Fairholme: Amex Bad Debt a Pig in the Python
Fairholme's Bruce Berkowitz describes the fund's rationale in assessing and adding American Express to the portfolio.
Michael Breen: Most of the changes happened last fall, but a more recent one, it looked like American Express was added to the firm and to the portfolios. Maybe you can explain that. That's got a ton of headline risk, but obviously that's when you get good bargains.
Bruce Berkowitz: I think last year we worried about financials. You didn't know what they owned, what they owed, and a few months ago I didn't even know who owned them. But it got to the point, especially with an American Express, where you could understand the basic businesses and there wasn't a lot of off-balance sheet risk. And I wasn't worried about derivatives and counter-party risks. And American Express has a significant cash flow from their merchant business, from their loan business.
Michael Breen has a position in the following securities mentioned above: AXP. Find out about Morningstar’s editorial policies.