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El Salvador Mines First Bitcoin Using Energy Harnessed From Volcano

Crypto-friendly country El Salvador has mined its first ever portion of a bitcoin using energy harnessed from one of the
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This article was originally published by The Deep Dive

Crypto-friendly country El Salvador has mined its first ever portion of a bitcoin using energy harnessed from one of the country’s volcanos.

After officially granting bitcoin legal tender status alongside the US dollar, El Salvador successfully managed to mine a small fraction of the cryptocurrency using geothermal power from a volcano. The country’s president Nayib Bukele tweeted on Saturday that the state-controlled energy company LaGeo SA de CV ran a mining operation that generated 0.00599179 of a bitcoin, which amounts to approximately US$269.

Earlier in the week, Bukele shared footage on Twitter of numerous shipping containers delivering cryptocurrency miners to a remote location for installation by the state-run energy company’s technicians. El Salvador is home to approximately 20 active volcanos, and derives about 25% of its energy from geothermal sources.

Back in June, the congress of El Salvador granted bitcoin legal tender status in an effort to make it easier for El Salvadorians working abroad to send remittences to their families back home. In the beginning of September, El Salvador officially became the first country to recognize bitcoin as a currency, as the president installed 200 bitcoin ATMs across the South American region, and purchased 400 bitcoin to start the process.

Information for this briefing was found via twitter. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post El Salvador Mines First Bitcoin Using Energy Harnessed From Volcano appeared first on the deep dive.

Author: Hermina Paull

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Equity outlook – What is the problem? The recovery

Equity markets have been finding the transition to the post-pandemic landscape more challenging than one might have expected. As Covid restrictions fall…

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Equity markets have
been finding the transition to the post-pandemic landscape more challenging
than one might have expected. As Covid restrictions fall away and consumer and
business confidence improves, the economic recovery should resume. However, in
a sense, the recovery has become the problem.

This is an abbreviated version of our
quarterly equity outlook

Demand has surged, but supply has lagged due to supply-chain
and job market bottlenecks. Prices have risen, more persistently than
anticipated. Nonetheless, we believe the disruptions will fade over time,
production will recover, and the ‘low-flation’ world we were in before the
pandemic will return.

Valuations – too high or about average?

Looking at metrics such as price-earnings, price-book and price-sales, equity markets look expensive. Is this really the case or are things different this time?

An alternative way is to look at the equity risk premium.
Today, the ERP is above the average
of 5.2%, suggesting S&P 500 valuations are at least fair value if not

Interest rates and their impact on value and growth stocks

Movements in inflation expectations and real rates have
remained key drivers of the relative performance of the growth and value
styles. After another hawkish surprise at November’s US Federal Reserve policy
meeting, market expectations for the future level of fed funds rose,
contributing to the recent decline in growth stocks.

Since we expect inflation-adjusted rates to climb further,
growth stocks could remain under pressure.

Similarly, the comparatively flat performance of US value
stocks has over the last several months corresponded with (until recently)
stable inflation. Now that expectations are picking up, value stocks may show
some gains.

Inflation and margins

We believe the inflation expectations related to
supply-chain and labour market constraints are still likely to be temporary. We
see tentative signs of easing backlogs in parts of Asia.

The impact on margins varies by sector and in the months
ahead, we expect performance to vary more between sectors than between styles.

The IT sector has high margins, so higher input costs are
less of a threat to its profits. Materials and industrials companies such as
metals and mining, construction materials, and building products companies are
better able to pass higher input costs along to customers.

The poor performance of consumer staples is likely due to
this being a low-margin business with limited pricing power. In healthcare,
prices are often negotiated and difficult to change at short notice. When the
input price pressures reverse, as they did modestly last month, these sectors
could be the ones most likely to benefit.

This sector breakdown helps explain why the performance of
the growth and value styles has changed with respect to inflation and real

  • Materials, industrials and consumer staples are
    all primarily value sectors, so they benefit from rising interest rates, but
    they respond differently to margin pressures.
  • IT and healthcare are largely growth sectors,
    but they are in different camps when facing higher input costs. 

Earnings – Back to normal?

Upcoming earnings reports will be critical as EPS growth
rates begin to return to more normal year-on-year levels. S&P 500 EPS
growth was 86% in the second quarter from the same 2020 quarter. For this
quarter, growth is forecast at ‘only’ 24%. 2022 profits are expected to rise by
nearly 8% from 2021.

