The management at American Express (NYSE: AXP) must have hoped that its relatively high-end card holders might dodge much of the economic slowdown. It was not to be. According to The Wall Street Journal, "the card company said yesterday that it would take a $440 million pretax charge against fourth-quarter earnings as it sets aside more money to cover soured loans." The news and a warning from Capital One (NYSE: COF) showed that credit problems have moved beyond the mortgage market and into consumer credit.

American Express described its problems as "broad-based and sudden." So, part of the financial industry says the consumer pulled in very sharply in December, a sign that GDP may have already begun shrinking at the end of last year.

The consumer was the economy's last, best hope. He was needed to drive revenue in the retail and consumer goods markets. It appears now that his hibernation has begun in earnest.

Douglas A. McIntyre is an editor at 247wallst.com.

Capital One Financial Corp. (NYSE: COF) stock is falling this morning after the credit-card company said today that its 2007 earnings will not meet previous estimates, citing increased loan delinquencies and additional legal reserves in the fourth quarter. The company said it will take a $1.9 billion provision for loan losses in the fourth quarter, raising fears that the subprime mortgage crisis has hurt other credit classes. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on COF.

After hitting a one-year high of $83.84 in February, the stock hit a one-year low of $41.23 yesterday, which it has broken this morning. This morning, COF opened at $40.42. So far today the stock has hit a low of $38.85 and a high of $41.71. As of 10:45, COF is trading at $41.04, down $2.37 (-5.5%). The chart for COF looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a February bear-call credit spread above the $50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in 5 weeks as long as COF is below $50 at February expiration. capital One would have to rise by more than 22% before we would start to lose money.

Target (NYSE: TGT) is trading down over 2% on disappointing December sales.

Macy's (NYSE: M) is up over 2% on strong same-store sales numbers.

Merrill Lynch (NYSE: MER) is off 3% on news that the investment bank may have to raise more money.

Capital One (NYSE: COF) is off about 9% on a downward revision in earnings.

Stocks may trade differently in the pre-market than they do in the regular session.

Douglas A. McIntyre is an editor at 247wallst.com.

Capital One (NYSE: COF) announced that it expects to report earnings for the fourth quarter of 2007 of about 60 cents per share (diluted) and full year 2007 earnings of about $3.97 per share, below its prior expectation of "about $5.00 per share." According to CNN Money, the company "said it is taking a $1.9 billion provision for loan losses in the fourth quarter, including about $1.3 billion in charge-offs."

The news is particularly bad for those who had hoped default rates would be largely contained to the mortgage sector. Capital One is a significant provider of credit cards and auto loans.

There has been some hope that the consumer could help keep the economy afloat, if he was not stretched too thin. It appears that the final buttress that might hold GDP up is falling apart.

Douglas A. McIntyre is an editor at 247wallst.com.

TheStreet.com's Jim Cramer says the fresh troubles for IndyMac make it more imperative for the Fed to act.

We keep coming close to losing these companies that are fighting for their lives.

Yesterday we had First Marblehead (NYSE: FMD) (Cramer's Take) on student loans.

Is CIT (NYSE: CIT) (Cramer's Take) next with its student loan portfolio (as opposed to its mobile home portfolio and its subprime portfolio...sheesh!)?

We obviously had a giant problem with MBIA (NYSE: MBI) (Cramer's Take) over the amount of capital it needs to raise. Will it have to raise capital and cut the dividend?

MOST NOTEWORTHY: The mortgage finance sector, Applebee's, Fuel-Tech, BHP Billiton, Anglo American and Rio Tinto were today's noteworthy downgrades:

• Lehman downgraded the mortgage finance sector to Negative from Neutral citing the potential of over $100B in losses for the group in the coming years. Washington Mutual (NYSE: WM) was downgraded to Equal Weight from Overweight; IndyMac Bancorp (NYSE: IMB) and Countrywide Financial Corporation (NYSE: CFC) were downgraded to Underweight from Equal Weight.
  
