In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
I think BNY Mellon’s executives believe private investors, such as family offices, are moving more and more of their money into alternative assets in a changing world. In particular, I think many big investors want to pull out of the stock market to avoid inflation and increasing economic turbulence. Hence, BNY Mellon is examining new markets, such as digital assets.
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Hence, BNY Mellon (NYSE: BK) can generate enormous amounts of cash. For example, Mellon reported a quarterly ending cash flow of $9.37 billion on 31 March 2021. The quarterly operating cash flow fell from $2.828 billion on 30 June 2021.
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To explain, Mr. Market priced BNY Mellon (BK) reasonably at $55.22 on 31 August 2021. Yet, The Bank of New York Mellon (BK) offers enormous value. For example, Mellon had $198.061 billion in cash and short-term investments on 30 June 2021. Additionally, BNY had $466.963 billion in Total Assets on 30 June 2021.
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I think Buffett buys BNY Mellon because it offers enormous amounts of cash and value for a cheap price.
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With or without the FinCEN scandal, Mellon can generate enormous amounts of cash.
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I think the hedge fund managers are buying BNY Mellon because they want companies with lots of cash. I suspect hedge fund bosses want cash-rich companies because they think a market correction or market turbulence is imminent.
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Intriguingly, Frank Fehrenbach; Mellon’s Senior Principal for Digital Partnerships, proposes the fractional tokenization of the property rights to big-ticket items like art works.
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The hope is to offer cold storage for up to $20 billion worth of cryptocurrency. Cryptocurrency exchanges and brokers want cold storage because custodians would take the problems and liabilities associated with storage.
For example, many exchanges and brokers have a hard time getting insurance for stored assets. However, established custodians like BNY Mellon already have such insurance.
On the positive side, all that is standing between companies and BNY Mellon and cryptocurrency storage is SEC approval. On the negative side, the cryptocurrency market has dropped dramatically in recent weeks losing up to 80% of its value.
The cryptocurrency market is certainly huge, BNY Mellon estimates that there are 1,000 cryptocurrencies with a market capitalization of $400 billion. On the other hand, US equities have a market capitalization of $25 trillion.
Therefore, cryptocurrency is a small portion of the global economy. However, cryptocurrency is growing fast.
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Obviously a lot of people will be scared by the USC, because it sounds as if the bankers know something about the world’s financial system we do not. One cynical view might be that bankers fear the current system might collapse so they are quietly building an alternative.
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Bank of New York Mellon is not just a bank with offices in Manhattan it is a FinTech play. BNY Mellon is one of four major banks developing the Utility Settlement Coin or USC, with the technology companies Icap and Clearmatics, Crowdfund Insider reported.
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