Plus: good news about your mortgage! (Kidding.) December 12, 2022 Made in Canada IN THIS ISSUE Estimated read time: 6 min 🥡 DoorDash drama 🏠 Mortgage madness 🪙 Greedy Goldman WHAT HAPPENED LAST WEEK Ah, the ’80s. A time of unsettling, pudgy-faced Cabbage Patch dolls and even more unsettling mortgage rates. Guess what — one of those things has made a comeback! | Getty Images THE WEEK IN MARKETS The most interesting number this week, to us, was US$71. That’s the price of a barrel of oil now, back down to where it was in January. That’s before the Ukraine war, close to the level it’s been for the previous five years. If you’d told us in May this would happen we’d have said you were not very smart. (Sorry!) That amounts to huge deflationary pressure. Enough to stabilize markets in recent weeks, although not quite enough to offset a bout of pessimism over the last five days. TSX, S&P, and Nasdaq dropped about 3% for the week. Nasdaq is down about 30% for the year and the S&P is down 20%. Both are close to 2022 lows. Cheaper oil is the main reason we're likely to see the Fed back off from a jumbo to a slightly less jumbo rate hike this week. And it’s a reason investors may be optimistic going into 2023. As always, though, we'll have to see how the dominos fall! THE WEEK IN ONE NUMBER 29% That’s how much commission DoorDash Canada is now charging some restaurants for delivery, despite restaurants having an average profit margin of 3.8%. IMPORTANT Currently in the lead for having the biggest cumulative rate hike of the year: Canada! Tiff raised rates by 0.5% Wednesday — 0.25% higher than expected, bringing our grand total for 2022 to 4.25%. The reign will likely be short, though, with the Fed meeting this week. Our trophy? Even suckier mortgage rates. National Bank of Canada reported that mortgages now eat up 67.3% of the average borrower’s income, the highest portion since the Rubik’s Cube- and Cabbage Patch-loving days of the early ’80s. A black eye for Blackstone. The U.S. investment giant watched its stock drop nearly 10% (down about 40% for the year) after news broke that it blocked shareholders from pulling out of its $92-billion real estate investment fund, BREIT. Why? Um, they didn’t really have the money. When times were good, real estate’s relative illiquidity didn’t matter: there was always enough coming in to cover people who wanted to sell shares. But then all those rate hikes happened, and owning real estate got a lot more expensive, and suddenly a lot more people want out than in — especially at the inflated values Blackstone says its shares are still worth. This is not an FTX-level implosion, but it does show how intense the ripples of rate hikes can be — and how tough the next couple of years may get for investors. INTERESTING No drama Dollarama. Boosted by nearly everyone’s desire to save money amid all this inflation, the Montreal-based discount store reported another strong quarter, with $1.29 billion of very, very small sales. Business is so good, the chain plans to basically double its number of stores across the country in the next eight years. Speaking of deals, Goldman Sachs announced plans to hit the crypto bargain bin. In their eyes, SBF’s FUBAR with FTX didn't expose fundamental issues with crypto so much as its need to be dominated by big traditional financial institutions that answer to government regulators. You know, like Goldman Sachs. THE FOMO INDEX by Stacey Woods IMPORTANT 👾 U.K. making plans to become a hub for crypto. (They don’t get out much.) Source 🥳 Virtually empty: The EU threw a big, pricey metaverse party, and six people came. Source 🍼 Subsidized daycare means more women than ever in the workforce wishing they were on vacation. Source 🍁 Royal Canadian Mint issues new Queen Elizabeth black-banded toonie, sure to turn all the other coins goth. Source CRASH & BURN TO THE MOON 🐓 Tim Ferriss launches an NFT project about roosters that will make people long for more 4-Hour books. Source 💸 Audit finds ineligible Canadians took about $4.6 billion from the COVID subsidy honour bar and didn’t even leave IOUs. Source ⌚️ Pandemic luxury-watch boom seems to end as people run out of money and lose interest in time. Source 🎧 Dyson’s $1,300-ish air-purifier/headphone combo will be great for anyone not ready for a full hazmat suit. Source WHO CARES FROM OUR SPONSOR Auto-Investments are Foolproof 💰 We know, because we write about it all the time: trying to time the market doesn’t work. The good news is that the smartest way to invest is also the easiest: automate it. Turn on auto-investing in your Wealthsimple app and take the guesswork (and dumb decisions) out of the equation. Set up auto-deposits WHAT’S UP THIS WEEK The U.S. releases its last inflation report of the year (Tuesday). Just in time for the Fed’s last rate hike of the year (Wednesday). U.S. lawmakers hold a hearing on FTX’s collapse (Tuesday). Could this be