Visa, MasterCard: A Chance to Profit as Markets Go Mad

The following was taken from the transcript of this week’s TFN Smart Trading video featuring Ian Cooper.

Laura Cadden: Economists are still at least another quarter away from being able to call the current economic downturn a recession proper. But the mainstream newsmakers believe that the U.S. is already in a recession, maybe even heading toward a depression. My guest today is Ian Cooper. One of the few analysts who accurate predicted the full extent of the sub-prime mortgage crisis back in early 2007 and forecasted a climb in the Dow as well as the real estate crisis in Britain. So Ian, by definition, the beginning of a recession can only be called retrospectively. What indications do you see right now that could say for sure we’re in a recession?

Ian Cooper: Well, GDP growth may have come out at .6% but if you look at domestic segments of the economy, they actually declined at .4%. It’s the same negative trend which is also referred to as Gross Domestic Purchases that we saw in the beginning of the recessions in 2001 and in 1990 and that’s probably only going to get worse. The classic definition of recession is two negative quarters of GDP growth but we’re obviously in a recession now with unemployment numbers and the economy just flat-lining with a dip in consumer spending.

Laura Cadden: Now, the IMF just downgraded, for example, Germany’s growth for 2008-2008; how hard will a U.S. recession hit globally, do you think? And what countries in particular will truly be affected? Whose economy really depends on U.S. consumption?

Ian Cooper: We’re gonna see declines all over the world; we already see France, Britain, China and Germany taking a hit. Germany and France are expected to show a growth of 1.4% and while Japan’s gonna show a slight growth of 1.4% — but it’s still a loss of momentum. With a growth of 1.6% in Britain, I expect it to spread. We’re gonna see this get a lot worse before it gets better.

Laura Cadden: What do you see is the down side for the Dow this year?

Ian Cooper: I’m calling for a Dow 10,000. You know, eight months ago, I was calling for Dow 12,400. It crashed under that significantly. The credit crisis is still unfolding, sub-prime is still unfolding, we’re still seeing global recession fears, we’re seeing crisis, we’re seeing banks fall apart, consumers stop spending money, foreclosures go through the roof, you name it. The Dow at 10,000 really isn’t out of the question. How we’re trading above 12,000 right now is beyond me.

Laura Cadden: Now you like to leverage market volatility. What specific sectors are you planning to tap for profits?

Ian Cooper: Right now, I’d stay away from anything credit-related. Any credit holder is going to go down even further because we’re beginning to see much higher delinquency rates, especially with credit card holders like Capital One (COF), Discover (DFS), and American Express (AXP). You also wanna stay away from anything housing related. If you’re really gung ho and want to own a credit card company, you want a Visa (V) or a MasterCard (MA) because they don’t issue credit. They are card processors, so they don’t worry as delinquency rates go up. Their only concern is, "Hey, how much money am I going to make per transaction?"

Laura Cadden: In your strategizing, do you prefer stocks or options?

Ian Cooper: Well, I like both but you know, options give me further leverage.

Laura Cadden: What do you recommend Smart Trading viewers should do right now?

Ian Cooper: Hold on to their seat and be prepared for a bumpy ride. As I said, you know, I’d recommend being in Visa and MasterCard because they don’t have exposure to the credit market delinquencies, I’d also be very bullish on gold right now. George Soros just told us that the dollar is headed much further lower and the Fed is likely to cut rates even further here. So we’re gonna see a much weaker dollar and much stronger gold.

Comments

[User 172125]

I bought Visa at $58.25- and maintain a core position of several thousand shares. I have traded this stock no less than 500 times in the last 30 days- and made a fortune doing it. There have only been two intelligent Visa 'posts' from Seeking Alpha- the others were slam 'posts'- by people who know nothing about stock.

A word to readers of these 'posts'- (I call them posts as there tends to be no serious analytics involved)- the writers of these blogs are generally uneducated and do not work in the financial industry. I have been insulted for pointing this out (by people that don't even own the stock).

Bottom line- I work on Wall Street (literally)- and can tell you that this is one of the best stocks to come out in the last few years. The major shareholders are member banks that can't sell the stock for 3 years! Currently there is less than 5% institutional ownership and when the funds start buying this will propel the stock even further as it will soak up the float.

You will hear snotty children attack the stock as they can't afford it anyway and wish to ruin your experience. Don't listen.

Just remember, when a writer doesn't use their own name (see the 'sean miller' post), or they can't read a prospectus (see the joanne rosen post), or they do not disclose whether or not they have a position (see ALL the V posts) ,it eliminates ALL credibility.

