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[ad_1] How do stablecoins work—and why invest in them if they’re always worth $1?–Serena Stablecoins are digital currencies pegged one-to-one with a fiat currency (money declared by a government to be legal tender), most often the U.S. dollar. The most famous stablecoins in the world are Circle’s USDC, Tether’s USDT, and MakerDAO’s DAI—and the first two are among the five biggest cryptocurrencies (of any kind) by market capitalization. But in a sector as volatile as crypto, why is there so much hoopla around coins that, by definition, don’t fluctuate? To understand this, let’s look at crypto’s utility as “money.” It is a medium of exchange, and it is a store of value. However, due to their volatility, cryptocurrencies aren’t a good unit of account, meaning that it’s difficult to price things accurately using crypto.  Stablecoins are cryptocurrencies that can fill this gap. Plus, stablecoins can allow you to protect your investments during crypto market crashes—you can convert your bitcoin, ethereum or other crypto coins to stablecoins and weather the storm. When you feel that market conditions have improved, you can buy back into bitcoin, etc. What is a stablecoin peg?  One of the most important things to know about stablecoins is their “peg,” which is the asset their value is linked to. The peg mechanism allows these coins to remain stable. Based on the type of peg used, stablecoins could be fiat-collateralized, crypto-collateralized or algorithmic. Fiat-collateralized: These stablecoins are issued by a centralized organization and backed (or collateralized) by fiat currency, bonds, etc. Circle’s USDC is an example of such a stablecoin. Circle issues USDC at a 1:1 ratio with fiat collateral, meaning USD$1 gives you 1 USDC. Crypto-collateralized: These stablecoins are decentralized, and their issuance is governed by smart contracts (lines of code with the contract terms and conditions written into them). They are backed by a basket of cryptocurrencies rather than fiat currency. However, these stablecoins tend to be over-collateralized. For example, $1.50 of crypto collateral will generate a single unit of the stablecoin. The over-collateralization exists to negate the effects of crypto price fluctuations and ensure that the stablecoins are backed by sufficient collateral. MakerDAO’s DAI is the most successful implementation of a crypto-collateralized stablecoin. Algorithmic: The stablecoins described above are issued based on the amount of collateral backing them up. Algorithmic stablecoins are decentralized and not dependent on collateral. They are dependent on smart contract mechanics. While the lack of collateral (or adequate collateral) may seem very attractive on paper, it can be an extremely risky proposition, as we have seen with Terra’s UST. Canadians can buy and sell crypto on CoinSmart* Go to Site Stablecoin risks So, now that you know what stablecoins are, let’s get into the risks associated with them. For that, let’s see what happened with TerraUSD (UST), an algorithmic stablecoin launched by Terraform Labs in 2020.  Stablecoins have found immense utility in decentralized finance (DeFi) applications. Stablecoin pairs are very popular with liquidity providers looking to earn a yield on their coins. UST found a lot of utility in this area. Unfortunately, due to a series of events, the UST peg broke in May 2022, and the ramifications were felt across the entire DeFi ecosystem. Users of UST and its sister coin, LUNA, lost millions and billions of dollars.  Bottom line: If you’re thinking of investing in stablecoins, you may want to stick with the established ones.  Jeremy Koven is the Chief Operating Officer and a co-founder of CoinSmart, a Canadian cryptocurrency trading platform. Sign up for an account* with the code money30 and receive CAD$30 in bitcoin when you deposit a minimum of CAD$100.  Have a question? Ask a crypto expert SEND EMAIL Read more about crypto:  Video: Is crypto a good investment? “Which cryptocurrency should I invest in?” Are we in a crypto bear market? How the Ethereum Merge affects investors The post Investing in stablecoins in Canada appeared first on MoneySense. [ad_2] Source link

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[ad_1] On Friday, the Bureau of Labor Statistics reported that 261,000 jobs were created and we had 29,000 positive revisions to prior reports. This means the honey badger labor market will keep the Federal Reserve from pivoting anytime soon.  This has been a theme of mine lately. Since all my six recession red flags are up, the only data lines that I am focusing on regarding the cycle of economic expansion to recession are job openings and jobless claims data. Both these data lines were solid this month, so the jobs data won’t turn damaging enough for the Fed to pivot.  The labor market is actually running into a big theme of my economic work over the years. I recently talked about it on this podcast because I wanted to remind people that early in the U.S. recovery cycle, job openings getting toward 10 million was part of my forecast. No country has a Dorian Gray labor market and the labor market deals with different dynamics as the baby boomers leave the workforce each year.   