Plus, is crypto really back this time? March 11, 2024 Sign Up | View online IN THIS ISSUE 7 min read 🤖 Rent-gouging robots 🪙 Back-from-the-dead Bitcoin 🤔 Value-boosting buybacks Stellantis is trying to make EVs macho by building an electric muscle car. Now they just need The Hoff to start driving one. We explain below. | Universal Television THE WEEK IN MARKETS Are stocks frothy or fine? How much foam is in our stock-market latte? This was the central question on market prognosticators’ minds last week, even as stocks ended Friday mostly flat. To catch up anyone who missed out: the market is on an extended bull run that began in October of last year. The S&P 500 is +25% since then; the TSX is +16%. Now the question is whether we’re engulfed in froth. JPMorgan chief market strategist Marko Kolanovic sees the tell-tale foamy bubbles that appear before a painful reversal (like Bitcoin’s quick surge; see the chart below). Goldman Sachs strategist David Kostin says, Nah, the market-leading tech giants will continue to rake in cash and grow into their monster valuations. Who’s right? Only the great barista in the sky knows — at least until the tech giants report Q2 earnings in a month or so. THE WEEK IN ONE CHART Bitcoin’s latest run means it now makes up more than $1.8 trillion of crypto’s global $3.5 trillion market cap, thanks in part to Wall Street’s embrace of Bitcoin ETFs. More below. WHAT HAPPENED LAST WEEK IMPORTANT Computers might be jacking up your rent. RealPage, a software company whose algorithm uses private data to recommend rent prices for more than 4.5 million properties across the U.S. and Canada, is facing more than 20 lawsuits accusing it of helping landlords collude with one another to inflate rents by as much as 33%. Some landlords aren’t shy about RealPage’s core value. A Canadian property-management firm bragged that using RealPage lets it rake in more cash. One of RealPage’s developers even admitted that the software was designed to have less empathy than human landlords, inadvertently revealing that he’s never met a human landlord. CEOs say pension plans in Canada aren’t Canadian enough. The country’s so-called Maple Eight pension giants manage $2 trillion in assets, but right now only 4% of their holdings are invested in publicly traded Canadian stocks. So dozens of Canada’s top CEOs, including the heads of Telus and Rogers, signed a letter asking Ottawa to, like, fix it somehow, which we understood to mean: legislate a bigger piece of the pie for them. Fund managers are pushing back, since the whole idea of a pension fund is to maximize low-risk returns for the people who trusted them with their retirement. If CEOs really want them to buy Canadian, fund managers argue, maybe they should focus on making their companies better investments. INTERESTING Is it finally springtime for Bitcoin? Benefitting from the same widespread optimism that has buoyed stocks, $BTC notched a fresh all-time high last week of $93,500. Bloomberg’s Joe Weisenthal, one of our favourite finance writers, described the rally as “super refreshing.” Why? Because “this time around people aren’t pretending there’s some use case.” In other words, the surge isn’t driven by true believers in the potential of DeFi or Web3 but by boring old institutional investors. Dodge flexes its EV muscle. Stellantis CEO Tim Kuniskis unveiled the world’s first all-electric muscle car — the Ontario-built Charger Daytona — with an actual quote so goofy we’ve got to share: the car “will make the rule makers, the suits and the lawyers wish they hadn’t had a kale smoothie for lunch.” Anyway, the Charger is the latest EV designed to make going green seem super macho, following the faux-militaristic Cybertruck and GMC’s beefy electric Sierra. The bro-ification of EVs makes a certain business sense: yes, women buy more vehicles than men, but macho gas-powered rides, like the Ford F-series, are among the best-selling vehicles in Canada and the States, and there’s money to be made for whichever automaker can get guys to switch to electric. