Given all the fretting about the Fed and China, we haven't had much space here to focus on developments elsewhere . . . including Facebook (FB: $195, up 1% this week) trying to create a presence in the Crypto Currency world that Bitcoin made famous.
Facebook's digital "coin" will be called Libra when it theoretically launches early next year. The goal is to use it as a way to centralize and streamline financial transactions that take place on the site as well as Instagram, the WhatsApp messaging platform and other properties in the company's sprawling Social Media portfolio.
Strip through all the Silicon Valley jargon and it's useful to think of Libra as a kind of "Facebook money," a store of virtual funds available for users to exchange in exchange for services or real products to have delivered. Naturally it's only valuable within the platform and it requires an initial infusion of real money in order to create the account in the first place.
That's where Visa (V: $175, up 1%) comes in. Visa has agreed to set up the initial deposit system and support all transactions. As far as they're concerned, it's just another currency, as easy as translating from dollars to yen or from either currency into Bulgarian leva. However the money is denominated, they take their sliver of fee income and turn 50% of it into profit.
And in theory, the more of the money that stays in the Libra system, the easier it is to keep moving the assets around without having to keep converting from currency to currency. That's the plan here. Facebook would be overjoyed to keep as much of its 2.3 billion users' money (and that's just on the main site) circulating as long as possible before it gets exported back into dollars, yen or someone else's currency. The longer it holds that money, the more it can leverage the balance and ultimately even capture interest, not to mention any service fees management can dream up.
Another goal here is to bring Western-style payment services to an estimated 1.7 billion people across the Facebook empire who don't have conventional bank accounts. That's mostly WhatsApp, which is huge in places like India. The more money that circulates on WhatsApp, the more messages get generated and the more advertising spaces Facebook ultimately has to fill. It's a great way to generate traffic, build engagement and retain users who might be tired of the platform but still need to hang around to spend their Libra balances.
Twilio (TWLO: $138, up 1%) produces the software that keeps WhatsApp running. They're winners here too. As Facebook prospers, they prosper. And because we recommend all three of these stocks, BMR subscribers have a real chance to make serious money here . . . denominated in dollars.