Prof

Prof. Depew was writing about credit cards in Mondays' in five things point number two: Former Homeowners Desperately Working to Save House of Credit Cards. Here's a recap in case you missed it. BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Credit card delinquencies fell to 4.41% in the first quarter of 2007, from 4.56% at the end of 2006, according to the American Bankers Association. Conventional wisdom has always held that a person would lose his or her credit cards long before risking losing the home. Merrill Lynch's David Rosenberg recently noted that balances on credit cards surged at an 11% annual rate in May and June, the highest rate since 2000-2001. we looked at a Federal Reserve paper by Vice-Chairman Donald Kohn, with Fed economist Karen Dynan, arguing that the rise in home prices was the primary reason consumer borrowing has soared since 2001. With median home prices now poised for what could be the first yearly decline since federal housing agencies began tracking them, it's back to the credit cards. Credit-card companies were forced to write off 4.58 per cent of payments as uncollectable in the first half of 2007, almost 30 per cent higher year-on-year. Late payments also rose, and the quarterly payment rate – a measure of cardholders' willingness and ability to repay their debt – fell for the first time in more than four years. But Moody's said the rate of losses remained well below the 6.29 per cent average seen in 2004, a year before the US enacted a new law that made filing for personal bankruptcy more onerous. Recent increases in credit card losses can in part be ascribed to a steady rise in personal bankruptcy filings since 2005. According to the Administrative Office of the US Courts, quarterly non-business bankruptcy filings have been rising since the first quarter of 2006. And the spike high in bankruptcies and credit card writeoffs after the bankruptcy reform act was enacted will be taken out in due time. That law, which attempts to make consumers debt slaves forever, is simply going to backfire in additional ways still not seen as consumers find ways around the means test. If the 200 EMA does not hold, look for the gap near 110 to close, with additional support at 100. That's a significant decline from here if it plays out that way. American Express is struggling to hold the 200 EMA and there is also a potential bearish cross under of the 50 EMA with the 200 EMA to be watching. Now that steady delinquency rates are a thing of the past, inquiring minds just might be asking 'what's the next shoe to drop?' Following are three possible answers: David Rosenberg at Merrill Lynch was quoted as saying 'The next shoe to drop from this subprime mortgage fiasco, which has already fed into the asset-backed market, is probably going to be the credit card business.' 'The turbulence in subprime mortgages has now spread to the commercial paper market -- a $2.2 trillion market in the USA that is the working capital lifeblood for the corporate sector,' David Rosenberg, North American economist at Merrill Lynch wrote in a note to clients on [August 15]. 'This is looking worse than just another credit cycle.' Rosenberg noted that more than half of the commercial paper market is backed by residential mortgages, credit card receivables, car loans and other bonds. 'Now the rating agencies have warned that they might downgrade several issuers of commercial paper,' he wrote. Actually shoes are dropping so fast and those shoes are so interrelated that it's going to be difficult to say precisely which shoe hits the ground first. The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.