We should note that earnings surprises were exceptionally
high recently, so it is probably inevitable that there will be comparatively
more disappointments in the quarters ahead. As a result, we expect some market
turbulence. However, a recovering global economy, reasonable valuations, and
rising earnings all point to further market gains.

US small caps – Follow the US dollar

A pickup in economic momentum, the return of the reflation
trade or a steeper yield curve could be drivers of small-cap outperformance. We
believe valuations are attractive. Relative to the broad S&P 500, the
forward P/E ratio and equity risk premium are near their lowest since 2004.

The longer-term outlook may depend on the value of the US
dollar. Should the dollar weaken further, small caps may resume their

Emerging market equities – A mixed bag

The list of headwinds facing emerging market equities is
unfortunately long: 

  • A stronger US dollar
  • Rising US interest rates  
  • Lagging Covid vaccinations
  • Regulatory crackdowns and highly indebted
    property developers in China
  • Higher energy prices
  • Supply-chain disruptions and labour

The main factor in EM equities’ favour is comparatively low
valuations. In addition, the sustained rise in commodity prices has benefited
commodity exporters.

Some of the negative factors should fade in the months
ahead. However, developments in China will be critical as the government
chooses between supporting growth through increased credit and the desire to
reduce debt in the economy. Regulatory action could continue as Beijing
refocuses the economy towards high-value added technology hardware rather than

Conclusion – Room for further gains

Managing price pressures and operational difficulties will
challenge many companies. We expect to see greater differentiation in
performance between companies, making active portfolio management propitious.

For equity markets broadly, we see further gains as the
economic recovery continues and supply chains unkink. We believe inflation will
eventually revert to pre-pandemic trends, meaning that monetary policy, while
less accommodative than previously, will not be tightened so much as to cause
economic growth to turn negative.

Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients.

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.

Investing in emerging markets, or specialized or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

Writen by Daniel Morris. The post Equity outlook – What is the problem? The recovery appeared first on Investors’ Corner – The official blog of BNP Paribas Asset Management, the sustainable investor for a changing world.

Author: Daniel Morris

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How Bitcoin Hedges Both Inflation And Deflation

How Bitcoin Hedges Both Inflation And Deflation

Authored by Peter St.Onge via CryptoEconomy substack,

In the 1970’s, Saturday Night Live…

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How Bitcoin Hedges Both Inflation And Deflation

Authored by Peter St.Onge via CryptoEconomy substack,

In the 1970’s, Saturday Night Live had a mock commercial for Shimmer Floor Wax, tagline: “It’s a floor wax AND a dessert topping!”

Between supply chains, rising prices, and falling growth, we’re living in hazy times, economically. Investors don’t know whether we’re due for a stretch of serious inflation or if, instead, we’ll get socked by a deflationary stagnation either as prelude or as crash. They don’t know if they need the wax or the snack.

As people struggle to protect against both, there is one hedge that actually covers them all: runaway inflation, runaway stagnation, even the “Goldilocks” scenario that historically burns gold investors. And that one hedge is Bitcoin.

Crystal balls cracking

One Hedge for All Seasons

Universal hedge is counterintuitive, since inflation and deflation are opposites, while Goldilocks is the opposite of the opposites. But the universality hinges on two mechanisms that are only present in Bitcoin: central banks addicted to printing, combined with Bitcoin’s dot-com levels of secular growth that approach historical levels of bona fide money replacement.

First, let’s sketch the economy at the moment.

Fed chair Powell is still predicting medium-term disinflation, but a substantial minority of macroeconomists are predicting “significantly higher” inflation. Meanwhile, growth figures are trending down worldwide, partly as a result of chaotic supply chains causing shortages from groceries to Christmas trees to aluminum chassis – I wrote about this last week. This drama is reaching into GDP statistics, with Atlanta Fed’s “GDPNow” estimate now limping along at 0.5% – flat per capita.

Into this chaotic world strides Bitcoin to heal all worries, to hedge all fears.

Atlanta Fed watching it melt

Hedging Inflation

Hedging both inflation and deflation may seem odd – make up your mind. But the key here is that, like an incontinent dog that pees when startled, today’s central banks print money in response to any sudden movement. They print when they’re happy – the economy can soak it up. And they print when they’re scared – the economy needs it.

One might think central banking has become an elaborate hoax to print as much money as possible no matter what, which is basically true. Of course, they print not because it’s the correct thing to do, but because legal counterfeiting is their business — barbers are paid to cut hair, central bankers are paid to print money.

