In this episode of the Industry Focus: Financials podcast, host Jason Moser and Fool.com contributor Matt Frankel, CFP, discuss some of the latest efforts to encourage a cashless society, answer a few questions from our Twitter followers, and discuss the stocks they're keeping their eyes on this week. It's all on this week's info-packed episode.
A full transcript follows the video.
Check out the latest Ameris Bancorp earnings call transcript.
This video was recorded on Feb. 4, 2019.
Jason Moser: Joining me in the studio now via Skype is certified financial planner Matt Frankel. Matt, how's everything going?
Matt Frankel: Great! It's always good to be with you guys!
Moser: Another week. We're definitely getting into earnings season here. Always a lot to talk about. We'll certainly be talking more earnings as the weeks go on. I wanted to talk a little bit -- we just had the Super Bowl yesterday, and we've seen some other articles here recently that are talking more and more about how sports franchises, stadiums, arenas, they're all leading this push for cashless concessions. We were reading an article that specifically was talking about Super Bowl 53, also talking about the Tampa Bay Rays actually leading that push. This is something we talk about a lot on the show, of course, because it's a real market opportunity. It's something we've had a lot of success with, with the war on cash basket. It was an interesting article to read. From my perspective, anytime I go to one of those events, it seems to me like cash is a hindrance, it's a problem. You go and you're like, "Oh, man, I have to stop by the cash machine and get cash. It'd be much easier if I could pay with my phone or if they had contactless payments." It sounds like that's what these sporting events are trying to do.
Frankel: Yeah. Visa is a big sponsor of the Super Bowl, which probably has something to do with it. It's not just on the consumer point of view. For the business, it's a benefit, as well. Not having cash greatly reduces your chances of getting robbed or employee theft. You don't have to go to the bank anymore. You don't have to make certain capital investments like having cash registers or a big safe in the back or things like that, for example. There's benefits on both sides to not using cash. As technology evolves, it's getting easier and easier to use contactless payments and things like that. It's getting easier for the consumer to use, which has been, in my opinion, the big hindrance up to this point. I don't foresee that trend reversing anytime soon.
Moser: No, I don't either. I put out a poll on Twitter a few days ago. I was reading another article that had done a survey in regard to mobile wallet vs. contactless payments. It got me thinking, I wonder if there was a strong preference out there for one over the other, so I asked on Twitter if you had your choice, invisible world where you have to make a payment, like at a grocery store or gas station or whatever, would you prefer to use your mobile wallet -- Apple Pay or Google Pay -- or, would you prefer to use a contactless payment form like waving a card, kind of like how we get into the Metro here in D.C. I wasn't sure myself, initially, if I had a preference.
It turned out that about 60% of the people prefer using a mobile wallet, a digital wallet, vs. contactless. The more I thought about it, if I had my druthers, I would probably go with the contactless payment. A little card is so easy to pull out and wave. The less I have to worry about dealing with my phone, probably better. But, it's either way. They're both convenient and I like both options. Where do you stand on the contactless vs. the mobile wallet?
Frankel: I like the contactless. I'm actually probably the least tech-savvy person that covers fintech. [laughs] I just got a Venmo account about two weeks ago.
Moser: Nice!
Frankel: I've used Zelle and I've used cash. I can go either way. Right now, I'm still one of the people who uses cash for small transactions. I'm in the majority of that, to be clear. Cash still dominates small transactions. For example, I could never see a convenience store going completely cashless. They would lose too many customers because that's what they use. But the latest statistic is, about 48% of all transactions are now either credit or debit card based. That includes things like mobile wallet and contactless payments. I'm one of the later adopters, but I definitely go contactless, especially with how easy it is, especially through some of the newer mobile phones. I just got the Galaxy Note 9, and the Samsung Pay is really easy to use where you can. It's becoming so much more user friendly than it was a just few years ago.
Moser: Yeah. I imagine that'll probably continue to be the case. We've talked about the legalities here with places not accepting cash. I think you're right, most places would be smart to always accept cash. Ultimately, you want to give your consumers choice. The place that gives their consumers the most choices is going to probably generate more business over the course of time. You did some research into the legality questions here. If an entity decides to go completely cash free, and how that could play out on the legal side of things. What'd you come up with?
