Plus: how DraftKings gambles on losers June 3, 2024 Sign Up | View online IN THIS ISSUE 8 min read ⏩ Speedy stock trades 🏡 Housing head-scratcher 📕 Buy Kyla’s book! If you use a sports-gambling app, goons (probably) won’t shake you down if you make a bad bet, à la Uncut Gems. But if you make a lot of good bets, the app might cut you off. We explain below. | A24 THE WEEK IN MARKETS Do Markets Even Care About Rates Anymore? All year, U.S. and Canadian investors have been waiting on the Big Cut — that is, when central banks would slash interest rates by >1% and make everyone’s economic life tons easier. Thanks to stubbornly high inflation, the Big Cut’s arrival has gotten pushed back and pushed back, and yet markets have kept right on cooking. The plot thickened last week when the U.S. Fed hinted that an unexpectedly robust economy might prompt a rate hike in the coming months. And markets … kept on cooking. (Investors still expect the Bank of Canada to shave rates by a quarter-point soon, maybe even this week.) Conventional wisdom holds that another Fed hike would hurt markets, but stocks finished last week near all-time highs. Have corporate earnings been so swole that they’ve assuaged investors’ rate concerns? Last week, the answer was yes. We’ll see if they’re right to be so relaxed. THE WEEK IN ONE NUMBER US$500K Or CAD$684,000. That’s how much some Walmart store managers can make, partly thanks to stock grants, after the discount retailer recently boosted its pay structure to improve its attrition rate. WHAT HAPPENED LAST WEEK IMPORTANT Stock trades now settle one day faster. In a world where everything is instant, the stock market’s inner workings have always been, curiously, slow. Until last week, trades in the U.S. and Canada technically took two entire days to settle, meaning that whenever you traded a stock, your broker wouldn’t actually formalize the transaction (sending over the stock or cash) until days later. This system was a relic of the ye olde days when you had to send a courier to-and-fro the brick-and-mortar stock exchange to complete a trade. Over the years, brokerages created workarounds to let clients move in and out of stocks instantly. But if you ever sold an asset and immediately tried to withdraw the funds, this two-day lag probably prevented you from doing that. Now you’ll just have to wait a day to get your money. Faster than before but still slower than Amazon. Trudeau’s housing head-scratcher. Last week, in a much-talked-about interview with The Globe and Mail, Prime Minister Trudeau said that Canada needs to lower home costs so that young people can afford to buy places, but — and it’s a big but — the country also needs to protect home values for older Canadians whose houses are their primary retirement asset. Folks quickly pointed out that these goals seem, well, pretty incompatible! Trudeau’s remarks underscored Canada’s can’t-have-it-both-ways pickle: our homeownership rate is, believe it or not, roughly the same as it has been over the past 20 years — today 66% of Canadians own a home. The problem is that far fewer people today can actually afford to buy a home. So how do you improve affordability (aka bring down home prices) without hurting home values? Let’s just say we’re glad we’re not politicians trying to thread that needle! INTERESTING Sports-betting sites boot their best betters. Bloomberg’s Odd Lots podcast chatted with professional gambler Isaac Rose-Berman about the sports-betting industry — which Goldman Sachs estimates could grow into a US$39 billion market within a decade — and he shared some wild insights, including the fact that some sportsbook platforms, like FanDuel and DraftKings, monitor users who have a knack for placing winning bets and then cap the amount they can wager, effectively banning them from winning too much money. It’s akin to how casinos ban players for counting cards: the only rule they’re really breaking is being too good. What it’s not akin to is financial markets, where winners are rewarded with more cash to bet even bigger. What does Salesforce actually do? It looks like the company might need to do a better job answering that question. Shares dropped by more than 20% on Wednesday after it reported slow sales and its first revenue miss in about 20 years. In 2021, cloud SAAS (software as a service) companies, like Salesforce, Workday, and Adobe, were hot investments, because it seemed like they could grow and grow without much additional cost, like building more hardware. But now that interest rates have risen, investors are asking how useful these softwares really are and how profitable SAAS companies will be. Salesforce is trying to jump on the next tech fad by investing in AI, but it remains to be seen whether it will be able to harness automation or just get replaced by it. A Bank of Canada official called out Payments Canada for its years-long delay in rolling out a real-time banking payment system for Canada. Why was this such a burn? Partly because the BoC official aired his criticisms at a summit put on by Payments Canada. