The VISA Black Card is a Joke

November 1, 2013
The only card you need

The only card you need

 

First, how pathetic is it that VISA can’t even come up with an original idea?

If you’re not familiar, American Express created its mythic Centurion card, known to the proletariat as the “black card”, in 1999. Beyond gold, beyond platinum, beyond californium or whatever the most expensive element in the periodic table now is, the Centurion card was available to such an exclusive subset of American Express cardholders that the company barely acknowledged its existence, let alone advertised it. If you qualified, they’d let you know. They’d also charge you $7500 for the privilege, plus a $2500 annual fee. Even today, in a world where the internet has made secrets scarcer and harder to keep, the card retains as discreet a profile as possible. The card’s website, Centurion.com, is not what you’d call ostentatious.

Even though credit cards have evolved and been democratized, turning from status symbols into mere necessities, the American Express brand still manages to retain some kind of cachet. Looking to challenge that cachet, in 2008 VISA introduced its Centurion competitor – the unoriginally monikered Black Card®. Seriously, that’s what they called it. Imagine Honda calling its new economy car the Bug, or the Cincinnati Bengals calling their end zone bleacher section the Dawg Pound, and you’d have an idea how this dances around the edge of copyright infringement without stepping over.

How about some other, more legitimate reasons why the Black Card (capitalized) is absurd? For one thing, it’s Made of Stainless Steel℠. And yes, they really did go to the trouble of attaching a service mark to that phrase. Exactly how is that a plus? So you can impress the clerk with an authoritative clink while slapping your card down on the marble desk at the Mandarin Oriental? Or is it to garner even more attention from TSA agents while shuffling through the shoeless indignity that is modern American air travel? Either way, that sounds like the opposite of the discretion that most truly wealthy people prefer.

You know what our PayPal accounts are made out of? Nothing. Literally, nothing. Neither are our bank’s wire transfers and direct deposits. If only they were made from (excuse us, “forged”–sounds classier) stainless steel, we’d be enjoying a money-having experience far superior to that endured by the huddled middle class.

Here’s what $495 gets you, assuming VISA selects you to buy your way into Black Card membership:

  • A magazine. Not just any magazine, but “the ultimate luxury guide [that] showcases the finest in travel, fashion, transportation, technology, interior design and art.” It’s for members only, just like the jackets. Again, we have the internet now. If information exists in printed or printable form, it’s available to everyone. Even entry-level cardholders. Besides, magazines, at least at our house, are literally* garbage. (If you want the latest issue of American Rifleman or Vegas Living, you’re welcome to wade through our trash cans.) These days, a magazine is something you buy at an airport newsstand because you want something to read, your Kindle is low on juice, and you can’t be bothered to fish its power cord out of your luggage and find a place to sit that’s near a power outlet. Speaking of airports,

 

  • Visits at “over 350 lounges in 200 cities worldwide.” Wow, that’s more than 1.75 lounges per city. We’re not here to denigrate airport lounges in principle, as sitting with the masses can sometimes be its own punishment. But if you’re spending so much time waiting for connecting flights that this sounds like an agreeable perk to you, then you’re rich enough that you can find a secretary who can reduce your layovers while she books your flights.

 

  • A 24-hour concierge, who can give you “local shopping information” and details on “highlights/sights/exhibitions/shows.” One more time, the internet. If you can afford $495 for a Black Card, you can afford $495 for an iPhone that will tell you what the time in Incheon, South Korea is without having to call anyone. Besides, if you’re that desperate to live the life of the upwardly-immobile-because-you’re-already-at-the-top, shouldn’t you already have a personal assistant at your beck and call? One who will help you with even more intimate problems than a VISA employee with a headset can? “Hi, Janie? It’s Mr. Smith. What’s the name of that guy we called to bury that hooker last time? No, I don’t need another hooker buried. But he also said he could secure some krokodil, and I was feeling more indulgent than usual tonight. I tried the Black Card concierge and she said she was legally forbidden from helping me with this. Bitch. What am I paying her for?”

