The Credit Card Trade

American Express (AXP) just can’t get its act together. After reporting its second quarter earnings, it’s clear that our macro Growth Slowing call is kicking into gear. The company reported large sequential deceleration in every growth category.


The company isn’t growing card volumes and instead is watching them evaporate, particularly in Europe. Taking into account that 100 basis points equates to one percentage point, look at the downward spiral that is AXP below:


US volumes slowed 380 bps to 8.7% YoY in 2Q vs. 12.5% in 1Q. International volumes slowed 920 bps to 3.0% YoY growth in 2Q from 12.2% YoY growth in 1Q. Right now the business is split 2/3 US and 1/3 International. As a result, overall growth slowed 570 bps to 6.7% YoY in 2Q from 12.4% last quarter.


Conversely, MasterCard (MA) is doing quite well. Over the last five years, MasterCard is up 157% compared with American Express’ -12%.  It’s easy to see why we’re bearish on AXP and bullish on MA.  Visa (V) is also a winner, up over 95% during the same five year period. V and MA are doing well in the broader market. The Financials SPDR (XLF) lost 55% in that five year period, too.



The Credit Card Trade  - AXPvsMA



The chart says it all. While MasterCard may be a little pricey, trading at 19x earnings, it’s golden compared to American Express’ performance and outlook.

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more