Posts Tagged ‘American Express’

Five Reasons to Avoid the Gold Rush (updated)

Here’s a follow up video on American Express and an updated article on gold by Vitaliy N. Katsenelson, at Contrarian Edge. - Ilene  

Vitaliy: I was on BNN-TV, a Canadian version of CNBC, discussing my take on American Express – a good company but not a good (fairly valued at the most) stock (click here to watch).   Gold just ran through a $1,000 mark.  I’ve been getting emails asking me if my thoughts on gold have changed, they have not.  Here is an updated article I wrote a few months ago.

Five Reasons to Avoid the Gold Rush (updated)

gold The reasons why one should sell the cat, pawn the mother-in-law, and use the proceeds to buy gold are well known: the Fed is printing money faster than you can read this, which will result in inflation; the government is borrowing like a drunken monkey, so the dollar will be devalued; this will debase all currencies, so the only thing that will save you is the shiny metal.

However, here are some arguments why one should think twice before jumping in bed with gold bugs, or at least remain sober while determining gold’s weight in the portfolio . 

1. For investors (not speculators) it is very hard to own gold, because you cannot attach a logical value to it. Unlike stocks or bonds, gold has no cash flow and has a negative cost of carry – it costs you money to hold it.  It is only worth what people perceive it to be worth right now.  The argument I commonly hear is, “What about all those Enrons, Lehmans, Citigroups, etc. that either went bankrupt or got near it?  What was the value of those?”  If the lesson learned is not to own stocks but to own gold, it is the wrong lesson.  The lesson should be: own companies you can analyze (the aforementioned companies were unanalyzable) and diversify – don’t put your all net worth into one stock. 

2. The gold ETF SPDR Gold Shares (GLD) is the seventh largest holder of physical gold in the world.  If its holders decide to sell (or are forced to sell; think of hedge-fund liquidations), who will they sell it to?  This is extremely important, as the presence of GLD changes the dynamics of the gold price, both to the upside and downside.  If gold keeps
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Is there any upside in American Express?

Is there any upside in American Express?

American ExpressCourtesy of Vitaliy N. Katsenelson at Contrarian Edge

Financial stocks had a huge run up from their bottom. Many have doubled and tripled, but are they still cheap?

It’s almost impossible to value big financial institutions like Citigroup (C), Bank of America (BAC), or Goldman Sachs (GS) — they’re a lot like hot dogs — you don’t really know what’s inside of them; for the most part, they’re leveraged hedge funds.

They may appear to be cheap on a price-to-book basis, but the book is an illusive concept when it comes to financial stocks, especially when leverage, a deteriorating economy, and accounting assumptions may transform the book into a pamphlet in a New York second.

There are very few financial companies that one can actually analyze and thus value — American Express (AXP) is one of them, and I believe it’s a great proxy for other financial stocks. American Express’s financials are transparent, thus you can make some fairly reasonable assumptions of its normalized credit losses (net write-offs), borrowing costs, fixed costs, etc… and come up with a ballpark earnings power.

In 2007, American Express earned $3.26, however, at the time, its net write-offs of its credit-card portfolio were hovering at an all-time low of 3.3%.

American Express was benefiting from the temporary impact of a new bankruptcy law passed in 2005 (people rushed to file for bankruptcy before the stricter law went into effect, which lead to lower bankruptcy filings in 2006 and 2007), in addition to easy access of credit through home equity loans, low unemployment, and expanding economy.

The 3.3% net write-offs are not coming back anytime soon, so $3.26 of earnings (which implies a price-to-earnings ratio of 10 at today’s price) is a number we can dream and fantasize about, but won’t see for a long, long time.

Fast-forward to today: American Express’s losses almost tripled, approaching 10% (though this number is a bit exaggerated by American Express proactively cutting available credit to its customers). Wall Street expects the company to earn $1 per share in 2009. However, similar to $3.26 earnings per share, this number is not really meaningful either — bad times, as good times, will not persist forever.

To figure out American Express’s normalized earnings power, you need to make an assumption of its normalized net write-offs, among other assumptions (borrowing costs, new level…
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Capital One Chargeoffs Rise To 9.4%

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Capital One Chargeoffs Rise To 9.4%; American Express Chargeoffs 10%; Card Issuance Drops 50%

credit cardsCourtesy of Mish 

Credit cards losses are accelerating at Capital One, a trend one should expect to continue given the rapidly rising unemployment rate. Interestingly, Capital One is returning TARP funds.

Please consider Capital One Card Write-Offs Advance to 9.4 Percent.

Capital One Financial Corp., the Virginia credit-card lender that’s returning federal bailout money, said uncollectible U.S. card loans rose in May.

Capital One wrote off 9.41 percent of U.S. card loans on an annualized basis, compared with 8.56 percent reported for April, the McLean-based bank said today in a federal filing. Loans 30 days or more overdue declined to 4.9 percent from 5.04 percent.

Charge-offs for international loans advanced to 9.77 percent from 8.91 percent, and auto finance climbed to 3.62 percent from 3.46 percent.

American Express Card Write-Offs 10 Percent

Bloomberg is reporting American Express Posts Card Write-Offs at 10 Percent.

American Express Co., the largest U.S. credit-card company by purchases, said uncollectible loans declined in May, aided by the sale of consumer debts written off in previous months.

