David Jackson

U.S. Credit Card Industry Moving into Uncharted Territory

Due to the comments above, I added tags to this article for JP Morgan Chase, and also Discover and Amex.

Is it correct that Discover and Amex do carry credit risk?

American Express: Watch the Dividend

Hi George,

The other comments here actually illustrate an interesting point: the identification of dividends with "value" is questionable. Buffett realized that the best way to deliver long term value is to compound returns, and that explicitly means NOT paying a dividend. And the theoretical arguments for dividends are weak; see:

Why Dividend Paying Stocks are a Mistake

Sharpest Drop in Consumer Credit in 15 Years

"However, credit card balances or so-called revolving debt, rose at a rate of 4%. It can be surmised that as housing prices fall, it has become harder for Americans to borrow against their homes in order to raise cash for other expenses. Instead, people have been relying more heavily on credit cards."

I guess the argument here would be that people can't get home equity loans to replace higher-interest-rate credit card debt. But an alternative explanation would be that this is the beginning of a consumer spending slow-down: first there's a slow-down in big ticket items that require specific loans, such as cars, and then it will spread to smaller items that are paid by credit card.

If the latter is correct, this is a negative lead indicator for AXP and MA.

Would love to hear some input from some people who know the consumer credit market better than I do...