Echo To All

Still Substantial Risk in Credit Card Investments

I understand your thesis, but your not quantifying the 'paper-to-electronic' payment change. We all know consumer spending will be down, and the market is not giving MA or V a free pass. They are currently trading at with a 2009 PE of 14-15. So I ask... if a PE of 14-15 too much of a premium for MA, that has beat (sorry... crushed) earnings expectations quarter after quarter.

They are able to do this because the social change of paper-to-electronic payment is extremely difficult to quantify.

I'm not saying MA is going to the moon, I'm just saying ur thesis needs to account for the social change. And your not doing this.

As for the charts, they are holding up very well. Get worried when MA breaks the 120 level. That is when the charts will indicate a fundamental issue not yet revealed.

Credit Cards: The Next Subprime?

come on Grace... everyone working on the street knows debt from credit cards are higher risk, and understand that risk far better than they did subprime debt. Meaning, they will be taking these delinquencies into account.

not that I even have to spell it out for you (as i am sure u already know), but the difference between credit card debt and subprime debt is that a grossly incorrect assumption to risk was placed on subprime.

investors know very well in times of economic slowdown credit cards delinquencies go up. (especially when the consumer is squeezed with a higher cost of basic goods.)

so no... its not the next subprime, its just the normal increase in delinquencies from an economic slow down. Pending how severe the slow down and real inflation (not gov. reported inflation) stays high, prudent assumptions should be the delinquency rate goes higher.

Capital One Financial Reduces Guidance on Mortgage Weakness

You point out the short-term problem w/COF, and what caused me to sell in AH upon the release.

"A delta of $48 million equates to a negative impact of $0.12 per share. Twelve cents!"

The EPS decline due to mortgages was not that harsh, so that begs the question... why did they disappoint the street's estimates so much? And why did they disappoint on their own yrly guidance?

The fundamentals to their biz seemed very much intact and improving w/delinquency rates falling, yet they still did not pull it off. Something is not working here. Maybe it is the integration of NFB?

Or maybe the street's estimates were too high, but judging by last quarter's results I think WS estimated fairly.

Too much uncertainty for the short-term, but agree with you about the long-term. It could be a great long-term winner. (and it is still cheap... but not if they keep disappointing.)