Yet another bank just fell…
By now, I’m sure you’ve seen the news about First Republic Bank.
It had roughly $229 billion in total assets before megabank JPMorgan Chase (JPM) acquired it this week. That makes it the second-largest bank failure in U.S. history.
My colleague Pete Carmasino covered First Republic’s fall in the April 28 edition of Chaikin PowerFeed. And he explained how the Power Gauge alerted us to its impending collapse.
Now, in many ways, a bank’s entire business model is based on trust. It relies on customers believing they’ll always have access to their cash – no matter what happens in the world.
As soon as that trust is broken, the customers rightly head to the doors of the bank and demand their cash. That’s what happened with these recent bank failures.
And look, folks, I know it feels like the world is coming apart at the seams right now. But the reality is very different…
The Federal Reserve is simply getting the intended results from its actions.
In fact, the central bank just raised interest rates again this week. The federal funds rate now sits in a range between 5% and 5.25%. That’s the highest level since 2007.
Of course, we can’t know the exact whereabouts of every risk-taker in the market. And we don’t know how many of them will ultimately get exposed in this high-rate environment.
This is investing, not crystal-ball reading.
But fortunately, the Power Gauge can serve as our guiding light…
Our one-of-a-kind system processes a mountain of analytical data. It helps us identify stocks with “bullish” attributes in all environments. And it helps us avoid “bearish” ones.
All that said, the point I want to make today is simple…
When uncertainty spikes, people expect big changes. But the reality is that our world still relies on a multitude of “old system” values. And that will be the case for years to come.
Today, let’s look at one facet of that reality. It relates closely to the recent bank failures…
The world isn’t cashless yet.
You see, hundreds of millions of people around the world need quick access to cash…
This concept might be hard to comprehend. After all, we live in a world of moving money through PayPal (PYPL), Venmo, and other apps with flashy names like Zelle.
But for a lot of people in Europe and elsewhere, the leading edge of financial technology looks much different…
It starts when they walk up to an ATM. They put in their cash. And with the press of a few buttons, a family member thousands of miles away almost instantly receives the money.
While this idea is foreign to many of us, it’s a daily activity for millions of people on Earth…
The so-called “remittance” industry is big business. That’s just a term for the money that folks around the world send back home to their families.
In fact, according to market-research firm Grand View Research, the remittance industry reached an estimated value of nearly $49 billion in 2021. And it’s expected to grow at a 10% annual rate through 2030.
What’s more, 75% of remittances are handled through the “offline” model. That means the working folks who need to send money back home are most comfortable walking up to an ATM and doing it that way.
For example, according to Statista, roughly half of Indonesia’s population is unbanked. They simply don’t have easy access to money-moving apps like PayPal, Venmo, and Zelle.
Even here in the U.S., roughly 4.5% of households are unbanked. That translates to about 5 million households within this country that need physical access to similar money services.
In other words… we’re not a fully cashless society yet.
That’s true despite the banking crisis. It’s true despite the rise of artificial intelligence. And it’s true despite the rumblings surrounding the idea of a “digital coin” from the Fed.
That’s why I recommend keeping a close eye on the banking industry…
After the recent bank failures, it might seem like everything is falling apart.
But many folks around the world still need cash. And therefore, they still need banks.
Good investing,
Marc Chaikin
