Plus, shooting for the stars (literally) February 26, 2024 Sign Up | View online IN THIS ISSUE 7 min read 🕷️ Spiderwebs 💰 Stimulus savings 🛰️ Space wars There are many potential not-terrific things about another space race. (Read the Big Important Story, below.) But maybe we’ll get more movies like The Right Stuff, so at least there’s that… | Warner Bros. THE WEEK IN MARKETS Nvidi-mania Stocks stumbled early last week, as investors fretted that AI bellwether Nvidia, scheduled to announce earnings Wednesday, wouldn’t meet their super-lofty expectations. We get into the weeds below, but suffice to say Nvidia’s performance rekindled hopes of an AI-driven profit boom, sent short-sellers running for the exits, and generally filled traders with optimism. The S&P 500 and Nasdaq both reached all-time highs and closed the week with Nviable performances; the TSX was also up about 1%. There’s no telling how long the optimism will last, but as of now there’s no shortage of it. THE WEEK IN ONE NUMBER 2,642% Increase in the price of paintings by Cree artist Kent Monkman over the past four years. Contemporary Indigenous art is enjoying what Bloomberg called a long-overdue hot streak. WHAT HAPPENED LAST WEEK IMPORTANT Gimme shelter… inflation relief. Canada’s inflation rate in January came in at 2.9%, which is this close to the Bank of Canada’s 2% goal. But we won’t get the rest of the way unless there’s a slowdown in shelter inflation — January’s rate minus housing/rental costs would have been just 1.5%. The BoC knows housing is the big problem, but it can’t just build more homes to solve it — that’s not its job! Economists argue, then, that the BoC should go ahead and cut interest rates this summer, which would at least provide relief to anyone trying to make pricey mortgage payments. The tricky thing is that rate cuts risk throwing gasoline on the already-too-hot housing market, to the dismay of prospective buyers and renters. It’s a pickle! Why didn’t we spend our COVID stimi dollars? Canadians have $350 billion more in savings than we did pre-pandemic, thanks to government stimulus. The problem, as CBC reported last week, is that experts and politicians hoped we’d spend more cash to boost the economy. That’s what the Americans did — they burned their COVID checks fast, which supercharged growth. But our national fondness for five-year-fixed mortgages (versus Americans’ 30-year-fixed loans) forced homeowners to sock away cash as interest rates rose. Plus, whenever stocks soar, people feel rich, invest more, and save less. And the TSX has been a dud. In other words, don’t blame everyday Canadians; blame the system, man. INTERESTING Nvidia saves the world and spawns a thousand memes. Heading into last week, the stakes were huge for what Goldman Sachs called “the most important stock on planet earth.” Either Nvidia would continue to grow quarterly revenue at a plus-20% pace — unprecedented for such a sizable company — or it wouldn’t, which would mean the AI boom was overblown and the economy was headed back to the Dark Ages. But, as the saying goes, no pressure, no diamonds: on Wednesday, Nvidia announced another banner performance and projected its revenue would keep growing fast, perhaps reaching US$24 billion next quarter. The announcement sparked a record-setting single-day jump of US$277 billion in company value — a number so staggering it launched 277 billion memes. Which is still not as many as… …Madame Web: your meme lord of the week! Imagine a Spider-Man spinoff so awful it makes Morbius look like Oscar bait. Sony’s Dakota Johnson vehicle took in just US$17.6 million during its opening weekend. And, fittingly for a movie about a clairvoyant superhero, basically everyone saw this coming, since several Spider-Verse films are famously lousy. Meanwhile, according to The Hollywood Reporter, all but one live-action superhero movie released last year — congrats Guardians Vol. 3! — underperformed. Forget superhero fatigue. We’ve achieved superhero exhaustion. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🚒 Wildfire season came early this year because it never ended last year. Unsure what this means for your back-to-wildfire shopping. Source 🍁 Maple syrup season came early too, so grab some pancakes and watch the fires. Source 🏒 Record attendance at Toronto PWHL game proves sport’s popularity. Little girls closer to dreams of knocking out each other’s teeth. Source ✈️ Air Canada must give passenger refund promised by chatbot. Will now have chatbot write itself stern annual review. Source CRASH & BURN TO THE MOON 🎓 Study shows half of college grads not using their degrees. Rest would kill to have a job studying college grads. Source 💰 U.S. to spend billions to replace Chinese-made cranes at its ports. Thought they’d have wings and beaks like the paintings. Source 🐷 Starbucks China launches a pork-flavoured latte, or as the rest of the world calls it, “soup.” Source 🍌 Australia has approved new backup bananas in case of