And, as if the concierge at a call center in Fort Wayne is going to be able to find you a dog groomer in Madrid any better than you can do it yourself.

  • “Global Acceptance. For your convenience, your Black Card is accepted in over 170 countries worldwide with no foreign transaction fees.”

(Just to clarify, that’s for your convenience, and not for your vexation.) Still though, what a perk! It’s not as if every other card with a VISA logo on it isn’t accepted in all those countries.

There’s also a plethora of arcane services that you’re never going to need and certainly wouldn’t be able to justify the $495 purchase of. Like late checkout, which can usually be had by asking the hotel employee nicely. Or “auto rental collision damage waiver,” which you already have if you have car insurance. Or reimbursement for “essential items in the event of baggage delay.” A $3000 laptop doesn’t count as an essential item, either. You get $100 of reimbursement a day up to a total of $300. That’s a lot of dental floss.

Adorably, VISA compares its own shiny apple to a decomposing American Express orange and doesn’t expect people to notice the unfair comparison:

 

Black Card

 

If the folks at VISA didn’t hate us before–after all, they’ve been losing money on us since we first signed up and started our uninterrupted pattern of paying our balances in full every month, as responsible people do–they probably do now. Glad to be of help.

 

*That’s 2 uses of “literally” in this post, both of them accurate and neither of them superfluous.

Filed Under: Credit Cards Tagged With: , , , ,

Exciting New IPO! Get in Now!

October 4, 2013

Initial public offering. For the uninitiated – and you really need to stop screwing around and buy the book already – it’s when a company’s owners finally decide to realize their investment potential and let ordinary scrubs buy into the company. Sometimes an in IPO is the culmination of decades of patience on the part of owners who were in no hurry to get fame nor recognition, largely because they were too busy enjoying their show horses and vacation homes as owners of an established private company (e.g. Dave and Gail Liniger of RE/MAX, which went public Monday.) Other times, an IPO is an attempt to capitalize on momentary good fortune as soon as possible. We’ll let you decide which is generally the more prosperous route. In fact, we’ll let some visual aids aid you. Here’s what’s happened to Visa stock since the day it first traded:

Visa chart

 

And here’s Zynga stock, over the course of its shorter but no less eventful public existence:

 

Zynga chart

 

As a general rule, being a ubiquitous global payments processor with billions of paying customers is a sounder financial strategy than creating animated time sinks emblematic of modern adulthood’s continued descent into permanent adolescence. (For Christ’s sake, they’re games, people.)

Which brings us to the latest headline in the money section: the upcoming initial public offering of Twitter.

Before we delve too deeply into this, a primer on how to read financial (or any other) news. Understand that consuming most of this stuff is not going to tangibly benefit you. For instance, from today’s USA Today Money section: “Battered Dow Falls Back Below 15,000”. Number 1, there’s nothing in the story that expounds upon the headline. Really, there isn’t. Read it if you don’t believe us. Number 2, even if there was, you can’t profit from it retroactively. A .9% drop in an index will barely affect your portfolio, especially since the index will likely bounce back tomorrow. Knowledge of the drop would only be valuable before the fact, which, as Andy Rooney and Sacha Baron Cohen demonstrated to great effect, is impossible:

 

 

Twitter’s going public, and the media can’t shut up about it. $1 billion in underwriting! Also, because Twitter is a social media service with something of a legitimate purpose, and hundreds of millions of users, the simpletons who prepare and serve news for your consumption are professionally bound to compare it to the famed IPO of Facebook even though the commonalities are only superficial. We had plenty to say about the Facebook IPO at the time, and our opinions haven’t changed. (The stock didn’t return to its initial price until 6 weeks ago.)

You know what excites us? Here, we’ll make that one of our patented multiple-choice (dual-choice, if you want to be specific) questions:

  • A. Investing in something we use every day.
  • B. Money.

Twitter is moderately useful for certain things, and can be entertaining depending on whom you follow. But it doesn’t do a blessed thing to extend anyone’s business, regardless of how badly this guy and millions more misguided fools want it to.