To be sure, happy-printing and scared-printing lead to different collateral damage for the economy. Printing in good times sparks a “tissue fire” boom that creates malinvestments — investments that only happened because money was so cheap. While printing in bad times slows the liquidation of those malinvestments until some become “zombies” like Japan has endured for decades. If you’re interested, there was a whole “liquidationism” debate in the 1930’s which, obviously, the good guys lost.

Still, what both stages of printing do have in common is they dilute your money. This automatically benefits anything priced in dollars, like Bitcoin or, say, donuts. And it can reinforce since dollars, having no intrinsic value, float on expectations about how much the central bank will magic up in future. So it’s possible that even a small printing can lead to a large drop in purchasing power if people expect the printing to go nuts. While the more usual is that a large printing, like the 40% jump in dollars in 2020, leads to a small change in value since people don’t expect it to last or don’t expect all those dollars to circulate “in the wild” for long.

Hedging Deflation

What about deflation, shouldn’t that do the opposite? After all if Bitcoin is priced in dollars, then a stronger dollar should reduce Bitcoin’s price. And here the key is where the deflation is coming from. It it’s healthy deflation driven by technology or productivity improvements then it would be inherently neutral to the Bitcoin price in dollars. So before the deflation, Bitcoin might be worth $60,000, which buys 3 months at a luxury resort. And after the deflation Bitcoin might still be worth $60,000, which now buys 4 months at that luxury resort. Good for Bitcoiners, just as it’s good for dollar owners.

Alas, this “healthy” deflation is rare nowadays, because central bankers stop it — no sense leaving money-printing opportunities on the table.

So, instead, deflation today is more likely to come from the kind central bankers actually create: debt deflation. This is where a lot of credit evaporates overnight — it won’t be repaid. We saw this in the 1930’s, and again in the 2008 crisis. Of course, in 2008 it didn’t turn to full-blown deflation, because the Fed stepped in – well, it flopped in – with $1.6 trillion of fresh money, of which $1.2 trillion went directly into the banking system.

The Fed has never regretted that 13-figure bail-out, nobody went to jail for it, and they repeated that script in Covid. So we can be fairly certain they’ll do it again next time.

The Dreaded Goldilocks

Now the final possibility, the one that keeps goldbugs up at night: Goldilocks. A scenario where governments and central bankers steer the ship of economy through the shoals and hurricanes until we end up with pretty good growth and pretty good inflation. Say, 2% on both.

The reason for focusing here is because Goldilocks scenarios have been terrible for gold these past 50 years. Indeed, gold’s three big losing streaks since the 70’s have been the early 80’s, the late 90’s, and the early 2010’s. All periods of economic calm where people relaxed, stopped worrying about the future, were happy enough to leave it to government, and sold their boring gold for exciting plastics, dot-coms, or electric car stonks.

Gold vs Bitcoin: Goldilocks has a favorite

Setting aside how unlikely Goldilocks is given the gang in charge, even in that doldrums scenario Bitcoin is likely to do just fine. Because, unlike gold, Bitcoin has enormous underlying user growth – currently running 40% year-on-year in the number of wallets in existence.

Indeed, remember that up until Covid we’d been in roughly a decade of Goldilocks, during which gold dropped from $1,900 to under $1,200, while Bitcoin went from one five-thousandth of a Papa John’s pizza to $8,000 on the eve of Covid.

I’ve written about some reasons why this secular growth might actually accelerate in the years to come, including El Salvador’s legal tender law that raises Bitcoin’s odds of replacing fiat, and rapid growth in Bitcoin’s Lightning Network that make it a superior daily-use money. One could imagine other reasons – demographics, regulation, company and investor learning curves. And the punchline is even in the classic macro doldrums scenario, Bitcoin’s got a lot else going on besides macro.


Boiling it down, inflation is always good for money hedges, and in this crisis Bitcoin has so far replaced gold as the hedge of choice. If we instead get deflation, it’s good-to-neutral for Bitcoin but, given today’s Fed, will probably be converted to inflation anyway. And in that last “Goldilocks” scenario, Bitcoin’s underlying growth is likely to carry any slack, sparing it gold’s humiliating plunge into periodic obscurity.

Finally, which macro outcome is most likely? You’d make a lot of money guessing that correctly, and there are excellent arguments for both inflation, stagnation, and even their demon offspring, stagflation. For now, unless you actually enjoy existential speculation, I think the prudent hedge is simply buy and hodl Bitcoin.

