Plus: Walmart v. Target May 23, 2023 Sign Up | Made in Canada IN THIS ISSUE 9 min read 🚧 EVs’ detour 🎯 Target’s miss 🐱 Cats’ stock picks The new BlackBerry movie may not be quite the success that the actual BlackBerry was in the early 2000s, but it did do pretty well for itself, pulling in a respectable US$1.7 million through its first ten days in theatres. | IFC Films THE WEEK IN MARKETS Raise the roof — err, ceiling It was an exciting week, at least if you happen to be a stock market. A lot of the excitement was predicated on the so-called U.S. debt ceiling. Would the U.S. government act to authorize more borrowing by June 1st? If not, they’d either have to basically shut off spending or default on debts, which a lot of people think would throw much of the world financial system into a tailspin. Fun game of multiple choice! But by Monday of last week, the risk of a crisis began to look less likely. The tech-heavy Nasdaq-100 finished the week up almost 3.5%, pushing it to almost +30% since January 1st. The TSX was flat but is still hovering near its 2023 high — up almost 5% on the year. So everyone’s happy, right? A swift resolution to the debt-ceiling drama could add to market optimism over inflation and interest rates. But a surprise hiccup would — well, let’s just say it would be a worse week (year?) for the Nasdaq and everyone else. THE WEEK IN ONE NUMBER 66% Canadian homeowners who haven’t renewed their mortgage at a higher interest rate yet. When most of their rates reset in 2025 or 2026, their mortgage payments could rise by as much as 40%, perhaps triggering an uptick in defaults. WHAT HAPPENED LAST WEEK IMPORTANT Inflation reinflated a little. Fresh data showed that inflation remained stubbornly high in April, ticking up from 4.3% to 4.4%. Before you get too deflated, some perspective: it’s only one month, and we’re still way down from the 8.1% peak last summer. Investors refuse to take off their rosy glasses, betting that this is a small bump in an otherwise downhill road heading toward interest-rate cuts by the end of the year. But if inflation sticks around, this year’s market gains could be out the window. Speaking of gains, Big Tech is back to seeing big ones. According to the latest Bank of America investor survey, people who overestimate how good they look in half-zip sweaters prominent fund managers are pouring money into tech stocks like it’s 2021. The move is based on two assumptions: 1. Inflation and rates may not stay as high as they feared, which makes it less important to have money now vs. later — music to high-growth companies’ ears. 2. AI will produce something more useful than a knockoff Drake mixtape. Word’s still out on both. Canada’s EV future took a detour. In the last 15 months, two carmakers signed deals to build EV-battery plants in Canada (our first two ever!), with one big difference: Stellantis, the European giant behind Peugeot and Chrysler, signed before the U.S. introduced a bunch of enticing new EV-production incentives, while Volkswagen signed after. Which is how VW was able to get Canada to throw in similar subsidies (and floor mats!), while Stellantis could not. Until now: on Monday, Stellantis paused plant construction in protest. Time to see just how committed Ottawa is to becoming an EV powerhouse. INTERESTING Walmart hit its earnings target, while Target completely missed. Last Wednesday, Target reported disappointingly flat sales to start the year, as customers cut back on (or just stole) the store’s bread and butter: non-essential items. You might think another retail giant like Walmart would have similar news, but the world’s largest employer is adding customers — and profit. The difference? Groceries. They’re Walmart’s top seller. The BlackBerry movie was actually pretty good! Through its first ten days in theatres, BlackBerry cleared a respectable US$1.7 million (approximately $1.7 million more than the real BlackBerry made in that same period). The Jekyll-and-Jekyll-and-Hyde portrayal of the three Canadians behind BlackBerry creator Research in Motion is a great reminder of just how revolutionary the idea of having email in your pocket was in 2002 — and just how quickly a brilliant idea can be overwhelmed by a brillianter one. VICE’s Exclusive Look At Bankruptcy Court. After weeks of rumours, the Canadian-born shock-doc factory finally filed for Chapter 11. Vice agreed to be sold to its lenders for a paltry US$225 million — and a couple of grams, on the house — which is far south of its US$5.7 billion valuation in 2017. The lunatic cousin of early-aughts traffic-driven sites like BuzzFeed News, HuffPost Canada, and Gawker is now left to wistfully remember the glory days when its business model was nonexistent and BuzzFeed wasn’t gleefully filling its now-empty newsroom with AI Woodwards. FROM OUR SPONSOR 4% interest on Cash account balances available to new and existing clients with over $100,000 in net deposits with Wealthsimple. Annualized rate, subject to change. Learn more. For more information on CDIC and eligible coverage, read more. THE FOMO INDEX by Stacey Woods IMPORTANT 👔 Study finds securities traders less likely to engage in misconduct when they work from home. At least above the waist. Source 📱 The ultimate convenience: Uber introduces a phone number to call for a ride. Source 🌎 Science says no large asteroids should hit earth for at least 1,000 years, so breed all the dinosaurs you want. Source 🛑 New app uses AI to decipher Montreal’s parking signs with 83% accuracy, just like you can! Source CRASH & BURN TO THE MOON 🚗 Come on down to Crazy Elon’s! Musk will try advertising Tesla for the first time. Source 🧴 Beyoncé hints that she’s starting a hair-care line, so you’d better hurry and use up your Jennifer Aniston shampoo. Source 🌹 Will you accept this wilted rose? ABC announces that The Golden Bachelor, its long-promised senior-citizen edition, will premiere this fall. Source 🎮 Bell insures the fingers of its Toronto esports team for $1M a player but leaves their butts sorely uncovered. Source WHO CARES WHAT’S UP THIS WEEK New data from the Canadian Housing Statistics Program! (Tuesday) Time to see just how many homes across the country are owned by investors. (The last report showed it was 1 in 5.) It’s earnings week again for Canada’s Big 5 banks! They’re better off than U.S. regional banks, for sure. But analysts still expect things to be a bit rough. SHARE TLDR WITH YOUR FRIENDS 🤝 Put this link in your group chats, your Slack threads, tattoo it on your back — whatever works for you! THE BIG IMPORTANT STORY INVESTING Prediction: Everyone’s pretty much