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🍔 Nearly 80% of Americans now consider fast food a “luxury.” Fast casual to be upgraded to a “pipe dream.” Source 🏢 Adam Neumann drops his bid to buy back WeWork. Feels confident it can finish imploding without him. Source 🍟 Canadian McDonald’s selling McShaker Fries – fries and seasonings you shake together in a bag until they’re coated with extra luxury. Source 🎵 Kevin O’Leary wants to crowdfund to buy TikTok. Hoping to repeat the success he’s had with that self-balancing unicycle. Source CRASH & BURN TO THE MOON 🇩🇰 Denmark makes a deal to rent jail cells in Kosovo to ease overcrowding. There goes your Danish crime spree plan. Source 🐮 If you smell something, say something: entire herd of cattle allegedly stolen from ranch in Quebec. Source 👖 Just dupe it: Nike wins right to put three stripes on some of its pants in lawsuit with Adidas. Source ⚾ Blue Jays fan hit by 110mph ball gets her own trading card. Can sell them to buy a new skull. Source WHO CARES THIS WEEK ON THE PODCAST THE BIG IMPORTANT STORY Q&A Vibes Are Shaping the Economy. A New Book Explains How If you have even a teeny-tiny interest in the economy or markets, a social-media algorithm has almost certainly served you a video by Kyla Scanlon, a market commentator who coined the term “vibecession” and who has become famous (among WSJ-reading nerds anyway) for her central-banker impersonations. She’s also a co-host of our humble little finance podcast (which you should totally listen to). Last week, Scanlon released her first book, In This Economy?: How Money & Markets Really Work. It explains the economy and trading and fiscal policy and what it all means for regular people. We sat down and asked her to explain. Your book opens with a chapter titled “The Vibe Economy.” Can you break that down and explain it in two parts? First, what is the economy? That’s a good question, because when a lot of people hear the phrase the economy, they think of money or corporations. But, at a very baseline level, the economy is just us — everyday people — and our economic interactions. We trade goods and services, and money is the facilitator of these interactions; it’s a technology we use to execute our transactions. But the economy is, at its core, people. I think it’s helpful to view it this way, because we often overestimate the role of corporations or governments in the economy and underestimate our own significance. Now the second part: vibes. What are they, and what do they have to do with the economy? The term vibes is basically a shorthand for consumer sentiment; they’re the way we feel about money and our jobs and the future. Vibes are important because they often influence our behaviour more than data, as John Maynard Keynes long ago realized. Whether you choose to buy a new car right now, for instance, probably has less to do with the latest GDP print than your gut feelings about the economy and your expectations for the future. And when a lot of people share the same expectation, it can have a powerful effect. If people generally expect boom times ahead, they’ll spend money and make the boom times happen. But if people expect a slowdown, they’ll likely cut spending and create the downturn they anticipated. The famous trader George Soros had it right when he said, “You affect what you predict.” That’s all very macro. Why should I care about vibes on a personal level? A lot of people think they don’t need to know about the economy or it’s too overwhelming to understand. But I was reading an article today that said that when people aren’t informed about politics, their response tends to be cynicism. And the same is true for economics: 55% of Americans and 58% of Canadians think the economy is in a recession right now, and it’s not. It’s just that interest rates and inflation are high, which is not the same thing. And people with an overly negative view of the economy might be making poor, or at least uninformed, choices — by not taking risk or investing or hiring enough or a million other possible things. In my view, we all have a civic duty to understand the economic world we live in, so we can help ourselves and the people around us make wise money decisions and not be as susceptible to vibes. So have you trained yourself to be unmoved by vibes? Are you a purely data-minded decision maker? No, not at all! Vibes can also lead to irrational exuberance, which might be more of my problem. It’s easy to get carried away when a stock surges or markets are on a tear. The key is to know your tendencies and put limitations on yourself. For me, I know I have to buy and hold stocks, because I can’t control my emotions. It would be very unwise of me to open my brokerage app every day. Get more of Kyla’s insights in In This Economy?: How Money & Markets Really Work. OTHER VERY GOOD READS 👗 The Sundress Discourse, Explained Inside the internet debate about who the dresses are for. | Vox 🤖 Google’s AI Search Setback The overviews tell a not-so-pretty story of the web’s future. | Platformer 💉 The Insulin Empire How profiteers pushed a lifesaving drug out of reach for many. | The Baffler POSTS OF WISDOM The youth will never understand the glory of Peak TV… THOUGHTS ON TODAY’S ISSUE? 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