The Fat Lady's Not Singing Yet for the Economy

It ain’t over it seems. Apple (AAPL) aside, the big news after hours was American Express (AXP). The earnings are awful, the business is in the dumps and now AMEX wants to withdraw any 2008 forecast. Bloomberg reported:

Profit in the company’s U.S. card business dropped 96 percent to $21 million from $580 million a year earlier as provisions for losses more than doubled to $1.5 billion from $640 million. uncollectible debt in the unit rose to 5.3 percent of loans from 2.9 percent a year earlier.

After hours, my old friend Capital One (COF) was knocked for a loop on the news as well. The credit card industry has proven itself to be no better that two-bit loan sharks. They rape customers with exorbitant fees, ruin your life if you cannot pay and now lie to protect themselves. I am totally disgusted with the way they have handled themselves.

For the longest time, I have wondered how stupid these companies think we are. Hiding bad debt in securitized and off-balance sheet positions and telling us that their charge-off rates were normal. They think we will buy anything… To be honest, I am totally bewildered as to how these companies keep on slinging the crap and getting away with it.

But not now. Maybe now the news is going to finally show all those perma-bull newspaper men (you know who you are) how wrong they have been and how they could have helped so many if they would have opened their eyes and stopped being so full of themselves.

Back in April, I wrote about the “False Sense of Security” and asked:

With all of the downgrades along with the fact that we are seeing a historic rise in defaults, what is it that I am not seeing?

Now I get it. It is not good…and don’t tell me that AMEX didn’t have any idea how bad things were. Really a crock! I am sure today will bring in the same faces on CNBC to tell us that there is no recession and that there is plenty of liquidity. Maybe they will bring in Brian Westbury to tell us that the economy is doing fine and there is no recession. This guy is unbelievable!

Just keep on evaporating the net worth of America and do it with a smile.. Oh yeah, can you tell…I am pissed!

(BTW - good news is that we have no positions in any mentioned or any of these cow-chips.)

Comments

[CaptBob:]

The loan business hasn't exhibited this level of ethics since Benny "The Nose" left the Bonnano family for some post sentencing, degree studies at Danbury.

It seems business is not business unless the last nickel can be extracted by whatever means works on the poor Schulb that is stupid enough to work for a living.

The Usury laws are a distant memory. Even the Politicians -(with the fattest envelopes to ever fit under a table)-were pulled up just short of repealing the Bankruptcy laws and re-instituting Debtors Prison. The Chairman of the Senate Banking Committee doesn't know the "prevailing mortgage interest rate"---Can you imagine!!??.

"Next payday" storefront loan offices grow like weeds outside every Military base, to suck blood out of underpaid servicemen, with easy week to week, high interest loans. Even our retired seniors are being ceaselessly extolled to sell the family home, take a reverse mortgage and live high off their children's inheritance,-you know, the ones who can't afford rent and student loan payback at the same time.

In a recent interview "The nose" when asked about his view of the Country's present debt Cancer; Stated: "Geeezze, I'd-a-done dat I'd-a-got Life"

If Christ can ever get through security, and make a second coming, he'd better bring the jawbone of an ass and revisit the "benches" in the Temples. Theeey'rreee Bacck!.

2008 Jul 22 10:07 AM

[Diyg:]

Right on, Andrew and captbob. Tell it like it is. The bloodsucking credit card companies prey upon everyone, especially those who can least afford their fine-print penalties, etc. They deserve baseball-bat losses. Couldn't happen to better loansharks! Bankruptcy is too good for them.

2008 Jul 22 11:08 AM

[eva:]

Guys if you are so frustrated with the capitalist way move to a socialist country, there you will be well protected....

2008 Jul 22 11:49 AM

[CaptBob:]

Eva: If you've got the funny idea that good Ole Uncle Joe Stalin was "protecting" his citizens, you'd better re-visit the library--you'll find it in the "Political History" section.

I believe in a Capitalistic economic model as much as anyone. But I don't believe a prerequisite of it is to extract as much easy money as possible, from people we hold an edge of sophistication on, till we drive them to the brink of indentured servitude.

I've found people in overwhelming debt, make poor company, and seldom smile when pouring my Champagne.

2008 Jul 22 12:20 PM

[Jason Rines...:]

Bottom line Eva: Hiding debts in securitized packages is misleading investors. There are laws and they are being broken. Remember Enron? Enron hid large expenditures off the books to fatten the bottom line. The Wall St. sharpshooter Spitzer became a crook and hid his prostitute expenditures paid by taxpayers off the books.

Investor confidence in the U.S. financial system is destroyed on a global scale. Yes, maybe I should hurry up and expatriate before our moronic Congress passes some laws it is contemplating on taxing dual citizens with more then $2 M worth of assets!

Dave Merkel posted an article today on Countrywide and the scope of special VIP deals by legislatures and members of the judicial branch. The majority of these violators just happen to be Clinton appointees and close friends, now running the funny farm up on the Washington and control of the House.

The Dems skewer Karl Rove for not wanting to give up the name of one of our spies in wartime to not blow cover (NY Times broadcasted the informants name to the public) but yet we're seeing the biggest criminal acts of theft committed in housing and banking in global history but the Republicans are silent? Where are the Republicans when you need them?!?

Note in a socialist government there are three stages:
1) Government creates mild entitlements for votes (FDR first Pres to figure this one out, note Great Depression irony). It will come out of the rich people pockets for the good of the country!
2) Government creates many new laws to enforce tax collection, petty fines for local and state revenue etc. Government adds more entitlements (45% of our nation has some form of government subsidy while 50% pay 97% of ALL taxes). But it's still MOSTLY the rich we tax, the middle class only has a small burden to bear!
3) The rich expatriate and the poor go underground to avoid any burden. Many new laws are created meaning all citizens are lawbreakers. Middle class fights back as small businesses go under. Property is directly confiscated in violation of laws. Confiscations go to buearocrats and informants.

We are between stage 2 and accelerating fast into stage 3. History shows us either voter revolution occurs, violent revolution occurs or the nation is conquered. That is the cause and effect of socialism in 6,000 years of history.

2008 Jul 22 06:21 PM

[Sr. Pessimist:]

I think this is only the beginning of the decline in earnings. 2008 will be the first year of the earnings recession. I believe earnings will continue to recede.

2008 Jul 22 07:10 PM

[Steven Hansen:]

to me the market has repriced itself to the future earnings potential, some would say the rally which began last week was a sign the market had over corrected - especially in financials.

please tell me that is true because i am thinking the big money people are creating a mini-rally to pull the fools back in to financials so that they can get out.

2008 Jul 22 09:56 PM

[PhillyD:]

Why would the big money people put money into a stock to create a rally to then attempt to sell their stock in hopes of profit? Isn't that mostly a zero-sum game? Or do you think that a 10% increase in JPM will trigger all the funds and individuals to blindly jump on board?

2008 Jul 24 08:49 AM