Moody's affirmed the Prime-1 short-term ratings for Amex and its rated subsidiaries.
"Today's rating action reflects Moody's concerns over Amex's asset quality trends and lending exposures, particularly within geographic markets in the United States that have experienced sharp home price declines," Moody's said in a statement.
"Broad economic weakness in the US, heavy consumer debt burdens, and home price erosion have also combined to place a damper on Amex's card-member spending growth in the US," Moody's said. Moody's noted that were Amex's long-term ratings to be downgraded, they would most likely be lowered by one notch. - cnbc.com
Where were you last year Moody's? As far as I'm concerned this is a non issue and a little late. American Express survived the famous Oil Salad Scandal in the early 1960s (while I might add helping to build Buffett's reputation), and it'll survive this 2007-08 mega credit panic. AXP closed at $36.40. I started building a longer term position in my portfolios today under $37.00.
Not only is AXP trading at a darn good value, but there are good looking valuations all over the place. The best time to practice the valuation methodology is after the market has suffered large declines. As the value maven mutual fund jockeys have proven beyond a shadow of a doubt, buying "alleged" value when the markets are moderately or overly priced can cause severe portfolio deterioration. When the markets are fairly or over valued, value managers who have convinced themselves that they are buying cheap merchandise are in fact often "forcing" the buy. Why? They have to do something and put the money to work. But after following these guys for 20 or so years, I think they really believe in their analysis. Plus they've proven to be more stubborn than a mule. Most of the time they get away with it because they are bailed out by the market. This time they got caught naked when the tide rolled out (i.e. Bill Miller, Bill Nygren and Co.). They got caught by the double whammy of 1) the credit crisis, which they didn't understand, and 2) the bear market caused by the US recession. What compounded their problems were that they bought too much too early, and had no exit strategy in the event that things went wrong. Value Investing, has its merits, but it can really destroy a portfolio as well.
As for AXP, is essentially an oligopoly, with V and MA, during this ongoing worldwide secular shift from currency to electronic transactions. Now that's a powerful trend. Just what until the Chinese masses start getting in on the action. It also has one of the most powerful brand names in the world. The co. has outstanding financial metrics and generates around 40% on invested capital. Net write offs will grow over the next 6 months, but it won't permanently impair its earning power as say a Merrill Lynch or Wash. Mutual. When the economy finally turns better, people will use their Visa, Mastercards, and AmExs to there fullest. Furthermore this bad credit cycle is shaking out the poor credit risks. So when the cycle turns, it'll be from a much sounder financial base. My estimate based on a dcf model is conservatively in the $55 - $60 area.
Not only is AXP trading at a darn good value, but there are good looking valuations all over the place. The best time to practice the valuation methodology is after the market has suffered large declines. As the value maven mutual fund jockeys have proven beyond a shadow of a doubt, buying "alleged" value when the markets are moderately or overly priced can cause severe portfolio deterioration. When the markets are fairly or over valued, value managers who have convinced themselves that they are buying cheap merchandise are in fact often "forcing" the buy. Why? They have to do something and put the money to work. But after following these guys for 20 or so years, I think they really believe in their analysis. Plus they've proven to be more stubborn than a mule. Most of the time they get away with it because they are bailed out by the market. This time they got caught naked when the tide rolled out (i.e. Bill Miller, Bill Nygren and Co.). They got caught by the double whammy of 1) the credit crisis, which they didn't understand, and 2) the bear market caused by the US recession. What compounded their problems were that they bought too much too early, and had no exit strategy in the event that things went wrong. Value Investing, has its merits, but it can really destroy a portfolio as well.As for AXP, is essentially an oligopoly, with V and MA, during this ongoing worldwide secular shift from currency to electronic transactions. Now that's a powerful trend. Just what until the Chinese masses start getting in on the action. It also has one of the most powerful brand names in the world. The co. has outstanding financial metrics and generates around 40% on invested capital. Net write offs will grow over the next 6 months, but it won't permanently impair its earning power as say a Merrill Lynch or Wash. Mutual. When the economy finally turns better, people will use their Visa, Mastercards, and AmExs to there fullest. Furthermore this bad credit cycle is shaking out the poor credit risks. So when the cycle turns, it'll be from a much sounder financial base. My estimate based on a dcf model is conservatively in the $55 - $60 area.
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According to Dow Theory, primary trends are characterized by three phases. Phase One (I) is the distribution phase. This is where the smart money starts bailing out during the prior bull 
market which occurred back in Oct/Nov 2007 (see my posts from back then). That was something I was actually right about for a change.
