Plus: why Canada’s housing market may be ready to implode October 24, 2022 Made in Canada IN THIS ISSUE Estimated read time: 7 mins 🥫 Pain in the pantry 🚀 Crypto in Walmart 😮‍💨 Weed in Toronto WHAT HAPPENED LAST WEEK Taylor Swift knew all too well that she had the power to break Spotify. Probably. Maybe that’s why she was the highest-paid female musician last year. | Beth Garrabrant, courtesy of @taylorswift13 via Twitter THE WEEK IN MARKETS Did it feel like another week of everyone waiting to figure out which way the wind’s blowing? People thinking, Hey, is that a crushing inflation breeze? Or Is that a mistral of we-already-hit-bottom-and-there’s-only-one-way-to-go-from-there I feel? All while mostly sitting on their hands? It felt that way to us. Not a ton to report numbers-wise: TSX up 1%, S&P up 2%, crypto flat-ish. But if you look at single stocks things were more interesting. Earnings season started heating up this week, and so far investors seem willing to reward strong numbers (Netflix +25%) and punish bad ones (Snap -25%). Next week is even bigger — everyone from Apple to Amazon to Microsoft to Google to Shopify will report. One thing to remember: What’s more important to markets than profits and losses are surprises. And lately there have been more than enough of those for everyone. IMPORTANT Well, that didn’t take long. Liz Truss is out as prime minister of the U.K., possibly with a generous parting gift. Who knew that when politicians fight the markets, the markets tend to win? Oh, that’s right, the people who are watching as President Erdoğan of Turkey slashes interest rates to stimulate growth and exports, while Turkish stocks tank with every cut, and five-year inflation tops 80%. Now we get to find out if the EU can avoid a Trussian implosion — and see who inherits Larry and the rest of the mess at 10 Downing. Inflation hides in the fridge. With prices up everywhere, it can be hard to Truss out — sorry, suss out; wrong crisis — what’s doing the most damage. Surprise! It’s your groceries. September’s consumer price index, which came out last week, showed Canada’s inflation at 6.9%— food costs were up 11.4%, the fastest year-over-year jump since Beyoncé was in diapers. The question (among lots of smart people on finance Twitter) is whether inflation may already be weakening in ways that haven’t shown up yet, which would be good for food prices but not great for central bankers who might start to wonder if they've over-tightened. Speaking of grocery prices, Canada is soooo grateful to Galen for that selfless price-freeze! In what was certainly not a PR stunt, Loblaw president Galen Weston Jr. emailed customers to announce that prices for the grocery chain’s No Name house brand would be frozen through January (when, presumably, everyone’s happy to get squeezed again?). A lot of people called BS — especially on Twitter. By total coincidence, the move came just as Ottawa promised to investigate allegations that big grocers are price-gouging. INTERESTING Canada’s housing market has huge cracks in the foundation. We know that Canadian real estate is in trouble, but a story in the Economist this week asks if, of all the major world economies, it’s the most likely to implode. Why? First, they point out that home prices surged 42% in the last three years. To afford those surging prices Canadians took on lots of household debt. We now owe about two dollars for every dollar we’re earning. And the cherry on top? Mortgage rates, which are more than 6% and could continue to climb, are making those houses even more unaffordable. The silver lining is that banks were far more restrained during this cycle, so the chances of Great Recession II are pretty minimal. Hodl up. The future of web3 is ... Walmart? The store that launched a thousand Reddit galleries already uses the blockchain to track its freight payments, but last week the CTO said crypto would eventually be accepted both online and in virtual Walmart stores. The move is one more sign that, despite coin prices still dwelling in the toilet, real-world crypto-use cases continue to proliferate. The question for the future could be: which companies will be able to profit from them? THE FOMO INDEX by Stacey Woods IMPORTANT 💯 Bloomberg Economics puts U.S. recession odds at 100%, because 110% sounds too cruel. Source 🎄 New report predicts holiday spending in Canada will be down this year. Smashing and grabbing, though? We’re bullish. Source 💿 Spotify crashes under the weight of people underpaying for Taylor Swift’s new album. Source 👩🏻‍💻 Alberta regulator says software engineers can’t call themselves engineers. For one thing, where’s the striped cap? Source CRASH & BURN TO THE MOON 📣 Shh! Nobody tell him he can join for free: Kanye West in talks to buy Parler. Source 🔥 Elon sells out of his first fragrance, Burnt Hair. Anything's better than Elon’s Musk. Source 