Plus, how rich people invest September 4, 2023 Sign Up | View Online IN THIS ISSUE 7 min read 🐻 Bears 🐯 And tigers 🏦 And banks, oh my! How could nobody love these tiger cubs? Just look at them! Oh, wait ... it’s the Tiger Cub hedge funds that are struggling to get love from investors. Find out why below. | Getty Images THE WEEK IN MARKETS The rally has resumed! The TSX and Nasdaq both ended last week +3%, while the S&P 500 finished at +2%. Why? It’s 100% because investors saw data suggesting a so-called soft landing is still very much in the cards. But here’s the thing: those of us who try to explain market movements are often full of malarkey. As the economist Brent Donnelly explains, humans, and especially financial commentators, are predisposed to see patterns everywhere. But markets are complex, and a lot of what happens is relatively invisible. Last week’s action might have had a lot to do with the fact that many investors were on vacation, for instance. Or maybe institutional investors were rebalancing their portfolios at the month’s end. The takeaway? Financial outlets do their best to report on markets accurately. But there’s almost certainly noise in the data, and big trends probably won’t be clear until later. In the meantime, don’t be super reactive to everything you read. WHAT HAPPENED LAST WEEK IMPORTANT Canadian banks are covering their butts. CIBC, BMO, and National all reported lower-than-expected earnings last week, in part because they needed to sock away more money in case they have more-than-expected defaults on loans, largely thanks to high mortgage rates. Both BMO and CIBC more than doubled the amount of money they set aside to cover potential credit losses this year, BMO to $492 million and CIBC to $736 million. More butt-covering means smaller payouts for shareholders — one reason the TSX bank-stock index is down -2% YTD. Meanwhile, Canadians are covering Rogers’s and Shaw’s. Canada’s Competition Bureau will have to pay $13 million — roughly a fifth of its taxpayer-funded annual budget — to cover legal bills resulting from its failed attempt to block the formation of a new $20-billion two-headed telecom monster. A judge ruled last week that Competition Commissioner Matthew Boswell was “unnecessarily contentious” about the merger and should’ve been more focused on the possibility that the merger could ignite fresh competition (which is going… great). That’ll show him. And us. INTERESTING Value investors are scooping up cheap Chinese assets. Which, as The Wall Street Journal reported, is either a great idea or the kind that gets you fired. These bargain investors are buying up battered stocks, like Alibaba ($BABA) and Tencent ($TCEHY), betting on a (far from certain) rebound from the monster economy that was, until very recently, going to eat us all. Did the Tiger Cubs get tamed? The hedge-fund protégés of Tiger Management’s Julian Robertson got famous by feasting on the plentiful cash of the tech boom of 2020 and 2021. But 2022’s big drawdown has left them scavenging, and investors wondering if they actually had a smart strategy to hunt down all those earnings in the first place. Bloomberg reported last week that investments into some Cub funds are down by as much as 99% this year. It’s a sign of how easy it is to look like a genius when everything is going up, how hard it is to keep beating markets, and just how quickly investors — and trends — can turn. FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🍁 Not only is Facebook’s traffic unaffected by the Canada news ban but the chemtrail reporting has never been better! Source 🤖 Ohio newspaper pauses AI sports reporting after badly written article. AI sorry, it was distracted by its surgeon job. Source 🇨🇳 Meta takes down massive Chinese disinformation campaign. Also, there’s a chance you could be a Miranda, not a Samantha. Source 🎰 Ontario bans gambling ads that feature celebrities, athletes, or anything kids like. Emphasis on all the math involved is fine. Source CRASH & BURN TO THE MOON 🍷 France spending €200 million to turn unsold wine into things like hand sanitizer, or as they call it, “Italian wine.” Source 🎥 Hollywood strike inspires even more actors to offer Cameo videos that are even more desperate than they were before. Source ✈️ Let us know when it’s the whole plane: Corendon Airlines introducing an adults-only section for people over 16. Source 🐻 Somebody call Greta Gerwig! Canadian private-equity firm acquires the company that owns the rights to the Care Bears. Source WHO CARES WHAT’S UP THIS WEEK Fresh jobs numbers (Friday). StatCan’s monthly labour-force survey will tell us about employment — and how worried we should be about future rate hikes. DON'T BE A TLDR HOG 🐷 Like TLDR? The first five million people to click this link can share it with a friend for free. (You can share it with enemies too but only if you’re ready for them to love you.) THE BIG