A Straw in the Wind?

If you spend much time in the investment world you learn to look for little things that can be a tip off to either good times or bad.

Most financial disasters occur when there is too much money around, not that it causes inflation as much as easy money causes mass stupidity. I know it’s 10 years since the GFC but think back, if you can, to what was going on leading up to it.

You had lending standards that were so loose that anyone, or thing, or group of people, or group things with a pulse could borrow money to buy a house. In a very real sense, in those years, people were being paid to lie, about assets, lie about income, lie about everything.

You had credit cards being handed out like candy or starter drugs, with the same effects. Candy rots your teeth and makes you gain weight, starter drugs rot your soul. Credit cards rot your finances.

We are now in a long period of easy money and guess what? As the chart above indicates charge offs on credit cards are rising! Gosh, is history repeating itself?

Credit Card companies grow by adding new customers who borrow. Like any credit extension operation there is a strong push to lower the standards to gain new customers so you can grow faster. From the above you can see that Cap One and Synchrony seem to have lowered their standards and are getting a lot of dodgy customers who are not paying. What really surprises me is that Bank of America isn’t among those leading the charge in losses, usually B of A leads the pack in doing silly things with money.

Anyway, just saying.

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