Two sectors are burning investors especially badly these days: consumer spending and financial services. Unfortunately, American Express (NYSE:AXP) is knee-deep in both.

Net income from continuing operations for the fourth quarter came in at $238 million, or $0.21 per share, down 72% from the same period last year. Revenue fell 11% to $6.5 billion. Analysts had been expecting net income of $0.22 per share, but come on, missing expectations can be happily overlooked these days, so long as the company doesn't hint at an impending collapse.

Absolutely terrible
On all fronts, this was a pretty dismal showing. The two most important aspects of this business -- how much consumers spend, and their ability to repay -- fell off a cliff. See for yourself:

Metric

Q4 2008

Q4 2007

Total card spending

$160.5 billion

$177.5 billion

Net Charge-offs

6.7%

3.4%

Sadly, there are few catalysts to suggest that things will rebound any time soon. Late last year, bank analyst Meredith Whitney predicted that existing credit card lines would be slashed by 45% over the next 18 months. On the finance side, some credible estimates predict that total credit losses could eventually total $3 trillion -- up from the cumulative $1 trillion written off so far. 

Unlike Visa (NYSE:V) or MasterCard (NYSE:MA), AmEx issues its own credit, so it has to grapple with the twin headaches of a dying consumer and a withering credit market. More to the point, since subprime, leveraged loans, and CDOs have already seen the bottom fall out, consumer-based finance could easily be the next shoe to drop.

Do I sound gloomy? Well, I am. As Bank of America (NYSE:BAC) and Citigroup (NYSE:C) become wards of the state, it's hard to get fired up about anything that calls itself a bank these days.

But is there value here?
At $16 a share, plenty of investors view AmEx as screaming value -- which it may be. But as someone who has witnessed the complete annihilation of almost every assumption used to value finance stocks over the past year and a half, I'd urge Fools to use utmost caution before jumping in here, even with a solidly franchised stock such as AmEx.

Maybe you feel differently? Our 125,000-member CAPS community would love to get your take. AmEx currently holds a three-star ranking (out of five), which is actually pretty darn strong for a finance stock these days. Click here to give CAPS a try. It's 100% free to join.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. American Express is a Motley Fool Inside Value pick. Bank of America is a former Motley Fool Income Investor recommendation. The Fool owns shares of American Express. The Motley Fool is investors writing for investors.