Everyone else in Canada is February 13, 2023 Sign Up | Made in Canada IN THIS ISSUE Estimated read time: 6 mins 🧊 Interest rates on ice 🚘 Uber earnings are nice 🛥️ Boat advice If you thought a regular Monopoly game was long and boring, Canada’s been playing its own version for 200 years. To learn how a few big monopolies took over (and what might help things change), see the Big Important Story below. | Wealthsimple THE WEEK IN MARKETS The Rally Is on Pause We’ll get into numbers in a moment, but first let’s discuss the big question on everyone’s mind. And that is: are stocks overpriced? Price-to-earnings ratios are currently around normalish levels, so perhaps markets aren’t frothy. Yay! On the other hand, P/E ratios are way higher than they were during past recessions, meaning stocks could be overvalued. So ... a note of caution. Where markets go from here largely hinges on whether a recession is en route. And right now investors seem undecided. The TSX and S&P ended the week flat; the tech-heavy Nasdaq finished -1.5%; riskier assets (BTC; $ARKK) fell 5% or more. All this effectively paused the rally that began around Jan. 1. Whether and how markets unpause will depend on things like the U.S. inflation report out Tuesday (2/14). It’ll be one more data point to help investors decide if stocks are a good deal right now (or, possibly, a rotten one). THE WEEK IN ONE NUMBER $13,777 The amount LeBron James has earned for each of his record-setting 38,390 career points. WHAT HAPPENED LAST WEEK IMPORTANT Tiff sticks with the pause. On Tuesday, the head of the Bank of Canada confirmed his plan to pause interest-rate hikes, citing, among other things, their outsized effects on homeowners in Canada. Our shorter mortgage terms — instead of 3–5 years, Americans can lock in rates for three decades — mean immediate pain for more than just new homebuyers. With any luck, next week’s inflation numbers (out 2/21) won’t give him a reason to change his mind. As Big Tech piles up the layoffs, is the next economic crisis on its way? More than 100,000 tech employees have lost their jobs and ping-pong-table access this year. But analyst Ben Thompson, who writes Stratechery, an excellent newsletter on the business of technology, doesn’t think tech’s fireworks will set fire to the house. Unlike other industries, he explained last week, Big Tech has big reasons to cut, from too-rapid growth and the end of free money to the long-lasting gut punch of Apple’s user-tracking ban. The larger economy, he reminds people, is looking surprisingly resilient. “This time is different” may be the four most dangerous words in finance, but they’re also feeling kind of apt. INTERESTING Uber’s ($UBER) latest earnings report gets five stars. Despite all those tech troubles we just talked about, the ride-share giant had its best quarter ever. Revenue is up 49%, thanks to a combination of increased prices, the waning effects of the pandemic, and a record 2.1 billion trips. That should earn CEO Dara Khosrowshahi the “Above and Beyond” badge for sure, or at least “Expert Navigation.” It’s not that Uber didn’t need to streamline and cut costs like other tech companies. They just already did it, starting in 2017 when Khosrowshahi came on board. The SEC comes for staking. It’s not the blanket ban Coinbase ($COIN) CEO Brian Armstrong fears, but staking — when investors lock up their own money to secure crypto transactions and earn a return — took a hit last week. The U.S. Securities and Exchange Commission forced crypto exchange Kraken to shut down its U.S. staking operations and pay a $40 million fine for not properly registering the service as a securities sale or disclosing risks to investors. It’s a sign of what’s to come, and it could inadvertently push investors toward decentralized options, which are even wilder and westier than the rest of crypto. FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 📺 Some of you will have to Tubi and chill: Netflix password sharing officially ends in Canada. Source 💰 Guess that’s off the table: new survey shows Canadians think they need $1.7m to comfortably retire. Source 🛢 World Petroleum Council says it will change its name to something less oil-y but still won’t go gluten-free. Source 🤖 “Greetings, humans, I am Bard. Prepare to die.” Alphabet’s stock drops after concerning demo of Google’s AI, Bard. Source CRASH & BURN TO THE MOON 🍿 AMC will start charging different prices for different seats and apologize to capitalism for not thinking of it sooner. Source 🐦 Musk says Twitter is “trending to break even,” which is almost catchy enough to be put on T-shirts. Source 🩺 Luxury European rehabs offering treatment for Crypto addiction for US$100K a week. (No crypto.) Source 🪱 Tastes bitter: Edmonton zoo will feed worms named for your exes to meerkats while you watch on Valentine’s Day. Source WHO CARES WHAT’S UP THIS WEEK U.S. inflation numbers for January come out (Tuesday). Disinflation, as the Fed Chair said last