In the must read column, from Mynianville: link.
"...no one is talking about it yet, but I think the market will soon begin to realize that the credit card lenders have in essence become the consumer lenders of last resort. As consumers have been shut out of the mortgage and home equity world, the last available credit is plastic. One statistic that I have found very troubling is the degree to which credit card balance growth is running ahead of retail sales growth - a key sign that the consumer is stretched. In normal times, you would expect aggregate credit card balance growth to run about in line with GDP and retail sales growth. This year it is running almost 2.5 times that. Clearly consumers are using their cards for far more than purchases. And my guess is that for many Americans their credit cards have become the latest, but potentially last, source of financing available.
Because of the oversized credit card balance growth, however, I think the market is missing what is really happening within card issuer portfolios – particularly loss and delinquency data. Today, no one seems to be very concerned about the increases in reported losses and delinquencies. However, when you start to normalize these statistics for the enormous balance growth we’ve seen, the increases in both are quite dramatic."
"...no one is talking about it yet, but I think the market will soon begin to realize that the credit card lenders have in essence become the consumer lenders of last resort. As consumers have been shut out of the mortgage and home equity world, the last available credit is plastic. One statistic that I have found very troubling is the degree to which credit card balance growth is running ahead of retail sales growth - a key sign that the consumer is stretched. In normal times, you would expect aggregate credit card balance growth to run about in line with GDP and retail sales growth. This year it is running almost 2.5 times that. Clearly consumers are using their cards for far more than purchases. And my guess is that for many Americans their credit cards have become the latest, but potentially last, source of financing available.
Because of the oversized credit card balance growth, however, I think the market is missing what is really happening within card issuer portfolios – particularly loss and delinquency data. Today, no one seems to be very concerned about the increases in reported losses and delinquencies. However, when you start to normalize these statistics for the enormous balance growth we’ve seen, the increases in both are quite dramatic."
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