• Applebee's International (NASDAQ: APPB) was downgraded to Underperform from Market Perform at Wachovia, as the firm sees potential downside risk if the company's acquisition of IHOP Corp (NYSE: IHP) does not go through, following mixed reviews from Proxy firms.
  
• Merriman downgraded shares of Fuel-Tech (NASDAQ: FTEK) to Sell from Neutral after channel checks indicated the competitive landscape is much more challenging than commonly perceived for the FUEL CHEM product line. Merriman sees significant risk to shares at current levels.
  
• Citigroup downgraded shares of BHP Billiton (NYSE: BHP), Anglo American (NASDAQ: AAUK) and Rio Tinto (NYSE: RTP) to Hold from Buy on valuation following the recent rally.

OTHER DOWNGRADES:

• Lehman downgraded the specialty finance sector to Neutral from Positive; the firm downgraded American Express Company (NYSE: AXP), Capital One Financial Corporation (NYSE: COF) and Discover Financial Services (NYSE: DFS) to Equal Weight from Overweight.
  
• Lululemon Athletica (NASDAQ: LULU) was downgraded to Neutral from Buy at Goldman Sachs.
  
• JP Morgan downgraded Dollar Tree Stores (NASDAQ: DLTR) to Underweight from Neutral.
  
• Angiotech Pharmaceuticals (NASDAQ: ANPI) was downgraded to Sector Performer from Sector Outperformer at CIBC and to Sector Perform from Outperform at RBC Capital.

Capital One Financial Corp. (NYSE: COF) is scheduled to report its earnings after today's market close, and investors are driving the stock down today after bad reports around the financial sector, with competitors Bank of America (NYSE: BAC) and Washington Mutual (NYSE: WM) posting particularly bad quarters. For COF, analysts are predicting a per share loss of $0.24 for the quarter, after earnings of $1.89 per share last quarter and also $1.89 per share in the year-ago quarter. Over the last few years, COF has been unable to consistently beat estimates. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on COF.

After hitting a one-year high of $83.84 in February, the stock dropped to a 52-week low of $59.49 in August. This morning, COF opened at $65.93. So far today the stock has hit a low of $64.80 and a high of $66.90. As of 10:45, COF is trading at $65.08, down $1.82 (-2.7%). The chart for COF looks bullish but deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $75 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just one month as long as COF is below $75 at November expiration. Capital One would have to rise by more than 15% before we would start to lose money. Learn more about this type of trade here.

For those consumers who have any money left after they look at the falling value of their homes and the huge credit card balances, Capital One (NYSE: COF) is prepared to offer reward points for money market deposits. Who says the froth is being squeezed out of the economy?

The Rewards Money Market, as it will be called, has an interest rate of 4.65% and will offer an airline mile for every $20 on deposit. According to The Wall Street Journal, Capital One insists that the new program has nothing to do with strengthening its deposit base during a time when banks are having problems with their mortgage portfolios. It is a matter of opinion whether Wall Street will believe that.

The fact remains that "safe money" like savings account deposits are desirable for banks especially while the home lending and credit card markets are in trouble. Capital One closed its wholesale mortgage unit last month.

And, most consumers would rather have airline miles than a free toaster.

Douglas A. McIntyre is a partner at 24/7 Wall St.

The Boston Globe reports that credit card companies have been targeting subprime mortgage holders.

The evidence is stunning. Direct mail credit card offers to subprime customers in the US jumped 41% during 2007's first half, compared with the first half in 2006. By contrast, direct mail offers targeted at customers with the best credit fell 13%. During this same period, defaults on subprime mortgages rose significantly -- in June, nearly 20% of subprime mortgages were at least 60 days past due, and more than 1 in 20 were in foreclosure.