If you are smart - buy as many shares as you can buy. This stock will be $100. within 3/4 months. Amex is up about %5 after earnings- and this will only strengthen V's case.

One last question to some of the poverty stricken and negative posters; if you have no interest in owning V- and most likely can't afford to be an owner- do you not have anything better to do with your time?

2008 Apr 24 05:39 PM

[[e-mail]]

Good post... V Winner At 72.30 do you think that it is still a good buy...?

2008 Apr 24 11:17 PM

[User 172125]

I still love V- BUT- it seems to me that the expectations are already factoring a great earnings report on Monday and we have seen this backfire on companies that put out good, but not exceptional reports this week. We are living in a schizophrenic market- a company that produces huge losses but less than expected gets rewarded and another with profits gets hammered.

I would say that if the earnings are strong (which I expect them to be) are VERY strong- this should continue to move the stock. The problem would be guidance - if the outlook is moderate to weak we could see the stock drop below 70 again- and quick.

The last trades after-hours were already 75$ Thursday night. I'm buying more tomorrow and going to continue to be bullish but that is only because I can afford to hold them if Monday doesn't work out well. Also, if earnings AND guidance are strong- and we see a strong market - the days of buying V will be long gong.

Bottom line- if you can afford to hold the stock in the event of bad news (and be prepared to hold it for up to a couple/few weeks) I would buy more under or close to 75. Under no circumstances would I pay much more than 75 until after M/T. I am also interested in hearing what Mastercard (MA) has to say.

If news does not move the stock- expect a correction- and I would buy as many shares as possible in the 70 range.

Good Luck!

2008 Apr 25 12:30 AM

[Emerson]

V Winner

I agree with you about the amount of people who post comments who no absolutely nothing about stocks or the stock market. I guess we have to use mental filters here as we do with the analysts. So, to that end. I have no problem admitting I know nothing and I'm intrigued by your comment that you've sold V shares and made money doing it. Is it possible to explain that to me in more detail as it's something I haven't done yet--(sell shares and lose money? Oh, I've done that!). Thanks, Emerson

2008 Apr 25 01:20 PM

[User 172125]

Emerson, I'm talking about trading the stock- buying it on the dips- and selling it on the peaks. If you are new to investing this is not a good way to go- I would say it would be better to buy at an entry point you feel comforatable with and hold onto the stock. Good Luck

I maintain a core position (buy and hold)- but also trade the stocks on dips and peaks. My core position is substantial and is one that I expect to hold long term- UNLESS I see that future litigation, increased regulation, or possible before the three year restriction of sales on the member banks (major pre-ipo shareholders) expires.

If you are new to V you might want to wait until after Monday- unless you feel ok paying 75$ (the current price). After the sugar rush there should be a dip (unless earnings and guidance are spectacular) - that would be a good entry point.

2008 Apr 25 02:25 PM

[Rumaz]

v winner

To quote you "Just remember, when a writer doesn't use their own name (see the 'sean miller' post), or they can't read a prospectus (see the joanne rosen post), or they do not disclose whether or not they have a position (see ALL the V posts) ,it eliminates ALL credibility."

I'm not taking anyone's side here, but you too have not revealed your original name/credentials, which is a contradiction to your above statement. How then, does this make you, or what you're saying, credible?

2008 Apr 25 04:13 PM

[User 172125]

Rumaz- I hear what you are saying- but I am talking about the people that write these articles- I am simply posting a comment. It is not me that has to prove my credibility - I'm not the one writing an article.

2008 Apr 25 05:09 PM

[VDiddy]

V Winner,

I'm glad that I didn't listen to Seeking Alpha or to WEZ and Buyforeclosures. I'm just your average retail investor and having stumbled upon your posts and doing my DD I have a winner in Visa. I remember owning GOOG near its IPO price but sold early before the run because I got scared by negative posts and reviews and now I regret every moment of it.
Thank you again for giving me confidence to buy stocks again. Also, I want to ask you a question. You mentioned that Visa could possibly hit $500 after a few years, but will it ever catch or overtake Master Card?
You mentioned that V is dominant internationally, will be buying back shares, have exposure to the BRIC countries, and Visa Europe will come back under Visa down the road. Will all this add to their bottom line and what do you see this stock in 10 years?

Thanks

2008 Apr 25 06:50 PM

[Wez]

Listen to Wez? I've never said to buy or sell V. I could care less what anyone does or says he/she does here, unlike the boiler room promoters commenting here. Heaven forbid someone give one balanced discussion on this stock. "Here is why I bought it" and "Here is what you might think about before buying it"........now that would be a refreshing post.

