Skip Olinger

Why is the Market Ignoring American Express's Bad Report?

1. very good short summary of 1Q activity. Well written
2. you said $136 billion, you meant million
3. Visa MC as someone above points out is over several more quarters. But I agree, it is non-core income.
4. $25M loss from US ops is not that bad given slow down in spending and write offs. In a past Amex presentation, they showed that write off in, I think '90-91 went to just over 10%. Amex survived. They could very well go to 12-15% this time. Amex will survive. I believe Mr. Market is getting excited about the prospect that the portfolio is getting close to being cleaned up. They aren't putting many new receivables on the books so at some point the losses will stop.
5. You correctly point out that card member spending is way down. Again, at some point it will stabilize and come back.

I don't know if we have reached the bottom of consumer spending or cc write offs, but we are a lot closer. Amex is a great company and it is trading a historical low multiples. It is buy low - sell high. You don't get the lows without a great deal of uncertainty. So don't get mad a Mr. Market, take advantage of his offers. That said, I am not going all in with Amex now. I think we are in for a long haul and there is a good chance Amex and a lot of other companies will retreat.