By educating yourself on crypto, you can invest with greater knowledge and confidence
Publishing date:
May 11, 2022 • 33 minutes ago • 1 minute read
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Cryptocurrency has become one of the most talked-about sectors of the financial world quite fast. And some days, it might feel like you missed the boat on making a big Bitcoin investment, and then on other days, it feels like there are generations of growth and possibilities ahead of us. If you’re curious about how to invest in crypto, then check out the 2022 Advanced Cryptocurrency Training Bundle, which is currently $44.99.
It features seven courses and 27 hours of content on crypto concepts like Fibonacci trading, short selling and advanced cryptocurrency theories. Students rated the Cryptocurrency Futures Trading Bootcamp 4.2 out of 5 stars, as it illustrates the basics of technical analysis, market psychology and how to trade on popular exchanges like Binance. The courses teach you how to read and analyze a Japanese Candlestick, trade based on Fibonacci levels and analyze risk management.
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Building on that, the Professional Fibonacci Trading Masterclass is rated 4.5 out of 5 stars and features over 30 lectures on Fibonacci trading tools, retracements and levels and how to master technical indicators in Fibonacci trading. Leaving this course, you should have a newfound understanding of using trend-following indicators, trading the best-performing chart patterns, etc. This all can be used when trading securities, stocks, options, crypto, EFTs and more.
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Don’t miss your chance to level up on your cryptocurrency knowledge for a minimal investment. For a limited time, you can get the 2022 Advanced Cryptocurrency Trading Bundle for $44.99.
Instead, mineral explorers and developers often see substantial projects halted in their tracks by staunch community-level opposition, even when projects had passed regulatory muster, says mining sector researcher, analyst and reporter Paul Harris, in an interview.
Legacy CSR programs are simply no longer adequate. The analyst suggests those wishing to do business in these jurisdictions take a more holistic approach toward meaningful engagement with host communities before engaging governmental authorities about their respective projects.
The solution, according to Harris, is companies today have to be willing to give up an ownership stake in their projects so that local communities and local and federal governments have more skin in the game.
The Investing Club is all about education. So when we receive multiple questions on a topic from members — and one unenlightened editor — we have some explaining to do. A question that’s been popping up lately: What do the pros mean when they talk about “demand destruction” and why is it so incredibly important we get some? We hear you, but before we can discuss the concept in more detail, we must first understand how prices are determined. Welcome to Economics 101. At the heart of all economics is supply and demand. That goes for the labor market, and it goes for a market of goods such as, say, semiconductors or oil. How prices are fixed for that labor or those goods will always come down to basic supply and demand. This concept can best be illustrated using a series of pricing graphs. Supply & Demand — free market On the Y-axis (the vertical one on the left) we have price. On the X-axis (the horizontal one on the bottom) we have quantity. The demand line slopes from the upper left to the bottom right, and the supply line goes from the bottom left to the upper right. The intersection of those two lines (demand and supply) is where we find “equilibrium.” In a totally free market — that’s unrestricted by supply chain bottlenecks and doesn’t have things like taxes or subsidies impacting demand — that equilibrium point determines the quantity (Q1) suppliers will produce and the price (P1) buyers will pay. The issue we face today: While demand has remained elevated and steady, supply has become tighter due to breaks in the supply chain. This break can be found all over the global markets: semiconductor production, not enough oil production, China’s Covid shutdowns, labor shortages, and so on. To illustrate this tight supply, we shift our supply line to the left as moving left on the X-axis indicates a lower quantity of supply. Supply & Demand — supply constrained market As we can see above, this small shift in supply — with no change in demand — creates a new equilibrium point at which we see a higher price level (P2). There are only two ways to get prices back down from the P2 level toward the original P1 level (or at the very least stop prices from rising even higher). One option is to increase supplies again — a move that will bring us back to the old equilibrium, or at least a point close to it. The other is to destroy demand. The first option is out: There is nothing the Federal Reserve can do to increase supply. It can’t force China to open its factories or make more container ships appear out of thin air. Therefore, the only option left is to destroy demand. How is that done? By draining liquidity out of the market through interest-rate hikes (which impact shorter-term rates) and a reduction in open market purchases of bond securities (which impact longer-term rates). The Fed needs to pull dollars out of the economy and raise the cost of borrowing — the exact opposite of what happened in 2020 with the economic stimulus. Supply & Demand — supply constrained with demand destruction By lowering demand, we can reach a new equilibrium level (marked in red). Here we find lower prices (P3) that are in line with the quantities suppliers can produce in this current environment. We can destroy some demand to meet the lower production of supplies. We also achieve the goal of bringing down prices (or at the very least reducing the rate of inflation). This is how the current Fed is trying to bring inflation back down to its 2% target rate. Whether this can be done without pushing the economy into a recession, by achieving a so-called soft landing, remains to be seen. But in the long run, we’re