2008 Apr 25 08:02 PM

[User 172125]

Vdiddy- Here's the deal on V- There are some potential future problems- and Wez- you want balance here it is (and this is from someone that loves this stock almost as much as my wife).

But- before I start let me address the fact that I have been called a 'boiler room promoter'- (see other V posts) so I will lend you me experience:

1. 22 years in the securities business
2. I have owned one retail brokerage
3. 3 registrations with Finra (formerly NASD)
4. I own a precious and base metals investment firm
5. No securities violations (knock on wood) in 22 years
6. I have taken one company I started public
7. I started one of the first online brokerage firms
8. I work on Wall Street (literally)
9. I have structured over 25 private placements
10. I have personally raised over 100,000,000$ in private capital

Having said that- I can't understand why someone would be so offended at someone that needs to counter all of the false and misleading information being disseminated on Seeking Alpha- (other than jealousy or anger at the fact they didn't get involved in owning V)

Now, for the problems:

Problem 1. There are many, many pending lawsuits against V- some may drag out for years- others may cost a fortune.

Solution1. V has stated in its prospectus it may do a follow-on offering. In other words, should they need more money- they will go back to the till.

Problem 2. Increased regulation.

Solution 2. Yes, V may have to deal with a new set of regulatory issues BUT- so have banks, brokerages, and even Microsoft. Bottom line- is that even if they are impacted exponential global growth will cushion the blow.

Problem 3. Lock-up expiration.

Solution 3. Yes, the pre-ipo shareholders (mostly member banks) will eventually be able to sell their shares. BUT- this will be in 3 years, unlike a normal lock-up which is only 6 months AND these types of transactions will be pre-arranged 'block' sales IF the major shareholders even sell.

What so many are missing when they pick this apart and whine about how many shares are outstanding is the brilliance of the viral expansion plan V has developed. Not only are Vs major shareholders some of the biggest banks in the developed and developing world, but so are some of the pre-ipo investors. China Life and the Chinese wealth fund- have 400,000,000. invested - the Kuwait wealth fund has 800,000,000. invested. The biggest banks from Australia to America to Latin America to Asia and the Middle East are all existing shareholders. Whose card do you think they will offer- Discover? Get real. Now that China and Kuwait are players whose card do you think will get preferential treatment in the gulf and in China?

I have been all over the developing world and credit and debit cards are brand spanking new in most of these markets. Even if V gets 10% of the market of Brazil, China, India, and the rest of the developing world's market- it will triple or quadruple its user base within a decade. Conservative estimates are 10- 12% growth over the next decade year-over-year! All this with less than 5,000. employees, and minimal costs ,other than computers, terminals ,and the cost of plastic to make the card :-)

Bottom Line:

Once they get past the litigation this company is a cash cow in the true sense of the word. Look at how much money Microsoft has made over the years because of the profit involved in reselling software. Unlike Microsoft, however, V does not have to update its product ever year, hire thousands of programmers, or deal with the whole planet trying to hack it to death.

Enough said?

2008 Apr 25 09:28 PM

[Rumaz]

V Winner

Is the $ 3 billion cash that V has kept aside for potential law-suits, enough money? You mentioned that the international growth would be enough cushion, but won't the law suits (if V looses) bring bad publicity to V and drive the stock down?

2008 Apr 26 10:49 AM

[User 172125]

Rumaz- Law suits are the one thing that could bring down the price of the stock over the next couple of years - as the major shareholders are locked in for 3 years. Lets look at this- lawsuits are a fact of life for major companies (especially companies that have a huge market advantage- like Microsoft). V is aggressively seeking to settle all pending litigation as they have already done with Amex.

Legal settlement costs could run from the low end of 1.5/2 billion to the high end fo 10 billion. In the event that costs exceed 5 billion V could go back to the till (raise more money)- as they have stated in their prospectus. I expect that major suits will be settled by around the turn of the decade. Furthermore, once all suits are settled V will have claimed an even greater percentage of foriegn and domestic transaction business and once unharnessed- should experience an incredible run.

I would look at future pullbacks as a buying oppurtunity. No stock moves in a straight line an V is no exception. What I would recommend is developing a pre- defined buying strategy whereby you seek to continue to acquire the stocks during times of weakness - whether artificial or real- turn other's weakness into your strength.

Bottom Line- you will hear the doubters critique and pick-apart this stock all day long- but V has one of the most enviable business models in the world- which is precisely why they have frustrated so many other companies and regulators.

