Friday, 04 November 2011 20:17

Investing: The Money of The Morrow

If you were to print money, they'll put you in jail. But banks are allowed to create money with every new signed loan. Banks can loan out nine times more money than they receive in deposits. And not just citizens borrow money from banks, but most importantly governments. In this apparently complex cycle, banks create and develop debt, personal and national. It turns out that more than three fourths of circulating money is in fact debt not monetary mass.   

One may rightfully point fingers and one could justify a way or another. But that's mostly bad blood because nothing short of a major disruptive event would make things right in a world of wrongs. 

Clever investors have the flair to understand the past and use it to make improved judgments over the future. The deepening financial debt crisis came as no surprise. For decades, if not centuries, the financial system is begging for continual inflation and more money printing. What a waste of paper... Enters MasterCard fabricating plastic money, credit and debit cards. 

So far as eight or nine dollars out of ten are not on paper, the credit card printing business seems like an excellent investment -- a "forever" stock. The convergent trend indicates that credit cards, or debit cards, will completely eliminate cash. This near future is appealing to the following players: 

1. The Banks. 

As they managed to veer away from the gold standard, they are about to escape the cash fluctuations and fully rule over the absolute debt-centered global economy where everyone, from your grandma to powerful empires, lives from lines of credit. 

2. The Consumer. 

Managing your assets can be a nuisance, especially when you are so focused on the suspense of the latest TV reality show, or the super bowl. But when the average consumer lives exclusively in the red, paying interest from an older credit card with a newer credit card, then managing your own assets becomes truly depressing. In order to avoid suicidal behavior, it is recommended that the investors and creditors will look after the well being and good health of their slaves, err, clients... The first measure would be to eliminate personal customer stress by completely automating all transactions. This will consolidate... 

3. The Information Technology Corporations. 

Google and Paypal are already fighting for domination over the mobile payments market. 

"It only takes you identify the right symbols at the checkout where you can tap your phone to pay with Citi, Master or the Gcard, a Google Prepaid Card. In the short and hasslefree tapping process, some vendors will make their check-in offers to your phone, along with other automated loyalty discounts loading to your smart phone, so you’re better off without leaflets, paper coupons or similar marketing stuff. A Google Wallet PIN, along with few extra security tokens will make your transactions as safe as reasonably possible."


4. The Governments. 

Now you pay with cash and go. It's difficult for the watchful govt eye to trace back on cash. To match profiles and behaviors based on cash payments. But when everyone has no cash option left and must pay with credit cards, then tracking and analyzing people's behavior is a given. Anonymity will vanish behind a veiled refurbished morality legislation. In fact, the government and its sub-contractors will rule Big-Brother style and 1984 will remain in our memories as the year of the Macintosh.  

And here's the "forever" stock to buy and hold: MasterCard (NYSE: MA).

The plastic money printer. It makes credit cards but it's acting as a simple "toll" operator, risk free. MasterCard is transparent to debt "money" - which is a matter for the banks. "MasterCard makes more money as the number of people around the world using its cards grows. And though this number is growing daily, according to MasterCard CEO, Ajay Banga, close to 90% of all transactions in the world still use cash." Imagine the value of such a plastic money printer in a future where card transactions by constraint will force the 90% out of cash!  

Small signs, indicators from the near past investments: 

"Berkshire Hathaway Inc. filed a quarterly update on its $53.6 billion U.S. stock portfolio with the Securities and Exchange Commission on Monday. The filing shows Berkshire's holdings on March 31, and it revealed 216,000 shares of MasterCard."

"What do you do when you find a stock with more than 988 million of its products in use... that holds more than $28 per share in cash... and is buying back $2 billion in stock?"

"I think you buy it and hold it forever. And I'm evidently not the only one..." 

"Just a few months ago, Warren Buffett seemed to have the same idea." 

"According to Berkshire Hathaway's (NYSE: BRK-B) most recent filing, the company just purchased 189,000 more shares of this stock. Buffett and Berkshire already had a 216,000 share stake in the company. With the new purchase, they now own 405,000 shares -- a stake worth roughly $125 million."  

"You've no doubt heard of this company. In fact, you might hold one of their 988 million cards in use around the world. That's because in total this company -- MasterCard (NYSE: MA) -- boasts more than 880 million accounts and racks up $545 billion in transactions each year. 

But besides its size, what is it about MasterCard that has grabbed Buffett's attention?" 


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