Have We Hit Bottom

I'm looking for a possible contrarian bump today in the markets as many will assume that the bottom has been reached - after all, how could it fall below 1997 levels? Surely, that's not possible.

Yet the other shoe - or shoes - have yet to drop. Now we hear that Amex is offering a reward to some of its customers to leave.

American Express Co. (AXP) is offering a $300 incentive for customers to cancel their accounts as the card issuer and payments processor grapples with surging loan delinquencies and reduced card-member spending.

The move comes as credit rating firms have warned that rising credit-card delinquencies could push the industry's charge-off rate into the double-digits by the end of the year from December's record level of 7.7% amid higher unemployment and a bleak economic outlook.

"It's a tool that has been used in the past to motivate borrowers to close off balances," says Scott Valentin, an analyst at FBR Capital Markets. Valentin cited an instance some years ago where National City offered $200 to borrowers who would close their home equity lines of credit.
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A potential problem for the company "is adverse selection," says Valentin. " The risk is that the ones that take $300 and close their balances do have the ability to pay, and the ones left behind that don't take the $300 anyway couldn't afford to pay off their balance."