Plus: a new peak for the Nasdaq June 05, 2023 Sign Up | Made in Canada IN THIS ISSUE 8 mins read 🥵 Startups are sweating 🔥 Infernos are expensive 🚘 EVs are everywhere Volkswagen is trying something novel: it’s making an electric vehicle that doesn’t look like it belongs in Super Mario Kart. Hence the revival of the Scout brand. Below, we explain where the EV industry might be headed. | Scout Motors THE WEEK IN MARKETS Smooth Sailing How do things look from up here? Because last week the S&P (up 3%) and the Nasdaq (up 4%) hit new 12-month highs. (The TSX ended the week ahead, too, though a dip in oil prices kept it lower than the others.) The rally was fueled by 1) the U.S. government averting a debt-ceiling disaster, and 2) blockbuster U.S. jobs numbers suggesting that hiring is staying strong as inflation falls, which has raised hopes of a soft landing (more below). What’s interesting is that, if you stop and take in the view, the march upward from last year’s lows has been pretty steady, notwithstanding the collapse of a few U.S. regional banks. (Steady doesn’t mean exciting, as the chart below shows.) Why the smooth sailing? Some of it is probably market mechanics (brokers have sold a lot of options). But it may also mean that, after years of Richter-scale-level upheavals initiated by COVID, business conditions are stabilizing. That would be good, right? SMART CHART The Year of the Mellow Market, Explained in Dots Source: Wall Street Journal The Wall Street Journal published this great chart showing just how little the market has moved on big news this year. In the first five months of 2023, the S&P 500 jumped 2% or more in a day only two times. Last year that number was 19. The WSJ suggests the mellowness could owe to emotionless automated trading. But, if you’re ready to let a little optimism in, it could also mean the jitters are gone and we’re back on solid footing. As always, we’ll have to wait and see. WHAT HAPPENED LAST WEEK IMPORTANT Another month, another explosive jobs report. New data shows U.S. employers drove through investor expectations like a lifted Ford F-250, creating 339,000 new jobs in May — nearly twice what analysts predicted. Even as the U.S. economy cools, workers aren’t being punished too much, which is nice (although wage growth has slowed a bit). The fact that workplaces are continuing to hire could be a sign of the mythical-sounding soft landing. We’ll find out if Canada is lucky enough to be in the same boat when our job numbers come out on Friday. Wildfire season is off to an apocalyptic start. More than 2.7 million hectares of land were torched in May — 11x more than normal. And that’s only one month. The season lasts until September, and, like the pages of a firefighter calendar, the situation doesn’t get any less hot. Thanks, climate change! Fire suppression currently costs Canada as much as $1.4 billion a year. If fire suppression trends with this year’s damage, that number could shoot to $15.4 billion in 2023. Alberta shifts further right. Led by incumbent Danielle Smith, the United Conservative Party eked out a narrow win against the New Democrats in last Monday’s provincial election. With a conservative majority behind her, the new premier is primed for some high-priority climate-based fights with Ottawa. But she also has plenty to figure out at home: if oil prices stay below $77 per barrel, Alberta’s budget will fall into a deficit and trigger a spending freeze next year — which would likely force Smith to slash spending or raise taxes. INTERESTING There’s more startup bubble to pop. Remember last year when the tech bubble burst, startup valuations tanked, and the only thing more anathema to VCs than funding women was spending money at all? Many startups have been running on fumes since then — or have completely run out of gas in the cases of Montreal-based construction-materials app RenoRun and Vancouver’s online car dealership Canada Drives. According to a new report from the Business Development Bank of Canada, the next 12 months will only get worse for startups. Layoffs bought young companies some time, but they’ll likely need lots of cash to get through the next little bit, and VCs are only beginning to sprinkle money around again. Lululemon ($LULU) stretches expectations. The Vancouver-based retailer and preferred pants supplier of people who brunch saw its stock do an upward salute on Thursday, rising 13% after the company announced a 24% jump in sales compared to a year ago. And that’s despite mountains of inventory and everybody typing #dupe into TikTok. Why the flex? (OK, we’ll stop now.) Lululemon reported solid growth in North America (+17%), but its biggest gains were in China. Sales there were up 79% over 2022. With inventory levels and costs dropping, and more than 30 stores scheduled to open outside the U.S. this year — primarily in China — that number could certainly continue to grow. FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🤖 Experts warn AI could wipe humans out like a pandemic or nuclear war, which AI already turned into a script. Source 💳 Canadian credit card debt rises for a third straight month, but don’t worry, everyone’s earning lots of points. Source 🙂 Study finds Canadians were slightly happier at work in May than in April, especially