IMPORTANT STORY INVESTING 2023 How to Invest Like a One-Percenter, Even if You’re Definitely Not For most of us, investing means buying stocks and bonds. But there’s a whole other universe of options out there that may offer higher returns through creative means. They’re called alternative investments, and, unfortunately, they’ve largely been reserved for pro investors and super-rich people — until recently. Brokerages have finally realized that normal folks make up a huge market, so they’ve come up with ways for us to invest like one-percenters. We don’t recommend specific investments — that’s not our game here at TLDR — but, if you’re interested in diversifying your portfolio, this list should help you understand some of the more popular alt-asset types. Private Equity is an investment in a private company (as opposed to a public one listed on the stock market). What PE funds typically do is buy a big chunk of an underperforming private company, turn it around, and then sell it for a profit. This is risky, since PE investors don’t always succeed at revamping companies. But, as the chart shows, the risk can pay off: from 2008 to 2022, private equity returned about 12% a year, outperforming stocks globally by 5.7%. Venture Capital, like private equity, involves investing in private companies. But, unlike plain ole vanilla PE, venture capitalists focus on startups, giving them cash to grow and getting rich if they do. Venture funds are risky, since they often bet on companies that are developing unproven tech (or have unproven leadership — remember Theranos?). But, over the 15-year period shown above, venture funds returned almost 10% a year, outperforming global stocks by about 4%. Private Credit funds work like bonds, in that they loan money to companies in exchange for interest payments. Which is a nice way for investors to earn consistent income. But, unlike bonds, private-credit funds offer returns more in the ballpark of stocks, returning 9% a year over the past 15 years. Yet they’re considered lower risk than stocks. Private Real Estate funds tend to appeal to income-seeking investors. These funds typically generate revenue from rental properties, like malls or apartments. Over the past 15 years, private-real-estate funds have returned 4.7% a year, which is 1.3% south of global stocks. But Blackrock expects that top-performing real-estate investments will return more than 8% a year over the next 15 years. So, how do you actually buy this stuff? As we said up top, brokerages offer many alt investments these days, so check with them. They’re also ETFs that track various alt investments that you can buy. THE UPSHOT So, should you start buying alt investments? Maybe! Alt-investment funds often require minimum buy-ins and long-ish investment horizons, and they may have restrictive withdrawal rules. But, if you know what you’re doing, alternative investments can be a great portfolio diversifier. But, as with any investment, you’ll want to consider your risk appetite and whether you think you can get better returns elsewhere, like from public stocks. Good luck! —Sarah Rieger OTHER VERY GOOD READS 🏭 Decoupling isn't phoney* The global trading system is really starting to change. | Noah Smith 🌍 The Investment Climate On the energy transition and the limits of private financing | Phenomenal World 🤑 How I Was Conned by the “Fake German Heiress” A friendship that ended with a $60,000 bill | Wealthsimple *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. TLDR IRL No one asked for it, but we made it anyway: a TLDR newspaper! The TLDR team recently spent a week on the streets of Toronto, handing out cold-brew coffee and the first-ever print copies of TLDR. If you stopped by to see us, thanks! Reading your feedback each week is always fun, so it was no surprise that talking to readers (like the folks in this photo) face-to-face was a blast. If you missed us, type your name and mailing address into the feedback module below (you’ll have to rate today’s issue first) and you might find a copy of the TLDR newspaper in your mailbox in the near future. No promises, but we have a few extra copies we’re willing to ship out. We won’t use your address for anything else but this, we pinky swear. THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Ben Mathis-Lilley (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), Ambrose Martos (fact checker), Ciara Rickard (copy editor), Nikki Holmes (copy editor), Sara Black McCulloch (fact checker), Mohini Tailor (senior lifecycle specialist), 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 No purchase required. Contest begins on August 21, 2023 at 12:01am Eastern Time (ET) and ends on September 10, 2023 at 11:59pm ET. Five (5) prizes available to be won in Canada (excluding Quebec), each consisting of a set of TLDR limited edition merchandise (ARV CAD$200). 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