AkLi wrote a post · Apr 19 14:46

Tinfoil (For Followers) [IS THERE A BUBBLE?]

Good afternoon everyone! As I mentioned in the previous The Market post, I will be sharing some Tinfoil I have in markets.

For reference, Tinfoil or “Tin Foil” is basically a theory without actual facts behind it. A hunch, or conspiracy more like. Therefore, please do not take any trades based off my ideas. You may certainly lose money, so do your own research, assess your personal finances, and consult with your financial advisor before taking any trades.

Todays Topic: Credit Cards

The topic of Credit Cards is probably not a suprise to you if you read today's The Market, or have been following earnings / trending news. I have talked about Credit Card Tin Foil before, so let me recap on what I mentioned.

I talked about:

- The misconception of credit cards as "Free Money"

- A possible Credit Bubble

- My interest in Bank Earnings

- My thoughts about that it might be smart to enter into credit cards companies due to spending as a result of what Jerome Powell said on previous FOMC days.

- What debt is with examples

And a lot more. I have written about all of these in seperate articles, but the most recent Credit Card analysis I did is in this article:

For Followers (SPY Data) (Advanced)

Tinfoil (For Followers) [IS THERE A BUBBLE?]

Now I am more interested than ever into these Credit Card Companies.

As such, I have created a new list and charts to track their performances.

Credit/Banking ETFs

Credit Card Stocks 1

Credit Card Stocks 2

If you want to create charts like these I wrote a full article about it here.

DeepCharts Part 2 ((MY CHARTING SETUP + PODCAST?) (The Market))

I chose to make these charts because I want to watch and study how they move and ask myself some questions:

1. Which Credit Card stocks are up today?

2. Which Credit Card stock is leading the sector?

3. Are any Credit Card stocks leading the market?

4. How are markets reacting to Credit Card stocks?

5. Is there a buying opportunity into one of these stocks?

I can also track earnings behavior this way.

Earnings Date Sorted By Upcoming Date:

American Express: Bullish Earnings

Discover: Bullish Earnings

Visa: 04/23/2024

Synchrony: 04/24/2024

Capital One: 04/25/2024

Barclays: 04/25/2024

Mastercard: 05/01/2024

Citi: 07/12/2024

Wells Fargo: 07/12/2024

JP Morgan Chase: 07/12/2024

Bank of America: 07/16/2024

So far:

2/10 Credit Card institutions had Better than expected earnings.

2/10 Credit Card insitutions had Better than expected earnings as a result of increased spending.

Discover reported a 68% decrease of net income due to misclassification issues, not related to payments made on time.

Actually let me dive even deeper.

Credit Card Companies That Offer Buy Now Pay Later

American Express: Plan It

Citi: Flex Pay

Chase: My Chase Plan

Barclays: Barclays Easy Pay

Visa: Installments

Mastercard: Installments

And thats just to say a few.

Earnings Reports:

American Express

From the Card Member Loans section, not only are card member spending going up, but the reported wages from card members is also increasing. When people make more money, they spend more. Bearish for inflation. Not only that, but loans are also up on average and late fees are also up.

So basically, people are spending inline or more than they make, resulting in increased deliquencies and interest. Furthermore, card members are choosing not to pay off their debts.

So card members are making more money, the spending is increasing, but also card members are taking out more loans or choosing to not pay it back. If they were paying off credit cards with increased wages, then the % of past due would decrease right? No, it's the same.

Discover

I know this is hard to read, so let me summarize it:

Credit Card Loans: Up

Private and Student Loans: Up

Borrowing: Up

Saving and Deposits: Down

Interest Bearing Liabilities: Up

Loan Recievables:

Ending Loans: Down

Average Loans: Up

Interest Yield: Up

Deliquency Rate (30 days): Down

Deliquency Rate (90 days): Up

Loans Deliquency Rate (30 days): Down

Loans Deliquency Rate (90 days): Up

Credit Card Loans

Ending Loans: Down

Average Loans: Up

Interest Yield: Up

Deliquency Rate (30 days): Up

Deliquency Rate (90 days): Up

Loans Deliquency Rate (30 days): Down

Loans Deliquency Rate (90 days) Up

So, individuals are borrowing at a lower frequency, but instead of borrowing, they are choosing to spend on their credit cards. As a result, the deliquency rates are skewed from overall loan rating, to credit borrowing. This tells me that Discover changed their approval rate for loan, resulting in increased usage of credit cards as a way of a "loan".

Unfortunately, I cannot find anywhere on their earnings sheet of reported card member salery increases or decreases, however I am going to make the assumption that people are making more money, spending more, not paying off their credit cards which hurts their credit and directly correlated to an individuals ability to get approval for a loan.

Equifax Credit Card Balance Chart

States in the US with the highest Credit Card Debt in Q3 and Q4 of 2023

Household Personal Debt

90 Day Personal Debt

Credit Loans Top Auto Loans

Outstanding Personal Loans

Consumors Taking Out Loans For Debt

Who Is In Credit Card Debt?

Oh, only the majority of individuals aged 40s - 60s. What does that mean for saving for the future generations?

What are individuals spending with?

Who has all the credit cards?

So not only are baby boomers in more Credit Card debt, they also own the most Credit Cards on average too.

They are also the majority of Credit Card holders who don't know what their interest rate is?

So are they spending just to spend, or spending and not thinking about it, or spending and simply not caring?

What about Buy Now Pay Later? Do they enjoy financing their everyday purchases?

Takeaway

So, from my research here are a few consistancies:

1. Baby boomers have the most Credit Cards, spend the most without knowing what their interest rates are, and own the most Credit Cards.

2. The percentage of Loan borrowers are taking out loans to pay of debts or personal expenses, specifically Credit Card debt itself and homeowner payments?

3. In fact, the cost of living is so high, that notably expensive states to live in such as California, Massachusetts, New York and New Jersey area, DC Area, all have the most credit card debt?

4. IN FACT, those same areas, along with almost everywhere else, is experiencing the highest homeowner unaffordability in history?

5. IN FACT, affordability is so low, that the majority of homeowners HAVE to take out loans and are enjoying financing their everyday purchases

Who owns the most homes?

Oh thats right, the same group that doesn't know what their interest rate is, takes out the most loans, has the most credit cards, has the most debt, and spends the most.

Are they keeping their homes? What is happening?

NO, they are selling their homes. And the younger generation cant even fathom owning a home.

Not only that, but people are choosing to rent more than owning a home

All the while the price to rent per month has been increasing.

Conclusion

Yeah there's a bubble.

How big the bubble is I have no idea, but it looks large. Seriously large. I want to pay close attention to these other Credit Card company earnings, and if they are saying the same thing American Express and Discover are saying interms of deliquency rates, loan rates, costs, and beating earnings because of it then I think we might be looking down the barrel of the next Great Depression. One much larger than 2008 and the .com bubble.

Again, this is all theory. None of this is an indicator of what will happen, what might happen, or how anything will happen. Simply food for thought. It is important to do research like this, as it teaches us what to be aware of in the economy and in markets. None of this is financial advice, and please do not take any trades based off this information. Tin Foil is strictly educational (if you can even classify the majority of Tin Foil as such), and therefore should not be acted upon financially until there is more food in the pot.

Thank you for reading

Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more

Translate

Report

836 Views

Comment

AkLi

Moo Contributor

Alkaline Analyst All Deep Dives: https://medium.com/@alkalinedeepdives

1112Followers

9Following

4324Visitors