American Express wrote off 10 percent of managed U.S. card loans, compared with 10.1 percent for April, the New York-based company said today in a federal filing. The decline reflects proceeds from selling bad loans that were already charged off, the filing said.

Loans 30 days or more overdue at American Express declined to 4.7 percent from 4.9 percent in April, while at Capital One, based in McLean, Virginia, late payments fell to 4.9 percent from 5.04 percent. Capital One estimated its charge-off rate was understated by half a percentage point, citing a surge in the number of bankruptcies that delayed processing of that data.

Banks Reduce Credit Card Mailings

Looking ahead expect these numbers to get much worse. Odds are unemployment continues to rise for a year or longer after the end of the recession is announced. And with each uptick in unemployment chargeoffs will increase.

Is it any wonder Banks Reduce Credit Card Mailings?

A major shift in the kinds of direct mail that banks send out occurred last quarter, according to Mintel Comperemedia, a firm that tracks direct mail advertising.

Overwhelmed by delinquent


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Zero Hedge

The Fed And The Treasury Have Now Merged

Courtesy of ZeroHedge View original post here.

Submitted by Jim Bianco of Bianco Research

As I've argued, the Fed and the Treasury merged. Powell said this was the case today (from his Q&A):

These programs we are using, under the laws, we do these, as I mentioned in my remarks, with the consent of the Treasury Secretary and the fiscal backing from the congress through the Treasury. And we are doing it to provide credit to households, businesses, state and local governments. As we are directed by the Congress. We are using that fiscal backstop to absorb any losses we have.

Our ability is limited by the law. We have to find u...



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Phil's Favorites

The PhilStockWorld.com Weekly Webinar - 04-08-2020

For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here.

 

Major Topics:

00:01:34 - Checking on the Markets
00:04:32 - Current News
00:31:34 - LEVI
00:35:08 - AMZN
00:39:26 - Mark Mahaney's Stock Coverage
00:43:00 - Public Transportation & Disinfecting
00:48:08 - Petroleum Status Report & OPEC
01:00:24 - COVID-19 Update | WYNN
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Biotech/COVID-19

COVID-19 is hitting black and poor communities the hardest, underscoring fault lines in access and care for those on margins

 

COVID-19 is hitting black and poor communities the hardest, underscoring fault lines in access and care for those on margins

Nurse Shelia Rickman participates in an after-shift demonstration on Monday, April 6, 2020, in Chicago’s Hyde Park neighborhood, after media reports of disproportionate numbers of black people dying from COVID-19 in the city. AP Photo/Charles Rex Arbogast

Grace A. Noppert, University of North Carolina at Chapel Hill

As the COVID-19 epidemic continues to ravage the American public, an unsurprisin...



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ValueWalk

Coronavirus symptoms, causes, prevention and cure

By Jacob Wolinsky. Originally published at ValueWalk.

The best case situation for Coronavirus or COVID-19 is that in a few weeks it dies down and things get back to normal. However, we must entertain the possibility of a far more frightening scenario.

COVID-19 models continue to change for the better

April 9, 2020 Update: More than 1.5 million people around the world have been infected by the novel coronavirus, and nearly 90,000 have died. In the U.S., the death toll surpassed 14,000 on Wednesday. Tuesday alone saw a record 1,858 deaths. So far, approximately 425,000 people in the U.S. have tested positive for COVID-19.

Although researchers say the peak hasn’t been reached yet, the model in use by the White House and many other agencies was updated on Wednesday. The number of projected deaths from the virus in the U.S. declined to 60,415 by August, compared...



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Kimble Charting Solutions

Silver/Gold Indicator Creates Largest Bullish Pattern In Decades!

Courtesy of Chris Kimble

Is an important metals indicator sending one of the largest bullish messages in nearly 50-years? Very Possible!

This chart looks at the Silver/Gold ratio on a monthly basis since the mid-1970s. Historically metals bulls want to see the ratio heading up, to send the metals complex a solid bullish message.

The ratio hit the top of the falling channel (A) back in 2011, where it created a large bearish reversal pattern. Since creating the bearish pattern at resistance, the ratio has experienced a significant decline.

9 years after hitting the top of the channel the ratio hit the bottom of the channel at (1) last month, where it looks to have created one of the largest monthly b...



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The Technical Traders

Adaptive Fibonacci Suggests Much Lower Prices Yet To Come - Part I

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system suggests a much deeper price move is in the works and the current price rally will likely end near resistance levels identified by the Adaptive Fibonacci Price Modeling system.  We are posting this research post for friends and followers to help them understand the true structure of price and to allow them to prepare for what we believe will become a much deeper downside price move in the future.

Fibonacci Price Theory teaches us that price moves in waves within up and down price cycles. The recent peak in price, near February 25, 2020, has resulted in a very deep -36% price collapse in the S&P 500 (ES) recently. This dow...



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Chart School

The Big Short movie guides us to what is next for the stock market

Courtesy of Read the Ticker

There is nothing new in WallStreet, it is only the players that change. Sometimes a market player or an event gets ahead of the crowd and WallStreet has to play catch up.

Previous Post Dow 2020 Crash Watch Dow, Three strikes and your out!

It is important to understand major WallStreet players do not want to miss out on a money making moves.  







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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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Promotions

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Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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