Tuesday 05/28/2019 links

Tuesday 05/28/2019 links

1. Big Tech Wanted to Dethrone Credit Cards. Why It Failed, and Who Wins Now

MVP (master card, Visa card and Paypal)—part tech and part finance—has crushed the FAANGs in terms of stock performance. The MVP group is up 154% over the past three years, compared with 127% for the FAANGs and 38% for the S&P 500 index.

Ellis says the payment companies ultimately benefit from the network effect of linking merchants, consumers, and banks. That network is defended by a moat of regulation, security, and fraud protection that no tech company wants to deal with. Network effect is an economic concept that explains how a product becomes more valuable as more people use it.

AllianceBernstein’s Tierney sees a future when Mastercard will facilitate mortgage, rent, and tuition payments. If Visa and Mastercard get their traditional 15 basis-point cut, that would be a significant boon to business.

The strongest driver of growth for Visa and Mastercard continues to be the move toward electronic payments, away from cash and checks. Some 43% of global consumer purchases were made on cards last year, up from 28% in 2010. It is rising roughly two percentage points each year, according to MoffettNathanson.

For PayPal, the opportunity is less about displacing cash and more about the long transition to e-commerce, which is still in its infancy.

MVP are also better than American Express and Discover.

• REITs Bet Big on the Mortgage Market
  These investors have become a key source of capital as government’s role in the market shrinks
• Trump to Seek Overhaul of Housing-Finance System
  White House says it aims to encourage sustainable homeownership while protecting taxpayers from bailouts
• The Likely Winners In The U.S.-China Trade War

1. Markets are getting their own dose of volatility due to fast-deteriorating US-China relations (courtesy of US chest beating).
2. A full 44% of all US imports from China are electrical goods (“computers & electronics” and “electrical equipment”).
3. So again, we have to ask… who benefits from what the US is doing in its trade dispute with China?

• With Huawei on Defensive, Ericsson and Nokia Fight Each Other for Edge
  Western telecom-equipment makers stand to gain if Chinese company loses business after U.S. security claims – watch out for Ericsson and Nokia if Huawei gets crushed