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I posted this on another blog, and might as well put it on my own blog. It's in regards to Amex and their expected (by me) and disappoining (to those who don't follow this blog) numbers.

 I think Amex's problems run quite a bit deeper than most realize. They have a substantial amount of credit risk. When I posted my initial analysis of them a couple of weeks ago, naming them as one of my best shorts (everyone thought they were untouchable, much like Goldman Sachs who is also significantly overvalued, more on that later) many people hemmed and hawed. A close look at their numbers show that they are a ticking time bomb.

I know many call me an uber bear, but I am not. I am just a realist, apparently unlike the 16 analysts polled by Thomson Reuters (see below):

" American Express said second-quarter net income came in at $653 million, or 56 cents a share, vs. $1.06 billion, or 88 cents a share, the same period a year earlier.
The latest results include $600 million that the company added to reserves to cover bad loans in the U.S., the company said. There was also one other $136 million charge and a tax benefit of $101 million.
American Express was expected to make 83 cents a share, according to the average estimate of 16 analysts in a Thomson Reuters survey."

Even the company itself appeared to fail to face reality, at least as it appears from their official stance:

"The second quarter results included a $600 million ($374 million after-tax) addition to U.S. lending credit reserves that reflects a deterioration of credit indicators beyond our prior expectation, and a $136 million ($85 million after-tax) charge to the fair market value of the Company’s retained interest in securitized Cardmember loans."

For those that are interested, I announced Amex's problems a few weeks ago here:

Now, why is it that I was able to see this with a simple scan and a skeleton staff (a very smart and capable staff, but skeleton nonetheless) but all of those heavily  funded research desks (okay, maybe not anymore, but still funded better than my operation) and the company itself (who failed to pare back in time) could not see it coming?

That long run-on is actually the basis for my investment thesis. The financial companies are quite overvalued (as an entire sector) and still have much, much farther to fall. They will be the catalysts for a global compression in the industrial, retail and manufacturing sectors - and China and Europe will probably beat the US to the bottom of the heap.

Again, I am not a bear, I am a realist with a spreadsheet!

I will post a detailed analysis an description on the overvaluation of Goldman some time tonight and will follow up with the same on Amex and probably HSBC.