Use Your Gift Cards

“Widespread fear is your friend as an investor because it serves up bargain purchases. "

- Warren Buffett

The Portfolio

The portfolio is down over -10% YTD this morning, improving from a position where we were down roughly -20%.

Our benchmark index, the S&P 500 is down -23.38% YTD.

If you're interested in the stock market, are looking for diversification or growth please feel free to connect me. I'm always available to talk, maybe provide some new ideas or to present to your group. clay@claybaker.com

Use Your Gift Cards

Want to help small businesses and big ones too, use your gift cards! This is boring, but explains how we can all give the economy a little boost by simply using our unused gift cards.

According to the Mercator Advisory Group, an advisor to the global payments industry, as much as 3% of gift card dollars are never redeemed.

The global gift card market in 2017 alone was $350 billion dollars, so as much as $10.5 billion was laying around unused in 2017.

In the United States alone in 2017, about $3 billion dollars was sitting in drawers waiting to be used.....or confiscated by the states. This residual money on gift cards has been adding up. Since 2005, Americans have left roughly $50 billion dollars unused on their gift cards.

The important take away is that when you buy a gift card, it's logged as a liability by the retailer (they may or may not be using that cash). When the card is used, the the retailer can log a "sale" transaction and record the revenue. But if the card goes unused and meets expiration requirements, some states confiscate the unused cash as an abandoned asset, they can't just keep the cash.

There are a number of accounting issues related to gift cards, which are:

  • Liability recognition. The initial sale of a gift card triggers the recordation of a liability, not a sale. This is a debit to cash and a credit to the gift cards outstanding account.

  • Sale recognition. When a gift card is used, the initial liability is shifted into a sale transaction.

  • Breakage. If there is a reasonable expectation that a certain proportion of gift cards will not be used, this amount can be recognized as revenue.

  • Escheatment. When a gift card is not used, the funds must be remitted to the applicable state government; the company cannot retain the cash. This requirement is stated under local escheatment laws that cover unclaimed property. Consequently, there must be a system for tracking unused gift cards, which trigger a remittance once the statutory dormancy period has been exceeded.

  • Fraud reimbursement. A thief could obtain access to the identification codes for individual gift cards that are on display in retail stores, wait for someone to buy the cards, and then use the codes to buy goods. When this happens, the issuing entity should reimburse the defrauded customers, which should be tracked by the accounting staff.

Please, dig through the drawers, locate all those unused gift cards, AND USE THEM!

"Markets don't go to zero, Portfolio's do.

Buy quality, be patient...and look twice for motorcycles."

- Clay Baker

Stay Invested,

Clay Baker

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Keep Me Honest 2020

  1. Today is a good time to carefully leg into stocks again (3-20-2020).

Clay's Rules

Rule #1: Don't lose money

Rule #2: See Rule #1

Rule #3: Portfolios go to zero, markets don't, Stay Invested

Rule #4: When a good stock you own drops 10% below your cost basis, add shares

Rule #5: Bull markets aren't sustained without the Transports

Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase

Rule #7: When an investment bank sells below book value, buy it

Rule #8: Tips are for waiters. Do your own homework.

Rule #9: Don't sell a stock because you're bored with it. Do your own homework.

Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:

HD, AMRN, BSTC, CVS, CSCO, VEEV, STZ, AMZN, NVDA, BCRX, GS, BDSI, VEEV, VTI, GLD, HD, AWR, XLNX, MRVL, NBRV, ENPH

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved