🧪 The big coin experiment

Wednesday, September 8, 2021 by Robinhood Snacks | Disclosures
_Not your average B-Day [MEDITERRANEAN/E+ via GettyImages]_

Not your average B-Day MEDITERRANEAN/E+ via GettyImages

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Hey Snackers,

Summer is almost over, and the McFlurry machine is still broken. The FTC is reportedly looking into McDonald's infamous McFlurry malfunctions.

Stocks ticked down yesterday as investors digested the bummer August jobs report, and Bitcoin dropped 10% after El Salvador made it an official currency.

BTC
1. The big coin experiment: El Salvador becomes the first to adopt Bitcoin as legal tender

"Happy B-Day"... Just got a whole new meaning. Yesterday, El Salvador became the first country to adopt Bitcoin as a national currency. Crypto enthusiasts call it "B-Day." Bitcoin is now legal tender alongside the US dollar, which has been El Salvador's official currency since 2001. The Salvadoran government is rolling out Bitcoin ATMs and snazzy kiosks — and offering a $30 BTC credit to those who download its govt-run Bitcoin wallet, Chivo.

  • Crypto pupusas: Salvadorans can now pay for anything in Bitcoin, from tortillas to rent. Twitter was flooded with images of BTC-bought McMuffins.
  • Crypto finances: Salvadorans can pay taxes and bank loans in BTC, and won't pay capital gains tax when converting to USD.

Crypto instead of cake... Not everyone's into it. El Salvador plans to spend $225M+ in the rollout, but ~65% of Salvadorans don’t want the govt to spend tax money on Bitcoin adoption, and 80% lack confidence in BTC. Meanwhile, the IMF is worried BTC's volatility poses major risks to El Salvador's economy, which is already one of Central America's poorest. A Bitcoin price plunge could make its huge debt load even worse. Just yesterday, BTC dropped 10%. Some potential pros...

  • Access: El Salvador's President says BTC will improve financial inclusion among the 70% of Salvadorans who don’t have access to traditional financial services.
  • Remittances: Because BTC is often cheaper to transfer, it could lower fees for Salvadorans abroad who send money to family in El Salvador. Nearly a third of the economy’s dollars come from “remittances.”
THE TAKEAWAY

It's the first big coin experiment... and the stakes are high. El Salvador's BTC adoption could destabilize its fragile economy, boost corruption, and be a boon to the Salvadoran president’s authoritarian tactics — or it could be a social and economic success. It’s all TBD. But the experiment could be valuable for other governments considering using crypto as legal tender.

Wires

Down to the wire... Hurricane Ida cut off power for ~1M people in Louisiana and Mississippi. The storm knocked out 31K electric poles – more than hurricanes Katrina, Ike, Delta, and Zeta combined. Plus, all those poles were above ground – aka: not protected against 150-mph wind. Entergy, the utility giant with 3M customers across the Gulf states, has restored power to less than half of its affected customers.

Pole-arizing issue... After the Senate passed its $1T infrastructure bill, officials are debating whether to build new power lines above or below ground. Underground wires can be more than 10X as expensive to build as above-ground wires — but they're also more resilient in disasters like hurricanes and wildfires. And America’s ~70-year-old electric grid is 20 years overdue for an update:

  • 10X = The increase in major US electricity outages between the mid-80s and 2012. Outages more than doubled between 2017 and 2020.
  • $7T = The estimated cost of modernizing America's electricity grid — around 9X more than Biden's infrastructure bill sets aside for electric infrastructure investment.
THE TAKEAWAY

Natural monopolies, extreme outcomes... One-third of US electricity companies are state-regulated "natural monopolies" that earn pre-determined returns, which means little incentive to pay for pricey upgrades. Often, taxpayers end up footing the costs: a whopping $99B just last year. Now, policy makers are debating whether to pay utility companies to update their infrastructure, or fine them if they don't: Last year, PG&E was fined ~$2B after its old wires caused several devastating wildfires.

What else we’re Snackin’
  • eToy: Toyota says it'll spend $9B over the next decade on electric car battery factories. It's gearing up to sell 2M EVs per year by 2030.
  • TikOff: TikTok has reportedly surpassed YouTube in US average watch time — at least on Android phones.
  • Afford: Ford poached former Tesla and Apple exec Doug Field, who helped lead Apple's secret car project, to spearhead its emerging tech efforts.
  • Billz: BlackRock raised $1B for the first-ever foreign-run Chinese mutual fund, drawing criticism as US-China tensions boil.
  • Krypto: The head of the UK's financial watchdog criticized a Kim Kardashian Insta post that promoted crypto, saying "social media influencers are routinely paid by scammers."
  • Rosy: Thanks to blooming bouquet demand, 1-800-FLOWERS cracked $2B in sales last quarter for the first time — a 43% surge from last year.
Snacks Daily Podcast

Callaway Golf, Earth's #1 golf company, is expecting its quarterly sales to nearly double from last year.

But it’s not because you’re working from the 7th tee box.

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Wednesday
  • Earnings expected from Lululemon, SentinelOne, GameStop, and Genius Sports

Authors of this Snacks own: Bitcoin and shares of Ford

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