IANR

Here Comes a Consumer Killer

On the other hand the credit card companies are experiencing increasing rates of default (and thereby increasing their provisions each Quarter) in the current economic environment. So what should a prudent company do to stem such writedowns and losses? Are you suggesting that reduced lines of cedit and higher rates of interest are NOT the tools they should use?
The writer may be able to pay off his CC debt easily (which begs the question as to why he was running it anyway) for others the higher interest rates is a an incentive to begin to pay off such debt quicker than B4. It's NOT the job of CC companies to help the economy recover by increasing lending and increasing their losses. They are responsible to shareholders and BoDs to manage their business prudently.
Better money management by consumers will eventually improve our economy while we undergo a period of deleveraging until the economy can safely grow again.

Memo to Warren: AmEx Preferred at 15%, Warrants at $12

I believe I should expand on my comments and also ask the question:
What event would make the writer close out their short position in AXP? This considering that AXP will be profitable in 2008 and is expected to be profitable in 2009, even if delinquencies reach a high of near 9%... Bearing in mid the stock is down near 70% from its high. i.e. how much more play is there, realistically, on the downside? Needless to say the the short play has been terrifically profitable to-date. But can it continue far?

I don't mean to describe the AXP managers as in ANY way "faultless". They are "marketing" orientated and "do" that well and run a reasonable tight expense base (much more in line after their new 10% culling this Quarter). What they have NEVER been is good Liability managers and for decades they refused to accept that there was anything better than funding largely via the cheap and prior readilly available commercial paper(CP) market. Now that "mistake" has been realised () and they have become a BHC all of a sudden (should have heppend decaes ago), This gives them an immediate alternative to very expensive CP markets i.e. Fed windows.....
As a newly annointed BHC and recipient of $3.5B in TARP they are in what appears to be OK financial health (well compared with all those other financial service BHCs which have been making depressingly consistent Quarterly losses and writing down assets by the many 10s of billions). We will likely see some more domestic bank failures, closed by the FDIC and poor asserts removed. What better BHC to sweep in and takeover such failed BHC deposit base? And what better use of such money to fund still profitable AXP card receivable business with relatively inexpensive, stable funding. The Fed and the FDIC would surely be happy as it would remove AXP as a future heavy user of "window liquidity" and create a combined MUCH stronger business. Paradoxically by a poor (AXP) management decision, not to become a BHC much sooner (read decades ago) AXP might well "luck out" by sometime soon helping the Fed Gvt takeover such a BHC cheaply. Of course current shareholders probably don't think themselves lucky and one has to ask why management and directors only belatedly saw the light (BHC light). Hint get better stronger independent thinkers as directors. But that's an industry wide problem! It was also a reulatory failure in alllowing non bank companies to flourish, largely outside of Fed supervision for decades, yet morp into bank like lending.


A Liability based bank takeover would be long term good for AXP's business and surely erode much more downside risk to the AXP stock and raise investor and analysts confidence in the future prospects?

I wonder why, therefore, the writer and shorter of AXP stock continues to like take the shorting risk in AXP? They have done tremendously well thus far. When is time for a rethink?

I would also like to see a new generation of AXP management hired, from the outside, to counterbalance their existing marketing heavyweights at the Executive Management levels. Preferably person(s) with Liability management background and excellent dynamic risk management skills. This could place AXP back as a TOP financial services(BHC kind) leader for years to come. A much quicker potential fix, IMHO, than at many other financial services companies.

Disclosure : Long AXP

Memo to Warren: AmEx Preferred at 15%, Warrants at $12

Of course if meantime AXP buys a nice $20B domesic bank with a nice set of stable Liabilities...... One or two may naturally become available...