[Week 27 of 2026] Swipes, Spikes, Stashes

Welcome back to Price and Prejudice with a few musings from Week 27 of 2026.

Fighting Against Goliaths

This article describes Visa and Mastercard as the "original gangsters of electronic collusion." The numbers behind the label are real enough: merchants paid nearly $200 billion in swipe fees in 2025, and credit-card merchant rates climbed from an average 2.02% in 2010 to 2.36% in 2025. To understand how we got here, it's good to remember that an interchange is the textbook two-sided market, where the fee merchants resent is the same fee that funds the rewards cardholders love. So whether the 2.36% fee is an outcome of a collusive equilibrium or just the price that keeps both sides of the platform on board is genuinely hard to call.

I'd personally set this question aside because another interesting one is whether this duopoly can be disrupted at all. Every few years a new technology promises to route around Visa and Mastercard, and every few years the promise quietly expires. One cautionary tale is robo-advising. Betterment and Wealthfront looked like they would unseat the incumbent asset managers a decade ago. Instead, Schwab and Vanguard shipped their own robo products within a couple of years and basically absorbed the whole threat.

Network economics is exactly why the incumbents seem to have an insurmountable advantage. In a similar vein, Blockchain and stablecoins are today's version of "this one finally kills the networks," except Visa and Mastercard are already settling transactions in stablecoins and issuing crypto-linked cards. If market forces keep getting swallowed, that is probably the strongest case that cracking the duopoly takes something structural like the Credit Card Competition Act rather than the next clever piece of plumbing.

Insuring Ignorance

This Bloomberg piece reports that the leverage that helped fuel the US stock rally has become a source of unease. Levered ETFs, retail margin accounts, and hedge-fund balances at prime brokers have all swelled, and the cost of borrowing to hold those positions has spiked to its highest since December 2024. Meanwhile the VIX sits near 20 and any spike fades within days, so something doesn't seem to add up.

Why is leverage so unsettling? Part of the reason is that we never actually observe why the market is up. We see the level and how much it changed relative to yesterday, but not the cause. And leverage makes it even more challenging to figure it out – the more of a rally is levered flow rather than fundamentals, the less the price tells you about value, and flow-driven gains unwind when the flow does. So the "leverage concern" is really a concern about downside scenarios you cannot rule out, precisely because you cannot see what is holding it up.

Fear and Funding

This article from Ben Carlson poses a puzzle: retail trading is at record highs, with SpaceX's IPO drawing an estimated $70 billion of retail demand and Citadel Securities logging nine of its ten largest retail days ever inside a single month. And yet cash as a share of financial assets is at its highest level since 1990. How do you get a speculative boom and record cash at the same time? Carlson offers three reasons: the historic bond bear market, cash finally yielding 3 to 4 percent, and baby boomers de-risking into retirement.

I would organize it around what the cash is actually for. There are generally two motives for holding cash. One is safety: I am scared, or bonds burned me, or I am retiring, so I shift allocation toward a store of value that will not draw down on me. The other is liquidity: I need funding, meaning dry powder staged for the next IPO allocation or a potential capital call from your PE fund manager. Interpreted this way, the same balance can be a retiree's margin of safety or a trader's ammunition. Under this view, the cash pile is not evidence against the mania, since some of it is the mania's fuel.

Podcasts

• Most people (especially the ones first getting into vibe coding) probably use Github instead of Gitlab. But Gitlab is the one that's publicly listed – here is a brief story on how we got there.