Another "own the casino" stock

I’m looking for some new ideas right now, and I may have even first heard of bond-trading platform MarketAxess (MKTX) long ago from this article:…

A while back, I had already mentioned the other “own the casino stock” mentioned in this article, Factset (FDS), which has been doing well for me. The other stock mentioned in the article is much more obvious - Starbucks.


MarketAxess (MKTX) at first glance looks very interesting. Thanks.

Denny Schlesinger

According to Niall Ferguson in The Ascent of Money: A financial history of the world money is the principal cause of progress. I saw a TED Talk about the progress of humanity some time ago and the biggest kicker in the rate of advance were Dutch and British East India Companies made possible by the newly minted joint stock laws that allowed owners of money to join up in gigantic enterprises not possible for individual entrepreneurs or even for small private groups of entrepreneurs.

Why invest in the money industry? Because that’s where the money is. There are three ways to do so:

1.- Put money at risk by investing or lending it
2.- Service the money industry (rating and news agencies)
3.- Own a toll road

1 is risky, 2 has no moat, 3 is the way to go taking a small bite out of every transaction without putting capital at risk. “Own the casino” is a very apt metaphor. Currently I own VISA which is in a mature industry and growing earnings per share very nicely:

Online trading of stocks started in 1991 not on the WWW but on AOL and CompuServe, two major online platforms of the time. One reason online bond trading lags online stock trading is that bonds are much less standardized than stocks making machine trading harder. Advances in computing and communications help solve that problem.

Online stock trading has become so commoditized that there is no real network effect anymore. In credit cards, VISA and MasterCard pretty share the industry, the remaining players are mostly bit players (I’m excluding AmEx which has credit risk). How will online bond trading evolve? Will it develop network effect or will it become commoditized? I don’t have a clue but MarketAxess (MKTX) is not alone, OpenBondX (private) is after them.

About MarketAxess

OpenBondX Brings Innovative Electronic Trading Capabilities To Fixed Income…

Ways to trade bonds

Denny Schlesinger

The Ascent of Money: A financial history of the world by Niall Ferguson…


Factset has more of a moat than you would think, because of its reputation and the quality of its information. It’s not that easy to be a go-to financial information service.

FDS (in which I have had a full holding for a long time) has come through the screens regularly for years despite pessimism about competition (Bloomberg etc.) and danger of client spending in a recession. MKTX seems attractive but the valuation is a real problem. SBUX I never consider, the only one I ever went into was grubby, the proprietor’s virtue-signalling is tiresome and the stock’s price is as absurd as the idea that a cup of coffee is to be worshipped. It might be a buy when the people who pour the stuff are replaced by robots. Already, the metal box down my corridor delivers a splendid cup and a darn sight quicker!

Factset has more of a moat than you would think,

The reason I didn’t mention Factset is because it is not a tollroad.

An interesting feature of tollroads is that the more people use it the more valuable they become to the users. The more people shop with VISA the more merchants accept VISA the more people shop with VISA… Once you build up this network it is very difficult for competitors to come barging in, it’s a terrific moat. This is an attractive feature of increasing returns type of industries. As economist Brian Arthur put it:, “The more you sell, the more you sell.”

Denny Schlesinger