Top 2%
Interesting article I read today. Here's a little of what it said below:
In the first quarter of 2008, banks charged off 4.7 percent of credit card loans, a 33 percent increase from the first quarter of 2006, according to the Center for American Progress. That timing is no coincidence; that's when easy credit for home equity loans dried up. In 2009, according to consulting firm Innovest StrategicValue Advisors, banks will charge off nearly $96 billion in credit card debt, double the projected 2008 losses. That's why credit card issuers are running for cover. "Delinquencies and defaults are soaring,"
I wonder if MA which is down from a high of $319.82 to $151.71 will tumble even further from these levels once the market levels off? Same goes for V, high of $89.71, now $52. Food for thought when looking for bargains out there, or short candidates. Proceed with caution.
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superbeeny
Oct 11 at 10:16 ET
Must have had a premonition, I just took some savings out to wipe out all my short term debt, credit cards mostly
Could you post a link to the article?
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longterminv
Oct 11 at 10:30 ET
Neither MA or V is a credit card issuer nor are they directly exposed to credit risk. The thing that hurts MA and V is a decrease in the absolute number of transactions. A slowing economy and banks going under should make an impact there. For example, it's likely that MA will get hurt if Wells ends up with Wachovia because Wells would likely transition Wachovia's Mastercards to Visa. And, if their banks issue fewer cards, I suppose that will reduce the number of transactions, unless consumers end up switching to the other card(s) in their wallets and V and MA get paid anyway. According to the Motley Fool (http://www.fool.com/ccc/secrets/secrets01.htm), the average person has 8 credit cards. At the end of the day, people have to buy stuff with cash, checks, credit, or debit cards. As long as it's credit or debit, V and MA get paid.
I am a big, big fan of credit cards in general and MA in particular. I just love getting a free loan for 30-60 days and I love the points, too. But, I've owned MA since they went public, so I am looking through rose colored glasses and I'm still in the money even in light of the general economic badness. I'm not sure I would buy now in light of the uncertainty, but I'm certainly not selling. I'm hanging in there.
Top 2%
rojack
Oct 12 at 1:14 ET
Here's the article:
http://redtape.msnbc.com/2008/10/how-credit-card.html
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superbeeny
Oct 12 at 9:06 ET
thanks