The leaders in selling higher interest rate credit cards to the financially vulnerable includes some subprime mortgage leaders. Here's a partial list:

The initial take regarding Capital One's (NYSE: COF) decision to shut its GreenPoint Mortgage unit is that it's not likely to be the last or the biggest housing- and subprime-related layoff and closure, as the housing slump continues.

Capital One cut 1,900 jobs and took a $860 million charge, or about $2.15 per share to pay for the downsizing. COF now expects to earn about $5.00 per share in 2007, down from $7.15.

Moreover, at this juncture few in Wall Street circles are willing to predict a bottom for the housing and subprime sectors; the analysis is complicated by the fact that Wall Street still does not have comprehensive data on the percentage of subprime loans that are at-risk - i.e. that stand a better than 50/50 chance of moving to the default category. Further, two hurdles faced by institutions building subprime data bases is that the definition "subprime" appears to have shifted in the past 5 years and there doesn't appear to be a universal subprime loan definition used by all lenders.

MOST NOTEWORTHY: McDonald's (MCD), Micron Tech (MU), ManPower (MAN), ASML Holding (ASML) and Wm. Wrigley Jr Co (WWY) were today's notable upgrades:

• McDonald's (NYSE: MCD) is creating shareholder value by selling 1600 under-performing restaurants and using the money for share buyback programs and dividends and was upgraded to Buy from Hold at Matrix.

• AG Edwards upgraded Micron (NYSE: MU) to Buy from Hold on the belief notebook unit growth could stay in the 25-30% YoY range over the next two quarters, while desktop growth could pick up from the 4% attained in the June quarter. Up from a low of close to $5 in February, NAND spot prices are in the $8-$9 range for an 8Gb chip over the last few weeks.

• ManPower (NYSE: MAN) was upgraded to Strong Buy from Hold at Matrix based on the growing demand for search services in Europe, Africa and North America.

• Friedman Billings upgraded shares of ASML Holding (NASDAQ: ASML) to Outperform from Market Perform and added them to their Top Picks list based on recent checks that indicate a sustainable recovery in lithography tool bookings beyond Q3.

• Bear upgraded shares of Wrigley (NYSE: WWY) to Peer Perform from Underperform citing the better-then-expected response to competitor Cadbury (CSG), UK momentum in developing markets, and likely strong performance by new gum, "5."

OTHER UPGRADES:

• Calyon raised Capital One (NYSE: COF) to Buy from Add.

• Goldman raised Darden Restaurants (NYSE: DRI) to Buy from Neutral.

• Lehman upgraded National Semiconductor (NYSE: NSM) to Overweight from Equal Weight.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

I estimate that General Electric Company's (NYSE: GE) GE Money segment is worth between $29.6 billion and $54.7 billion.

GE Money, which constituted 13.3%, 13.1%, and 11.7% of GE consolidated revenues in 2006, 2005, and 2004, respectively, provides financial services to consumers and retailers in 50 countries. GE Money offers private-label credit cards; personal loans; bank cards; auto loans and leases; mortgages; corporate travel and purchasing cards; debt consolidation; home equity loans; deposit and other savings products, and credit insurance.

GE Money enjoyed 15% revenue growth and and 5% operating profit growth in the first half. Unfortunately, it also had a subprime mortgage business -- $3.7 billion worth of which GE sold at a loss. GE Money continues to hold $1.1 billion worth of subprime mortgages. To me the biggest concern about GE Money is that comparable companies -- see below -- have low P/E ratios -- around 10. Thus this business could be dragging down GE's corporate valuation.

Assuming that GE Money generates net income of $3 billion in 2007, here are the range of valuations based on the Price/Earnings ratios of the following peer companies:

• Bank of America Corp. (NYSE: BAC) P/E: 9.9. $29.6 billion
• Capital One Financial Corp. (NYSE: COF) P/E: 11.3. $33.8 billion
• American Express Co. (NYSE: AXP) P/E: 18.3. $54.7 billion

Next: Breaking Down GE Healthcare

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He owns General Electric shares and has no financial interest in the other securities mentioned in this post.