Frankel: Yeah, especially in bigger cities, it's becoming a real trend. Restaurants, things like that are going completely cashless. Starbucks is even testing out some cashless locations in certain areas. I know they have one in Seattle that's completely cashless right now. This begs the question, is that legal? If you look at the money in your wallet, it says right there, this is legal tender for all debts, public and private.
I did a little bit of digging into that. Long story short, the Treasury and the Federal Reserve both say that it's completely optional for a business to accept cash. There's two main reasons why. First, the wording on the bill itself says that in order for cash to be mandatory to be accepted, it has to be a debt. If it's not the purpose of repaying a debt, then the businesses don't need to accept it. They gave a good example involving gas stations. A lot of gas stations won't accept $50 or $100 bills at night. If you go to a clerk with a $50 bill and say, "I want to fill up my tank," they have the right to say no. If they let you pump and then go to pay, then it becomes a debt and they legally do have to take the money. That's an interesting gray area. So, if they let you get the merchandise first, then it becomes, you're indebted to them, and they do have to take it.
Reason No. 2 is that although everything that's written on our money is implicitly backed by our law, there's no actual federal law in the book that says cash is legal tender. You would think there is, but there's no law. This comes straight from the U.S. Treasury. There is no law on the federal level that says that businesses have to accept cash. It's completely optional. Now, there are some local laws. Massachusetts, for example, has a lesser-known state law that says that businesses have to accept cash. So, you're not going to see a cashless Starbucks in Massachusetts anytime soon. There's a big push on some local levels, in New York, for example, there's some politicians who say that cashless businesses unfairly discriminate against lower-income individuals. Makes sense. A lot of people in the lower income brackets don't have bank accounts, don't have debit cards, things like that. The argument is that you want a fully inclusive marketplace. That's definitely a problem that would have to be worked out before cashless businesses become really widespread.
But, yeah, it's completely legal for businesses to refuse cash, which I was surprised to find out. It makes sense when you think about those two reasons.
Moser: Yeah, those are good examples. Matt, I think you may need to go in there and update your LinkedIn profile there to reflect your legal expertise. Good research there, man! I appreciate that. I'm sure our listeners do, too.
OK, let's pivot over to Twitter for the week. We had some fun stuff happening on Twitter. We always like to shine a light there to some of the good stuff that's going on. @JGLabonte said, "Hey, TMFJMo, I found that online checkout using PayPal is so frictionless that I buy stuff before I can talk myself out of it. I bet lots of other folks have this problem, too. Next time, I'll try to buy more PayPal instead." Jay, probably not a bad idea. PayPal will pay dividends for some time to come. But I feel your pain, I know the problem.
@Every90Midwest said, "Hey, you mentioned you could put four more in your war on cash basket. Care to share what those would be? Are Discovery and American Express (AXP +1.74%) two of them?" Matt, I'm going to give you first up here. If you could add any stock or stocks to the war on cash basket, what would you throw in there that's not currently in there?
Frankel: I like American Express because they do a really good job of spanning the entire spectrum, especially the lower-end consumers. I've referred to Green Dot, it's one of my favorites that I'm about to talk about. They've done a great job of the prepaid debit card market, being really inclusive to the underbanked, which is what they call people without bank accounts and things like that. American Express has been a pioneer of solutions for that segment of the market. I would definitely put Amex in there.
Green Dot is one I talk about all the time. They're not only focusing on their own products, but on helping other companies offer cashless products to customers. To name a couple more, I'd actually put Apple in the war on cash basket. Apple Pay is getting bigger and bigger. Amazon's another one, they're the ultimate cashless business.
Moser: That's a good point.
Frankel: I would argue that you can put more than four in the war on cash basket.
Moser: We could probably have our own fund. We could build an ETF with all these ideas. I like all those names you said. I would lean toward American Express over Discovery. Discovery is not a bad business, I just don't know that it has the same brand power that American Express has and the optionality to build out new offerings and whatnot. I also was thinking about this, Berkshire Hathaway. You could throw that in there as a lower-risk play, but they recently made some big investments in to the cashless movement. That's a way you could participate.
