TraderMark

Capital One Financial Is Not American Express

I had other names I was shorting, can't have them all in the personal account. I might have 50 candidates and only can short a few - plus my personal account has been ignored much of the past year since I am working on so many things so its not getting the needed attention to be honest.


On Aug 18 10:14 AM Danny Furman wrote:

> Thanks for the analysis, Mark. I don't have any experience shorting
> stocks, but current valuations make COF, among others, an appealing
> candidate. I'm curious why you haven't shorted the stock in your
> personal portfolio. Do you trade leveraged short ETFs instead of
> shorting stocks to mitigate risk? Are there junkier companies that
> have had similar run ups that you see as better short sell candidates?
> Is the market not yet in bubble territory?
> Thank you and all the best.

Capital One Financial Is Not American Express

My track record shorting COF is not good - this is like my Moby Dick. Now I have to fight Paulson as well. ;) But that gap in the chart will get filled. Just have to stay alive until it does.


On Aug 18 10:00 AM LoveShorting wrote:

> Thanks, Mark. couldn't agree more. I never leave home without my
> AmEx and I will stay short COF until it pays, in fact, I am adding
> 50%.

Covering American Express and Capital One Shorts Ahead of Earnings

AXP has the transaction network so its sort of a mix between a COF and a V, MA in a way. DIscover as well (i'm long a touch of Discover)

COF on the other hand has its bank but no transaction network. AXP is just expensive to me, we'll soon see. The CEO was also none to optimistic in his last interview on CNBC. But right now the mkt cares less and is taking everything as a green shoot. Well almost everything. I just dont make any bets ahead of earnings because of how reactionary people are. There will be chances to be long or short after the initial reaction.


On Jul 23 10:09 AM LoveShorting wrote:

> excellent article, thank you. I am holding my COH short just for
> the adrenaline rush (and because I am still a small fish and won't
> lose the farm.... and because I have pared my position and yes, would
> double up on a pop. ) But I like AXP too much to short them. Too
> emotional?

Covering American Express and Capital One Shorts Ahead of Earnings

I am hoping one of them pops 20% on earnings ;) exactly for those reasons.

But i doubt it.. just covering my bases.


On Jul 22 06:38 PM Drew Arnold wrote:

> Good call on covering. In fact, if these companies "surprise" to
> the upside or find another excuse to shoot higher, there could be
> an even better opportunity to put on a short position.

Duopoly Visa and Mastercard Vs. Retailers - Who Wins in a Free Market?

I see that in gasoline, for example usually 10 cents off at station if you pay gas over credit


On Jun 20 10:41 PM E Nuff Sed wrote:

> I agree that these monopolists should be sued.
> Why don't the retailers get together and give a discount (i.e. 2
> or 3%) for people who pay cash or debit?

Duopoly Visa and Mastercard Vs. Retailers - Who Wins in a Free Market?

You wrote:

US pays more interchange than any other developed country - about 60% of what is globally collected. We also have the highest interchange rate of ANY tier 1 or 2 country?

I believe the EU just came down hard on Mastercard and now is going after Visa for these rates - MA agreed to 0.3 (I believe, I am going off memory and might be mixing things up)

It's just two very different sets of ideaologies - I think both have pros and cons. Here we claim things are free market (even when GE's Immelt says the US is never a free market, and he positions GE to go where the government is) yet under the guise of this claim allow oligopies. Whereas in Europe they seem to be more concerned for the consumer but of course have their drawbacks there as well.

I am sure there is a happy medium, but it will never be reached in the US with the growth of lobbyists as a dominant force even versus a decade ago.

Duopoly Visa and Mastercard Vs. Retailers - Who Wins in a Free Market?

Good comments on both PaymentsGuy and dkold, thanks


On Jun 19 11:55 AM PaymentsGuy wrote:

> gpatrick: the merchant processor sets only a small piece of the total
> merchant fee. Interchange is by far the largest piece of merchant
> costs. It is set by the card brands (V,MC) and processors have no
> ability to change it. When negotiating processing, merchants can
> only affect the processor’s markups and fees.
>
> Merchants have some good points. The fees are essentially take it
> or leave it, seem high, and change in an apparently arbitrary manner.
> But don’t wave off the other side as “big bad banks and their monopolistic
> buddies.”
>
> Interchange is not a "hidden fee on consumers" any more than the
> cost of employee salaries or the cost of electricity is a hidden
> fee. Merchants sign detailed contracts that clearly disclose pricing
> and receive detailed statements that show what they paid and why.
> Interchange is a completely transparent, fully disclosed set of fees
> which merhants pass on to consumers as a cost of doing business.
> Only in limited cases, such as fuel, is there so little price elasticity
> that this is a huge problem. The argument that interchange harms
> consumers is dubious; it only hurts them to the extent that prices
> would be lower in its absence. We can safely assume that retailers
> will not lower prices if they get lower rates.
>
> Merchants also downplay the enormous value they receive. Consumers
> like cards, shop where they are accepted, and spend more when they
> do. By taking cards, merchants pay 2% to get guaranteed funds, often
> overnight. The cost of handling checks is larger, settlement is
> slower, and the merchant assumes the risk of bad funds. Even cash
> has a significant handling cost (those armored cars don't show up
> for free) and is prone to loss and error.
>
> Further, merchants increasingly accept American Express, despite
> its higher cost. They do this voluntarily, despite the fact that
> they would turn away very few customers by not doing so (how many
> AmEx cardholders don't also have a V or MC?). If they receive no
> benefit, they should drop AmEx, right?
>
> There should be room for compromise here. I’m not saying that interchange
> is not too high, card acceptance rules are not too restrictive, or
> that the rate setting mechanism is not maddening. But when merchants
> call it a “hidden tax”, claim they receive no real benefit, and try
> to make it a consumer issue, they are being more dishonest than their
> adversaries.