Capital One Financial Corp. (NYSE: COF) opened at $77.49. So far today the stock has hit a low of $76.51 and a high of $78.80. As of 11:05, COF is trading at $77.26, up $1.75 (2.3%).

After hitting a one year high of $87.19 a full year ago, the stock fell to a year low of $69.30 in August. The stock has repeatedly hit resistance in the low-80's throughout the past year, and has fallen sharply in the past month after hitting a top at 82 in June. The company released its Q2 earnings report yesterday after the closing bell, reporting earnings of $1.89 per share, topping analysts' predictions of just $1.62 per share. COF reaffirmed its full-year forecast, citing revenue growth for its stellar performance thus far. Technical indicators for COF are bullish but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $70 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make a 8.7% return in just two months as long as COF is above $70 at September expiration. COF would have to fall by more than 9% before we would start to lose money.

COF hasn't been below $70 by more than a few cents in the past year and has shown support around $75 recently. This trade could be risky if the company's earnings aren't as rosy upon closer inspection, but even if that happens, it looks like COF could have trouble going lower than $70, where the stock bounced twice in the past year.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: At publication time, Brent neither owns nor controls positions in COF.

In today's world, people rarely carry large amounts of cash on them. People have credit cards for large purchases or even debit cards to access their checking accounts. ATM machines are on every urban street corner in America. But what happens when you're not at home in that urban setting? What do you do if you're on vacation?

I recently went to the Caribbean with my wife. We knew that most places would accept our cards but we questioned the exchange rate. Eastern Caribbean money isn't that strong in comparison to the U.S. dollar ($2.60 EC to $1 U.S.) and we knew that our credit cards would charge a service fee for purchases made in EC dollars. My wife, whom I consider a "world traveler," has always gone with the traveler's checks and prepaid card route. She would cash the checks in at the hotel and use prepaid cards so she wouldn't put her personal accounts at risk. I always used my credit card on vacation. Before our trip, I was sent to the bank to pick up a pair of prepaid cards and some traveler's checks.

The July issue of Money magazine has a great article regarding the best way to keep exchange costs to a minimum with today's weak dollar.

I found out she was completely wrong - a month too late.

MOST NOTEWORTHY: Whirlpool Corp (WHR), Amazon.com, Inc (AMZN), Arkansas Best Corp (ABFS) and Capital One Financial Corp (COF) were today's more noteworthy upgrades:

• Citigroup upgraded Whirlpool Corp (NYSE: WHR) to Hold from Sell with a $107 target after better-than-expected Q1 results.

• Amazon.com Inc (NASDAQ: AMZN) was upgraded to Market Perform from Underperform at Piper Jaffray, to Hold from Sell at Citigroup, to Neutral from Underperform at Cowen, to Sector Perform from Underperform at Pacific Crest and to Buy from Hold at BWS Financial.

• Elsewhere, Stephens raised Arkansas Best Corp (NASDAQ: ABFS) to Equal Weight from Underweight with a $30 target.

• Bernstein upgraded Capital One Financial (NYSE: COF) to Outperform from Market Perform...

OTHER UPGRADES:

• Key Bank Capital Markets upgraded Cheesecake Factory Inc (NASDAQ: CAKE) to Buy from Hold.

• Alcatel-Lucent (NYSE: ALU) was upgraded to Buy from Neutral at Goldman.

• Stifel upgraded Advance Auto Parts, Inc (NYSE: AAP) to Buy from Hold with a $48 target.

• UBS raised Yamana Gold Inc's (NYSE: AUY) rating to Neutral from Reduce.

• Longbow Research upgraded Parker Hannifin (NYSE: PH) to Buy from Neutral.

• Lehman upgraded American Standard Cos (NYSE: ASD) to Buy from Hold with a $50 target.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).