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Relevance of the Visa IPO

3/13/2008

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I've gotten some questions about the relevance of the Visa IPO.  So, the following is my explanation.

The Visa IPO will serve to further disrupt the financial markets.  It's supposed to be the biggest IPO *ever* at about $15B.

Visa is owned by its member banks that produce Visa cards, like JP Morgan Chase, Bank of America, etc, and they desperately need the liquidity they will raise in this mega market offering.  If it doesn't go well, the financial services firms involved and the markets as a whole will face  an increasingly challenging environment.

Today, I've gone ahead and sold my very average (and not end times portfolio) holdings in Kraft and Gol, a Brazilian airline.  Kraft was basically even money with a nice dividend and Gol was good for a while as an overall tracker of the Brazil economy, but with oil prices skyrocketing, it has fallen substantially.  Gol is unlikely to stem losses in the near term.  Going forward, most airlines will need to substantially reconfigure business models in light of higher fuel costs.

The rebalanced funds are going right into Gold.  Gold has been strongly under-performing the past month because of the $1k barrier.  But, note how quickly oil went from $100 to $110.   I'm relatively confident that Gold will jump 10% or so as soon it tests and breaks that $1,000 barrier.

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