Welcome to our Friday mailbag edition!
Every week, we receive some great questions from your fellow readers on our recently published essays. And every Friday, I answer as many as I can.
Today, we have questions on the disposal of battery waste, what to do with Amazon stock, and how digital currencies would affect the value of our money…
So let’s get started… with this great question from a concerned reader about what happens to all the batteries…
I have a question I would like answered. The powers of our Homeland are claiming pollution from the gas-powered vehicles is causing great pollution.
But you have not seen pollution yet. Just what are we to do with the lithium, magnesium, and other products that will be “waste”? The bad batteries have to go somewhere.
Are there any companies to handle these? And can they be recycled into usable materials rather than being trashed and put in dumps? More pollution.
– Bettie S.
Hi Bettie, thank you for that excellent question. I absolutely agree that no matter what the power source, an appropriate recycling solution is needed.
With respect to batteries or battery materials that have reached the end of their lifecycle, there isn’t a federal policy dealing with this on a national basis, yet.
But various groups in the individual states have recognized the battery material recycling issue you brought up.
For instance, in my home state of California, the California Environmental Protection Agency established the Lithium-ion Car Battery Recycling Advisory Group in 2019. It’s researching useful strategies for recycling electric vehicle batteries.
The group issued a report of its recommendations earlier this year. The two main ideas were:
1) For EVs still in service, if the battery is approaching end of life (EOL), there would be a core exchange program with the battery manufacturer. The manufacturer would then be responsible for recycling the battery and its materials.
2) When an EV battery reaches EOL, the auto manufacturer would be responsible for ensuring “proper repurposing, reuse, or recycling,” at no cost to the consumer.
There are a growing number of firms that handle that. Li-Cycle (LICY) in Ontario, Canada is one I’ve heard of. It was founded in 2016.
And there’s Retriev Technologies in California. That’s been around for more than 30 years (previously called Toxco), but it isn’t publicly traded.
To be clear, I’m not recommending these companies as investments right now. I just wanted to demonstrate that there are companies addressing this need.
But my team and I are actively watching this rapidly growing space. So be sure to keep an eye on my paid subscriptions for future recommendations.
In fact, I just recommended a company in my Distortion Report subscription service that addresses your concern, just in a slightly different way.
It makes a type of battery that lasts much longer than traditional and lithium-ion batteries. And its components are non-toxic, so it’s much easier to recycle.
To find out how to subscribe to Distortion Report, just click here. Each month, I research a new investment recommendation across my five distortion themes. And that includes energy.
Which brings us to our next question…
I’ve written a lot about inflation and how it’s hitting regular Americans. Even the largest companies are feeling the effects, including Amazon. Rising energy costs are causing its shipping costs to go exponential.
Now, while Amazon isn’t a recommendation in any of my paid subscription services, it’s one of the biggest household names there is. So I’m sure many of my readers may have bought its shares over the years and are wondering what they should do next…
Should we sell our Amazon stock now? Thanks for all you do for us “little investors.”
– Linda M.
Thanks for your email, Linda. While I can’t give individual investing advice, I’m sure you’re not alone in holding Amazon (AMZN) stock. And the same question applies to lots of the big names that are part of many folks’ portfolios.
Amazon shares have dropped by as much as 40% this year. This is largely in line with the broader market. Likewise, as the market has rebounded in recent weeks, Amazon has clawed back a lot of its losses.
But your question speaks to the general uncertainty among investors right now. The different narratives Janice O. asked about in last week’s mailbag are creating lots of fear and distrust.
The Federal Reserve’s lack of a clear pathway is also causing much turmoil in the markets.
And of course, everyone’s noticing the effects of inflation on their day-to-day spend.
And we’re all bracing for the huge energy crisis that’s looming this winter. Spiking energy costs… especially natural gas… will have huge financial repercussions.
Obviously, I can’t say what will happen exactly. But I do see more uncertainty and volatility ahead in the coming months. This will be exacerbated by the ongoing conflict in Ukraine, as global energy demands increase in the winter months.
If you’re in the market, this will hit your portfolio. There’s no doubt about that. And if you own Amazon (AMZN) stock… you’ll want to pay special attention.