week, “has begun.” Time to see if it “will continue.” Shopify ($SHOP) reports quarterly earnings (Wednesday). The Ottawa-based e-comm company’s stock is up 35% this year. Time to see if it “will continue.” SHARE TLDR WITH FRIENDS 🤝 Put this link in your group chats, in your Slack threads, on a tattoo on your back — whatever works for you! THE BIG IMPORTANT STORY THE BUSINESS SCENE Is Canada Just Three Monopolies in a Trench Coat? Canadians are all too familiar with the illusion of choice. WestJet or Air Canada? Loblaws or Sobeys? The Big Five banks? Even 63% of our beer comes from two multinational behemoths. The telecom industry, considered one of Canada’s most egregious oligopolies, will likely consolidate further, with the Rogers and Shaw merger that’s expected to go through any day. The deal has sparked heaps of controversy, at least partially because the companies have exploited weaknesses in Canada’s anti-monopoly* law, the Competition Act, to push through a deal. TLDR’s Sarah Rieger talked with Arshy Mann, of the Canadaland podcast Commons — whose latest season focused on monopolies — about how a few companies came to dominate Canada and why that hurts the rest of us. What problems do monopolies cause in Canada? Does it really matter that we only have one major movie-theatre chain or one wild-blueberry producer? Most obviously, customers often get worse, more-expensive products because of the lack of competition. Almost every other country in the world pays less for cell service, for instance. Beyond that, workers have less bargaining power since they have fewer employment options. That results in lower wages and worse working conditions. And monopolies inevitably lead to less research investment, because why not just shuffle all your profits into dividends when competition is so limited? [One economist calculated that in 2019, limited competition lowered the economic wellbeing of U.S. consumers and companies by 11.5%; comparable data for Canada isn’t readily available, unfortunately.] Why does Canada produce so many monopolies in the first place? In a lot of ways, Canada was built on monopolies — think about the Hudson’s Bay Company or Canadian Pacific Rail. Canada has always feared that if we don’t let our homegrown companies get huge, we’ll get swamped by American competitors. That’s why the law incentivizes consolidation. Explain that: how does the law encourage consolidation? Isn’t the Competition Bureau supposed to prevent that? I spoke to Competition Commissioner Matthew Boswell, and he was really frank. He said, Look, our laws are not adequate. He doesn’t have enough power to do the things Canadians expect him to do, because of some incredible legal loopholes, like the efficiencies defence, which basically allows a merger to go through if it benefits shareholders. It doesn’t matter if consumers get screwed over. Well, is there evidence that allowing Canadian corporations to balloon better positions them against U.S. competitors? Not in my view. When you coddle companies, they actually become less competitive abroad because they’re not forced to innovate or improve their services. That’s why we don’t see Rogers or Telus out there competing with Verizon or AT&T. Is the government doing anything about monopolies? The Liberal government has promised to review the Competition Act (which aims to prevent anti-competitive behaviour). But the government appears as if it’s going to let one of the biggest mergers of the decade — Rogers–Shaw — go through first. Which, to me, feels like a corrupt bargain. That said, while I’m pessimistic about a lot of things, I think monopolies are one of the easier problems we, as a nation, can fix — small changes in the law would make a big difference. We have the capacity to change the status quo. We don’t have to say, Well, this is just the way it is. This interview was edited for concision and clarity. Read a longer version here. *Okay, yes, some of the industries we talk about here are duopolies or oligopolies, but we're largely going to use monopoly to avoid overloading you with -opolies. OTHER VERY GOOD READS 🙃 The Fleishman Effect* Some NYC moms are very, very stressed about money | The Cut 🏠 Many Canadians Will Never Own a Home. Does It Matter? Living in a country of renters | The Walrus 🌎 The World Is on Fire. Yet Life Is ... Getting Better? Some good-ish news, for once | Wealthsimple Magazine 🗞 The Vicious Battle to Control the Toronto Star Clash over Canada’s largest newspaper | Toronto Life THE WISDOM OF TWITTER Suddenly feeling really good about our finances ... 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). Correction: Last week, we said the number of home sales in Calgary dropped 40% in 2022. That was poorly phrased — sales dropped 40% in January year-over-year. Apologies! Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Replies to this email address are not monitored. Have questions? 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