Plus, PepsiCo says sorry for shrinkflation October 21, 2024 Sign Up | View online IN THIS ISSUE 8 min read 🔮 Fortune teller fail 🍟 Shrinkflated snacks 💼 WFH woe Ontario’s gonna need a lot more power than 1.21 gigawatts. We explain why, and what the province is doing, below. | Universal Pictures THE WEEK IN MARKETS CLEAR AND PRESIDENT DANGER If you want the numbers, they're good: earnings season is off to a strong start and markets hit record highs again this week. But we wanted to check in on a big topic that, even as markets are sanguine, has spiked investors' blood pressure just a bit: the U.S. presidential election. There's something called the VIX, aka Wall Street's "fear gauge," which measures how much instability investors are feeling — and currently the VIX is projecting stock prices to be 20% more volatile than usual in early November, right around election day. Election angst makes sense! The winning candidate gets to shape everything from tax rates to tech regulations. The polls and betting markets suggest there’s a 50% chance of either the Democrats or Republicans emerging with full control of Congress. That's a wide range of outcomes, and nothing makes investors twitchy quite like uncertainty. THE WEEK IN ONE NUMBER 25.8% How much Phillip Morris stock is up YTD. The company, alongside two other tobacco sellers, will be forced to pay $32 billion to Canadian smokers for knowingly selling a product that kills 46,000 Canadians each year — news that didn’t seem to faze investors one bit. WHAT HAPPENED LAST WEEK IMPORTANT Inflation’s dead, which means high mortgage rates will be killed off too … right? Last week, StatCan reported that inflation had fallen to 1.6%, well below the Bank of Canada’s 2% target, and investors rejoiced by betting big on a jumbo-sized 0.5% rate cut on Wednesday. That would bring the overnight rate down to 3.75%, and traders are projecting rates as low as 2.8% by next summer. Sounds like great news for anybody with a mortgage, right? Not quite: Desjardins predicts that while variable mortgages will continue to drop, fixed mortgage rates might have already priced all of this in — meaning no further discounts. Ontario needs a power surge. Thanks to sweltering heat this summer, energy use across the province hit a 10-year high. And over the next decade, industrial demand — mostly from electric-vehicle factories and generative AI use — is projected to increase by another 58%. That’s the equivalent of adding a second Toronto. Long-term forecasts like these are notoriously unreliable, but they do prompt action, and in this case, it helps explain Ontario’s rekindled love affair with nuclear power. In the meantime, natural gas will fill the void — at least until it runs up against the federal plan to phase out fossil fuels by 2035-2040. INTERESTING Would a crystal ball make you a better stock trader? A new online game created by wealth-management firm Elm Partners Management uses randomly-chosen front pages from The Wall Street Journal’s archives to give players a glimpse of the next day’s news. It allows them to bet on future market outcomes — yet so far they’ve lost money more than half the time. (Experienced investors did better.) Elm’s founder, Victor Haghani, was also a co-founder of Long-Term Capital Management, whose collapse — in part due to taking huge bets that were upended by unexpected world events — almost took down the U.S. financial system. The game highlights what many investors forget: successful trading is more about navigating uncertainty and managing risks than being right. PepsiCo is sorry for shrinkflating you out of potato chips. The company, which makes Tostitos, Ruffles, and a bunch of other things you pretend you eat only during the Super Bowl, irked customers during the inflation surge by hiking prices despite shrinking bag contents by about 15%, aka shrinkflation. What happened next? Snack sales and profits sagged, and the stock missed out on a pretty big rally. (Coke is up 40% this year.) Now PepsiCo is trying to atone by announcing plans to stuff 20% more chips into its bags in certain markets. This might be a case of a company framing an obligation as a kindness, however. France and other countries are requiring companies to report when they slim down products without reducing the prices, and the U.S. has introduced a bill that would do the same. –Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🌎 Global debt to surpass US$100 trillion by year’s end, but think what we can buy with all those credit card points. Source ⁉️ Mysterious pale, foamy blobs are washing up on Newfoundland shores. Scientists haven’t ruled out a possible spill from HMCS Bisquick. Source 🛠️ Study finds 50% of American Gen Zs want blue-collar jobs. Other 50% triggered by any shirt with a collar. Source 🐶 Crocs introduces new Crocs for dogs. Now your best friend can look like he’s given up too! Source CRASH & BURN TO THE MOON 🤖 Robots working Tesla’s Cybercab event were actually under human control, which is more than you can say for Elon Musk. Source 🦈 Whale shark in Shenzhen aquarium turns out to be a robot. “Can it serve drinks?” asks Elon Musk. Source 📸 Instagram introduces digital business cards. Digital fishbowl for digital business card draw for free digital lunch