January 27, 2009
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News: Cap One Can't Cap Calamity.
No, the ‘worm didn't turn'. The UFO turned. Turned on a dime, too – Cap One's dime (actually, quite a few dimes). Rollin' in the dough back in 2007, they boasted profits in the range of $1.57 billion. By 2008, the credit card mogul's spaceship had made a quick switcharoo descent from Deep Space 9 down to Deep Water 9, reporting a $46 million red figure (first red figure ever). $1.4 billion down the tube in just the last quarter. This news may not be as shocking today as was the shock last year when credit card loss projections were predicted to be as high as $5.6 billion. No one wanted to hear (or believe) that credit card loses would actually reach the $6.4 billion mark, instead.
It turns out that jobs supposed to provided by ‘trickle-down' have experienced the worst drought in our lifetime (at least most of us). Any connection here? Failed ‘trickle-down, no job, no house and bankrupt. Credit card debt? Forgetaboutit. No rush, we've got a year or so to think it over. In fact, the job-loss typhoon is just brewing now – with credit card debt in tow.
So, where's this sea floor, anyway? Steady, as she goes, Cap'n (Cap One). Fitch Ratings report sightings of sea monsters and serious undertow. The good ship B of A has already been caught in the wake of a lynch mob (Merrill). They appear to be under tow (not up, either). Even with the $3.6 bullion bailout, this may be the wrong time for a high-speed Chevy Chase. We're looking at a monsoon season of bad economic weather. Like with B of A, credit card charge-offs have the whole credit card industry top-heavy with dwindling lifeboats.
Certainly, Cap One is not alone in the credit card storm. It appears as though none will be spared. It's the time now for credit card lenders to be skittish about new investments. It might be better to batten the hatches and survive.