San Diego Housing Bubble News and Analysis

Many of the AMEX customers were house rich and cash poor. When the RE market cratered, they became house poor and cash poor. This is a repeat of Orange county story from early '90s.

bsrsharma,

Could you give me a refresher course in what happened in O.C. late 80ies and early 90ies. I specifically remember as a kid O.C. filed for bankruptcy? What was that about. Was that R.E. related?

(...too lazy to google it...after all, it is my middle name.)

OC, circa 1990 to 1998. Housing prices in the tank. Employment, good but weak market. Rents, decreasing. About 1995-1998, homes could be had for less than equivalent rent.

The OC bankruptcy, was not RE related. However, I wouldn't be surpised to see a repeat. OC went BK, because everybody was trusting the magically investment powers of the treasurer to generate big fat profits to increase their budget. Unfortunately, like the MBSes, they vaporized on risk and much like Real Estate, the hammer fell because of leverage. See Robert Citron in the Wikipedia.

WSJ: "AMEX has been hurt by a slowdown in cardholder spending and rising losses and delinquencies in its fast-growing lending portfolio, which allows cardholders to carry a balance. To stem the losses, AmEx has been slashing credit lines and tightening its underwriting standards to a range of customers.
The company defended its strategy to expand its credit-card business even though those customers are responsible for the bulk of its woes, saying that it hasn't lowered underwriting standards on these newer customers. "The quality of accounts that we've added in recent years is as strong as our traditional card members," Mr. Chenault said."
The company said it wrote off 5.3% of loans during the second quarter, up from 4.3% in the first quarter and 2.9% in the second quarter of 2007.

Looks like the new customers are causing defaults. Not as many new rich people as they expected and small businesses are feeling pain.

AmEx collects an average of 2.6% of customers' bills, vs. about 2% levied by rivals. AmEx says merchants pay higher fees to gain access to its high-end customers.

Are there merchants who only take AMEX and not Visa/MC? These 2-2.6% fees are incredibly high in this electronic market. Heard that someone like Amazon wanted to come out without new payment card that would charge 1%, but these Visa/MC guys got special training from DeBeers to essentially lock market.

My hero of the week: Ken Chenault, CEO of American Express (AXP), The chairman and chief executive of American Express received compensation valued at $53.2 million in 2007, nearly double the $27.3 million he received in 2006, according to a regulatory filing Monday. The main driver behind the raise for the executive, Kenneth I. Chenault, was an increase in the stock and options awards. He received $42.8 million in stock awards in 2007 and an incentive stock option grant. For 2006, his stock awards were valued at $16.9 million. Mr. Chenault’s base salary in 2007 increased nearly 13 percent to $1.24 million, and he got $6.5 million in bonuses. Wonder why there are no negative bonuses if the company/stock tanks?? Stock does good, he get the credit. Stock tanks, its the economy, Piggs causing home prices crashes and litany of American Excuses.

http://www.nytimes.com/2008/02/26/busine...

He logs a lot of miles on the company's corporate jet. According to the company's proxy statement, he also received $405,375 worth of personal travel on the jet, and $132,019 in personal use of a company car.

Now he has to sacrifice people because you selfish bast**rds are not spending money or paying it back. Well, hope he set aside some money for Soprano type analyst to get through pain of layoffs.

$132,019 in personal use of a company car

Really??? Let me guess...it was not a Honda.

How exactly do you spend this money on a personal use of a company car? This is of course meaning it was "use" rather than buying a car for him.

How much are the limo drivers making these days anyway?