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Trading Lessons

How to Profit from the Fed's Anti-Cash Stance

Stock-Markets / Banksters May 11, 2015 - 03:42 PM GMT

By: ...

Stock-Markets

MoneyMorning.com Peter Krauth writes: Savvy investors know that over short time periods, and especially during bear markets, the saying “cash is king” often holds true. It provides security and allows for bargain hunting when assets are cheap.

However, through times of financial repression and negative interest rate policies (NIRP), central planners, along with banks, are changing that precept into “cash is trash.”


That notion is a dangerous one that you can prepare for and prosper from….

A Troubling Development… But We Can Benefit

Not long ago we discussed how financial repression is the “new normal.”

With interest rates at zero or even negative levels, some banks are warning clients that they will begin charging fees on some deposits. Surely it’s driving some people to consider simply withdrawing their funds and stuffing their mattress.

That serves two purposes. It avoids any deposit fees, and it provides the flexibility of having physical cash in case of an emergency. But central planners don’t like that either; they hate the anonymity of – and their lack of control over – cash.

Academic vice president of the Mises Institute and professor of economics at Pace University Joseph Salerno recently highlighted a concerning development:

As of March, Chase began restricting the use of cash in selected markets, including Greater Cleveland. The new policy restricts borrowers from using cash to make payments on credit cards, mortgages, equity lines, and auto loans. Chase even goes as far as to prohibit the storage of cash in its safe deposit boxes. In a letter to its customers dated April 1, 2015, pertaining to its “Updated Safe Deposit Box Lease Agreement,” one of the highlighted items reads: “You agree not to store any cash or coins other than those found to have a collectible value.” Whether or not this pertains to gold and silver coins with no numismatic value is not explained.

And if you look around, the signs are clear and growing that they’d like to do away with cash… completely. Citibank chief economist Willem Buiter recently suggested that cash allows people to avoid NIRP. To counter that, he suggests abolishing or taxing currency as ways to deal with this “problem.”

Virtual Currencies Are Gaining Velocity

As bitcoin was hitting $1,000 back in November 2013, Bernanke told Congress that virtual currencies “may hold long-term promise, particularly if the innovations promote a faster, more secure, and more efficient payment system.” It’s possible he was thinking how replacing physical cash with a ‘trackable virtual currency’ would suit central planners much better than anonymous cash.

Think I’m exaggerating? Well consider this…

“Helicopter Ben” also said: “In general, the Federal Reserve would only have authority to regulate a virtual currency product if it is issued by, or cleared or settled through, a banking organization that we supervise.”

Central planners are not about to let the free market have rein over money. It’s just too lucrative.

That’s why in January last year I highlighted that JPMorgan had submitted a patent for their own form of digital currency called “Web-Cash,” likely in a bid to compete with bitcoin.

Based on its description, Web-Cash is similar to Bitcoin. It's a system to process Internet payments and conduct financial transactions over a payment network. Even its proposed directory sounds comparable to Bitcoin's blockchain.

Governments, meanwhile, are exacerbating the development of virtual currencies.

Back in 2011, Louisiana passed a law banning the use of cash in the transaction of secondhand goods. The Justice Department in the U.S. is now telling bank employees they should contemplate alerting law enforcement when customers withdraw $5,000 or more.

There are numerous examples across Europe, including France, Italy, Spain, Sweden and Denmark, but also in Israel and Mexico where cash transactions are being regulated to limit their size and frequency. Curious, I took up the issue at my local bank branch in Canada. Lo and behold, they’re no longer allowing the payment of municipal taxes, driver’s license renewals, and a host of other transactions in cash.

So there’s little doubt that the push toward a cashless society is well on its way.

Here’s what you can do about it.

This Stock Will Help You Cash In

In the “fight ‘em” category, while you still can, consider sitting on at least a little cash to prepare for possible emergencies. Besides, it’s not like you’re going to lose a lot of interest on it meanwhile.

In the “join ‘em” category, consider investing in the industry that facilitates and processes electronic payments.

Founded in 1967 and based in Atlanta, Georgia, Global Payments Inc. (NYSE: GPN) is a leader in electronic payment processing services and is a targeted way to play the move towards electronic money.

GPN processes billions of checks, payment cards, and e-commerce transactions annually for more than 1.5 million merchant locations around the world. It’s little wonder Global Payment's revenue and earnings estimates continue to trend higher.

The company boasts over 4,300 employees worldwide, is a member of the Fortune 1000, and has merchants and partners in 29 countries. Just recently, GPN announced the launch of a turnkey mobile point-of-sale solution. Ingenico Companion Mobile Payment (iCMP) offers full debit and credit EMV (chip enabled) and contactless payment acceptance. By using a secure Bluetooth-enabled reader paired with the merchant’s Apple, iOS or Android device, customers can transact in a simple, quick, and secure on-the-go way.

In fiscal Q3 (ending Feb. 28, 2015) Global Payments reported earnings up 19% to $1.14 on an 8.2% increase in revenue to $666.9 million. That concluded seven consecutive quarters of earnings growth that beat analyst forecasts. GPN will also forge ahead with a $100 million share buyback plan.

Global Payments is a $6.7 billion market cap leader whose shares are in a steady climb and look headed firmly higher (I’d suggest using a 25% trailing stop on the stock). And given the momentous trend towards a cashless society, its future is looking pretty bright indeed. If you’re going to benefit from the virtual payment wave, and you might as well, GPN stock is a great way to do it.

Source :http://moneymorning.com/2015/05/11/how-to-profit-today-from-this-sweeping-global-trend/

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