From BLS: Total nonfarm payroll employment increased by 261,000 in October, and the unemployment rate rose to 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in health care, professional and technical services, and manufacturing. The unemployment rate did rise from 3.5% to 3.7%; this happened once before this year when we saw the unemployment rate pick up among people who had never finished high school. The following month it reverted back to 3.5%. Below is a breakdown of the unemployment rate and educational attainment for those 25 years and older. Less than a high school diploma: 6.3%. (previous 5.6%) High school graduate and no college: 3.9% Some college or associate degree: 3.0% Bachelor’s degree and higher: 1.9% The unemployment rate can rise if the labor force pool grows while still creating jobs. I advise you not to read too much into one month’s data until it becomes a trend. Of course, regarding the Fed’s pivot, jobless claims need to get to 323,000 on a four-week moving average for me to believe that the Fed will take notice of an economy going into recession.  Since I have all six recession red flags up now, I am keeping an eye on jobless claims data first because once it breaks higher, the job-loss recession has begun, something we’ve seen in every economic expansion-to-recession cycle. Below is a breakdown of the jobs created this month. As you can see, the construction sector was barely positive; this is one area of the marketplace that should be losing jobs next year. The builders are now holding onto their labor due to the backlog of homes under construction. When that ends, they will join the ranks of others in the housing industry that are laying off people.  Remember, housing went into recession in June of this year and we haven’t had 12 months of recessionary layoffs in the system yet.  All six of my recession red flags are up, so these are data lines that people should be tracking: Job openings The Fed would love to see this data line go down. Before COVID-19, job openings were over 7 million, and we didn’t have to deal with inflation. The Fed believes higher unemployment means people get paid less, which is why they want to fight inflation. The most recent job openings report showed an increase to  10,717,000. Jobless claims This data line is essential for the general economy because the Fed can keep discussing higher rates or keeping rates high until the labor market breaks. Once jobless claims break, the discussion changes. That level is 323,000 on the 4-week moving average. We aren’t there yet, and jobless claims fell this week to 217,000. At this point, is there any way to prevent a recession? Once all six recession red flags are up, history is not on our side.  However, due to the crazy swings that this COVID-19 recovery has given us with the wild bullwhip effect on data, I have come up with some plausible theories. Here are the two ways we can avoid this recession: 1. Rates fall to get the housing sector back in line.  Mortgage rates falling toward 5%, as we saw earlier in the year, can be a stabilizing factor for housing if they can have duration. Traditionally, mortgage rates below 4% boost housing demand. However, first things first: the bleeding needs to stop.  2. The inflation growth rate falls, and the Fed stops hiking rates and reverses course, as it did in 2018. Some of the inflation data is already cooling off and will find its way into the data lines. However, rent inflation won’t come down in the data until 2023, even though we already see some coolness in that sector.  Is there any hope that one of these things happen and we avert this recession? If we don’t have any more supply shocks like we experienced after the Russian invasion of Ukraine or from other variables that aren’t tied to the economy, the growth rate of inflation should be falling next year due to rent inflation falling. I talked about it on CNBC recently. If that happens, if the Fed starts to pivot and then cuts rates as they did in 2018, we might have a shot here. Of course, it’s very late in the year now, so this is more or less a 2023 storyline, but I outline my best case for mortgage rates to fall next year in this article. However, history has never been on our side once the six recession red flags are up. There is a first time for everything, but most people are now employed, and household balance sheets look much better now than we saw in 2005-2008. At this point it’s all about timing. However, the longer we go with higher rates, the less chance of a soft landing. [ad_2] Source link

[ad_1] Kyle Prevost, editor of Million Dollar Journey and founder of the Canadian Financial Summit, shares financial headlines and offers context for Canadian investors. Don’t call Shopify a comeback—it’s been here for years The Federal Reserve in the U.S. raised interest rates on November 2 by 0.75% to a target range of 3.75% to 4%— the highest level since January 2008. We’re as tired of writing about interest rates as you probably are of reading about them. Long story short: The interest rate increase was exactly what the Fed forecasted, and the markets appeared to take it in stride. So, we’re looking at the news in Canada. As last week’s tech earnings bonanza wrapped up, former software darling Shopify (SHOP/TSX) announced surprising earnings news and bucked the negative trend lines seen by its American tech counterparts.   Shares of Shopify saw a massive 17% jump after earnings results came in, because losses weren’t as bad as expected. With losses of only USD$0.02 per share—with analyst predictions of a USD$0.07 per share loss—investors breathed a sigh of relief. Given that revenue also slightly beat expectations and was up 22% on a year-over-year basis, it appears that the markets had been pricing in a worst-case scenario. And they were presently surprised.  