That’s why next Wednesday, August 31 at 8 p.m. ET, I’m going to do a deep dive into the energy crisis… and what you can do to prepare your portfolio…
I’ll also give my recommendation on what to do with Amazon – buy, sell, or hold — for free.
So I urge all my readers to tune in next Wednesday night. Just click here to save your spot
Finally, the digital currency discussion continues…
If our dollar is not worth a dollar, will our dollar value at the banks lose half the value when and if the banks go digital?
– Kay K.
Thanks for writing in, Kay. You’re not alone in wondering how a shift to digital currencies and banking will affect the value of your money.
From other questions I’ve received in the mailbag, as well as what I’ve been hearing at my various speaking engagements and meetings, I feel there’s quite a bit of confusion out there about what the digital dollar will likely look like. So, let me clarify a few key aspects here.
The digital dollar would be issued by the U.S. Federal Reserve, like all the U.S. dollar bills we use now. It would just be in a digital form.
This means that technically speaking, a digital dollar should be worth the same as its paper counterpart.
That said, it’s even easier to fabricate a central bank digital currency (CBDC) out of thin air than a fiat currency. So, if the government needed to create more money, it would be even easier than it is right now. And as we know, the more of something there is in supply, the less valuable each unit of it becomes.
And there’s another reason to be concerned about global governments’ interest in CBDCs… As I explained in a previous mailbag, CBDCs would help strengthen central banks’ power over the financial system. That’s because CBDCs will be highly centralized.
Already, according to the Atlantic Council Central Bank Digital Currency Tracker, 105 countries are currently exploring a central bank digital currency. This represents 95% of global GDP.
Interestingly, the U.S. is lagging behind. Ten countries have already launched their own CBDC. These include Nigeria, Jamaica, the Bahamas, and eight countries in the Eastern Caribbean.
Fourteen countries are currently trialing a CBDC. These include China, Honk Kong, Sweden, Saudi Arabia, Russia, South Africa, and Singapore.
Now, some feel that the issuance of CBDCs will erode the greenback’s global dominance, and therefore value. That’s because it will make all national currencies easy to use in cross-border payments.
This won’t greatly reduce transaction costs. But the argument goes that it could dethrone the U.S. dollar as the world’s premier reserve currency over the long term. I don’t agree with this argument, but it is out there, nonetheless.
China’s yuan, in particular, is often cited as the closest contender to the U.S. dollar’s long-lasting reign as the world’s primary currency. Indeed, we’ve had lots of interesting discussions on that in these pages.
And while I believe it’s an interesting theory, I think it misses an important point.
For a currency to become popular, it has to be safe, have a stable value and market depth, and the ability to move without restrictions.
With China recently taking more steps to open its $20-trillion bond market to foreigners, the market-depth issue may soon be put to rest. But the yuan still doesn’t meet any of the other standards I mentioned.
China’s capital controls complicate the international use of the yuan. And as long as the Chinese Communist Party is in power, there will always be questions of trust and transparency.
Now, smaller economies may not have these problems. But they often lack the scale needed to move a large volume of cross-border transactions.
So, regardless of what happens with CBDCs, I don’t see the U.S. dollar’s status as the primary currency for both global reserves and trade changing any time soon.
And that brings us back to the heart of your question: the value of the dollar. The biggest threat to that right now is the Federal Reserve. Every time it increases the money supply, the value of your dollar falls.
And as you can see in this chart, the Fed has been in peak money-fabrication mode in recent times…
I explained all about how this affects inflation in an earlier essay. Here’s a link, if you’d like to read back over that. It includes a way to protect your wealth from the effects of the Fed’s money creation spree and governments’ crazy monetary policies.
And that’s it for this week’s mailbag. Thanks again to everyone who wrote in.
If I didn’t get to your question this week, look out for my response in a future Friday mailbag edition.
I do my best to respond to as many of your questions and comments as I can. Just remember, I can’t give personal investment advice.
And if there are any other topics you’d like me to write about, I’d love to hear from you. You can write me at [email protected]
In the meantime, don’t forget to tune in to my event next Wednesday, August 31 at 8 p.m. ET.
As well as giving my guidance on Amazon, I’ll also name the five sectors I believe will go down during the energy crisis… and the five that will go up.
To save your spot, just go here.
Happy investing… and have a fantastic weekend!
Editor, Inside Wall Street with Nomi Prins