Don't Leave Your Portfolio Without American Express

Moreover, the company has likely added as many as 1.5 million new accounts in the U.S. as well as another million accounts overseas in the quarter due to some smart marketing and an increase in the variety of cards sold, including a clever new type of metropolitan affinity card that provides spending awards to customers living in big cities like Los Angeles. As a result, it has almost certainly boosted market share in the last year and could very well shock the Street by doubling its current 5.2% share of the U.S. card business by 2011.

Charge-Offs Under Control

Meanwhile, charge-off rates for credit quality problems are under control, no matter how much bears believe they should be exploding. Credit reporting agencies say charge-offs for deadbeat accounts were up just a hundredth of a percent in the second quarter over the first quarter but are far below the three-year average of 4.6%.

The high average is probably partly due to the fact that new bankruptcy rules, which went into effect in 2005, created a boost in charge-offs at that time. But even if poor credit problems advance by as much as 30% annually through the rest of the decade, analysts believe that American Express and its peers over at MasterCard and Discover have prepared adequately through derivatives and insurance just as biscuit companies routinely hedge out some of their exposure to higher corn and wheat prices.