Probably not. But keeping your money safe is a good idea March 20, 2023 Sign Up | Made in Canada IN THIS ISSUE Estimated read time: 7 min 🏦 No bank drama for Canada 🫣 No sign of Shaq 🛢️ No buyers for a pipeline If the last two weeks of banking news have you wondering about the safest place to store your cash, the answer is still not a briefcase in the snow. See the Big Story below for a primer on how banks work, where your money is actually kept, and how it’s protected. | FX THE WEEK IN MARKETS Great Expectations Here’s a game. Try to guess whether stocks moved up or down in light of the following events: governments had to step in to stabilize two troubled banks, First Republic and Credit Suisse, while a U.S. inflation report showed prices remain stubbornly high. (More on the bank drama below.) OK, surely you guessed stocks moved down, right? Well, not so. The S&P 500 ended last week up about 2%, while the Nasdaq finished north 5%. (The TSX, the outlier, finished a smidge down.) What gives? Many investors are now betting that central banks will soon meaningfully cut interest rates to protect banks. And rate cuts would be good for stocks, hence the mini-rally. Beyond that, there’s much disagreement about, well, everything — will bank bailouts lead to hyperinflation? Is a soft landing still possible? We’ll see if investors revise their expectations yet again on Wednesday, after the U.S. Federal Reserve announces its latest interest-rate decision. THE WEEK IN ONE NUMBER 9,786 days How long it’s been since the most recent bank failure in Canada. In June 1996, Calgary's Security Home Mortgage Corporation went under, to the dismay of its 2,600 clients. WHAT HAPPENED LAST WEEK IMPORTANT The bank run threatened to take an extra lap. Banking requires confidence — that your money will be there when you need it, namely — and, despite a federal rescue of depositors after the implosion of Silicon Valley Bank (SVB) and Signature Bank, investors still weren’t ready to trust anyone: so many people pulled cash from First Republic last week that it needed a US$41 billion infusion. After flagging “material weaknesses” in a regulatory filing, perennial obituary subject Credit Suisse required its own $68.5 billion rescue, before UBS agreed to take it over Sunday afternoon. Will all that be enough to calm edgy investors and keep panic from spreading? Policymakers sure hope so. Canada, however, is pretty well insulated. Other than daily check-ins from regulators, it’s been a blissful week of boringness for our oligopoly network of big, diversified, and closely supervised banks. There is one particularly Canadian risk to watch out for, however, and that’s the banks’ potential for big losses if households start struggling to meet their surging mortgage payments. You can bet Tiff is watching closely. Anybody want to buy a pipeline? Trans Mountain announced some budget problems last week. The plan to triple the volume of oil it transports from Edmonton to the west coast is now expected to cost $30.9 billion — 44% more than last year’s estimate, thanks to inflation and the massive expense of tunneling through a mountain that won’t get out of the way. The problem (besides the obvious)? When Ottawa first bought the TMX expansion from Kinder Morgan in 2018, the plan was to sell it off someday, ideally to the Indigenous-led groups whose land it’ll run through. But at this price, that’s looking more and more like a pipe dream. INTERESTING Did all the heat on banks thaw crypto? Bitcoin surged 18.4% a day after major crypto lender Signature Bank was shut down, and a week after major crypto lender Silvergate Bank closed. Which seems … surprising. One theory for the jump is pure relief. The federal backstop prevented any crypto contagion that might have been caused by substantial stablecoin reserves being held at SVB. Another reason: the bank implosions show rate hikes are working, which made investors expect rate cuts by this summer — and lower interest rates are good for speculative investments like crypto. 🎵 Good batteries gro-o-ow in Ontario. Volkswagen announced that it will open its first overseas electric vehicle battery factory in St. Thomas, Ontario, in 2027. It’ll be Canada’s second EV battery plant — along with Stellantis’s upcoming Gigafactory in Windsor — positioning us to take an even bigger chunk of a global EV market that’s expected to top US$200 billion by 2030. One benefit for VW: having a plant in North America helps it meet an important requirement of a major U.S. subsidy. And one benefit for Canada: thousands of jobs for our auto industry — even if Ottawa did have to sweeten the pot with undisclosed subsidies. FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 👾 Stay tuned for the new line of Sesame Street NFTs, brought to you by the letters N, F, and T, and the symbol $. Source 🤖 Microsoft layoffs reportedly include entire A.I. ethics team. They say it was Bing’s idea. Source 📱 Ryan Reynolds’s Mint Mobile sold