting into 170 nations, titled “Faith in20History.” (We have received responses from South Africa to the Philippines.)

I have spoken in hundreds of churches, pastor’s conferences, American Legions Conventions, political events, schools, business lunches, university lectures, literary societies and military bases.

I have published 5 more books. (bringing the total to 16), plus written chapters for other books. (see http://www.amerisearch.net/store/)

There is an URGENT need to get information to the public before policies are put in place to SILENCE free-market ideas and traditional Judeo-Christian voices.

Will you help me?

Articles referencing or quoting me have appeared in USA Today, Human Events, New York Times, Washington Times, Washington Post, Roll Call, Harper’s Magazine, Insight Magazine, WorldNetDaily.com, TownHall.com, NewsMax.com, Catholic.org, Crosswalk.org, CitizenLink.com, as well as Federal Court Cases.

I have given away thousands of books to students, teachers, schools, prisons, chaplains, missionaries20and military personnel – books such as:

AMERICA’S GOD AND COUNTRY Encyclopedia of Quotations

WHAT EVERY AMERICAN NEEDS TO KNOW ABOUT THE QUR’AN – A History of Islam & the United States

GEORGE WASHINGTON CARVER – His Life & Faith in His Own Words

BACKFIRED-A Nation Born For Religious Tolerance No Longer Tolerates Religion

And the latest book:

ENDANGERED SPEECHES – How the ACLU, IRS & LBJ Threaten Extinction of Free Speech

Paul Weyrich ’s last book endorsement was of my latest book http://www.cnsnews.com/public/content/article.aspx?RsrcID=39662

In Paul Weyrich’s article “Movement to Silence Pastors and Reinstate the Fairness Doctrine,” he wrote:

“Read Federer’s book to understand how American churches fit into the political process. Then gear up for the fight on the re-christened Censorship Doctrine and the Internet.”

New doors are opening every day for me to make an even greater impact on the policy debate in America and the world.

But I need your help!

Just imagine how many people can be reached with your support!

Can you make a one-time, tax-deductible gift to AMERICAN PRIORITIES FOUNDATION (Congressional District Program – 501(c)3) to help me make up an urgent budget shortfall?

Or can you give a regular monthly amount to help reach out in a more powerful way!

We are asking for 100 individuals to help us with a generous gift of $1000.

If you are not able to, please consider $500 or $250.

Your donation to AMERICAN PRIORITIES is an investment in a proven voice to help educate and change millions of minds in America to conservative principles.

The AMERICAN PRIORITIES on line donation page is http://cdprograms.newc.com/Templates/SearchDetails.aspx?ProgID=5008552

Or you can send a check to:

AMERICAN PRIORITIES

P.O. Box 4363

St. Louis, MO 63123

Thank you in advance at this urgent time!

May God abundantly bless you!

Sincerely,

Bill Federer

www.AmericanMinute.com

P.S. If you have not already, sign up to receive the free AMERICAN MINUTE daily emails at http://www.amerisearch.net/index.php

P.P.S. Even if you can’t give $1000, but only $100 or less, it is a great blessing to us and tremendously appreciated!

Please donate here http://cdprograms.newc.com/Templates/SearchDetails.aspx?ProgID=5008552

You are enormously appreciated!

Starting this Monday, January 26, The Moral Money Blog will be published on Monday, Wednesday, and Friday of each week. 

Thanks for reading.

“Everyone must submit himself to the governing authorities, for there is no authority except that which God has established. The authorities that exist have been established by God”   (Romans 13:1)

Today is inauguration day and while I didn’t vote for Barack Obama, as of 12:00 pm EST, he is our new leader. Even though I don’t agree with many of his principals or with the promises he made during his campaign, I have to remember that God, who is all knowing, almighty and in control of everything, choose Obama as the next leader of our country and Obama’s authority, even though it isn’t always recognized, is also under the will of God.

 As Daniel said in his praise of God:

“He changes times and seasons; he sets up kings and deposes them. He gives wisdom to the wise and knowledge to the discerning”.  (Daniel 2:21)

So today I pray for wisdom, understanding and foresight for our new President and pray that God’s will be done through him, whatever it may be.

Today is going to be a short post compared to the rest of this weeks. I just wanted to wish everyone a happy weekend and let the new readers know about a few of our features. For those of you who are unfamiliar with our site, www.MoralMoney.com has several tools and resources that you might find handy.

First of all, is our free moral screening program?  If you head over to the MoralMoney home page and click on the screening tab, it will take you to our screening program. We currently screen over 3500 publicly traded companies for involvement in abortion, alcohol, tobacco, pornography, immoral lifestyles, embryonic stem cell research and gambling. Each member is allowed up to 10 free screens per month.

Another neat feature is our webcast page. We compile radio shows from Christian financial experts from around the country and air them on our site for free. Our collection grows every week so check back in to see if your favorite show is available.

Lastly, when you sign up for your free membership, don’t forget to subscribe to our monthly newsletter. This is not the same newsletter that you get when you subscribe to the blogs RSS feed. The Moral Money Newsletter covers recent news in the corporate world and how companies are reacting to the moral choices that they are forced to make. 

Thank to everyone for reading and have a great weekend.