Morning Brew - ☕ Worrying, darling

How’s that bitcoin experiment working out, El Salvador?
September 07, 2022 View Online | Sign Up | Shop

Morning Brew

reAlpha

Good morning. Friendly reminder that later this month we’re kicking off a Leadership Accelerator for anyone who wants to become a better manager. Access to executive coaches, networking with like-minded people, the retractable RFID card holder all managers are required by law to wear on their belts—it’s got it all. Learn more here.

Jamie Wilde, Max Knoblauch, Neal Freyman

MARKETS

Nasdaq

11,544.91

S&P

3,908.19

Dow

31,145.30

10-Year

3.349%

Bitcoin

$18,826.91

Netlfix

$218.39

*Stock data as of market close, cryptocurrency data as of 10:00pm ET. Here's what these numbers mean.

  • Markets: Investors returned from their three-day weekend to be greeted by the face of Ukrainian President Volodymyr Zelensky, who rang the opening bell for the New York Stock Exchange remotely. Zelensky is hoping to drum up support for $400 billion worth of projects to rebuild the country’s war-torn economy. As for the actual trading, stocks fell and the tech-heavy Nasdaq slid to a seven-day losing streak.

CRYPTO

El Salvador hodls on to its bitcoin dream

Salvadoran boy makes a purchase at a stall lined with bitcoin ads Sthanly Estrada/Getty Images

One year ago today, El Salvador became the first country to make bitcoin legal tender, or an official currency, alongside the US dollar. But laser-eyed President Nayib Bukele’s dream of Salvadorans buying pupusas with digital wallets isn’t working out.

At worst, the national experiment is being called a total failure and at best, according to El Salvador’s former central bank chief Carlos Acevedo, “No one really talks about bitcoin here anymore. It’s kind of been forgotten.”

Altogether, the Salvadoran government has spent over $100 million of public funds on bitcoin since its adoption as legal tender, and it’s still feeling bullish, buying $1.5 million more of bitcoin in late June. But, given bitcoin’s price plunge since last fall, the value of its investment has crumbled by more than half, according to Bloomberg.

The bad bet comes as the country’s economic growth is slowing, which is exacerbated by mounting national debt. And the global bankers who could help El Salvador don’t seem to understand “buying the dip”: The International Monetary Fund has pushed back on the country’s request for a $1.3 billion loan, raising red flags about its crypto investments.

What was the point of this anyway?

El Salvador spent a big chunk of bitcoin on incentivizing adoption—$30 in bitcoin was given to every citizen who downloaded the national cryptocurrency wallet app, Chivo. How’d that go? According to a survey from the US National Bureau of Economic Research…

  • Over half of Salvadoran households have downloaded the app since then, most in the first month.
  • But 20% didn’t spend the free bitcoin at all. An additional 60% spent the gifted funds and never made another transaction using the app again.

The small group of Salvadorans who actively use Chivo are overwhelmingly young, educated, and “banked,” meaning they have traditional bank accounts. It’s not exactly the target audience: During his speeches hyping up bitcoin, Bukele said making it legal tender would help “unbanked” Salvadorans (~70% of households) gain access to the security of digital banking without having to open a traditional bank account.

What about Bitcoin City? El Salvador’s plan to build a tax-free city on the side of a volcano where the restaurants, bars, and sports teams all pay homage to bitcoin is on hold. In order to build the city, the government plans to raise $1 billion by selling bitcoin-backed bonds, but the bond issuance keeps getting delayed.—JW

        

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WORLD

Tour de headlines

Juul smoke turning into a dollar sign Francis Scialabba

Juul settles over its marketing practices. The e-cig company will pay almost $440 million in a settlement with 34 states over allegations it marketed its products to young people—even though it’s illegal for them to buy Juuls. While the deal resolves a major investigation that began two years ago, Juul is still facing nine other lawsuits from states as well as hundreds of other personal lawsuits. A few months ago, the FDA ordered Juul’s products to be taken off the market, but then allowed them to be sold again while the agency conducts an internal review.

California swelters, testing its power grid like never before. A blistering heat wave out West reached its peak yesterday, setting fresh September temperature records in California and prompting the state’s grid operator to warn that rolling blackouts were “very possible”—though they were ultimately avoided. The heat dome is expected to slam other parts of the Western US today with triple-digit temps and heightened fire risk.

Russia is buying weapons from North Korea. A declassified US intelligence report stated that Russia is buying “millions of rockets and artillery shells” from North Korea to help out its war effort in Ukraine. But anytime you resort to buying things from a globally shunned country like North Korea, it’s not a great sign. The purchase is a desperate move that reflects Russia’s banishment from mainstream supply chains, an anonymous US intelligence official told the Washington Post.

DEFENSE

Man behind Navy scandal escapes house arrest

Leonard Glenn Francis United States Marshals Service

Leonard Glenn Francis, a Malaysian defense contractor who pleaded guilty in 2015 to the worst corruption scandal in the US Navy’s history, has escaped from San Diego house arrest weeks ahead of his September 22 sentencing date.

Officers who arrived at the house discovered that it was vacant and that Francis, nicknamed “Fat Leonard,” had cut off his GPS monitoring bracelet. Neighbors told authorities that U-Haul trucks were outside of the property in the days leading up to the escape.