Credit Card Losses Are the New Bad Mortgages

Perhaps the print is not large enough of a font?


On May 12 08:49 AM Arroway wrote:

> Isn't part of the problem inherent in the fact that Eddie Ward, 32,
> from Arkansas, doesn't even know his balance to the nearest $5,000?

Credit Card Losses Are the New Bad Mortgages

lol.
Maybe they do!
didnt everyone have a credit card division in 06?


On May 11 09:16 PM J Moayyad wrote:

> Change your ticker of Capital One to COP from COF. You've got it
> listen wrong, unless Conoco has a credit division I don't know about
> ;)

Credit Card Losses Are the New Bad Mortgages

Anthony - if we were not the reserve currency of the world we would not get away with what we are doing. In about 10-15 years the Chinese yuan should be free floating and China should have a mature bond market. Until then we are the only game in town and hence can seemingly issue as much debt as we wish and the world still runs into our debt and currency as a safe haven. If Europe were in better shape or "more unified" or Japan was not a 20 year basket case we would not get away with this.

So my expectation is we continue these policies until there is a deep seated and valid competitor. That will be China. But they have a mostly closed system for now but are quietly doing a lot of things to change this - i.e. 1:1 currency swap situations with certain countries.

Look for the Simon Johnson posts on my blog or here on Seeking Alpha - it explains how we have the exact same situation as a 3rd world country. In fact that is how Nouriel Roubini caught what was to happen in US - he said he saw all the same signs as destabilized 3rd world countries before they fell off cliff.

The only difference is when those countries went off cliff, US clucked about how they were bad actors and needed to fix their budget, and cut back, and do all the "right things". But when it came to us... we didn't follow our own advice. Two faced.

But again, we have the ball and can do whatever we wish since there are no real alternatives - hence unlike those 3rd world countries who had to make hard decisions because the world turned off their spigot we've had the exact opposite situation. Remarkably - the first country to set off a world financial crisis that all the world ran TO them rather than AWAY from them.

Just keep an eye on what Chinese officials are saying and doing - many interesting develops each month. They will the the axis on the other side of the world but its going to take time. For now its a co-dependent situation between us.


On May 11 06:12 PM Anthony B wrote:

> So, assuming the 'limitless' quantitative easing to keep mortgage
> rates low and housing prices up. It'd be deciding to keep housing
> prices up in exchange for $4+ gas. That went really well last time.
>
>
> The difference is this time with unemployment at 10% plus, and wage
> freezes for everyone who still has a job... no one will be able to
> afford the gas. I'm still hoping for 'limited' QE.
>
> On May 11 05:22 PM TraderMark wrote:

Credit Card Losses Are the New Bad Mortgages

AMEX used to cater just to upper X% crowd. But when you are a public company and you see easy money being made by competitors you get pressure from shareholders. So to maintain your CEO package you must get that stock price up one way or the other. So AMEX moved downstream in a big way in 2006-2007. Now they are paying for it. If they had stuck to policies 2004 or earlier they would be in much better shape.

Now as a solution they are literally paying people $300 to close accounts (carrots) and other tactics of much more hardball tactic (stick) - I am not sure if Seeking Alpha has my post on AXP recent tactics but you can search here or my blog on what they are doing now.

They made an error basically chasing for riches. Sort of like what the investment banks and indeed money center banks (the huge ones) did - many of these businesses are now simply run to scalp as much short term gains as possible and if you leave a smoking hulk behind so be it, you still get your massive compensation. And if you are a bank you get the US taxpayer to save you in 99% of cases... as long as you are big enough to matter.


On May 11 05:31 PM PastTense wrote:

> I used to be under the impression that AMEX had higher standards
> than the Visa/MC crowd, so the data about similar charge-off rates
> is surprising. Was I wrong about this, or did AMEX adopt lower standards
> in the last few years....?

Credit Card Losses Are the New Bad Mortgages

If China says no, Ben says yes... $300B will just be the start for their quantitative easing. Their balance sheet is theoretically limitless - see Zimbabwe currency for "limitless" applications


On May 11 04:53 PM Anthony B wrote:

> I think I need a post from Cetin to try to cheer me up after that
> one. What if China says no to us refinancing mortgages at 1%, how
> many mortgages will be underwater if rates go up to 6-7%?!

Credit Card Losses Are the New Bad Mortgages

Paging Celtin, Paging Celtin.

Removing American Express from the Trio of Death

No, won't go to zero. The Fed/ Treasury won't allow any major bank to fail. If Citigroup will "win", COF will win. COF is in a lot better shape than Citi.

COF will have impaired earnings for a long while unless you are in the "everything will be back to normal and 10% unemployment rate is cool" crowd.

This will be a very pricey stock for a long while.

To Jasper, I wrote this piece before the Friday explosion up in price in AXP and I don't want to be a buyer "up here". Now its quite expensive. If you shorted late Friday you should be in good shape, thanks to swine.

Expecting the 'Better than Expected' from GE, Google and JPMorgan

Pretty soon - I anticipate a nice 7-9% pullback somewhere between S&P 870-900.

Just as 6 weeks ago you could wake up and short anything and win, now vice versa. Huge swing in emotion and sentiment. Once all shorts give up, we'll probably start turning the other way

After that I expect a very range bound market but over a quite large range.

Assuming valuation means something nowadays.


On Apr 15 10:55 PM R. Ennis wrote:

> Hey Trader Mark,
>
> Yep, bear markets generally kill all involved. I'm getting the feeling
> that it is time to start shorting....especially as some of my favorite
> bears capitulate. I'll be all in short by Friday.
>
> regards,
> r.ennis