Here’s an actual usable paragraph we found from a New York Times story. Because it’s important, they buried it in the text:

[Twitter] has also been losing money, reporting a net loss of $79 million last year and $69 million for the first six months of 2013. Even after adjusting for stock option compensation and other items like depreciation, Twitter has still reported steady losses.

Where do we sign up, then? And how long do we have to wait to get our hands on that sweet IPO?

Unless you live in Denver, and even then it’s doubtful, you’ve likely never heard of Antero Resources. It’s a company that extracts oil and natural gas, all of it right here in North America; the Appalachian Basin, to be precise. Antero’s been around slightly longer than Twitter, the former being founded in 2002. The company predicts an opening price of between $38 and $42, making its IPO somewhere around a $1.2 billion proposition. Antero lined up every big underwriter – Barclays, Credit Suisse, Citi, JPMorgan, Wells Fargo et alia – and is expected to first trade publicly a week from today.

There are dozens of oil and gas companies. The finished products of one are largely indistinguishable from those of the rest. In fact, the finished products of most of them aren’t even anywhere near the final link of the production chain. (Most explorers stop their involvement short of the refinery, let alone the retail stores.) Created by 2 middle-aged industry veterans, Antero originated in a boardroom of a law office, not in the basement of a Silicon Valley townhome populated by 20-somethings. Celebrities don’t patronize Antero, at least not consciously. Antero was nowhere to be found during the riots in Tahrir Square.

As a private company (for another week), Antero’s financials didn’t have to be disclosed until the company filed with Securities and Exchange Commission for the IPO. Antero could have been losing money faster than Twitter is, for all we’d know. Except Antero isn’t. In fact, it’s stupendously profitable. Assuming that 60% profit margins are your thing, and in a capital-intensive industry no less. Antero has 200 employees, and most of those are seasoned petroleum engineers, rather than quasi-paid intern programmers. The company qualified for $2 billion in loans last month, meaning that either its credit is fantastic or the lenders are confident of the company’s future profitability.

No one, at least no other personal finance blogger, is going to write about Antero’s upcoming IPO when it’s easier to follow the crowd and blather on about Twitter. Anyone want to meet us back here in 6 months and see which company’s stock is doing better? Now if you’ll excuse us, we have a line to wait in.

 

Filed Under: Investments Tagged With: , , , , ,

Another 3 Bite the Dust

September 27, 2013

 

That is one eye-catching logo

That is one eye-catching logo

 

The Dow. Or, in metonymic fashion, simply “the market”. The single quantity most identified with the strength or potency of the economy, particularly its investing arm. We’ve discussed before what exactly the Dow Jones Industrial Average is and how to calculate it, but that was 4 years ago and it’s time for a freshening.

In one sentence, if you’re too lazy or burned out to read the linked article above: Add the stock prices of 30 particular large companies, multiply the sum by a constant, and there’s your Dow index. Mindlessly simple, and either in spite or because of that it’s managed to burrow itself into the collective consciousness. The companies have changed throughout the years, U.S. Leather having less impact on the economy today than it did in 1899, but here are the 27 oldest constituents of the Dow:

3MAmerican ExpressAT&T
BoeingCaterpillarChevron
CiscoCoca-ColaDuPont
ExxonMobilGeneral ElectricWalmart
Home DepotIntelIBM
Johnson & JohnsonJPMorgan ChaseMcDonald’s
MerckMicrosoftDisney
PfizerProcter & GambleTravelers
UnitedHealth GroupUnited TechnologiesVerizon

 

Earlier this month, the 3 remaining slots were occupied by Bank of America, Alcoa, and Hewlett-Packard. Last year the Dow traded out one of its components for another, and this is the first time in 9 years that it’s traded out 3 simultaneously. We’ll get to the newcomers in a minute.