What did “Fat Leonard” do? For at least a decade, Francis’s company, Glenn Defense Marine Asia, provided US Navy ships and submarines in port with necessary items and services like food, fuel, and waste removal. But, through bribes and false invoices, the company overcharged the military by almost $35 million. Following a 2013 sting investigation, Francis pleaded guilty to bribing Navy officials with $500,000 in cash along with sex parties, alcohol, and even Lady Gaga tickets. Hundreds of military personnel were investigated in the scandal, including 60 admirals.

Francis, who faced up to 25 years behind bars, was placed on house arrest in 2018 following a bout with kidney cancer. US Marshals say he could be anywhere.—MK

        

ENTERTAINMENT

When Harry met Chris

Harry Styles seated next to Chris Pine Vittorio Zunino Celotto/Getty Images

An international investigation has been launched over the apparent debasement of an American by his British colleague.

A viral video taken during the world premiere of Olivia Wilde’s thriller Don’t Worry Darling at the Venice Film Festival on Monday night seemed to show star Harry Styles hocking a loogie on costar Chris Pine’s lap as Styles took his seat in the theater. Millions of amateur forensic scientists began examining the clip like it was the Zapruder film, gauging Pine’s reaction, Styles’s lip gesticulations, and the Newtonian physics of a liquid projectile. Reps for both Styles and Pine denied any spitting took place.

The video, while ridiculous in and of itself, took over the internet because it’s the climax of what has been one of the most drama-soaked, tabloid-friendly promotional tours for a movie that anyone can remember. For the not-so-online among us, some of the scandals include a) the rumored rift between director Wilde and star Florence Pugh after Wilde began an off-screen relationship with Styles and b) Wilde’s suggestion that she fired Shia LaBeouf for one of the lead roles, a claim that LaBeouf publicly pushed back on. That’s not even counting a spaced-out Chris Pine “astral projecting” during a press conference earlier on Monday.

Anyway, the drama surrounding the film has certainly eclipsed discussion of the film itself, which may or may not be helpful for its financial prospects. Though it got a seven-minute standing O in Venice, critics say that Styles’s performance falls flat compared to Pugh’s.—NF

        

GRAB BAG

Key performance indicators

Cars leaving from Burning Man CJ Yu

Stat: This crazy shot captured the “exodus” out of Burning Man on Monday, during which attendees had to wait eight hours (some claimed it took them over 13) to leave the grounds of the cultural event in the Nevada desert. Drivers also had to contend with triple-digit heat and gas stations running out of gas before they could get on their way to a desperately needed shower.

Quote: “As strong as the storm may be, I know that the British people are stronger.”

After being officially appointed UK prime minister by Queen Elizabeth II yesterday, Liz Truss tried to assure Brits that they’ll get through upcoming economic hardship. Tomorrow, she’s planning to roll out the details of her big plan to cap soaring energy bills, which could require up to $230 billion in taxpayer funds over the next 18 months, per Bloomberg.

Read: Where do memes come from? (Know Your Meme)

TOGETHER WITH REVELA

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WHAT ELSE IS BREWING

  • Couy Griffin, an elected county commissioner in New Mexico, was removed from office by a judge for rioting at the Capitol on Jan. 6, 2021—and he can never hold elected office again. It’s the first time an elected official has been terminated from their position over the Capitol insurrection.
  • More people in the US traveled via air this Labor Day weekend than during LDW 2019.
  • Students in Uvalde, TX, returned to school yesterday for the first time since 21 people were killed at Robb Elementary in May.
  • Google is hosting a hardware event on October 6, where it’s expected to release its Pixel 7 phones and the Pixel Watch.

FROM OUR PARTNERS

Send that CC interest a-packin’: When you move your existing balance to this credit card, you’ll pay 0% interest on your transferred debt for 21 months, plus no annual fee. Apply for this card here.*

*These sponsored posts support Morning Brew.

BREW'S BETS

Jerry Seinfeld x Kith: What’s the deal with all this drip?

Eurotrip: This interactive map shows how far you can travel in five hours from each train station in Europe.

GAMES

The puzzle section

Word search: Today’s puzzle is for anyone who can tell a Snickers from a Milky Way. Play it here.

App Store trivia

With the launch of the new iPhone today, let’s test your familiarity with the App Store. Below are the logos of six popular apps—can you name them?

Logos for various apps

Is a 4-day workweek worth it?

Is a -day workweek worth it?

Four-day workweeks and less money? Or 40-hour weeks and a raise? We asked New Yorkers their thoughts on the evolving work schedule. Watch here.

Check out more from the Brew:

On Imposters, Grammy-nominated country singer Ty Herndon discusses his struggle with addiction and hiding his sexuality from the public. Listen here.

Network with marketing trailblazers from Vans, McDonald’s, and more at The Brief, Marketing Brew’s NYC summit. Secure your seat here.

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ANSWER

  1. Shein
  2. Telegram Messenger
  3. Waze
  4. Discord
  5. Instacart
  6. Vrbo

✢ A Note From reAlpha

*Based on comparison of Zillow and AirDNA in various popular cities.

         

Written by Neal Freyman, Max Knoblauch, and Jamie Wilde

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