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🧼 The Body Shop is laying off 200+ Canadian workers. Not how anyone wanted to use their relaxing bath bombs. Source 🎭 Bankruptcy filing forces cancellation of Montreal and Toronto’s Just For Laughs festivals. Should’ve been doing them just for cash. Source ⚕️ B.C. offering nurses $30K to work in hard-to-reach places… of the province, not the patients. Source 👾 Binance launches its own perfume, “CRYPTO.” It has notes of freshly laundered money and South African Musk. Source CRASH & BURN TO THE MOON 📱 iPhone sales fall and Huawei phone sales soar in China as country’s population remembers to like Chinese things better. Source 🚚 Truck containing $70K of pistachios stolen in Ontario. Police hoping thieves will have to stop soon to dump the shells. Source 🤦 Telus lobbyist writes op-ed arguing lower cellphone prices are bad. Follow-up to his previous piece, “Lobbyists Don’t Earn Enough.” Source 💻 Director Denis Villeneuve sent his laptop to a dying man to watch Dune: Part 2. Man had one note: “too long.” Source WHO CARES WHAT’S UP THIS WEEK The First-Time Home Buyers Incentive ends (March 21). The Feds have decided to discontinue the program, which offers a tax-free loan in exchange for the government owning a share of your property. But it’s still taking applications for another week and a half if you want to squeeze in. THE BIG IMPORTANT STORY EQUITIES Stock Buybacks Are Popular, and Controversial. Why? Buybacks, as the headlines say, are back. An increasing number of companies are spending a great deal of their money — US$7 billion, in Uber’s case — to buy their own stock on the open market. And you, our readers, have been asking us to explain what this sort of thing is all about. Since we live to please, here’s a quick discussion of what buybacks are, why they’re polarizing, and how they might matter to you. What’s the purpose of buying back your own stock? If you’re a company that has profits to spare, you have two basic options: you can spend the money on yourself (by expanding operations, making acquisitions, etc.). This is what companies like Amazon do, reasoning that investors are best served by their continued expansion. The second option is to reward investors for believing in your company by returning value to them in the form of a dividend payment or, less directly, by buying your own shares, aka a stock buyback. Why buy your own shares? Mostly because doing so limits the number of issued shares on the market and pushes up a company’s stock price, to the benefit of investors. Why don’t companies just pay dividends to investors? Dividends were the traditional way companies returned money to shareholders (in part because until 1982 U.S. regulators considered buybacks a form of stock-price manipulation). But dividends have drawbacks: for one, once a company starts issuing them, the market tends to interpret any decision to stop as a sign of trouble. Buybacks, on the other hand, are like a nice one-off. Plus, investors who sell their shares after a buyback get cash in their pocket and usually save on taxes, since a buyback counts as capital gains and is taxed at a lower rate than dividend income. So why are buybacks sort of controversial? A growing number of economists and politicians have started to ask whether the money spent on buybacks might be better used to benefit workers or consumers — a criticism that tends to come up whenever companies that have done major buybacks ask for government bailouts, lay off workers, or turn out to have been making airplanes that may or may not fall apart in the sky. Such concerns drove the recent imposition of a 2% tax on buybacks in Canada. (In the U.S., it’s 1%, and taxes are paid by the companies doing the buybacks, not by shareholders.) But long-term studies have found that companies that buy back stock, as a whole, outperform those that don’t, so there’s that too. Are buybacks good or bad for average investors? For investors, the simple answer is that it’s usually good if companies are making enough cash to do buybacks (or pay dividends, for that matter). People are mostly talking about buybacks right now, though, because that’s how the big tech companies have been using their geyser of profits — a move that has been propping up their share prices and keeping investors happy. More buybacks could push up stocks further; fewer could lead to a retreat. We’ll have to see how long the buyback spree will last. —Ben Mathis-Lilley OTHER VERY GOOD READS 🍬 The Theranos of Marshmallows When Silicon Valley failed to mass-produce candy. | Business Insider 🏠 Airbnb’s Devastating Effect on Canadian Housing Thousands of homes became vacation suites. | The Walrus 🏎️ Behind F1’s Velvet Curtain To glimpse the 0.001%, spend a day at a Formula 1 race. | Escape Collective 🤑 Two Genius Moves to Make With Your Tax Refund You can turn it into more money, which is smart. | Wealthsimple THE WISDOM OF X We have a soft spot for dad jokes. SORRY. 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), Nikki Holmes (copy editor), Sara Black McCulloch (fact checker), Mohini Tailor (senior lifecycle specialist), 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 Replies to this email address are not monitored. Have questions? Visit our Help Centre or submit a request to our Client Support team. 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. 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