Good luck

2008 Apr 26 12:45 PM

[User 184063]

V winner,

I'm 21 just starting to get into stocks. I bought 30 shares of V at 64.80 and now have $2,500 that i would like to invest, do you think i should put it in V, or another stock. Its at $75, do you think i should wait for it to go down, or should i buy 33 more shares now. How do you think i should play the cards?

I know your not my investment broker but would appricate some help, you obviously know what your talking about.

jake

2008 Apr 27 09:52 AM

[User 172125]

Jake- You might not like what I have to say- which is NEVER to take advice from ANYONE over the internet, but I have to say it.

I will commend you at becoming an investor at 21- that alone puts you ahead of the curve of 99% of the population.

My OPINION only is to find strong companies that you believe it, and then do a lot of research. Luckily the web offers many, many = sources. If you have an online brokerage account (which I'm sure you do)- then you can take a look at the fundamentals, earnings, analyst reports, etc.. Then continue doing what you are doing- there are many sites that have message boards to bounce ideas (this one, motley fool, marketwatch community, yahoo finance, google finance, aol finance- etc).

Now having said all that - one thing you have going for you at 21 is that you can take a risk- If you can invest the money and not lose sleep or effect your lifestyle if the stock drops - then I have no problem with the idea of you investing in V- I think its a great company with a huge future. 99% of the world will tell you to diversify into many stocks- and this is also good advice-

2008 Apr 27 11:24 AM

[User 172125]

Jake- forgot to mention (IPI)- Intrepid Potash- you might want to check out the posts on IPI-
Just type in IPI in the search function on this site- and you can learn more about that company.

2008 Apr 27 11:31 AM

[Wez]

Sorry Buy V, I mean V winner, nobody who has raised over $100 million would spend even a fraction of the time on these boards as you do. This is where pikers go to tout their positions, not people with real wealth. It is funny to see people respond to themselves though.

2008 Apr 28 12:00 PM

[Plantinseeds]

Hey,
I am one of the poorest of the poor here. ( if you jude someone by how much money they make or by how little they have)Yea you know of me.
I'm the one that keeps your sewers flowing, your yards mowed, fixes your AC in August at 2:00 am, or takes your order at the restaraunt. The one whose family income is less than $60k a year and pays the most in taxes ( based on percentage of income).
I only had the prospectus to read as far as research for V. But I had more than that in life. No one wants to take or use cash anymore. A lot of folks have gone to shopping on the inet which you need plastic or paypal. Everything is going plastic and V is not a credit company, its what I call a taxi cab for transactions.
So yes I scraped all most all my funds to buy 400 shares V @ $59 and $65. I have put all my faith in this one stock for a 17 year investment. This will pay hopefully for my families future.
Those who say to research and do your due deligence are correct everytime but, I cannot tell you how strong this gut feeling is to own V for my future in this world.
Of course I consider my self one of the richest PPL on this earth because of my family, friends and most importantly because of what Jesus has done for me.

2008 Apr 28 03:18 PM

[greencapitalist]

hmmm.... i expected v to come down. fully priced at this level. but let me reiterate, they gave all the expected things in terms of volume, transactions, eps, etc, etc. the stock is a 120 to 150 one in 3 years. but the stupid wall st is expecting 125 right after earnings.....

guys dont sell if you got in very very low like 55's.

meanwhile tomorrow MA.... it is still DEAD CHEAP for its huge growth rate. expected is 2.00 eps tomorrow. they will give 2.18 for sure. beating and raising is a joke for MA.

one point to note. V at 65 to 70 still is equal to MA 260 to 270.

2008 Apr 28 04:32 PM

[User 172125]

Buying Opp- but before I touch on that - I have to ask you a question Wez- are you gay? I have never had a man so obsessed with me.

Listen, you obviously have no money and nothing better to your time- why don't you go hang out on yahoo finance- that is your speed.

NOW- I have to say V is a tremendous opp at these prices- I am buying more right now in after-hours.

Profits were up, revenue was up, transactions were up (in all markets)- guidance was strong. The President of the company stated that they have yet to see any effect from the economic slowdown, and that is strong.

As of trading hours the stock is up 72% in 5 weeks. When people pull their heads out of their asses and wake up this stock will come back strong.

I also agree very much with Green Capital- MA is also a strong play- it will put up tremendous numbers from global growth.

Look at what happened to Apple when it reported strong earnings - it dropped in after-hours- and was trading over 170 today up from 160 a week ago.

For those of you that are actuall investors- right now is a great time to buy.

Good luck!!

2008 Apr 28 07:16 PM

[Wez]

Nah, I just like calling BS on fakes and pathetic stock touters.

2008 Apr 28 07:54 PM