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I beg to differ, you said:

“In this recession both credit and debit transactions will decline in number, therefore it's likely that this year's earnings will be unimpressive”.

As a restaurateur, I have seen credit transactions spike up lately, from 15 to 20% of revenues to often over 30%. In fact just last week we set an all time per store one day high for credit/debit transactions (34% of revenues). As a merchant, I loathe to pay the service charges (that’s why I invested in MasterCard symbol MA), particularly as that expense has steadily increased. But that steady expense has slightly accelerated lately as consumers are feeling more pinched.

The last conference call for MA got my attention when someone mentioned that struggling consumers were driving up revenue for service fees as opposed to the discount fee. See, MA and Visa charge per transaction fees, and so called discount fees where they take a percentage of the transaction. What MasterCard was alluding to was that every time a card is declined, MA earns a 5 cent fee, and would likely make an additional 5c fee and still get the discount fee when the consumer tries another credit card that goes through.

As going concerns, I only expect MasterCard and Visa to become stronger in this economic climate. My concerns lie not with the consumer. My concerns are what is the business truly worth to shareholders, and who will hold the majority of shares.

I can’t accept the Performa balance sheet that indicates that its worth $28B to be market capitalized for $18B. If the company was worth $27.7B you can be damn sure they would be asking for that amount. They’d either issue more shares or ask a higher price. Goodwill and Intangible assets should not account for 60% of assets. I feel we must discount the company’s assessments in the regards. IMO a company probably worth $10-15B or around $15-20/share.

I am also fearful of price manipulation by institutional holders as they try to offset their losses from the credit meltdown. Yet, I must admit, that I will buy a small stake at the outset, fully prepared to take a 50% loss for years. If it debuts at a more reasonable price than the projected $40, I likely dive in deep. Hope this helps,

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