How People Pay

People pay in many ways these days. It’s less and less coming in the form of Dollars and cents. The movement was kickstarted in the 1950s with the creation of the credit card. In 1950 came the Diner’s Club Card in New York City. Eight years later, out of Fresno, California, came the BankAmericard, which is known today as Visa. The movement away from cash is still in its early stages. Roughly 30% of all purchases today are still made with cash. The thinking is, that number will eventually move close to zero, meaning that there’s still a ton of room for companies in the cashless payment market to grow. Companies like PayPal and Square are taking advantage of this trend. Chances are you’ve seen the Square Reader connected to a smartphone or device being used at the point of sale. Apple has become a big player with its Apple Pay, as well as a co-branded credit card with Goldman Sachs. What’s missing is a global, digital currency. But the seeds have already been planted all over the place.

It has been a decade since Bitcoin was born, yet consumers at large still do not use it. But Bitcoin transactions are occurring. And the number keeps growing. You might be surprised to hear that Bitcoin is accepted in select Subway and KFC restaurants. The total number of users is unknown, but it was last estimated that less than 6 Million people used cryptocurrencies in 2017. That might sound big, but it’s a teeny number considering there are over 7 Billion people on Earth. Of the many cryptocurrencies, Bitcoin is by far the most popular.

Facebook made news this week with it plans to get in the crypto mix. Facebook is working on a project to develop a crypto-based payment system built around its giant social network and its Billions of users. It’s called “Project Libra.” Facebook has signed up more than a dozen companies in support, including Visa, Mastercard, PayPal and Uber. Facebook has nearly 2.5 Billion users. That is roughly 1/3 of the global population! It’s a strategic advantage for the company as retailers, advertisers and financial service companies try to compete for their business. This audience was too strong for many companies to pass up. The Credit Card companies have been afraid that Silicon Valley would disrupt their business, creating a payment option that cuts out card networks. So if you can’t beat them, join them? That seems to be their plan.

The Dollar is still the unofficial global reserve currency. It’s basically the Gold Standard. It has held this status for decades. The Dollar is sought the world over for its stability and liquidity. There is approximately $1.7 Trillion currently in circulation. Most of it is overseas. Two-thirds of all the $100 Bills in circulation are outside the United States. 90% of foreign exchange trading involves Dollars. US Dollars are accepted in some shape or form in pretty much every corner of the world. It’s also believed that nearly 90% of trading between China and Russia comes in US Dollars. They are trying to move away from a Dollar dependence for geopolitical reasons.

One beneficiary of this move away from Dollar dependence has been Gold. China and Russia are amongst the largest owners of Gold. Gold has been sleepy strong and is now up four weeks in a row after building a strong base. It surpassed the key $1,350 level for the first time since April 2018. With rising global tensions and economic slowdown, Gold is finally providing some insurance and is earning its safe-haven status again.

I’m curious to see how many of you have used Bitcoin. Do you only use cash or conversely, never use cash? How many use Apple Pay? Does the idea of a Facebook-backed cryptocurrency concern you considering the issues of privacy? Please feel free to reply with your thoughts and answers.

The Digital Age has made many things so much easier. But it’s also become so much more complicated. It’s all very investable.

Have a nice weekend. We’ll be back, dark and early on Monday. Happy Father’s Day to you fellow dads!


Happy Father’s Day!

This weekend we celebrate Father’s Day and want to recognize our office dads: Mike, Mike, and John. From our Bedell Frazier family to yours, Happy Father’s Day!

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