coming soon. Source 🪩 Abu Dhabi is getting a Sphere. Phish fans already planning how they’ll smuggle in the nitrous. Source WHO CARES THE BIG IMPORTANT STORY SWEATPANTS A Moment of Reckoning for Work-From-Home? Last month, Amazon CEO Andy Jassy announced that the company will require workers to return to the office full-time starting next year. A week later, The Wall Street Journal declared that “The Work From Home Free-for-All Is Coming to an End.” Are we about to see a wave of control-hungry bosses using the leverage they have over workers in a slowing labour market to cut back on remote work? Probably not, says Tammy Schirle, a professor of economics at Wilfrid Laurier University who just completed a study of WFH trends for Toronto’s C.D. Howe Institute. She spoke to us about why most WFH perks are probably not in jeopardy, and why that’s actually a good thing for employers — but also why you, as a worker, might want to hit up the office now to maximize your long-term earnings potential. So, how many people in Canada work from home? According to data collected by Statistics Canada, at the end of 2023, 26% of paid employees were spending at least part of their week working from home. [For comparison: only 7% of Canadians worked mostly from home when StatCan asked this question in 2016.] But there are some markets where there are huge numbers of people. In finance and insurance, it’s 65%. Similarly, about two-thirds of federal public servants work from home. Is there any reason to think Canadian companies will be making the same push anytime soon? There are a lot of people watching what’s going on with Amazon. But employers should probably be careful — they risk losing some of their best employees if they start taking on these mandates. If you’re working in IT, for instance, there are going to be competing employers willing to offer work-from-home provisions. And for larger, unionized employers, it’s going to be difficult to get requirements into collective agreements. They’ll have to create policies that seem fair to all their employees and are individualized to levels of experience and the type of work people do. There are some situations where “letters of understanding” were written during the pandemic, but I’m not sure how often it’s been formalized outside of that. Do you buy this idea that some companies are using return-to-office mandates to create “stealth layoffs,” because they know some workers will choose to quit rather than go back to commuting? Using RTO policies as a mechanism to reduce the size of a workforce seems risky. And inefficient, since some of the most productive workers are the ones who would be able to find better options elsewhere. Jassy says he’s ordering the return to office because it will improve teamwork. Is there research to support this, or is he just being a control freak? There seems to be a delicate balance. People who are more senior tend to know exactly what they need to do, and they can work independently. They’re often more productive working from home. But people who are just starting their careers benefit from the teamwork, networking, and training you get at a work site. They should be in at least a couple of days a week, and you want them all in at the same time so that people are interacting. But it’s also people in their early 30s with young kids who want these flexible work-from-home arrangements the most. So you’re trying to balance and have employees who see their families but still come in a couple of days a week so that they can work in teams and build their productivity and their careers. You’ve talked about individual productivity, but should we be worried about collective productivity? Could work from home do something like cause a recession? In the bigger picture, sitting in a car and commuting long distances is not productive for anyone. You also get more productive matches between job and worker if you don’t have a strict schedule in an office. We see parents enjoying these flexible provisions, and we see evidence of an increase in people with disabilities working. Those are people who are contributing more to the economy, and they’re probably happier for it. So I think there’s room to say work from home is helping find more productive matches, and everyone really should expect it to stick around. The next thing, I think, is for regulations and employment standards to catch up to the idea. —Ben Mathis-Lilley OTHER VERY GOOD READS 🏕️ Another Encampment, Another Eviction A comprehensive, intimate account of Toronto’s unhoused. | The Local 🌌 Those Northern Lights Photos Are Lying to You If Instagram makes you feel like you missed out, you didn’t. | Slate 📺 How Everyone Got Lost in Netflix’s Endless Library* The streaming revolution really changed our viewing habits. | The New York Times *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. POSTS OF WISDOM And after work, they’ll fold them up and live in them. 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), Clare Douglas (copy editor), Sara Black McCulloch (fact checker), Mohini Tailor (lifecycle marketing manager), Matthew Karasz (markets editor) 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 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. © 2024 Wealthsimple Media Inc.