when they were charging stuff online. Source 🐝 Bumble seeks new president for business relationship with benefits — lotsof benefits. Must love profits. No doms. Source CRASH & BURN TO THE MOON 😬 Kramer vs. Kramer wasn’t real? Lawyer who used ChatGPT to write court filings busted when it cited six fake cases. Source 🎙️ Fake heiress Anna Delvey launches podcast and music career, which unfortunately won’t also be confined to her home. Source 🩸 Orange is the new black turtleneck: Theranos founder Elizabeth Holmes starts her 11-year prison sentence. Source 🚬 Philip Morris CEO says he expects company to eventually qualify for ESG status, but it’s probably just a vape dream. Source WHO CARES WHAT’S UP THIS WEEK Apple finally announces its VR headset, the Reality Pro (Monday). If anyone can get us to wear these things, it’s the company that somehow convinced the world to wear smartwatches. The Bank of Canada meets (Wednesday). All this strong economic growth has the markets seeing a 40% chance that Tiff will lace up those hiking boots again. 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 EVS The Global Auto Industry Is Up for Grabs. Canada Stands to Benefit We talk about electric vehicles a lot in TLDR, and it’s not just because we find them neat (which we do). It’s mainly because the battle to dominate the US$15 billion EV market is, in truth, a struggle over the entire US$2.9 trillion global auto industry. Bloomberg recently concluded that combustion-vehicle sales peaked in 2017; EVs are expected to outnumber combustion vehicles on the road by 2040. This sea change has already helped China claim a much larger slice of the auto industry; a few weeks ago, it officially surpassed Japan as the world’s largest auto exporter. Now the governments of other countries are doing everything they can to gain an edge in the EV arms race (which has a lot to do with minerals and batteries). TLDR’s Abigail Covington spoke with Abhishek Murali, an EV analyst at Rystad Energy — a research and intelligence firm based in Norway — about Canada’s place in the EV fight. First, the basics: why are countries spending billions to lure EV companies to set up factories, like Canada did with Volkswagen? Neither Canada nor the U.S. wants to be overly dependent on another country to meet their energy needs. But right now they are with EVs. China currently controls about 40% of the world’s mining capacity, 75% of the mineral-processing industry for EV batteries, and about half of the actual battery manufacturing. And, in many respects, the fight over EVs is a fight over batteries. If North America fails to develop an EV industry, what then? If China retains control of the EV-battery market until, say, 2050, it could essentially price out the market by making batteries extremely expensive for everyone else. The government could even tell Chinese companies not to do business with certain countries. So what are countries doing to catch up? The Inflation Reduction Act, passed last August, was a bomb the U.S. dropped on China, and it’s the reason hundreds of billions of dollars in investment have flowed into the U.S. and Canada. That’s because the law created a US$7,500 tax credit for car buyers if an EV is made in North America and if its battery contains minerals sourced there. That benefits Canada, since it’s home to the mineral producer Vale, among others. [Canada introduced similar incentives for buying an EV.] Canada is famously mineral rich. What else does it have going for it? Other countries, particularly in South America, have vast mineral resources, too, but they don’t have the best environmental records, and the EU requires that battery minerals be sourced responsibly. Since Canada gets most of its electricity from hydro and has more sustainable policies, that makes it a good partner for a German company like Volkswagen. So mining is where a lot of growth will be, I presume? It’s complicated. There’s a shortage of certain key minerals, like lithium, that you need to make EV batteries, but people will likely find them now that they’re hunting for them in earnest. The greater scarcity is in mineral processing, because to make lithium, for instance, you have to dig up the mineral spodumene and process it into lithium. And China dominates when it comes to processing minerals and turning them into batteries. The U.S. is trying to change that by giving companies a US$35 tax credit for every kilowatt-hour of battery-cell capacity they produce. And that adds up. Canada has introduced similar policies. These tax breaks, in my view, are partially why cell-manufacturing companies will be the future for North America. This interview was edited for clarity and concision. OTHER VERY GOOD READS ⛺ America’s 163-Year Obsession With Gorpcore* How camping garb got cool | Bloomberg 👶 Seven Ways to Get Ready (Financially) for Your First Kid Tip: don’t forget life insurance | Wealthsimple Magazine 😓 Why Young Workers Are Putting in So Much Overtime Gen Z is pushing itself to the brink of burnout | BBC *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER Someone needs to create a potato-chip ETF… 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), Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). 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