Pch101

As American Express Goes, So Goes the Economy

I concur with the analysis. The credit crunch is deep and has a long way to go as it ripples through the broader markets and commercial real estate.

But I do question the value of using AmEx as a proxy. For one, AmEx maintains a niche within the financial sector, targeting business users and higher spenders with its cards and travel services, so it does not represent the economy or the financial sector as broadly as do the banks, Visa or Mastercard. For another, AmEx is facing ever increasing competition from Visa, Mastercard and online travel businesses for its various foreign exchange and travel services, so it is slowly getting squeezed in a space where it once had a strong brand and considerable market share.

In that sense, I think that using AmEx as a barometer for the broader economy would be akin to evaluating the performance of the automotive sector by focusing on BMW, instead of Toyota. AmEx is too specialized a company and there's too much other potential noise in the numbers to use it definitively. Perhaps companies such as Bank of America and Visa would provide better shorthand on the financial side.