FINANCIALS

Capital One is Spending $35B To Capitalize On America’s Credit Obsession

Cash or card? Nowadays, it’s all about the plastic. In the past four years, American credit card spending has hit one record after another, with balances topping $1.13T at the end of 2023 — all while average credit card interest rates have soared to 21.5%.

This lucrative pairing has been a goldmine for lenders investing heavily to attract customers with targeted offers and bonuses. However, one of America’s major creditors is taking a different approach to capitalize on the nation’s love affair with credit — by acquiring its closest competitor.

All-in on credit cards: In what marks the biggest deal in credit card industry history, Capital One (NYSE:COF) is buying Discover (NYSE:DFS) in a massive $35B all-stock deal — combining two of the most prominent players in the space.

• Post-merger, the combined entity will emerge as the largest US credit card company, with outstanding loans exceeding $257B — surpassing JPMorgan’s (NYSE:JPM) $211B.

• The acquisition will also add over 61M Discover cardholders to Capital One’s roster — expanding its total card accounts to 170M.

It’s a strategic and savvy move…

Capital One cards are issued by Mastercard (NYSE:MA) and Visa (NYSE:V), which handle over 90% of the US payment volume. However, acquiring Discover gives Capital One access to its payment network — positioning it to disrupt the payment duopoly and potentially abandon its existing card relationships.

• Plans are in motion at Capital One to transition some credit cards to the Discover network — dodging the ~1% network fee currently paid to competing networks, sending $MA and $V down 3% and 1.5%, respectively.

• Capital One anticipates that this switch could generate an extra $1.2B in revenue in 2027 — but changes will be slow to roll out due to Capital One’s recent renewal of partnerships with existing payment networks.

Lina is calling: The substantial similarities between Discover and Capital One customers guarantee that 2024’s largest deal will have to face off with regulators at Lina Khan’s Federal Trade Commission (FTC), which have put up roadblocks for big takeouts like the $3.8B Spirit-JetBlue combination and the $24.6B Albertsons-Kroger merger. So don’t hold your breath; this major deal may take years to complete.

PARTNERED WITH HARTFORD GOLD

Protect Your Freedom & Finances from Biden's Digital Dollar

Your privacy and financial freedom were attacked last year when the government launched their Digital Dollar program — and became one step closer to obtaining total control of your savings. Here's what a digital dollar can mean to you:

• Cash is over — Everything will need to be bought and sold electronically.

• Privacy is over — All transactions will go through the government. They would know exactly how much you spend and on what.

• Freedom is over — If you support the wrong cause, you can be penalized, or simply lose all your funds with the click of a button.

• Retirement funds are over — They could force you to spend your savings to pump up the economy by applying negative interest rates.

Learn how to protect your freedom and your finances.

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LARGECAP RECAP

📺 Walmart buys its way into the connected TV market

The world’s retail titan is hoping it can buy your undivided attention. Walmart (NYSE:WMT) is spending $2.3B to acquire TV maker VIZIO (NYSE:VZIO), which has experienced rapid growth in its connected TV sector — a market that is expected to balloon to $29.2B this year, according to eMarketer, as advertisers ramp up spending on smart TVs and streaming services.

• Since going public in Mar. 2021, VIZIO’s connected TV business has been its standout performer — last quarter, revenues surged by 22% year-over-year (YoY), nearly reaching the $1B mark.

• Walmart’s strategic move aims to tap into VIZIO’s vast user base of 17.9M connected TV users, potentially offering advertisers “greater impact from their advertising spend with Walmart.”

In search of new growth: Although Walmart experienced a 4% increase in sales in the latest quarter, its operating margins took a hit — which has the company seeking alternative profits like advertising, online third-party marketplace sales, and fulfillment services. The acquisition of VIZIO could boost all three areas, positioning Walmart as a formidable competitor to e-commerce goliath Amazon (NASDAQ:AMZN).

The affordability crisis finally has a solution: ConsumerDirect has helped over 300K subscribers save $2.9B in interest by raising their credit score¹. Along the way, they’ve exploded as a company with 540% revenue growth since 2019² — reaching over $91M in sales in 2023 profitably³. And investors can finally get in… Five reasons to invest in ConsumerDirect →*

Markets & Economy

Heavy rain continues to batter California: Typically sunny counties like Monterey and Sonoma have seen inches of rain, with the chance of flooding and strong winds grinding activity to a halt in LA, Santa Barbara, and San Diego. [Read]

Arkhouse Management launches proxy fight at Macy’s (NYSE:M): The investment firm wants to take the retailer private and has nominated nine directors to the company’s board. For now, Macy’s is considering the move to go private but still needs details on financing. [Read]

Israel’s GDP contracts ~20% amid Gaza War: Way more than the ~10% contraction expected, Israel has deployed 300K+ individuals to Gaza, causing drastic labor shortages. Increasingly, investors are anxious that the turmoil could derail the US’ record stock market performance. [Read]

Business & Wealth

Switch 2 delays hit Nintendo (OTC:NTDOY) shares: The long-awaited console will arrive in early 2025 instead of late 2024 — and now investors are worried that blockbuster Nintendo releases will be few and far between this year as they hold games until the next-gen hardware hits stores. [Read]

Tinder to crack down on fraud with expanded ID verification: Before you get swiping, you’ll have to upload a picture of your driver’s license and a self-recorded video. That way, Tinder will know you’re a human looking for love — not an AI looking for sensitive financial information. [Read]

WSJ’s tax columnist tells us how she files taxes: Her big tip is to consider the tax implications of certain investments before you make them. Carefully time when you sell shares to minimize your tax burden — and consider a donor-advised fund to make tax-smart donations. [Read]

*Thanks to our sponsors for keeping the newsletter free.

DIGIT OF THE DAY

The Sobering Reality of Alcohol Spending for 45% of Gen Z

Forget the hangovers; Gen Z’s real headache is their sky-high booze bills. According to a LendingTree survey, 45% of Gen Z drinkers admit their drinking habits have caused a hole in their wallets. Despite averaging three drinks a week in 2023, they’re finally ready to dial it down for the sake of their finances.

• 55% of Gen Z regrets overspending on alcohol, while 29% say their drinking habits have led them into debt.

• A recent NCSolutions survey revealed that 61% of Gen Z plans to cut back on drinking this year, compared to 40% in 2023.

Raise your (mocktail) glasses: Amidst social media glamorizing wild party nights, Americans recognize the importance of balance. Many are proactively managing their alcohol-related expenses by setting dedicated budgets and exploring non-alcoholic alternatives. Considering that cocktails in NY average $20 a pop, we don’t blame them for trying to have fun without the alcohol.