It’s worth noting that Shopify CEO and founder Tobias Lutke seems happy enough with the company’s long-term trajectory. He was willing to buy CAD$10 million of company stock on Monday. Given that SHOP is working hard to integrate its CAD$2.1 billion acquisition of Deliverr in order to boost its ground game, it wasn’t a surprise to hear company president Harley Finkelstein refer to 2022 as an “investment year”.   The share price spike comes off the heels of an 80% fall from 2021 highs. Investors appeared to be reassured by Finkelstein’s statement: “This is a company that ultimately wants to be profitable.”  I mean… better than a company that doesn’t want to be profitable. That’s why CEOs get paid the big bucks, I suppose. In any case, it appears investors see a smoother path to profitability for the former growth stock than they did a week ago. Globe and Mail columnist David Berman put forward a very plausible case that SHOP’s drastic share price move—versus more profitable American tech heavyweights like Alphabet and Microsoft—was likely due to peak pessimism about the Canadian software company already having set in. Canada’s other tech companies also announced earnings this week (to much less fanfare): Open Text (OTEX/TSX): Earnings per share of $0.77 (versus $0.76 predicted) and revenues of $852.0 million (versus $852.59 million predicted). Lightspeed (LSPD/TSX): Earnings per share of -$0.05 (versus -$0.11 predicted) and revenues of $183.7 million (versus $182.93 million predicted). Shopify doesn’t have a Blackberry-esque fate written in stone. This company isn’t dead, and it is actively trying to diversify in order to offer maximum value to customers and investors. The founder still believes in the company and is helming the ship. Shopify clearly didn’t deserve its brief status as Canada’s largest company by market cap, as the shift to online shopping was not as drastic as some thought it might be. That said, it might still turn out to be a very profitable company in the long term. It’s a classic high-risk high-reward play.   We recently wrote about Canada’s tech stocks over on MillionDollarJourney.com. Canada’s oil profits pour in While Canada’s stock market certainly has not been immune to the widespread drawdowns we’re seeing around the world this year, our large natural resource companies have cushioned the blow to some degree. Here’s a look at how three of Canada’s biggest extractors did this quarter. (All figures in this section in Canadian dollars unless otherwise indicated.) Canadian Natural Resources (CNQ/TSX): Earnings per share of $3.09 (versus $2.88 predicted) and revenues of $11.04 billion (versus $10.58 billion predicted). Suncor (SU/TSX): Earnings per share of $1.88 (versus $1.83 predicted) and revenues of $15.06 billion (versus $11.7 billion predicted). Nutrien (NTR/TSX): Earnings per share of USD$2.51 (versus USD$3.95 predicted) and revenues of USD$7.98 billion (versus $8.7 billion USD predicted).  Shareholders liked what Canadian Natural Resources had to say the most, as the company announced it was raising its dividend by 13%, making it a 45% increase overall this year. With the stock up a whopping 50% this year, it looks like investors are really digging the commitment to passing profits on immediately. Suncor decided to take a different path than their oil sands brethren, CNQ. Rather than commit to passing all of their oil profits on to shareholders, management completed a major acquisition of Teck Resource’s oil sands properties. With rumored buyouts of CNOOC and Sinopec’s oil sands assets, it is clearly doubling down on their status as bitumen bulls for the long term. Shareholders appear to respond lukewarmly to the acquisition, and it remains to be seen if the commitment to oil sands production will pay off down the road. By far the biggest surprise for me personally this earnings season was Nutrien. While the company forecasted that potash demand was edging downward, the market was shocked by its massive earnings miss, and punished the company with a 14% hit to its shareprice on Thursday. That said, the stock is still up over 7% year-to-date and 17% over the last 12 months.  Technical support issues for U.S. tech shares U.S. tech stocks continue to see significant volatility, even in the face of solid earnings results. These high-multiple stocks just continue to come back down to Earth, as it looks like higher interest rates might be with us for a while. Here’s a look at this week’s earnings news. (All figures in this section are in U.S. currency.)  Airbnb (ABNB/NASDAQ): Earnings per share of $1.79 (versus $1.44 predicted) and revenues of $2.88 billion (versus $2.84 billion predicted). Uber (UBER/NYSE): Loss per share of $0.61 (versus a loss of $0.22 predicted) and revenues of $8.34 billion (versus $8.12 billion predicted). eBay (EBAY/NASDAQ): Earnings per share of $1.00 (versus $0.93 predicted) and revenues of $2.4 billion (versus $2.33 billion

[ad_1] Officials on edge but no major issues reported as Election Day voting opens across the US  CNN US Midterm Polls LIVE | US Midterm Elections 2022 Live | Polls Open in Crucial US Midterm Elections  CNN-News18 Midterm elections 2022: Live updates and results  Yahoo News Vote, and then don’t jump to any conclusions on election night  The Seattle Times Op-Ed: Get ready to wait for the midterm results  Los Angeles Times View Full Coverage on Google News [ad_2]

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