Wise, Wine, and A STONK on Watch
Financial services are a funny thing. Between PayPal's new stablecoin and foreign currency debit card accounts, who wouldn't love a race to the bottom in transaction fees?
What uuuuup. I’m back from vacation. It was good to unplug for a few days. My wife and I drank a lot of wine and spent a lot of money. It was wonderful. I’ll get into a key takeaway on the money part in a moment. But first, some thoughts on my newest piece for Seeking Alpha. Last night, SA published my article covering PayPal’s PYPL 0.00%↑ new stablecoin. Long story short; PayPal makes roughly 90% of it’s revenue from transaction fees. So if the company’s Ethereum-based stablecoin gains any sort of network adoption, Ethereum’s validators are arguably the bigger beneficiaries of the fee revenue associated with on-chain “PayPal USD” transfers.
Since Paxos Trust is the issuer of the token, PayPal is likely sharing the interest gains from the treasuries that serve as the coin’s collateral. And if bond yields go back down if/when investors move out of equities, it’s difficult for me to see how this new stablecoin really benefits PayPal monetarily for the foreseeable future - especially if it cannibalizes the core payments business that relies almost entirely on transaction fees.
Of course, I could be wrong and I certainly have no insight into what PayPal is planning internally. But I don’t think it’s a long even after the big post-earnings selloff or the massive COVID-boom retracement. Speaking of fintech stocks that I’m avoiding, I almost talked myself into getting a Wise account before my Canada trip. I ultimately decided not to because I figured out something pretty important. It didn’t actually make economic sense for me to use the Wise card for one critical reason; rewards points.
My Fidelity Cash Rewards credit card pays 2% cash back on everything. I’m sure there are better cards for gas or groceries or shopping. I don’t care about all that. I like a 2% blanket deal on everything so I don’t have to think about which card to use at various merchants to try to game the rewards. Anyway, Wise operates an international debit card and a few weeks before my trip, I considered getting one of those Wise cards to use while over the boarder.
Even though Wise would have allowed me to pay directly with CAD, USD to CAD swaps carried a small conversion fee. But the bigger problem is/was a lack of rewards on the debit card. My credit card charged me a 1% foreign transaction fee on everything but still paid the points on the purchases. So even though the foreign transaction fee was higher than the conversion fee in the Wise account, it still made more sense to use the Fidelity card I already have and eat the fee.
Here’s an example: we spent $53.13 at the Gretzky Estates Winery in Niagara on The Lake on Friday. Foreign transaction fee: 53 cents. Cash back rewards: $1.06. On net, I’m still ahead by using my normal credit card. It actually gets better because after the trip I noticed all of the foreign transaction fees rounded down fractional cent remainders even when they were greater than 0.5 cents but the rewards rounded them up. Which means I actually did a little better than 1% on the rewards if we’re taking it to the decimals. Point is, the only conceivable time I would have used a Wise account was a week ago and it made more financial sense not to. Not a great sign…
The Wine
I learned a little secret about the Gretzky Estates Winery while visiting a neighboring winery called Trius; Wayne Gretzky is a minority owner. He actually owns just 1% of the equity but you’d never know it by visiting the winery or by looking at the bottle labels - decked out in The Great One. The majority owner is the same person who owns Peller Estates Winery about 10 minutes away. Peller also owns Trius. Fun stuff.
Also, if you ever consider visiting Niagara on The Lake, we tried 8 wineries over the course of a few days and Gretzky was honestly the best and I don’t think it was even really close. The reds at Gretzky were very good. There was a double oaked red blend that I liked and a Cab Sauvignon that was tasty.
The Niagara area in Canada is known for “icewines.” The way icewine is created is with frozen grapes from the winter. These frozen grapes yield a very small portion of juice and it’s a highly concentrated form of juice. The result is a dessert wine that is sweet AF. We’re more into dry wines so the icewines didn’t make it over the border. I actually like port and the icewines were still too sweet for me. To each their own.
We ended up chatting with a Canadian couple at Trius who swore by a Peller Estates membership package that bundles and ships wines from Peller, Trius, and Gretzky on a quarterly basis. They then proceeded to tell us every time they go to a wine store that carries all regions they go straight to the California section. We did not get the membership package…
STONKS
Being largely unplugged for a week allowed me to step away from charts, balance sheets, and economic data. It was lovely. I come home and find the S&P 500 down 100 points from where I left it. This actually bodes quite well for one of the larger positions that I have on and I’m almost ready to add to it as I’m gaining conviction in the trade.
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