Wednesday, March 19, 2008
Much like I figured it would, the market reversed sharply. At the beginning of the day, stocks started higher, but eventually fear took over greed and stocks plummeted. Much of it can be attributed to the exact opposite reason that stocks went up. There was hope that the financial sector had seen the worse of it. This move down shows that the fear still exist that the worse is not over.
However, there was one bright spot. Visa had its IPO and it was up about 28% from the open. Now the good thing about Visa is that its market is actually growing and some would argue that it is almost recession proof. You see, Visa makes money on its transaction fees. It owns the largest credit card network in the world and makes money each time one of its cards are swiped.
Its actually a fantastic business model. If you are like me you can appreciate it because you pay for everything with credit cards, even the little transactions. What's even better is that they actually don't have liability for consumers who don't pay their bills, that is the responsibility of the issuing bank.
So do I think its a buy? Maybe. Mastercard has quadrupled since its IPO, and Visa is the better company. I still think its kind of dicey right now to be playing in the market, but if you want a good risk in a time when nothing really looks very good, Visa may be it.