US Credit card delinquencies, charge offs up substantially Print E-mail Last Modified: Tuesday, Apr 15/2008 18:23 Written by Guerin Green ResearchRecap.com notes that: Credit card performance deteriorated further in two important metrics in March, but not by enough for any immediate rating implications for credit card asset-backed securities, according to Moodyâs. The charge-off rate is now the highest it has been since December 2005, when charge-offs temporarily spiked due to a change in the consumer bankruptcy law, Moodyâs said. âThe normalization of bankruptcy filings and economic headwinds will most certainly continue to increase charge-off rates throughout the year and, perhaps, into 2009.The charge-off rate measures those credit card account balances written off as uncollectible as an annualized percent of total loans outstanding. The rise in February marks the fourteenth consecutive month of year-over-year increase and the fifth consecutive month of month-over-month increase.â At 5.59%, the February charge-off rate is just above the long-term average of about 5.5%, Moodyâs said. After the 2001 recession, charge- off rates eventually reached 7.05% in May 2003, according to figures tracked by Moodyâs Credit Card Index. As in the 2001 recession, the rising trend in charge-off rates following the 1991 recession significantly lagged (by more than a year) the official periods of business cycle contraction. Moodyâs âbelieves that fundamental differences in credit underwriting standards, risk management, issuer credit strength, and macroeconomic drivers explain why the credit card sector does not appear to be following the downturn in the sub-prime mortgage sector at this time.â The delinquency rate, which can be an early indicator of future charge- off rates, is also on the rise. In February, this rate was 4.53%, the highest it has been since March 2004.
S2007S, are you in any trades that correspond with your scenario of the credit card loans being the 'next shoe to drop'? E.g. you could short (or put puts on) AXP and COF, I believe both have lots of retail credit card loan exposure.
Late yesterday he said that the market's rally did not phase him and that he would be "buying inverse ETF's such as TWM, FXP, and DUG as early as tomorrow morning . . ." Again, I don't think that this kid even trades. I think that he might be in college and works part-time for Baron on ET. How else could you explain so many "cut and paste" jobs day after day after day?