Processing Prosperity
This Week in the Market
This week is being shaped by the geopolitical signaling out of Greenland and the tone set at the World Economic Forum in Davos. Discussions around Greenland have highlighted long-term strategic investment, resource development, and Arctic infrastructure rather than near-term conflict, which markets are interpreting as constructive rather than destabilizing. While initial headlines sparked outsized concern and speculation, the situation de-escalated quickly, with clear communication and swift coordination preventing it from becoming a prolonged issue.
The markets are still down from the Greenland fears, although we believe it won't be long before that changes.
The introduction of a 10% credit card interest cap originated as a proposal from President Trump and marks a meaningful shift in consumer finance policy. The move is aimed at easing pressure on the household balance sheet by limiting excessive interest burden.
There are many misconceptions around this proposal that give us an opportunity to make money:
This is not solidified, and the banks will lobby against this.
This affects credit card issuers (banks) much more than payment processors (Visa and Mastercard)
Trump only wants this for one year, so it's not a permanent thing at all. He knows it's not sustainable.
The next section outlines our trade around this theme.
Payment Processors - Buying the Dip
We view buying Visa or Mastercard on this dip as easy money. Payment processors have insane profit margins, and people are overestimating the negative impacts of the possible 10% credit interest cap.
Buying stock, selling puts, and buying calls are all good ways of getting exposure in accordance with your risk tolerance.
We prefer Mastercard at the moment over Visa, but both are perfectly fine.
We see a 10% percent upside in both names. This can get stretched to a 20-30% upside pretty easily using call options, but it's important to be careful, as options are not suitable for all investors.
Disclaimer: At any time, A4K Capital and its affiliates may hold positions in the assets and/or contracts discussed. The content in this newsletter is for informational and educational purposes only and should not be considered financial, investment, or legal advice. A4K Capital and its affiliates are not responsible for any financial losses or decisions made based on the information provided.
