Posts Tagged ‘Vitaliy N. Katsenelson’

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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Phil's Favorites

Vladimir the Terrible

 

Vladimir the Terrible

The uneasy relationship between Putin and terror.

Courtesy of Greg Olear, at PREVAIL, author of Dirty Rubles: An Introduction to Trump/Russia 

1/ Operation Successor

During the Yeltsin years...



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Biotech/COVID-19

While coronavirus cases spike in the South, the Northeast seems to have it under control - here's what changed

 

While coronavirus cases spike in the South, the Northeast seems to have it under control - here's what changed

Face masks and social distancing have become the norm in New York City. Noam Galai/Getty Images

Courtesy of Taison Bell, University of Virginia

Hospital Capacity Crosses Tipping Point in U.S. Coronavirus Hot Spots” – Wall Street Journal

This is a head...



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ValueWalk

Coronavirus stimulus: Petition seeks $600 weekly checks for essential workers

By Aman Jain. Originally published at ValueWalk.

The negotiations for the next round of coronavirus stimulus are likely to start next week. If you, and many like you, want something to be part of the next package, then you have a week to make yourself heard. The best way to do so is starting or supporting a coronavirus stimulus checks related petition.

Q2 2020 hedge fund letters, conferences and more

Petition asks coronavirus stimulus checks for workers

Currently, many petitions related to coronavirus stimulus checks are trending. One such petition calls the government to send $600 weekly federal checks to essential wo...



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Kimble Charting Solutions

Tech Leader Hitting Brick Wall of Resistance and Going To Reverse Its Trend?

Courtesy of Chris Kimble

Is leadership running into a brick wall of resistance and about to pull an important reversal? A strong bullish trend looks to be experiencing an important breakout test!

The trend for SMH remains up as it has spent the past 10-years inside of rising channel (1).

This chart looks at Semiconductor ETF (SMH) on a monthly basis since inception. Fibonacci was applied to the 2000 highs and 2008 lows.

Fibonacci was applied to it’s 2000 highs and 2008 lows.

The rally off the March lows, which tested the 2000 highs, has it currently testing the und...



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Zero Hedge

Taleb: Tail-Risk Hedges Are Now A Necessity

Courtesy of ZeroHedge View original post here.

Authored by Michelle Jones via ValueWalk.com,

Tail risk hedges are designed to only pay off when the markets suddenly plunge, so many investors don’t have the stomach to carry them. However, one expert on tail risk funds advises investors not to be in the market right now if they aren’t using a tail hedge.

No V-shaped recov...

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Digital Currencies

Chainlink Crypto Surges To A New All-Time High - Here's Why...

Courtesy of ZeroHedge View original post here.

Authored by Joseph Young via CoinTelegraph.com,

Surging volume, price discovery, and new partnerships pushed Chainlink price to a new all-time high at $8.48...

image courtesy of CoinTelegraph

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The Technical Traders

Gold & Silver Measured Moves

Courtesy of Technical Traders

The next few weeks are certain to attract much attention to precious metals.  Hardly anyone can argue that Gold has not experienced an incredible upside price rally over the last 12+ months.  Recently, Gold closed above $1800 for the first time since 2011.  Our researchers believe the next target is $1935.  Keep reading to learn why we believe this is the next major price target for Gold.

Gold Weekly Price Analysis

Over the past 18+ months, Gold continues to develop price patterns that seem to be replicating going forward.  This pattern consists of an advance in price followed by consolidation/rotation in price to set up a new momentum base.  The example of this price advance ...



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Chart School

Dow 2020 Crash Watch - Update

Courtesy of Read the Ticker

Like 1929 the markets have bounced. This time it is on the back of the FED $6.5T money printing.

Previous Post: Dow 2020 Crash Watch 

But can the FED blow $6T every time the market rolls down to test support.

Yes, maybe before the US 2020 elections the FED will do 'what it takes'. But post elections not so much, the year 2021 is a long way from the next election (presidential or congress) and defense of the markets may not be so supportive at $6T or $10T per market smash. The FED may hesitate, and that will be window for stocks to break lower.

The 36 month simple moving a...

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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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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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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

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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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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About Phil:

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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