“The End of American Money As We Know It”

What's Dr. David Eifrig's "New Currency?"

By Travis Johnson, Stock Gumshoe, February 11, 2015

We see pitches about the “end of money” all the time — across the spectrum from the goofy spiel for “loyalty points” being the next Bitcoin, to actually trading in Bitcoin, to the more popular “end of America” pitch about the dollar dying and the need to have old silver coins and gold in your bunker that you can trade for sorghum and molasses and ammunition after we enter the next dark age.

But this one’s a little different — and, frankly, more “real” and familiar and less reactionary. The spiel is from Dr. David Eifrig in an ad for his Retirement Millionaire, and his tease is really about the next stage of payments and the end of cash and conventional credit cards.

Which is also not necessarily a new idea, of course, our society has been mostly cashless for close to a generation now, since the debit card came into full swing, credit cards became easy to get, and we saw the end of the paper “paycheck” and, before that, the cash payroll distribution… and it becomes more “cashless” every day thanks to the growing ubiquity of electronic payments.

So what investment does Eifrig recommend to play this variety of the “end of money” story? Here’s a little intro from the ad:

“Recently announced 2015 ‘dollar upgrade’ will radically reshape everything we know about money… from saving and spending… to banking and finance… to investing and retirement….

“A new digital currency ‘is coming to town,’ says Fortune journalist Philip Elmer-DeWitt, ‘and I can’t wait to try it.’

Headline & Global News calls it simply, ‘The next form of currency.’

“Similar to the advent of credit cards in the 1950s… Debit cards in the 1980s… and online banking in the 1990s… this upgrade will completely – almost radically – reshape everything we know about money… from spending and saving… to banking and finance… to investing and retirement.

“Already, the global financial community is quickly gearing up for the massive digital ‘overhaul’ – what is likely be the biggest change to money in the U.S. in decades.”

And then…

“Keep in mind: This upgrade will not replace the dollar.

“It won’t compete against it.

“In short: It’s designed to make the dollar better.”

So what’s he talking about?

This is, as some of you have guessed, another tease that’s largely about Apple Pay — the payment system using Apple’s iPhone and near field communication (NFC) chips to process payments at cash registers using credit or debit cards that you already have (if your bank participates, you really just take a picture of your card, authorize your phone to use that account, then wave your phone at the cash register’s payment thingamajig and verify it with your fingerprint on the phone). Your bank has to be participating for it to work, and the retailer also has to accept Apple Pay, but by all accounts the power of Apple’s market presence has been a big jolt for these kinds of touchless payments — which have been possible for a long time, but haven’t achieved commercial acceptance in the U.S.

Here’s more from the ad:

“It could quite possibly be the single most perfect version of money ever created.

“For most, this is a welcome – and long overdue – change…

“Others are concerned about what the transition to a completely digital dollar might mean for the future of spending, saving, and investing in America—

“But here’s the thing…

“It doesn’t matter whether you’re prepared or not… this upgrade is happening….

“The good news is, it’s still not too late for you to grab your piece of the pie.

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“I’ll even tell you about a super simple trade you can make right now, today—one that could prove very profitable in the coming months.”

Aaaaand, that’s what we were waiting for, right? The way that this “end of money” will make us some money? He won’t tell you straight out, of course — for that, you’ll need to sign up for his Retirement Millionaire newsletter.

Or, of course, we could figure it out from the clues. That is what we do here, after all. Shall we proceed?

Here’s where Eifrig gets into the meat of the tease:

The Next Big Money Revolution Is Here

“The new payment revolution I’m talking about is called NFC.

“NFC stands for Near Field Communication. In its early form, NFC was used by the military to prevent ‘friendly fire’ accidents. The technology was declassified in the mid-1990s.

“An NFC chip is essentially a tiny radio transmitter – about the size of a ladybug. It’s inactive, until it receives a signal from another NFC-enabled device. The technology operates in a two-way manner, so that information can be passed in both directions. NFC-ready devices must come within a few inches of each other to transfer data….

“If you’ve ever used a ‘smart card’ to unlock a door… or if you have a car with a remote ‘keyless entry’ system… you’re using NFC.

“But now, this technology is being adapted by banks, payment processing firms, credit card companies, and retailers and merchants across America to completely transform the way we pay for things.

“In short, with NFC technology our wallets will be replaced by smartphones….

“According to Visa, Americans are now TWICE as likely to carry a mobile phone as they are cash.

“And those between the ages of 18 and 34… FOUR TIMES as likely.”

He goes on to describe the convenience (lots of cards and accounts on one device, no wallet) and security improvements of NFC (phone is locked and trackable, unlike your wallet, transactions use one-time token codes, not your full credit card number that might be stolen or re-used or hacked), and that’s all true — though whether or not it will lead to mass public (or retailer) acceptance is still probably an open question.

Habits change slowly, and established players want to protect their slice of the pie — and retailers are grouchy about credit cards and the fees they pay so they’d really like to come up with their own payment network that doesn’t rely on Apple, Visa or Mastercard (which is why some retailers, in high-profile actions, have blocked Apple Pay as they work to develop the CurrentC system with their own consortium).

But if we assume that we’ve finally hit the “tipping point” on touchless mobile payments, what is Eifrig’s investment idea?

“I believe NFC is in the same exact position as credit cards were in the 1950s… debit cards in the 1970s… and online banking in the 1990s…

“Which means – right now – we are perfectly positioned to capitalize on this massive new trend….

“So how do you capitalize on this?

“Of course, one obvious trade you could make right now is to buy shares of Apple.

“The consumer tech giant, for example, will get 15 cents for every $100 spent using Apple Pay.

“While that may not sound like much, just consider: If Apple Pay captures even just a tiny percentage of the $13 TRILLION in credit, debit, and cash transactions that occur worldwide every year, Apple’s revenue will surge.

“But here’s the thing. Apple is the largest publicly traded company in America right now. It’s currently trading for over $100 per share. While I believe Apple is a good investment and its shares will continue to rise, it’s likely not going to make you thousands of percent gains anytime soon.”

Hard not to agree with that — Apple is my largest single equity position, and I’m hoping the “network effect” of Apple Pay will help to keep iPhone user loyalty high, their revenue is going to continue to be dominated by sales of iPhones for the foreseeable future. At that fee rate, even if Apple Pay has a hand in processing half a trillion dollars of payments a year at some point in the next few years, that’s still only $750 million in