The love for payments, any payments, knows no bounds. It's almost pathological how much the market loves this group. I don't know if it is because people are expecting takeovers -- unlikely given the advances -- or because people simply don't care about valuations at all. But you can recommend these stocks with impunity.
Let's start with Square ( SQ) . I remember when Square was a $10 stock two years ago and people figured it would go under because it was advancing money to little businesses that could never pay it back. The whole story devolved into the risky small business loans narrative that everyone hates, especially since the Great Recession.
Now it is an $80 stock making what is thought to be an unsustainable parabolic move. But that could have been said any time in the last 40 points.
I do not know how this can levitate without new news. Founder and CEO Jack Dorsey did talk it up at one point as a Bitcoin play, something that the incredibly good CFO Sarah Friar said on "Mad Money" wasn't the centrality of the story. I also know that people figured out that Square "owned the register" of small businesses and was able to access receipts as a way to measure how much to loan. In other words they were more secured than anyone thought.
I almost feel like telling people to buy it because $80 stocks go to $100 in this tape, something I used to say in the '80s. I can't believe we are back to that.
But we are.
Next is PayPal ( PYPL) . Not that long ago I debated a young fellow on the air about how PayPal would do when the eBay ( EBAY) deal runs out. The stock was about $50. He said it would plummet. I said it would be irrelevant. He had chapter and verse about how much earnings power would be lost. I had PayPal CEO Dan Schulman telling me not to worry.
The latter was right.
When it was at $74 Dan came to a TheStreet.com Teach-In and gave a lunch time keynote where he talked about how the opportunities for PayPal were far greater than anyone realized. Venmo hasn't even begun to be monetized. The company could end up being the banker to 2 billion people who don't have an account but have a cellphone.
We bought some for the trust.
We just sold some at $90.
Then there are the big three: Visa ( V) , Mastercard ( MA) and American Express ( AXP) . The first two keep putting up fantastic numbers, with Visa almost as good as Mastercard. No matter what has happened is they have basically usurped all the extra worth that was available and would be available for JP Morgan ( JPM) and Bank of America ( BAC) which are regarded as risky bets that are hurt by a terrible yield curve and not a lot of new mortgage activity.
Meanwhile, American Express didn't even have a good quarter and after a speed bump the buyers came right back, enticed by the notion of small business lending and a millennial story no one even knew existed.
It's regarded as the riskiest of the fintechs which still makes it better than the least risky of the banks, JP Morgan.
I do not want to opine about whether any of this is right.
I do want to say that I don't know what brings any of these down. They remain the replacement for the banks in the big fund portfolios. It's unnerving that people keep buying them. But it is a reality and a reality must be obeyed.
