Cruel summer indeed: T-Swift shafts CA. June 26, 2023 Sign Up | View online IN THIS ISSUE 8 min read 🍞 Bread 🏀 Basketball 🏘️ Bungalows Noted Very Tall Man™ and #1 NBA draft pick Victor Wembanyama is expected to rake in at least US$100 million from endorsements his first season — which puts him on pace to crack the three-comma club waaaay faster than LeBron. | Getty Images THE WEEK IN MARKETS All Quiet on the Markets Front A relatively quiet week. We mean the markets, not the short-lived quasi-coup attempted by a former-caterer-turned-mercenary-overlord in Russia. The S&P 500 and Nasdaq finished the week both down about 2%, though this year’s U.S. stock rally is still going strong. The TSX, on the other hand, finished -2.8%, bringing it flat for the year. Deflating energy prices will do that to an index that’s heavy on energy. The macro question here continues to be: Is the so-called soft landing still on track? Will AI be an enormous profit machine for the winners, or is it just corporate vibeflation? We will learn more about that first question this week when inflation numbers come out (see below). Stay tuned. THE WEEK IN ONE NUMBER $23.7M The estimated economic benefit for each Canadian city Taylor Swift would have visited had she not rudely skipped the country entirely on her upcoming international tour.* WHAT HAPPENED LAST WEEK IMPORTANT Hedge funds are betting on a bubble — and losing lotsa money waiting to be right. US$1 trillion of stocks were shorted on U.S. markets this month, the most since April 2022. So far it hasn’t turned out to be the greatest move, considering U.S. stocks have gone up nearly 15% this year. Plus, the longer you short shares, the more you have to pay to borrow them. The question for the rest of us is whether the short hedge funds are actually on to something. If they are, that newfound willingness to look at our portfolios may disappear. But if they’re not and stocks keep rising, hedge funds may have to cut their losses and buy back stocks — pushing the markets even higher. Like Snoop, rates are expected to stay high. Not since the first Trudeau was in office have we seen interest rates rise as fast as they have these past 18 months. It’s so unusual, Bloomberg’s Matt Levine points out, that no one in finance seems to have even considered the possibility that rates might rise at all. And they’re shook — especially now that rates are expected to stay steady or climb through the end of the year. So far, the fallout has mostly hit Canadians trying to afford mortgages. But the longer rates stay up, the more likely consumers and companies are to miss payments, causing banks to take losses, and sending all of us into… a recession. We’ll see! INTERESTING The knives came out for Big Bread. On Wednesday, Canada Bread pleaded guilty and agreed to pay a $50-million fine for its part in a scheme to inflate the price of bread. The investigation started in 2015, when one billionaire family’s company ratted out another for conspiring to add yeast to wholesale prices for nearly a decade. The investigation, along with two class-action suits, continues — as does Canada’s wider grocery oligopoly, which remains deep in the legal soup over accusations of greedflation. We won’t have to wait eight years to get that report, though. It comes out Tuesday. Victor Wembanyama IPO’ed a new billion-dollar start-up: himself. The 7-foot-4 French teen, who’s been called “the greatest prospect in the history of team sports,” went first overall to the San Antonio Spurs at Thursday’s NBA Draft, instantly adding an estimated US$1 billion to the franchise’s value. He’ll earn US$12 million his rookie season, but that’s just the thin base layer on a towering mille-feuille of money: he’s expected to net at least another $100 million in endorsements the first year alone. As the league’s first true superstar in the age of social media and the money it commands (LeBron started the year before Facebook launched), he’s poised to be the second NBA player to crack $1 billion. And it should take him nowhere near the 18 years it took LeBron. Hollywood braces for not-so-boffo summer box office. Spooked by last weekend’s back-to-back mega-flops of traditional sure-things — a comic-book movie (DC’s The Flash) and a new Pixar joint (Inside Out 2 Elemental) — studios are angsting about “superhero fatigue,” and journalists are blaming the diminishing returns of a cultural “nostalgia loop.” Both have elements of truth, but here’s another theory: the movies were bad. Spider-Man: Across the Spider-Verse has a 96% freshness rating on Rotten Tomatoes, and, whaddya know, it’s a smash hit. FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🤖 Some crypto platforms accused of using made-up regulators, with Blockchain, Finacom, and possibly Bob’s Crypto-Approving Co. among the fakes. Source 🍊 You had one job: Disease and disaster will make for Florida’s weakest citrus crop in a century. Source 🥊 Musk challenges Zuck to a cage fight and he accepts. Still no word back from the cage. Source ✈️ Westjet CEO says absorbing low-cost airlines Swoop and Sunwing will be good for everyone…at Westjet. Source CRASH & BURN TO THE MOON 🚗 With hard work we’ll get that down to 5: Report shows a car is stolen every 6 minutes in Canada. Source 💸 New list of world’s most expensive cities puts Toronto at 90th. Until your car’s stolen. Then it’s higher. Source 🧮 CPA Quebec and CPA Ontario split from CPA Canada without giving a reason or saying where the rumble’s gonna be. Source 🎙️ Spotify doesn’t renew Harry and Meghan’s contract but will call them if they want another US$20M podcast about nothing. Source WHO CARES WHAT’S UP THIS WEEK Canada’s new inflation data comes in (Tuesday). Time to find out if April’s stickiness was a fluke. Nike shares its 4th-quarter earnings report (Thursday). Unlike Air, this could be good. 