banana disease breakout. Promises clowns they’re just as slippery as the originals. Source WHO CARES WHAT’S UP THIS WEEK Canada’s Big Six Banks report earnings (Tuesday – Thursday). We’ll learn how BMO, Scotiabank, RBC, CIBC, National, and TD are doing as they set aside cash to cover bad loans. THE BIG IMPORTANT STORY COLD WAR PART II There’s a New Space Race. Governments and Big Tech Are Desperate to Win By this point, you’ve surely read about the race to develop AI technology. Well, there’s another consequential tech race that has attracted lots of attention in recent months — and that’s the race to develop low-Earth orbit (LEO) satellite “constellations.” The competitors in this Space Race Redux include some of the world’s biggest companies, like SpaceX, the current leader, which has more than 5,000 satellites in orbit as part of its Starlink network. Amazon, in a bid to catch up, recently announced plans to create its own 3,200-satellite network, while Canada’s Telesat intends to launch a couple of hundred satellites. The stakes are high! Whoever controls LEO constellations could control the internet of the future. Which helps explain why governments are taking part too. China wants to send up 26,000 satellites, and U.S. military and spy agencies have forged close ties with SpaceX. We called up Ewan Wright, who follows LEO tech for the University of British Columbia’s Outer Space Institute, to help us understand the growing political and economic importance of satellite constellations. And, yes, we asked about the Russian space nuke. First, what’s the difference between an LEO constellation and a regular ole satellite? Traditionally, we sent up massive six-tonne satellites into “geostationary orbit,” which is about 35,700 kilometres above Earth. For a long time, this was the most cost-effective way to provide communication services to a large area. The trouble was that data took a relatively long time to go back and forth. Over the past decade, though, SpaceX and a few other companies started providing faster coverage using a large number of smaller, cheaper satellites that are only about 550 kilometres from Earth. When did governments realize LEO constellations were vital to national security? In 2022, when Russia invaded Ukraine and crippled the Ukrainian military’s communications by hacking geostationary satellite terminals. After that, [SpaceX CEO] Elon Musk sent Starlink terminals to Ukraine, which its military used to restore communications and carry out attacks. OK, but Russia might try to disrupt Starlink with a nuke, right? That seems bad. The U.S. tested a space nuke in 1962, and it damaged about a third of the satellites in orbit. If the Russians tried something similar, it would be catastrophic for traditional satellites and for constellations like Starlink, even though its satellites are kind of everywhere. But Russia currently has about 220 satellites and three cosmonauts in orbit, and I doubt it wants the collateral damage. Also, there’s little good information about this new threat. It may be more benign than an actual weapon, like a nuclear power source on a spy satellite. So why are companies like Amazon building constellations? It must be lucrative. That’s a bit of a problem, actually. According to one estimate, satellite broadband could generate US$500 billion annually by 2040. But right now, satellite internet services can’t compete with traditional cable providers. If you live in a city, there’s no point in paying US$120 a month for Starlink and US$600 in equipment when you can get good internet for much cheaper elsewhere. [Starlink hoped to have 20 million subscribers by the end of 2022; instead, it had about a million.] Outside the military, who’s actually paying for satellite internet, then? Right now, it’s mostly folks who live in vans in Yosemite or in remote Canada. That could change. Something like 4 billion people worldwide don’t have reliable internet. But right now, in many cases, these people can’t afford expensive Starlink terminals or subscriptions, or they live in places like Iran, where the government will seize your equipment if they find it. Moving forward, Starlink and its competitors will likely continue to target rural people, plus cruise lines and airlines. Still, I think there will be too many constellations for future demand and that some will fail. This interview, conducted by Ben Mathis-Lilley, was edited for length and clarity. OTHER VERY GOOD READS 🛍️ The Complete History & Strategy of Hermès How a French family, over six generations, built a luxury giant. | Acquired 💸 The Great Pretenders How a family scammed financial aid earmarked for Indigenous kids. | Toronto Life 🍁 Inside the Canadian Tire Gadget Lab The retailer is launching tons of new products to win your business. | The Globe & Mail THE WISDOM OF TWITTER X Keep yourself on mute for the Q&A, though. 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. 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