👊 Told you this would pay off one day! Oakland restaurant servers dressed like Power Rangers save woman from attack. Source 🍃 Uber Eats now delivering weed in Toronto and might even come in and hang for a bit if that’s cool. Source WHO CARES WHAT'S UP THIS WEEK The Bank of Canada announces a new rate hike (Wednesday). We can’t even bring ourselves to say “is expected to announce” anymore. Earnings season continues! Time to see if Meta ($META) can thrive without legs (Wednesday), Shopify ($SHOP) can stop the bleeding (Thursday), and Apple ($AAPL) can break USD $20 billion in profit (Thursday). THE BIG IMPORTANT STORY THE FUTURE Q4 market predictions from experts who don’t make market predictions Last week, we published our third-quarter special edition (read it if you haven’t!), in which we tried to make sense of this wild economic moment. Now we’re looking ahead. We asked four pretty smart analysts and thinkers to explain what they’re watching to figure out what’s in store for markets in the coming months. Will inflation slow more quickly than expected? The economy is slowing, and it’s “not because of interest-rate rises, which are barely below par,” explains Stephen Poloz, a former Bank of Canada governor. Instead, Poloz suspects rising prices — for gas, for groceries, for everything — have had a cooling effect that’s “at least equal to 100, maybe 200, basis points of interest-rate tightening.” In other words, high prices might be encouraging people to buy less stuff and slowing the economy. “Therefore,” Poloz says, “I think that the interest-rate profile will probably not be as high as the market expects.” And, if true, that could help investors a whole bunch. When will interest rates start to hammer the economy? So central bankers are raising interest rates to curb inflation, right? Well, the trouble, explains Trevor Tombe, an economics professor at the University of Calgary, is that it’s hard to predict when rate hikes will really hit. “Estimates are that it takes a year and a half or more before the full effects of rate changes manifest themselves,” he says. The worst could be behind us inflation-wise, Tombe adds, but we won’t really know until sometime in 2023. What data are you tracking to see what might happen next? Instagram’s favourite finance nerd, Kyla Scanlon (you’ve seen her videos, right?), is closely following manufacturing data of the sort put out by the Dallas Fed or Statistics Canada. “Jobless claims are sort of noisy,” she explains, given the weird labour market. Manufacturing data, meanwhile, includes insightful info on how many hours people are working (or not, if the economy is slowing) and hints at potential supply-chain issues, both of which could affect inflation’s trajectory. Will we see any big changes to the energy sector? In the wake of a war-fuelled power crunch, Shell, BP, and other European energy firms are throwing money at offshore projects, confident that energy demand won’t wane soon and that Western European governments won’t stifle their efforts. Still, because of past boom-and-bust cycles, “institutional investors have given up on the oil-and-gas industry,” explains famed stock picker Bob Robotti. He’s curious if that will change drastically over the next few quarters as cash flows improve. That could lead to further investment, which could help to stabilize future energy prices. —Interviews by Brennan Doherty and Jared Sullivan 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! LAST WEEK IN FEEDBACK 21 readers called out the Q3 newsletter’s special format 6 missed the FOMO index 3 loved the haikus 2 wanted us to know they weren’t teenagers 1 just wanted to know about “marihuana” stocks 1 called us “kick ass donkey kong awesome” 1 called us a “bunch of silly pickles :)” — in a loving way, which we appreciated. Keep the notes coming, please. It helps us be better (and reading them is a great way to procrastinate). OTHER VERY GOOD READS 💸 When $500K Disappeared From a Small Town The heist that tore apart a community | The Walrus 🤞 The $30 Million Lottery Scam* Turns out the lottery is hard to win on purpose | The Atlantic ⛏ Doubts Downstream After asbestos poisoning, a new mine is a hard sell | CBC *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER All hail our benevolent, bread-selling, sweater-wearing overlord… 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). Clarification: In our special quarterly edition last week, we reported that Bloomberg’s benchmark Treasury index shed 4.3% in Q3. Which is true. But we weren’t clear that those returns were for U.S. bonds, not Canadian Treasury bills, which finished the quarter flat. The point stands that it hasn’t been a great year for bonds. Full disclosure: contributors to this newsletter own stock in Apple. 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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