wrong We should be in a recession. At least that’s what a plurality of smart people predicted about nine months ago, when inflation was scorching, central bankers were starting a regime of severe interest-rate hikes, and all the ingredients were in place for an economic slowdown. In response, the stock market — which (remember this!) is a reflection of what people think is going to happen in the future — dropped a lot. But in the intervening months, corporate revenues and profits (as well as employment) have proved surprisingly resilient. The Nasdaq is now up 22% since January 1st. The TSX: +5% YTD. The S&P 500: +9.6% YTD. And that much-anticipated recession? It’s still a no-show. Which illustrates a few of the most important truths in investing: People are bad at making predictions The brain is a “prediction machine.” It has evolved to identify patterns and draw conclusions about the future. That’s a useful trait moment to moment. (“Will this rock that’s flying toward my face persist in doing so? I should probably prepare.”) The trouble is that we experience volatile and highly complicated situations in contemporary life, which are much harder to predict correctly, in part because our brains create bias. The writer Shane Parrish compiled a list of 23 “mental models” that humans use to make judgements, and six of them directly involve bias — like confirmation bias, and commitment and consistency bias. The economy and the world are complex How much will the major companies earn in the future? How will stocks perform? Well, on Thursday of last week, there were 32 million trades executed on the Nasdaq exchange. That’s just one stock exchange. Each year, people around the world trade between US$68 trillion and US$101 trillion dollars’ worth of stocks. And that’s to say nothing of the countless transactions made by the world’s eight billion people, which make up what we call the economy. This is what you have to have a handle on to successfully predict markets. It’s tough sledding. Even pros are lousy at predicting markets It’s no surprise that Wall Street analysts mostly failed to anticipate the five major swings the S&P 500 took over the last 15 years. In 2018, for instance, the median analyst’s forecast was off by 14%. Chimpanzees, monkeys, sixth-graders, Wall Street Journal staffers throwing darts, and a cat have all beaten professionals at picking stocks over given periods. And no wonder. To have seen the last two major market drops coming, you would need to have guessed that a pandemic super-virus would emerge and that an extended land war in Europe — the largest since WWII — would ensue after a former comedian rallied his people to face down Vladimir Putin. Good luck. The only two ways to make money Given all this difficulty, how can you make money? There are two options. The first is to be smarter than everyone else. Remember, the market is a reflection of what investors think will happen. If you happen to know better than that collective wisdom, you can make money. That’s essentially what lots of hedge funds try to do. But the degree of difficulty there is extremely high. Luckily, everyone knows that nobody knows what’s going to happen. Which brings us to the second option: don’t try to outsmart the markets at all. Instead of guessing on stocks, buy and hold index funds, which track things like the S&P 500 or TSX. There’s risk involved, because while markets have gone up over time, no one knows how much or when or even if that will always be true, but that uncertainty is what longterm investors get compensated for. As financial writer Mark Hulbert, who has spent much of his career tracking the performance of people who give stock tips, puts it, “The odds are overwhelming that, over the long term, you will make more money by buying and holding an index fund.” READER FEEDBACK Ken Griffin: interesting or terrible? Last week, we published a special edition of TLDR about the 10 most interesting people in money. And the thing that elicited by far the most reaction was an entry about the CEO and founder of the hedge fund Citadel, Ken Griffin. As one reader put it, “Saying anything positive about Ken Griffin is gross and will not age well.” Another said, “Are you f**kin’ serious? Ken Griffin? Citadel?” Look, we get it: Griffin has been accused of meddling in markets during the $GME frenzy, among other things. We decided to include him anyway because our story was about the most interesting people in money, not folks we necessarily love. And, while making more money than any hedge fund ever may or may not make Griffin a hero depending on your outlook, we figured it makes him interesting. Was it the right call? We thought so, but a lot of you didn’t. Let us know what you think. OTHER VERY GOOD READS 🎰 I’ve Gambled More than $1 Million Since I was 10 On the danger of sports betting | Maclean’s 💔 This Is Catfishing on an Industrial Scale* Freelancers target the lonely on dating apps | Wired 🚒 The Most Tragic Wildfires to Scorch the Prairies “How could a whole town burn?” | Calgary Herald *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER In fairness to the U.S. Congress, who among us hasn’t ignored a credit-card bill until the day before it’s due? THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Brennan Doherty (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), Ambrose Martos (fact checker), Ciara Rickard (copy editor), Sara Black McCulloch (fact checker), Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Replies to this email address are not monitored. Have questions? Visit our Help Centre or submit a request to our Client Support team. VIEW IN BROWSER PRIVACY POLICY UNSUBSCRIBE TLDR is offered by Wealthsimple Media Inc. and is for informational purposes only. Any views expressed are those of the individual author and/or of Wealthsimple Media Inc., not of Wealthsimple Financial Corp or any of its other subsidiaries or affiliates. The content in TLDR is not investment advice, a recommendation to buy or sell assets or securities, nor any other kind of professional advice. TLDR is not a research report and should not serve as the basis for making investment decisions. Wealthsimple Media Inc. does not endorse any third-party views referenced in this content. When you invest, your money is at risk and it is possible that you may lose some or all of your investment. Past performance is not a guarantee of future results. Historical returns, hypothetical returns, expected returns and images included in this content are for illustrative purposes only. Always research before investing. © 2023 Wealthsimple Media Inc.