Get Ready for Amazon Coin and the Fintech Boom

Editor’s note: In this weekend’s video I profile a few interesting fintechs and their charts. Click the thumbnail below to view.

Every now and then, a tiny little headline captures your attention in a really powerful way.

On an average day I have 20–40 tabs open on my browser when I am working.

The first three I open up are always the Australian Financial Review, Bloomberg, and Reuters.

I suspect many in the finance world have a similar habit.

But I don’t read these three outlets for investment ideas, I have my own methodology.

Rather, I read them to know what not to say or think.

Think of it as triangulation.

I get my bearings on emerging investable trends by sifting through 100s of headlines, of which maybe a handful I actually click on.

Heuristics are very important for investors.

You sort and categorise the headlines instinctively, higher volumes in the same ‘subconscious’ category indicate a stronger trend.

Or at least, peak hype.

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Is this GFC-like behaviour? Whatever it is, it’s a first

Buried amongst all the dross, and whatever these big outlets decide is on the agenda, are gems though.

Anyway, here is what really caught my attention yesterday:

Port Phillip Publishing

Source: Reuters

[Click to open in a new window]

It may not sound like much.

Maybe you don’t know what it means.

But this is a watershed moment.

As the article explains (emphasis added):

U.S. investment firm Valentus Capital Management will raise part of a $250 million credit fund through the public sale of its own unique virtual currency, the company’s top official told Reuters in an interview on Tuesday.

Valentus, which launched in March this year, aims to register as a private equity firm with the U.S. Securities and Exchange Commission.

Its first fund — the Credit Opportunities Fund I — hopes to raise $50 million through the digital token sale scheduled sometime this year, said Behzad Taufiq, Valentus’ chief investment officer.

He added that this would be the first time a private equity credit fund will raise capital using a digital token that will be made accessible to global retail and institutional investors.

The goal?

To allow Valentus to invest in:

Mortgage securities and distressed debt, a lucrative area that saw private equity giants Apollo Global and KKR & Co raise $1.75 billion and $4 billion, respectively, the last few months, for credit funds focused on COVID-related dislocations.

This move reeks of GFC-like behaviour.

Probably misguided.

But the point remains, a digital currency issued by a company.

It’s not a share.

And it’s certainly not crypto.

What is techno-monetary competition?

Last year, I said we were about to enter a new phase in the history of money which I call techno-monetary competition.

China is hurtling towards this new phase (emphasis added):

A Chinese CBDC will be part of the largest experiment in social control, Libra could potentially leverage your transaction history for even more targeted marketing, and an ECB issued CBDC could leave you exposed to the pressure to spend.

The picture that emerges here, is of a world where there are three broad classes of currency.

You will have genuine, bona fide cryptocurrencies, corporate “cryptocurrencies” and CBDCs — all competing and interacting in different ways.

True cryptos may be the safest bet in this environment.

You are not beholden to some corporate behemoth that is trying to peddle your data, or at the mercy of a central banker who could be trying to force you to spend or save (unlikely).

It’s yours and yours only.

I use quotation marks around corporate ‘cryptocurrencies’ because corporations would likely want you to think they are crypto, when they are actually the most centralised thing ever.

This is digital currency, not crypto.

I can’t count how many times I’ve seen Bloomberg refer to Libra as a ‘cryptocurrency’.

Maybe it’s because the distinction is lost on people.

Either way, it’s important to know the difference.

I think the Valentus coin is the first of many corporate digital currencies to come.

Cash, debit, credit, then Valentus coin, and soon a digital yuan.

Point is, money is becoming an increasingly malleable concept.

How do you invest in new types of money?

Fintech is the natural bridge between old and new.

A company like Wisr Ltd [ASX:WZR] is a prime example, which my colleague Ryan Clarkson-Ledward discussed yesterday.

No shopfronts mean lower overheads, and the ability to encroach on the big banks’ market share.

The BNPL stocks are having their moment in the sun as they go after the relic that is traditional credit.

This may not last forever though, and the next step after Valentus is for bigger companies to launch their own tokens.

Who knows? Maybe just about every asset will be tokenised in the coming years.

Buying something online? Amazon will have a coin for that!

The age of techno-monetary competition is upon us.

Get ready for Amazon coin.


Lachlann Tierney Signature

Lachlann Tierney,
For Money Weekend

PS: Four Well-Positioned Small-Cap Stocks — These innovative Aussie companies are well placed to capitalise on post-lockdown megatrends. Click here to learn more.

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:

Money Morning Australia