Plus: Meta feeling betta May 1, 2023 Sign Up | Made in Canada IN THIS ISSUE Estimated read time: 7 mins 📈 Meta stock soars 🎸 Nickelback scores 🛢️ Suncor explores Last quarter’s Meta earnings should have Mark Zuckerberg feeling so pumped that he just might pull out the hydrofoil again. For why Zuck and the rest of Big Tech are so happy, see the Big Important Story, below. | @zuck / Instagram THE WEEK IN MARKETS Stocks Pull a Uey What a week! Stocks fell hard Monday and Tuesday, after the U.S. Fed signaled it would likely raise interest rates at least one more time, with inflation still running hot. But, after a wave of companies released better-than-expected earnings, the market pulled a U-turn. (See the Big Important Story below.) The S&P finished the week up about 1%, the TSX was basically flat, and the tech-heavy Nasdaq ended +1.3%. The big question now: is it possible that spending, revenues, and profits will hold up even if central banks continue to raise rates? We’ll know more this week, with more earnings (Apple being the biggie) and April economic data coming out, on top of a Fed meeting. THE WEEK IN ONE NUMBER $328.50 How much the government spent, per Canadian, to entice Volkswagen to open a battery factory in Ontario — the largest corporate subsidy in Canadian history. WHAT HAPPENED LAST WEEK IMPORTANT No CRA helpline! No peace! Canada’s largest strike in three decades entered its second week, with continued passport delays, reports of strikers still getting paycheques, port shutdowns, ticketed hotdog stands, and hours-long waits for anybody stuck calling in with tax questions. Although a tentative deal was reached Monday morning, sending 120,000 employees back to work, it did not include the 35,000 striking CRA workers. First Republic became the Fourth Implosion. Hope you weren't enjoying the brief period between bank failures! Regulators took over the flailing American regional bank on Friday, held a fire sale over the weekend, and announced this morning that JPMorgan Chase was First Republic’s (proud?) new owner. Is this 2008 all over again? In most ways no — the big banks are still in good shape, the government has been quick to backstop customer losses, and the Fed is planning new, stricter rules to prevent future failures. But also yes in that Jamie Dimon seems to be winning this round of instability, too. Suncor doubles down on the oilsands. The $56-billion, Calgary-based energy giant watched its stock bubble up by 7% after announcing it would buy a French competitor’s oilsands assets for as much as $6.1 billion last week. The timing isn’t exactly horrible: with OPEC+ set to cut production by 1.16 million barrels per day this month, oil prices (like oil profits) seem unlikely to drop, sending even higher dividends to Suncor investors. INTERESTING Your Spotify daily mix is about to have 30% more Nickelback. Bill C-11, the controversial Online Streaming Act, became law Thursday night, forcing streaming platforms like YouTube and Netflix to follow the same rules traditional broadcasters do. Mainly: serve up a certain amount of Canadian content — and chip in money to help more get made. The specifics will come from the CRTC, but, like a taste for Heartland, they could take years to develop. Coinbase is sick of playing without a rulebook. After being told the SEC was coming for them more than a month ago (possibly for trading unregistered securities), America’s biggest crypto exchange got tired of waiting. Coinbase sued the agency Monday, arguing that you can’t break laws that haven’t even been defined. And if it turns out you can? There’s always Bermuda. FROM OUR SPONSOR Must be new or existing Wealthsimple client. Make a deposit or transfer of at least $500 or essay method to enter. Limit of 1 entry per entrant. No purch nec. Canadian resident (excl. Quebec) and age of majority+ only. STQ required. Full rules wsim.co/investyourrefund-en THE FOMO INDEX by Stacey Woods IMPORTANT 📞 Fed Chair duped by Russian comedians impersonating Zelensky because he wasn’t prepared for such an outdated prank offensive. Source 🚁 Drones are dropping contraband into prison yards across Canada faster than guards can stop them or Amazon can study them. Source 🍁 Rogers partners with SpaceX to bring satellite-to-phone service to remote areas of Canada, which might surprise everyone by working perfectly. Source 👔 New study shows 9 in 10 Canadians interested in a 4-day workweek. Other person really fears losing Casual Fridays. Source CRASH & BURN TO THE MOON 🛀 Bitcoin thief who photographed himself in bathtub of cash gets 4 years for theft and awaits trial on cliché charges. Source 📸 BeBack? Last summer’s hit app, BeReal, will now let people be real three times a day instead of just one. Source 🍎 Apple planning health coach/mood tracker that can tell you how bad you’ll feel after it nags you to exercise. Source 🚲 What if you pay us less and we take it away when you’re bored? Peloton starts monthly rentals in Canada. Source WHO CARES WHAT’S UP THIS WEEK Hollywood writers’ contracts are up (Monday). Could be a