MudEngineer

Does True Competition Among Credit Card Issuers Exist?

The fact that most credit card companies are losing money right now has much more to do with their stupidity on who they gave credit cards to and the fact that currently about 10% of their poorly chosen customers are defaulting on their credit card debts. Some due to unemployment and some due to greatly excessive debt load.

Their losses are not due to excessive competition!


On Sep 17 03:06 PM It Figures wrote:

> The most transparent and objective measure of competition in an industry
> is the profitability of the participants. Sustained above average
> profitability is a sign of lack of competition - think drug companies
> in the '80's and '90's, or MSFT a decade ago.
>
> Given that most credit card issuers are losing money right now,
> and have for the last year or so, it is hard to characterize the
> sector as lacking competition in any economic sense.
>
> Folks would benefit from trying to separate their personal "beefs"
> with these companies from their economic/investment analysis

Capital One Surges on Lower Default Numbers

This little maneuver is one designed to jack up the price just long enough for those who had sold huge amounts of puts to buy them back cheaply or let them expire worthless. Now that large amounts of calls have been sold at the top, don't be at all supprised to see this hog fall like crazy on options expiration day which is this Friday.

There will be massive credit card losses in the future as the unemployed run out of benefits and start to run up their cards in a last ditch effort to stay afloat. Raising rates to usurious levels of almost 30% for those that are late literally does force people into bankruptcy so watch for much higher bankruptcy rates. Based on Capitol One's stupid TV ads, I would say that they issued cards to almost anyone who could still take a breath. Sell short and wait.

The Directionless Financial Sector

With the current credit card default rate at 10.4% and rising due to the unemployed running out of unemployment benefits, and the large number of underemployed (average workweek is now down to 30 hours); I have been shorting COF looking for poor earnings in the future due to the above. They sent all those credit cards out to anyone who was still breathing and the losses might get huge!