Perhaps for a little global exposure, Latin America in particular, MercadoLibre might be one worth looking at. They have their own payments solution there, Mercado Pago. Could be a little bit of a higher risk profile, maybe, but definitely gives you exposure to that.
A lot of different options out there for investing in that cashless movement. Nice problem to have, I suppose.
One more question we got, from @CNGChicago. He asks, "Gents, any good forums for real estate investors you would recommend? Appreciate your work." Matt, this seems like it's right up your alley. I'm going to yield the floor to you and see if you can't offer this guy some good resources.
Frankel: First, I need to start off by saying The Motley Fool is going to be your go-to source for real estate before too long.
Moser: Hey, now!
Frankel: [laughs] We're launching our real estate sister website a little bit later this year. Stay tuned for that! Listen to the interview with Matty A. that you did a few months ago for a little more details on that.
Talking about some existing places to go, my favorite is biggerpockets.com. Probably the best real estate social network and full of resources. If you're a beginner or a seasoned investor looking for more advanced strategies, that's a good place to go. connectedinvestors.com is another good real estate social network. They're more oriented in my mind toward the fix-and-flip market than they are the buy-and-hold real estate market. Two great resources there. There's a bunch of them, but those are two of the really big ones.
Moser: All good stuff. Thanks, man! Yeah, that was a good interview with Matty Argersinger from a few months back. He gave a lot of good insight as to what you guys are doing. I know you're excited to get that thing going. Stay tuned, that's right around the corner.
Let's jump into what's coming up here for the week. We got our One to Watch, taking a look at stocks on our radar here for earnings season. What's one that you're watching this week, Matt?
Frankel: I'm watching Berkshire, ticker BRK-A or BRK-B, depending on how much money you want to spend on each share. There are two big events coming up within the next couple of weeks that I'm paying attention to. On the 15th of February, all hedge funds and companies with big stock portfolios like that have to disclose what they did in the fourth quarter. I have a feeling we're going to see that Berkshire was very active in the stock market in the fourth quarter. They were sitting on over $100 billion in cash in an environment that is Warren Buffett's dream environment for investing. I wouldn't be surprised if he bought himself some Christmas presents on the Christmas Eve lows there, especially things like Apple and a lot of his favorite companies that really took a dive the in the second half of the fourth quarter.
Beyond that, there's also Buffett's closely watched annual letter. That comes out about a week after that, along with Berkshire's year-end results, where we'll find out how much of their own stock they bought back, which has been a hot topic lately. And, Buffett's feelings on the market and where Berkshire might be going. Hopefully, he whittled down his cash holdings a little bit. Investors would be happy to see that. I think that's exactly what you're going to find out.
Moser: We're looking forward to that. I'm going to go, on that same wavelength there, our little baby Berkshire that we always call it, Markel (MKL +0.44%), ticker MKL, earnings are coming out on Tuesday. Not a lot that goes on with this business on a quarter-to-quarter basis. It's pretty consistent. You've got the insurance business, you've got the Markel Venture side of things. They've got their investment portfolio, much like Berkshire Hathaway has. Listeners will recall that there was a little bit of an issue here. They announced there was an investigation into the reinsurance side of the business, specifically it was in regard to reserves. Looking for any clarity on that, and how it could play out on the business here for the coming year. It's a reserve issue, it doesn't sound like it's anything very pivotal to the overall company. But, hey, maybe it plays out on the book value of the company in the short run, and maybe that offers investors an opportunity if there's a little dip in the stock. This has been one that we've owned for long periods of time here in a number of our services here at The Fool, and I suspect that will remain the case regardless of what they say with the earnings release. But hey, if the stock takes a dive, investors may want to take a look at it because it's still a very good business.
I think that's going to wrap it up for us this week. Matt, appreciate you, as always, joining!
Frankel: Always good to be here! Looking forward to next week!
Moser: Yes, sir! Speaking of next week, a reminder for our listeners. Next week, we will have part two of our Between Two Fools interview with Dennis Zember, Ameris Bancorp CEO. Stay tuned for that! Really excited to be able to bring you that. Thanks again for listening, folks!
As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Today's show is produced by Dan the Man Boyd. Enjoy that new motorcycle, Dan! Be careful! For Matt Frankel, I am Jason Moser. Thank you again for listening! And we will see you next week!
