Can American Express stay strong?

American Express (NYSE: AXP), a favorite stock of just about every value investor I know, is facing some problems related to the struggling economy. Any continued downturn in consumer spending could smack the company's bottom line, and American Express recently wrote off $440 million to cover an increase in defaults. Continued economic weakness could send that amount higher in the months to come.

So far the company's affluent clientele has allowed it avoid the pain a lot of other consumer lenders are facing. But according to the Wall Street Journal (subscription required), "Investors, however, recently have expressed concern about a push into lending through a big credit-card expansion. Unlike AmEx's traditional 'charge cards,' which must be paid off every month, credit cards let people carry a balance from month to month. While AmEx collects interest on the balance, it also runs the risk that people won't ever pay off their loans."

Like most CEOs, Kenneth Chenault remains optimistic, telling the Journal that "When I look at what I had to work with in 2001 compared with what I hold now, I think I have a better hand."

American Express has a fairly complex business -- and its growth driven by expansion into lending makes it more difficult to understand. I would put this one in my "too hard" pile, along with 99% of other stocks.

That said, Warren Buffett has been a shareholder for more than 40 years, so how bad could it be?