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. (Don't like TLDR? Afflict it on an enemy! We'll appreciate you either way.) THE BIG IMPORTANT STORY REAL ESTATE The Government Will Help You Buy a Home. Should You Take Them Up On It? Earlier this month, prospective homebuyers received some, shall we say, unwelcome news: Toronto’s famously hot housing market got even hotter, with prices surging by 3.2% in May, the largest spike since early 2022. And it’s not just Toronto. Housing throughout Canada is basically the most unaffordable it has ever been. The crisis is so dire that Ottawa is (ostensibly) trying to do something about it. Most notably, in April of 2022, the government announced that it would create what’s known as the First Home Savings Account (FHSA), a special account that helps aspiring homeowners save for a down payment. It took a while to launch these FHSAs, so they’re not widely adopted yet. But that will likely change this summer as more financial institutions offer these accounts to clients. Which makes it a good time to figure out what a FHSA really is and whether it’s worth using one. A quick guide: First, what is an FHSA? An FHSA is an account, like an RRSP or a TFSA, that helps first-time home buyers save for a down payment. You can contribute up to $8,000 a year, with a max lifetime limit of $40,000. And you can use that money to buy stocks, mutual funds, bonds, GICs, etc. The biggest benefit is that your contributions are tax deductible, meaning they lower your taxable income in the eyes of the feds (tax break #1). Plus, whatever income you make on your investments isn’t taxed when you withdraw your money (tax break #2). This can save you a lot. Is an FHSA actually worth it? OK, you might be wondering, $40,000 is a lot of money to sock away, but I’ll probably need more than that for a down payment. Is it even worth bothering with an FHSA? We don’t like being super prescriptive at TLDR, but here’s an example to help you arrive at an answer: Let’s say you put $8,000 a year for five years (a total of $40,000) straight from your paycheque, tax-free, into an FHSA and you get an 8% annual return on your investments. In that case, you would end up with $48,810 — that is, your $40K investment plus an $8,810 return. And remember: that money is all yours. You have to pay zero tax on it when you withdraw it for a down payment. Suppose you instead decide to put $8,000 from your paycheque into a savings account. Well, unlike with an FHSA, you have to pay tax on that money, which, assuming a 32% tax rate, means that $8K becomes $5,440. If you put that same amount into savings annually for five years and get a 5% yield, you’ll end up with $29,610 (partially because your gains are also taxed). That’s an almost $20,000 difference between an FHSA and savings. Plus, let’s be real: the temptation to use your money on other purchases will probably be greater with savings than with an FHSA. So is there anyone who shouldn’t use an FHSA? If you have high-interest debt or don’t have an emergency fund, you should pay off the former and build up the latter before you invest in anything. Also, consider your other goals, like retirement. You might want to max out your TFSA first before putting money in an FHSA, depending on your income tax bracket. If you’re deciding between investing in an RRSP or an FHSA, probably go with the FHSA first: a nice thing about FHSAs is that, if you decide against using the money for a home, you can transfer it to an RRSP without affecting your RRSP contribution room. So you might as well max out your FHSA first. THE UPSHOT Will you make 8% on your investments in an FHSA? Who knows! But in some ways that’s the less important question — because tax savings is the closest thing to a free lunch in finance, and FHSAs offer a lot of them. To be sure, there’s some fine print you should read before opening an FHSA. But at least now you know, in broad outline, how one of these accounts can make saving for a home a slightly less mammoth task. OTHER VERY GOOD READS ⛽️ The Hidden Cost of Gasoline Gas stations caused a $20-billion toxic mess — and it’s not going away | Grist 🛍️ Is Ssense Hurting the Cool-Clothes Ecosystem? What the e-commerce site’s rise means for small designers and shops | Blackbird Skyplane 🤖 Inside the AI Factory** A vast underclass is emerging to sort our data | Intelligencer 🏳️‍🌈 Money Diaries: Pride Edition The best conversations we’ve had with LGBTQ+ icons | Wealthsimple **Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER Let’s just hope the Cactus Club isn’t going anywhere. 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), Nikki Holmes (copy editor), Sara Black McCulloch (fact checker), Mohini Taylor (senior specialist, lifecycle marketing), Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). *Our math on The Week in One Number: Swift takes in an average $13.1 million per show, and every $1.31 spent by an out-of-town fan on tickets (54% of concertgoers are willing to travel) generates an estimated $4.39 for the local economy. 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. 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