to T-Mobile for US$1.35B. Finally, something goes right for that guy. Source 🌮 American couple wins wedding in the metaverse sponsored by Taco Bell. When it’s real, love finds a way. Source CRASH & BURN TO THE MOON 🏀 Shaq may be hiding from FTX lawsuit process servers. Says he’s covered in Icy Hot and can’t open the door. Source 😢 Free Kiska: After 40 years in captivity, Canada’s last killer whale, Kiska, died this week. Source 🍺 Poll: 75% of Canadians say they’ll exceed the newly recommended 2 drink weekly max. Other 25% thought it said “a day.” Source 🌎 Topless climate activist interrupts Avril Lavigne during Juno Awards. Climate change undeterred. Source WHO CARES WHAT’S UP THIS WEEK The U.S. Fed meets (Tuesday – Wednesday). If anything throws your economy-throttling plans in the air, it’s two collapsed banks. 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 BANKING How Safe is Your Money? Banks are famously the most boring places on earth 99.9% of the time. Watching them usually feels like watching paint dry. But the last week or so we’ve been living in that other 0.01%, with the failure of Silicon Valley Bank in the U.S., and all the dominoes that have fallen, or threatened to, after. Meanwhile, though the U.S. FDIC insures up to $250,000 in deposits, a lot of customers had a lot more than that in SVB, and for a very long weekend we all wondered if they’d get their money back. Thanks to the U.S. government stepping in, they did. But it left a lot of us wondering how safe our money is. Even in Canada, where there hasn’t been any bank failures (or even rumours of bank failures). We figured it’s a good time to get acquainted with how banks work and what’s different in Canada. Read on to learn where your money gets kept and how it’s protected. What’s a bank? And where does a bank keep my money? Banks are businesses that have special licenses so they can do things like accept savings account deposits and make loans. How does a bank make money? By borrowing your money, paying you interest for the privilege, and then using it to make more money by doing things like loaning it out or investing. Regulators stipulate banks keep a certain proportion of deposits as cash — in case, you know, people want some. That works until, as we discovered last week, everyone wants their money at the same time. That’s what’s known as a bank run. What happens if my bank goes under? First of all, it’s super unlikely a Canadian bank would become insolvent. But in the event that it happened, the Canada Deposit Insurance Corporation (CDIC) provides some insurance to depositors. Canadian bank deposits are generally eligible for insurance up to $100,000 at each CDIC member institution for each category. For folks who have more than $100,000 in a CDIC member institution, what happens to that money depends on a few factors like the account type. See this page for more details. What about investments? Investments work differently. Stocks, bonds, ETFs, money market funds — those are all assets you own. They’re held in trust for you, in your name, at places called custodians. If anything happens to those companies, those investments still belong to you — they don’t get loaned out the way a bank loans out cash. These assets are often insured as well, in this case by the Canadian Investor Protection Fund. The rules on what’s covered and how are a bit complicated; you can learn more here. Will you ever need to know this info? Probably not. Between 2008 and 2012, 465 banks went down in the U.S. In Canada? Zero. If you’re still worried and you have more than the insurable deposit limit at a single bank, you could consider spreading that money among different accounts at different banks. Otherwise, let’s all hope we’ll be watching paint dry for a long time. OTHER VERY GOOD READS 💻 YouTube Millionaires Are Not Your Friends The “passive income” bros just want your money | Vox 🤖 Will A.I. Actually Mean We’ll Be Able to Work Less? If history is an indicator, probably not | The Walrus 👾 Crypto Faces a Banking Crisis* The industry scrambles to find anyone willing to work with them | Wired *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER Me with my empty account, looking at the bank with its empty account like Spider-Man pointing at Spider-Man. 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). About those typos: As a few readers pointed out, last week’s newsletter was missing a bunch of spaces. No, it was not because our two (two!) copyeditors were out the same week. We started using a new tool in our email editing process and are still working out some kinks. Hopefully things are squared away this week, but please let us know if you spot any mistakes. As for the person who complained about our having chosen to write “all right” instead of “alright,” we have bad news. 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. 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. 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