There are busy weeks, and then there are weeks like last week.
In the span of the last seven days, the stock market shed another unfathomable amount of value , the Supreme Court lost its longest-standing member in history and it looks like the U.S. presidential election’s two most competitive candidates are a reality star and a democratic socialist.
It’s a slightly different world out there today then it was for the last edition of the Data Dive, and with such a non-stop deluge of happenings, it’s easy to get lost. Luckily, we remain diligent in creating your payment and commerce roadmap each week so that you can keep your ears to the signal, while we filter out the noise.
So, what’s pulsing this week?
Big Money Buys In To Cool The Market
Just looking at the numbers, it seems nearly impossible to put a positive spin on the stock market at this phase of 2016. As of the second week of the year, the stock market had shed a trillion dollars’ worth of value. The mass exodus of investor money from the public markets has periodically slowed through the fitful first few weeks of the year but shown no significant signs of reversing its downward trend.
The “why” of the abrupt trip to the cooler for the market is very much up in the air — many explanations proliferate. Chinese instability is a favored explanation, though one that works less well in light of the last seven days, when Chinese markets were closed and international markets still bled value. Other favorites are the Fed’s planned increase of the interest rate and genuine concern on Wall Street that voters have taken leave of their senses.
Whatever the causes or interplay of causes, the effects have been far-reaching enough and long enough that it seems the big players — with the big checkbooks — have come to bat to stomp out the bonfire of the market shares.
According to reporting by USA Today, big banks, big companies and big name executives are now throwing some real money into the market in an attempt to cool the selloff fever (not to mention that they can buy in at a really cheap price).
Big buybacks seems to be among the orders of the day for bolstering confidence in the market. Amazon, Chipotle, PayPal, Pfizer and FedEx are just a handful of the 19 S&P 500 firms that have announced stock buybacks this year.
So far, that will collectively add up to about $60 billion in bought-back shares.
And while the method is a controversial means of increasing shareholder value, the general consensus is that it does indicate confidence on the part of a firm that its own shares are its best investment vehicle.
Companies aren’t alone in buying their own stock; CEOs are also moving in on the buy-in. The shortlist of the dozen or so big names there includes: JPMC’s Jamie Dimon, Citigroup’s Michael Corbat and Wynn Resorts’ Steve Wynn.
These CEOs are making these purchases at market prices — not at the steep discounted rates associated with options exercises — so they cost some very real money, even for very rich people. Jamie Dimon, for example, bought $27 million of his bank’s shares, roughly his entire paycheck in FY 2014.
Even banks are getting in on the act — using their own cash to bolster market confidence in their product. Deutsche Bank has announced its intention to buy $5.4 billion of its debt. Showing it has faith in its debt helps cool the panic and worry that it’s loaded with troubled loans.
Will it stem the market meltdown that has been eating up market caps all year? Alone, probably not, but if China chills out, the end of quantitative easing doesn’t pitch the U.S. into a recession and the election stops scaring Wall Street, it might be a step in the right direction.
Amex’s Life After Costco
Since American Express and Costco announced the dissolution of their long-term card partnership, the world has been wondering “what’s next” for Amex. If stock price over the last year is any indication, the world has also been becoming increasingly pessimistic about the answer to that question.
But, it seems, after a very rough year, Amex is working to rebuild some of the profits that evaporated when Costco went away and is looking to the small business community as a central pillar of that effort.
Specifically, Amex is eyeing small business lending and is working in tandem with online lending marketplace Fundera to feature its charge cards on the site. The company did not disclose how much exactly it will be paying Fundera to feature its cards.
The hope is that SMEs shopping online for financing will be able to compare terms and ultimately choose an American Express small business card over traditional financing options.
American Express’ small business cards are offered under the OPEN brand.
In a recent interview with reporters, Amex Senior Vice President of Small Business Customer Acquisition David Rabkin said that the collaboration with Fundera is part of its refocus on small business lending.
According to reports, Amex already has an impressive presence in the small business financing space. Data from 2014 said the company saw $190 billion in purchases made on small business card products — a $68 billion increase from 2010.
However, just 10 percent of spending by SMEs is done with a card product, reports added, with small business owners relying on traditional loans and cash more than plastic.
And Amex has a rather significant amount of ground to make up; according to reports, 8 percent of the company’s worldwide annual spend made with American Express cards came through Costco in 2014.
Visa Discloses Square Ownership
As disclosed in a regulatory filing on Thursday (Feb. 11) with the Securities and Exchange Commission, Visa owns 4,194,230 shares of Class B common stock — accounting for approximately 1% of Square’s fully diluted common equity as of the end of 2015. According to a Visa spokesperson, Visa has not made any investments in Square since its initial investment in 2011.
The filing indicates something that everyone already knew: Visa has held at least some stake in Square since 2011, though it was never publicly disclosed just how much it had.
The news of the holdings cheered Square investors, sending the stock up roughly 6.8 percent in aftermarket action on Thursday evening, as Reuters noted. That takes the shares in the FinTech outfit up from nadirs, as Square lost 35 percent of its values since going public in November.
It was possibly the shot of good news that Square needs to get out there ahead of its first-ever public results call in March, when investors everywhere will get their first big window into how Square is fairing on its own.
The why of it all is interesting and worthy of lots of speculation, including as a way for Visa to get into the SMB POS business — or at least have its finger on that pulse in a more direct way. With the launch of Visa’s Developer platform and Commerce Network, it could be that Visa sees an opportunity to double down on a direct channel to the SMB and its portfolio of products, including Visa Checkout.
So, what did we learn this week? That most everyone is getting a bit weary of watching the bouncing market (and the value of their own portfolios bounce along with it), but that no one ever gets tired of watching what, if anything, will come from big investments from big players, big plans to go small from Amex or big interest from the biggest payments player on the planet in Square.