Bank of America, as you may remember from our haranguing of a couple years back, received a direct $45 billion in taxpayer cash, and $5 billion more via equally culpable straw purchaser intermediary American International Group to avoid what 2 presidential administrations feared would be the collapse of the economy. We weren’t close to having that happen, and the bailout did thousands of times more harm than good, but Bank of America has a more effective public relations department than we do. 6 weeks after the cash infusion, B of A stock hit a nadir of $3.14. Within a year the stock price had sextupled, leading B of A management to issue pronouncements; of perfunctory thanks to the helpless taxpayers, and of the promise of happy days ahead to investors and borrowers. Long story short, by the end of the next year the stock had again lost 2/3 of its value. A consistent non-performer drags the value of the index down, so Dow Jones & Company said “enough” and went looking for suitable replacements.

Same deal, to a lesser extent, for Alcoa and Hewlett-Packard. The former is profitable but dwindlingly so, and revenue is down year-to-year for the first time in a long time. Alcoa is an acronym for Aluminum Corporation of America, and aluminum prices have been dropping steadily for the last 2 years. Alcoa isn’t diversified enough to make up for the commodity price drop, and so it did do the Dow adieu.

Did do the Dow adieu. Did do the Dow adieu. In other news, the 6th sick sheik’s 6th sheep’s sick.

Finally, the titan-cum-laughingstock Hewlett-Packard. For those of you either too young to know or too well-balanced in your daily lives to care about this stuff, Bill Hewlett and David Packard were the original Jobs & Woz. H & P started their company in a garage in Palo Alto, the Steves in a garage in Los Altos, 8 miles away.

But a lot has changed since 1939. By the 2010s, Hewlett-Packard was making mistakes almost for the fun of it. The company spent $1.2 billion to buy Palm, and basically wrote the purchase off a year later. They hired an overmatched CEO who didn’t even last a year. He authorized the purchase of Autonomy, and if you think the Palm purchase was stupid at least Palm didn’t publicly overstate its value by $9 billion. Yeah, that was another writeoff. Hewlett-Packard stock free-fell last fall, bounced back this year (doubled, in fact), but that wasn’t enough to keep it in the Dow.

The replacement stocks fit the index as well as any, given the Dow’s implied goals of reflecting the diversity and breadth of the economy. The committee traded out a tech company, a mining company and a bank and replaced them with…a shoe company and 2 more banks.

Notice something about the list of 27? Relatively few of them are full-on consumer companies, selling something you can buy in a store. Thus Nike joined the mix. Not coincidentally, Nike stock is at an all-time zenith. Revenue is growing – arithmetically rather than geometrically, but Nike has been around for a few decades. Add healthy profit margins and a price/earnings ratio with room for growth, and Nike was an easy choice.

Goldman Sachs, profiteers of the 2008 mortgage crisis and beneficiaries of the infamous Troubled Asset Relief Program, replaced Bank of America. An exchange of scoundrels? Perhaps, but the former’s financial statements are far more attractive than the latter’s. Goldman Sachs’s earnings per share is at a record high. Also, it’s the most juiced company in America. Its CEO seems to spend more nights at the White House than Michelle Obama does, and the list of recent Treasury Department upper-level hires reads like the 2002 Goldman Sachs internal phone directory.

That leaves Visa which, curiously, began to trade publicly only in the spring of 2008. (Prior to that Visa was more an agglomeration of companies, more of a “membership association” than a standard stock issuer.) At its initial public offering the stock traded at $44. It’s now within a gallon of gas of $200, and the company enjoys a market capitalization of $125 billion. (Fun Fact: Visa cards debuted in 1958, under the name BankAmericard. A service of…Bank of America. B of A licensed the card to other banks, and by 1970 had effectively ceded control to the entity that would become Visa.)

How does this affect you, the ordinary investor (assuming you’re an ordinary investor)? Minimally, unless your investments’ value derives from the value of the Dow. Or, of course, if you’re long into any of these 6 companies. If your mutual funds are tied to an index, chances are pretty good that it’s the 17-times-broader S&P 500, whose makeup remains unchanged.

Filed Under: Finance, Uncategorized Tagged With: , , , , , ,