better off in a temporary recession than an economy with runaway inflation. This results in the destruction of buying power that’s incredibly difficult to rebound from. ‘Demand elasticity’ One last concept that impacts how we approach investing in this market when we know the goal is to reduce demand, is to be very mindful of “demand elasticity,” or the change in demand resulting from a change in price. If a good is very elastic, it means the consumer can do without it and will quickly demand less as the price rises. On the other hand, if a good is highly inelastic, it means that the consumer will pay the increased prices and minimal demand will be lost. One example of an elastic good is soft drinks; at some point, most consumers just aren’t going to keep paying up for a bottle of soda. Sure, they may accept a small increase here or there but at the end of the day, it is a luxury that most can survive without. This is why the Club seeks out companies that have pricing power, even in bad economies. Conversely, lifesaving medication — like drugs manufactured by Club names Eli Lilly (LLY), AbbVie (ABBV) and Johnson & Johnson (JNJ) — is about as inelastic as it gets. Even if prices were to double, most consumers will cut other expenses (like soft drinks) first to ensure they can stay healthy. Energy is another example of an inelastic good, since it’s not only required to get around but also serves as the main means of producing most goods. That’s where oil and natural gas names — including Club holdings Pioneer Natural Resources (PXD), Devon Energy (DNV) and Coterra Energy (CTRA) — can benefit. Consumer staple stocks also have a degree of inelasticity, and Club name Procter & Gamble (PG) is the powerhouse of the group. While P & G does run the risk that people will turn to cheaper toothpaste, laundry detergent and shaving products, we believe its superior brands such as Crest, Tide and Gillette allows it to raise prices to combat business cost inflation without appreciable loss of market share. Although these products may come at a higher upfront costs, investments in innovation can actually make them more competitive on a per-use basis Even cloud computing and cybersecurity would represent examples of inelastic goods, though perhaps not to the same extent as life-saving medication. Cloud computing is fast becoming the backbone of global productivity. Good luck running a business if your data is hacked into regularly. Our Club names with robust cloud units include Amazon (AMZN), Alphabet (GOOGL) and Microsoft (MSFT). To be clear, some businesses of these companies are more elastic. Think Amazon’s e-commerce unit, Alphabet’s hardware business, or Microsoft’s personal computing segments. Many of our other tech holdings are exposed to the cloud, including Salesforce (CRM), which offers cloud-based solutions that help companies run their businesses more efficiently. Then there are those goods that fall somewhere in the middle of the elasticity spectrum. One example is iPhones. Brand loyalty provides Club name Apple (AAPL) with significant pricing power, but it’s not the inelasticity found for oil or medication. When times get tough, iPhone consumers may look to extend the life of their phones. So, while we certainly maintain our “own it, don’t trade” view of Apple, we must be mindful that in these uncertain times, broad demand destruction can impact sales for even the greatest consumer products. Bottom line Companies that boast inelastic goods are where we want to focus our buying power in the face of uncertainty and a Fed intent on destroying demand. That is why we continue to focus heavily on energy, healthcare, and consumer staples — taking shots at other sectors only when the long-term value is too great to ignore. These are usually companies we believe will ride out a tightening cycle and are positioned to capture an outsized amount of economic activity once we recover. (Jim Cramer’s Charitable Trust is long AAPL, ABBV, JNJ, LLY, PXD, DVN, CTRA, AMZN, GOOGL and MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
China still holds the cards for global supply chains, whether or not Covid lockdowns frustrate businesses in the near term. An employee works on the production line of the screens for 5G smartphones at a factory on May 13, 2022 in Ganzhou, Jiangxi Province of China.
Standardizing ESG reporting, and making it mandatory, would be a start toward reliable ESG investing
Author of the article:
MoneyWise
Dina Al-Shibeeb
surasak jailak/Shutterstock
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“Scam” or “dangerous placebo” are some of the terms used by critics to denounce Environmental, Social and Governance (ESG) investing. Yet others see it as one of our last chances to pivot our financial world to a more sustainable and environmentally-friendly model.
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ESG, a form of sustainable investing, is increasingly being used as a measure of how well a company is using its investment money. For investors looking to instigate change, ESG scores help them decide if a company is worth their money.
Not a perfect system
ESG scores aren’t standardized, nor do all companies disclose their ESG standing.
This is despite ESG dating back to 2006, when the U.N. launched the Principles for Responsible Investment at the New York Stock Exchange. The initiative was backed by leading institutions from 16 countries, representing more than $2 trillion in assets owned at the time.
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ESG critics and optimists have called on the government to use its power to fine tune ESG metrics and finally standardize it, in order to give it more credibility.
ESG not what it seems?
In 2021, ESG investment saw issuance exceeding US$1.6 trillion, bringing its total market to more than US$4 trillion. Not only that, but Bloomberg expects ESG assets to exceed US$53 trillion by 2025.
Fierce critics like Tariq Fancy — who worked as the chief investment officer for investment management firm BlackRock before leaving in late 2019 — made headlines with his disillusionment over ESG’s true impact.
“That $4 trillion isn’t really $4 trillion,” Fancy said, in reference to the widely-circulated figure.