Trading volume is high but diminishes on rallies. The public is active, but frustrated because it's not so easy to make money anymore. Phase Two (II) is panic. The downward trend of prices accelerate in a waterfall like cascade on heavy climatic volume. Phase II - Panic - started right after New Years Day and lasted to the mid March Bear Stearns intervention by the Fed. Phase Three (III) is characterized by investors throwing in the towel who have managed to hold on so far. The business environment is negative and the daily dose of of news pelting investors is down right depressing. The final phase is less rapid than the second phase. Higher quality stocks decline slowly (witness AXP and WFSL to name only two). This goes on day after day until the market sentiment is completely negative, (like it is now a-days) and PEs are in the single digits. We aren't at single digits but when was the last time the Dow was around 12x earnings. In theory, the stocks get so cheap that the smart money starts returning to the market with buy orders. That's when stocks are under accumulation with rising volumes and rising breadth.
Let me be clear, I'm not calling a bottom, because I don't see the accumulation taking place by the "big money" - institutions. But we are probably in phase three of this thing, and it's only a matter of time before we come out of it. That mid July bottom is key as to whether it holds or not. If it holds, so far so good. That's a great place to start. If it doesn't hold, how far to the downside does it go? Do we get a new low on low volume, that is unconvincing, or is it the puke up your positions capitulation finale? I'm not looking for a capitulation that's bantered about on TV all the time. No this is an old fashioned water torture bear market. BTW - that's how I view the RE market for the next decade to 15 years. A leveling off, followed by another drip lower, which will last a lot longer than most people who are hoping for a rise in valuations expect. Kind of like the Japanese stock market only this time it's US residential RE. That was an enormous bubble that is hasn't come down to earth yet.
A much worse scenario is if phase II (panic) is from January '08 to mid July '08, and we are currently in the midst of a secondary bear market reaction (SR). If so the SR would have further to go, possible retrace 33%, 50%or even 66% of the January to July decline. After the SR (into the election?), then Phase III sets in. Oh boy, if that's the case, then we've probably only seen 1/2 of the bear market with another 50% to go from the July bottom. That would take the Dow down about 40% from the top to the 8500 area. 30% down is Dow 9800 which seems more likely but one never knows about these things.
For now I'm using the template in the chart. To be revised later if necessary.
market which occurred back in Oct/Nov 2007 (see my posts from back then). That was something I was actually right about for a change.Trading volume is high but diminishes on rallies. The public is active, but frustrated because it's not so easy to make money anymore. Phase Two (II) is panic. The downward trend of prices accelerate in a waterfall like cascade on heavy climatic volume. Phase II - Panic - started right after New Years Day and lasted to the mid March Bear Stearns intervention by the Fed. Phase Three (III) is characterized by investors throwing in the towel who have managed to hold on so far. The business environment is negative and the daily dose of of news pelting investors is down right depressing. The final phase is less rapid than the second phase. Higher quality stocks decline slowly (witness AXP and WFSL to name only two). This goes on day after day until the market sentiment is completely negative, (like it is now a-days) and PEs are in the single digits. We aren't at single digits but when was the last time the Dow was around 12x earnings. In theory, the stocks get so cheap that the smart money starts returning to the market with buy orders. That's when stocks are under accumulation with rising volumes and rising breadth.
Let me be clear, I'm not calling a bottom, because I don't see the accumulation taking place by the "big money" - institutions. But we are probably in phase three of this thing, and it's only a matter of time before we come out of it. That mid July bottom is key as to whether it holds or not. If it holds, so far so good. That's a great place to start. If it doesn't hold, how far to the downside does it go? Do we get a new low on low volume, that is unconvincing, or is it the puke up your positions capitulation finale? I'm not looking for a capitulation that's bantered about on TV all the time. No this is an old fashioned water torture bear market. BTW - that's how I view the RE market for the next decade to 15 years. A leveling off, followed by another drip lower, which will last a lot longer than most people who are hoping for a rise in valuations expect. Kind of like the Japanese stock market only this time it's US residential RE. That was an enormous bubble that is hasn't come down to earth yet.
A much worse scenario is if phase II (panic) is from January '08 to mid July '08, and we are currently in the midst of a secondary bear market reaction (SR). If so the SR would have further to go, possible retrace 33%, 50%or even 66% of the January to July decline. After the SR (into the election?), then Phase III sets in. Oh boy, if that's the case, then we've probably only seen 1/2 of the bear market with another 50% to go from the July bottom. That would take the Dow down about 40% from the top to the 8500 area. 30% down is Dow 9800 which seems more likely but one never knows about these things.
For now I'm using the template in the chart. To be revised later if necessary.
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