*  *  *

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Tyler Durden
Mon, 10/25/2021 – 03:30

Author: Tyler Durden

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China weighs on Asia today

Asia is off to a mixed start this week with individual asset classes struggling to find a central unifying theme. Equity markets are mixed after China…

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Asia is off to a mixed start this week with individual asset classes struggling to find a central unifying theme. Equity markets are mixed after China announced a pilot programme of property taxes in some cities, and Covid-19 cases rose on the mainland. Cases remain extremely low, but ominously, are quite spread geographically. There is plenty of per cent internationally to see how delta plays out in Covid zero countries and it will be interesting to see how this develops in China. It is a potential dark cloud if it results in widespread social restrictions.

Evergrande, having made an offshore coupon payment in a nick of time on Friday, faces another in four days’ time on 29 October. Its Chairman has said work has restarted on property projects in China, and it is going big on its EV division in the decade ahead. Where all that money is coming from, I know not, and markets seem to be sharing the same thoughts.

Powell says it’s time to taper

The US dollar made a comeback on Friday thanks to Fed Chairman Powell’s remarks that it was time to taper, but not hike. He also said inflationary pressures would persist well into next year but remained transitory. Clearly, central bankers’ definition of transitory inflation is a bit different to many of us, with two years seemingly transitory. Still, I agree that raising interest rates is not the answer now when the drivers of the inflationary surge are beyond the reach of domestic monetary policy. Although Mr Powell was stating the obvious on rate hikes, the limited boost in the US dollar likely reflects those remarks. However, US 10-years are holding comfortably above 1.60% and with next week’s FOMC meeting locked and loaded to announce the Fed taper, I suspect we are nearing the bottom of the US dollar retracement.

Before that though, we have a raft of earnings announcements this week, kicking off with HSBC this afternoon. Faceplant, I mean Facebook, is later today and after Snap got an Apple caught in its throat, markets will have an itchy trigger finger over the sell button if the social network says the same. Additionally, this week, it is a FAANG-sters paradise, heavyweights such as Alphabet, Microsoft and Apple also announcing, along with some international financial heavyweights and real economy stalwarts like Caterpillar, General Motors, and Ford. It will be big-tech, however, that decides whether the US earnings season party continues, before the FOMC reasserts its dominance next week.

Over the weekend, the Saudi Arabian Energy Minister said that OPEC+ would remain cautious over output. Oil had a banner Friday as it was and has moved higher in Asia. Ominously, natural gas futures have risen over 4.0% this morning, and China coal futures are also 4.0% higher, perhaps testing the limits of the ability of China’s central government to talk prices down. A resumption of the energy rally will be a bullish factor for the US dollar. In the US, Nancy Pelosi said the Democrat’s spending package was 90% done. Market impact is limited for now, as, like me, the street seems to want to see the details before it is reconciled through the Senate. The debt ceiling has gone quiet as well but will undoubtedly come back to the front pages soon enough with December not too far away.

The data calendar in Asia is quiet today but we do have both regionally, and in the northern hemisphere, despite the dominance of US earnings in investors’ minds. South Korean Q3 Adv. GDP tomorrow morning will be slightly old news, but Singapore’s Manufacturing Output and Employment later in the week should confirm its export recovery remains intact, even as the domestic economy lags. Today’s CPI will be a non-event as the MAS tweaked monetary policy higher recently already.

Japan’s Retail Sales, Australian Q3 CPI and China’s Sep Industrial Profits will grab the headlines on Wednesday, with the Australian CPI potentially increasing the noise around the RBA’s ultra-dove stance. Sub-par China Industrial Profits will, similarly, increase the noise around the China slowdown and probably weigh on all of Asia. Thursday’s Bank of Japan policy decisions will be a non-event ahead of the election on 31 October.  Heading North, German IFO is released this afternoon and in the US, Consumer Confidence tomorrow, Durable Goods Wednesday, GDP Thursday, and Personal Income/Expenditure Friday round out a busy week for them. Europe’s highlight will be the ECB policy meeting on Thursday with an outside chance that they could lay the ground for tapering, although I’m not holding out much hope from the European Central Bank of Japan.

We may well have another week ahead of us of higher equities and a weaker US dollar as earnings have their week in the sun. Next week, and the week after, it’s business time once again with the US FOMC, and China’s Central Committee meeting the week after. Evergrande may throw a spanner in the works as well if they don’t pay by Thursday and I wouldn’t rule out some “shared prosperity” announcements before the China meeting.

Author: Jeffrey Halley

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