For Fancy, the “vast majority” of what’s happening is that companies are “recategorizing existing funds and moving money and shares around from one basket to another…
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“They’ve figured out that socially conscious investors will gladly pay more in fees for something with a ‘green’ label,” he said, adding that ESG funds have 43 per cent higher fees on average.
“Also, they don’t fund carbon capture and new innovations, for the most part they publicly overweight tech companies (Microsoft) and underweight oil companies (Exxon),” he added.
Also, regular investors mainly have access to secondary shares that are sold and purchased on a daily basis, which have little impact, argued Fancy.
“The changes we need immediately to flatten the [greenhouse gas] curve are collective actions led by the government — experts have been telling us this for decades,” he said.
As ESG investing rises, so do emissions
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Like elsewhere, Canadian ESG investment is increasing, but, again like elsewhere, the nation hasn’t reduced its emissions in the past year.
A March, 2022 report from the International Energy Agency said that global energy-related carbon dioxide emissions rose by six per cent in 2021 to 36.3 billion tonnes — a new record — as the world bounced back from the pandemic.
ESG does make a difference
Art Lightstone, climate activist and host of the Green Neighbour Podcast, acknowledges ESG has its critics. But for him, this class of investing is still making a difference.
“The fact that ESG investing has not only helped to launch several green tech companies, but also encouraged less socially-minded companies to compete in ESG spaces is now pretty much undeniable,” Lightstone said. “Tesla is invariably the best case in point. The amount of investment directed toward Tesla and other EV startups has been mind boggling.”
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While money can be moved from one shareholder to another, “that’s not where the story ends.” He cited the example of Tesla when it was “able to raise large amounts of capital [at market prices] with rather little dilution to its stock.”
“Tesla did this three times in 2020, and with that money they were able to build more factories, scale up their production, lower their per-unit costs, increase their profit margins, and therefore increase the economic viability of their entire operation,” he explained.
This expansion created a domino effect for legacy automakers such as GM and Ford, who are investing more in their electric vehicle programs.
Investing intentionally and collectively
Tim Nash, founder of Good Investing, a company with a goal to help at least one million Canadians invest intentionally, argues that informed decision-making can make the impact needed.
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“People spend more time choosing an avocado in the grocery store than they spend when choosing a mutual fund for their RRSP,” Nash said.
Instead, he urged people to think more about their portfolios and ways to diversify, including carving out part of their portfolios for investment just “for doing more good.”
“This is where we can invest part of our money into things like community bonds and impact investments,” he explained.
Community bonds, a debt financing tool, are issued by non-profit, charity or co-operative organizations. They allow these groups to take loans from community backers. The backers will eventually get paid interest for investing in an impactful project, while the organization enjoys access to capital.
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During the interview, Nash noted that he was located at the Centre for Social Innovation, a non-profit that owns two buildings in downtown Toronto.
“How does a non-profit own two buildings in downtown Toronto?” he asked. “Community bonds. That’s how they were able to access capital.”
Then there is also shareholder activism, and this is where Nash highlighted how shares that are publicly traded on a secondary market can be used as a powerful tool if used collectively.
“If I sell my shares, someone else is going to buy them. However, if enough people sell their shares that will impact a company’s cost of capital,” he said. “This is a very important metric when it comes to how a company operates.”
One example Nash cited as proof of effective shareholder activism is the increased cost of capital for fossil fuel companies. At the same time, there has been an unprecedented shifting of investment capital into greener energy.
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Better knowledge needed
The financial industry needs to delve into the environmental sciences, sustainability, and systems thinking to have a more well-rounded view on how to make a full impact, Nash says.
“I do think that a lot of the criticisms come from the financial industry, people who don’t have a background (in these topics),” he said. “ESG is a very broad concept… We need everybody rowing together in the same direction.”
While the government is in a position to lead, it’s still caught up in a four-year election cycle, he added.
“It’s even shorter if it’s a minority government, which we’re in right now,” he noted.
Time to start mandating metrics on ESG
Nash put the onus on the Ontario Securities Commission, which regulates companies listed on the Toronto Stock Exchange, to start mandating disclosures of ESG issues, as other regulators have done.
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For example, the SEC in the U.S. is focused on the climate aspect of ESG. It mandates that all publicly traded corporations publish their environmental compliance costs, and proposed new rules in March to standardize climate-related disclosures to investors. The rules would require businesses to disclose information about their direct greenhouse gas emissions, as well as the indirect emissions from the energy the business consumes.
In Europe, the trend tends to lean more toward the corporate governance aspect of ESG. Under the 2018 Non-Financial Reporting Directive of the European Union, companies are expected to disclose information on environmental, social, and employee-related problems, such as anti-bribery, corruption, and human rights performance.
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In Nash’s view, Japan is ahead of the curve with its Financial Services Agency actually mandating climate risk disclosure.
“Investors, I think, to some degree are demanding more data and information and disclosure than what governments are requiring,” he said. “This is an area where investors are asking tough questions and pushing that forward. That said, investors can ask, and companies get to decide how they respond. Many of them are responding in different ways.”
ESG optimists and critics alike want to see those regular investors emboldened to make the difference the world is waiting for.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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