the first interview request that SBF turns down? Avatar 2 premieres (Friday). And just when we stopped feeling weird about how they plug their ponytails in to ride horses. THE BIG IMPORTANT STORY TECHNOLOGY Battery Industry Is Booming, and Canada Stands to Benefit Batteries have made big headlines recently: Tesla delivered its first electric semi; Ford broke ground on a huge battery-production site in Kentucky; and Volkswagen inked a deal to build a battery cell factory in Canada. The Canadian battery industry attracted an unprecedented $15 billion in investments in 2022. Because, in case you haven’t noticed, batteries have become A Really Big Deal, powering everything from phones to bikes to computers to cars. Wherever there’s technology (so, uh, everywhere), smaller and more powerful batteries are making it better. And Canada, with its vast mineral deposits, stands to become a major player in the industry — it could even challenge China’s battery dominance (hence all that investment). TLDR’s Sarah Rieger spoke with economist Noah Smith (author of an excellent newsletter about everything from interest rates to rabbits) about how batteries could become a dominant force in our future — a topic he’s written about extensively. Why are batteries crucial to the renewable-energy transition? Batteries let you move energy through space (portability) and through time (storage). Oil was, and is, so important because it’s a way of storing and transporting energy, whereas you can’t easily do that with nuclear, hydro, solar, or wind unless you have batteries. You’ve called this the “Decade of the Battery.” Why are you so bullish? Technologies often exist long before they find wide use. It was only when computer chips, for instance, reached a sufficient level of cost and performance that people started putting them in everything. And we’re getting there with batteries. [The price of lithium-ion batteries fell by 97% between 1991 and 2018.] Large batteries will be able to power cars, of course, but also homes, shops, and restaurants. And, as batteries get cheaper, we’ll start seeing little appliances or robots doing everything — maintaining solar panels, mending infrastructure, waiting tables. Which is already a thing at some hot-pot places. [Smith also recently wrote about a company called Impulse, which makes battery-powered appliances, like stoves.] What’s an obstacle in wider battery adoption? Mining. You need either cobalt, nickel, copper, or lithium to make a battery, and there’s a supply bottleneck — people aren’t investing in mines and processing facilities fast enough. The other thing is that nearly all these minerals are currently processed in China. But what if China wakes up in a poopy mood? Guess what happens to your battery-dependent economy … Why is China so far ahead? Manufacturing batteries has historically been low margin, so, when battery production started taking off a decade ago, North American companies weren’t interested. Plus, at the time, nobody worried that the world might divide into Axis and Allies again, or that they would need domestic production capabilities, so battery production was offshored. Now we’re trying to reverse that. What can North America do to catch up? Increase demand for electric vehicles. We’re doing that, but the transition needs to happen rapidly. Obviously, the oil industry isn’t going to disappear — we still need plastics and fertilizer and ship fuel — but we’ve got to go hell-bent on EVs to drive battery demand. One good thing is that batteries are heavy, so it’s not terribly economical to ship big ones from China. But we have to increase demand first with policy. SHARE TLDR WITH FRIENDS 🤝 Put this link in your group chats, in your Slack threads, on a tattoo on your back — whatever works for you! CHALLENGE! Next week, we’re publishing a special edition of TLDR. And, for this special edition, we have a special request: tell us the most interesting, helpful, or surprising thing you learned about money this year. Like: If your portfolio takes a 50% loss, you’ll need a 100% gain to recover 😿. Or: The Bahamas are a really great place to “hide” from American authorities. Click here to submit yours. If they’re as good as we think they’ll be, we’ll publish the best ones in an upcoming newsletter. OTHER VERY GOOD READS 🛍️ The Rise and Fall of a Retail Legend* They built an empire off dry cleaning. Others paid the price | Toronto Star 🛻 In Her Defence Helen Naslund killed her husband. Now, she tells her story | Globe and Mail 🎵 So You Want to Be a TikTok Star Is the app’s domination a good thing? | The New Yorker *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER Hey, if Copenhagen can do bike lanes with that weather, maybe Grande Prairie can too. 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). 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. 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