Dipping Your Toe in Crypto

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Happy Thursday!

It’s report card time for corporate America – publicly traded firms are starting to announce how they performed in the first quarter, and analysts are pretty optimistic. If you’re tuning in, we have a guide to the jargon you’ll hear during earnings season. However, the overall financial market is still in a jittery place due to high inflation, rising interest rates, and fears of slowing economic growth. One day you may be up, convinced you’re an investing natural worthy of an office on Wall Street, and the next you may be staring at a screen filled with red flashing figures. Remember, panic selling has not been the ticket historically. Prepare in advance and ride out the volatility with a diversified portfolio and an emergency fund, knowing this too shall pass.

What does need everyone’s attention is our home (Mother 🌎). Since the 1970s, April 22nd has been Earth Day; the entire month is now known as Earth Month. What began as a small movement in Santa Barbara, California in response to air and water pollution is now an international celebration of the planet’s wonders, and a call to action in the face of climate change. And while the urgency of the challenges could not be clearer — this week alone saw the release of both a new IPCC report saying it’s “now or never” if we’re going to limit warming to 1.5 C and a White House report claiming climate change could cost the US $2 trillion each year by 2100 — it is important to keep the celebration of our natural world, and the progress toward a healthier planet front-and-center. The progress that is being made on so many fronts along with the economic opportunity that comes from the innovation, exciting new companies and corporate practices that we are seeing rolled out to fight climate change are extraordinary.

As an investor, your influence and impact can go beyond making green consumer choices. In your own small way, you can help shape the future by backing climate solutions that can build a healthier planet, rewarding the responsible actors with your investment, and using your shareholder vote to push companies to get on a track that aligns with your values.

We all bring our own values and lens to our investing. If being green is a priority for you, some initial steps to consider for Earth Month include: review what’s in your portfolio to confirm everything aligns with your values and goals (one way to analyze the fossil fuel exposure and carbon footprint of funds: Fossil Free Funds), seek out stocks that get you excited about going green (look for, and then verify, net-zero commitments as you do your research) and learn about your rights as a shareholder (voting on the many ESG proxy issues up this year is a great way to influence policy).

News You Can Use

With mortgage interest rates nearing 5%, applications for new mortgages are down 9% and refinances are down 62% compared to last year. Analysts say the increased rates and limited housing stock available for purchase are impacting first-time home buyers particularly severely. Need a quick reminder on how the Federal Reserve’s actions are pushing interest rates up? FWIW’s got you covered.
Shareholders assemble! It’s proxy season, and the SEC is allowing way more ESG shareholder proposals to go to vote this year. This is the policy shift the agency had promised, and it may be why there are 13% more ESG proposals (567) filed in 2022 than in 2021. Climate change is the top issue, followed by political influence/lobbying, human rights, work conditions, and diversity. Unfortunately, we’re also seeing the rise of anti-ESG proposals.
Plenty of EV headlines this week – Rivian is on track with its production goals, GM and Honda are building a low-cost car, and we may be swapping batteries in the future rather than charging them. China’s NIO, the only automaker to offer battery-swapping, is reportedly in talks to license the technology to others and is expanding the service to Europe this year. Swapping a battery for a fully charged one takes about five minutes — much faster than the hour it can take to charge an empty one.
Companies with significant exposure to Russia continue to report big losses on those operations as they choose to pull out of the country in light of the war in Ukraine and the sanctions imposed by the US and EU. The latest announcement that caught our eye: energy giant Shell said today that they expect to lose up to $5 billion this quarter due to their decision to leave Russia. They had previously predicted the hit for the quarter due to their disengagement with Russia and Russian oil would be $3.4 billion.
While you may have seen the headlines about Elon Musk joining the Twitter board, one item that got a little less attention this week was the CEO of ESG fund favorite Tesla calling ESG “the Devil Incarnate.”

Getting started in crypto

A recent poll found that one in five Americans has invested in, traded, or used cryptocurrencies — and crypto week just kicked off in Miami with more than 25,000 participants expected. If you’re considering taking the plunge and don’t know where to start, or just want to keep up at the next cocktail hour, read on. You can also get the tea on NFTs here.

What is it? Cryptocurrencies are digital money that no bank or government controls. They are part of the decentralized finance, or DeFi, movement. All DeFi transactions are automatically recorded on an online public ledger known as the blockchain network. Think of it as a giant spreadsheet that everyone can see and proves how much you own. Crypto can be used as an investment, currency to shop with vendors that accept it, or donated to causes. You can buy coins (or a fraction of a coin) in the marketplace where the price is determined by supply and demand. You can also bring new coins into existence by “mining” or maintaining the network, but this complex computing work isn’t for most people. (There are exceptions, like XRP, which is controlled by a private company.)

How do I buy crypto? Your first step is choosing a crypto exchange or broker, like Coinbase, Gemini, Robinhood, or SoFi. Some factors to consider are security, fees, the range offered, and whether you can withdraw your crypto from the platform. Once you create and verify your account, you can deposit your dollars and place orders for the coins of your choice. As a newbie it’s safer to go for the larger, more established currencies.

How do I store it? When you buy crypto, you’re given a private key – a long secret password that provides access to your funds. You can either keep this private key in a secure digital wallet provided by your exchange or a third party, or you can store it offline, on a piece of paper or a USB drive. Digital wallets are more convenient, but keeping it off the internet protects you from hackers. Remember, you’d still be vulnerable to online phishing attempts, and if you lose the private key, you can never use the money, as some people have painfully learned. There is no “create new password” fail-safe here.

What else should I know? Cryptocurrencies are extremely risky since prices are volatile, regulations and investor protections are still catching up, and we don’t know if or when they’ll ever be mainstream. Their use for criminal activities and their environmental impact may also turn some values-aligned investors off. Bitcoin “mining” consumes more electricity than many countries, but the proportion of green energy it uses has been reportedly rising and some newer coins like Cardano, XRP, and Ethereum once it's upgraded, are more energy-efficient.

Before you go -

In Miami’s bid to be the “future of finance”, the mayor unveiled a robot bull statue with laser eyes this week at a Bitcoin conference to rival Wall Street’s famous “Charging Bull” statue and reinforce the city’s commitment to cryptocurrency. Makes us wonder if next year’s Basel Miami will feature the Miami version of “Fearless Girl”...