Economic Volatility Pushes ARM Index Down from Historic High

In one of the most volatile months in the 6-year history of the Kaulkin Ginsberg Index (KGI), the leading indicator of economic conditions affecting the accounts receivable management (ARM) industry fell 3.7% to 1250.7. The KGI is down 4% from its June 2005 high of 1303.1 but remains up 4.8% year over year.

A number of macroeconomic factors placed downward pressure on the Index. The total market capitalization of publicly traded ARM stocks fell from $3.4 to $3.0 billion. The number of bankruptcy filings increased from 497,000 in the second quarter of 2005 to 542,000 in the third quarter of 2005 — the highest number ever recorded for bankruptcy filings by the Administrative Office of the U.S. Courts. In addition, outstanding consumer credit decreased by $7.2 billion during October, the steepest decline ever reported by the Federal Reserve.

"Had the KGI been comprised of only six economic factors, this would have been its worst month ever," said Paul Legrady, Director of Kaulkin Ginsberg's Research Group. "However, increases in the charge-off rate held the Index up during an otherwise challenging economic period for the industry."

Given the amount of debt available to purchase or collect, increases in chargeoff rates cause the KGI to increase as well.

The KGI is a product of Kaulkin Ginsberg's Research Group, which provides industry-specific publications and custom research services to the ARM industry. For more information about the Kaulkin Ginsberg Index, see www.kaulkin.com/research/kgi.cfm or call Paul Legrady, Director of Kaulkin Ginsberg's Research Group, at 301-907-0840 ext. 104.

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