tough week for people waiting for passports and new episodes of The Tonight Show. The Fed meets again (Tuesday – Wednesday). Investors expect a 0.25% hike, followed by a Tiff-style pause to finish up the year. Even more earnings! We’ll get numbers from Pfizer (Tuesday), Loblaws (Wednesday), Apple (Thursday), and Enbridge (Friday). SHARE TLDR WITH YOUR FRIENDS 🤝 Put this link in your group chats, your Slack threads, tattoo it on your back — whatever works for you! THE BIG IMPORTANT STORY PROFIT & LOSS Earnings Told Us Stuff About the Economy. It Wasn’t All Bad. Here’s the thing about earnings season: sure, it’s fun because you get to find out how much money some of the world’s largest public companies pulled in over the past quarter. But earnings also give us a look at how people and companies are responding to macro forces — new technology, rising interest rates, inflation, etc. That’s why earnings can reveal some pretty interesting, and important, things about the economy — about which there are a lot of questions right now. Here are three big stories, from three sectors, that emerged last week: Rail traffic suggests people are buying less stuff CN, Canada’s largest railway, reported a 16% rise in quarterly earnings, raking in a total of $4.3 billion, largely thanks to last year’s bumper grain harvest. But here’s the thing: shipments of stuff that isn’t grain are way down. In an earnings call, CN execs said shipments of consumer goods — furniture, clothing, etc. — dropped 13% by volume in Q1 YoY, which, in their view, suggests the economy has entered a mild recession. Relatedly, fewer container shipments from abroad are entering Canadian ports, according to another railway, the Canadian Pacific Kansas City. But Visa is still doing fine That said, folks are still spending money. Visa reported that payment volumes rose by 12% last quarter, which nudged its revenue up by about 11% YoY. Mastercard’s revenue rose a more impressive 14% YoY, which CEO Michael Miebach said was mostly due to travel purchases. How can you have higher payment-card revenue but lower goods shipments? The answer is probably higher prices. Google, Meta, and the return of ads A drop in ad sales is one of the telltale signs of a recession. So it’s notable that Google reported a 3% rise in overall revenue and a 2% uptick in search ad revenue over last quarter. More surprisingly, Meta, which seemed almost doomed at points last year, shocked Wall Street last week when it posted a 4% rise in ad revenue in Q1 YoY — which drove up its stock price an improbable 15% on Thursday. If companies were seeing storm clouds ahead when it comes to consumer spending, they’d be slashing advertising and stashing that cash, but that doesn’t seem to be the case. THE UPSHOT Investors were anxious headed into earnings season, fearing that high interest rates and high inflation would lead to a steep drop in spending. And yet, as of last week, 80% of companies that had reported earnings beat expectations. Apparently, the slowdown in consumer demand has been moderate, and companies have made up for the lower sales volumes by raising prices, which customers have been willing to pay. The upshot is that, while central banks have had to raise interest rates to slow demand, it hasn’t yet hurt companies’ bottom lines much. Which is not what usually happens! The question now is will a moderate slowdown in demand be enough to bring down inflation (companies are surely hoping so), or will inflation refuse to fall and force central banks to keep hiking rates and perhaps drive the economy into a painful recession? Only time will tell, of course, but, at the moment, the latter scenario looks to be the less likely of the two. — Sarah Rieger OTHER VERY GOOD READS 🪑 Ikea Redesigns Its Bestsellers* The furniture giant tries to keep its costs low | The Wall Street Journal ⚡️ The Turbulent Future of Green Energy in Manitoba Residents worry for their water and their way of life | The Narwhal 🤑 Two Genius Moves to Make With Your Tax Refund Hint: both get you more money | Wealthsimple *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER We haven’t hit peak khaki-dad economy until Canadian Tire is in the mix. 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). Disclosures: Contributors to this newsletter own stock in Microsoft and Google. 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. The content in TLDR is not investment advice, a recommendation to buy or sell assets or securities, nor any other kind of professional advice. TLDR is not a research report and should not serve as the basis for making investment decisions. Wealthsimple Media Inc. does not endorse any third-party views referenced in this content. When you invest, your money is at risk and it is possible that you may lose some or all of your investment. Past performance is not a guarantee of future results. Historical returns, hypothetical returns, expected returns and images included in this content are for illustrative purposes only. Always research before investing. © 2023 Wealthsimple Media Inc.