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This week'searning report from American Express (AXP) quite frankly substantiates much of what we've been warning about for a long time. It is just taking longer to hit the "upper middle/lower upper" class. (Jan 10: Credit Card Warnings Here, Credit Card Warnings There) Remember our thesis - credit cards are the last major lifeline many Americans are clinging too. The real defaults in this group have only just begun - many should be able to make the minimum payment for a while, maybe 9 months, maybe 15, maybe 21 - but eventually without their home ATM to use as a lifeline, they will be out of places to juggle debt. And that's when the personal bankruptices begin to fly up the charts. So we use Capital One Financial (COF) for normal folk, and AXP for the upper 10-15%. Keep in mind this is in a time where rebate checks were being handed out by your grandchildren to stave off such data as we are starting to see below...

• American Express Co. said Monday its second-quarter profit tumbled 38 percent, well below Wall Street's forecast, as consumer spending slowed and the number of loans that had to be written off as unpaid increased beyond the lender's expectations.
• The company, known for catering to some of America's wealthiest consumers, said the effects of the weakening economy were evident even among its more established members with excellent credit.
• The results include a $374 million addition to credit reserves, reflecting higher credit losses and the expectation for increased write-offs in the third and fourth quarter.
• Results were hurt by a $1.5 billion provision for loan losses, up from $640 million in the 2007 quarter.
• The net loan write-off rate, including both on-balance-sheet cardmember loans and off-balance-sheet securitized cardmember loans, was 5.3 percent, compared with 2.9 percent in the prior-year quarter.
• "Consumer spending slowed during the latter part of the quarter and credit indicators deteriorated beyond our expectations," Chenault said.