Will face TVs or artificial intelligence carry the day? January 29, 2024 Sign Up | View online IN THIS ISSUE 8 min read 😎 Apple has goggles 💸 Tesla has discounts ⛰️ The market has peaks 1995’s Johnny Mnemonic was sort of meh, but it was oddly prescient about a world-threatening plague, conspiracy theories, megacorps, AND maybe VR goggles. We explain below. | TriStar Pictures THE WEEK IN MARKETS More Up and To The Right Another week, another round of fresh all-time highs for U.S. stocks. Even the light-on-tech TSX is getting close to surpassing its 2022 peak. Does this mean if you buy stocks now you’re paying too much? Below, a primer on how markets work and what history tells us about “all-time highs.” THE WEEK IN ONE NUMBER 2009 The last time Chinese stocks listed on the Hang Seng Index were trading at their current levels. The index has shed almost 20% of its value over the past six months as China’s economic outlook has worsened. WHAT HAPPENED LAST WEEK IMPORTANT Hot Rate-Cut Summer is coming. To no one’s surprise, Team Tiff held interest rates at 5% last week, but Canada’s top central banker did make headlines by loudly hinting that rate cuts — that’s when they go down, in case you’ve forgotten they can go in that direction — could come as early as June. Markets are expecting a 0.32% cut, per Bloomberg data. Canadian universities might need a new funding model. It’s no secret that post-secondary schools make bank on international students, who on average pay 429% more in tuition than Canadians. One problem with this is that some predatory institutions have lured foreign students to Canada with false promises of citizenship. To crack down on such grifts, Ottawa plans to hand out 35% fewer student visas than it did last year. That could spell trouble for reputable schools, like Queens, that are already facing budget shortfalls. INTERESTING Microsoft joins Apple in the US$3-trillion club. Microsoft has nearly doubled its value in a single year, which is a feat usually pulled off by penny stocks shooting up to two pennies. How did Microsoft get so hot? It has a big lead in machine learning thanks to its partnership with OpenAI. Also, less Brave-New-Worldy, about a decade ago, Microsoft pivoted hard into cloud computing and gradually became the go-to data-storage provider for jumbo companies. Apple dominated Round #1 of Mac v. PC. If it’s going to win Round #2, it’ll need to sell a lot of US$3,500 AR/VR goggles… …And so far, so good on those goggles! Apple’s Vision Pro went on presale in the U.S. last week, and customers quickly bought out the initial 180,000 run. Early adopters don’t seem quite sure what to do with the headsets yet besides watch movies, but, as Stratechery’s Ben Thompson pointed out, watching movies could be plenty. After all, why gather the family around a $700 TV when you can spend US$14,000 on four pairs of Vision Pros? Elon Musk begs Big Government to protect Tesla. The EV giant’s shares fell by 12% on Thursday, putting it 55% below its ’21 value, after it announced not-great earnings. Basically, Tesla slashed its car prices to boost growth, which hurt profits and didn’t actually boost growth very much. Adding to Tesla’s woes, Musk conceded to shareholders that its Chinese rival BYD builds “extremely good” cars that cost about CAD$24K less than the typical Tesla, and that Tesla can’t cut prices much more. Musk even warned that, unless the U.S. puts up further trade barriers, BYD will “demolish most other car companies.” RRSP v. TFSA: Last week we shared this chart, to help you figure out which tax-advantaged savings account is most advantaged for you, but the link didn’t work for some reason. Sorry! Here’s a backup link just in case it doesn’t work again. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT ✉️ Canada Post is selling its slightly used IT department. Extra postage required. Do not bend, fold, or irritate. Source 💅 Oscars snub Greta Gerwig & Margot Robbie but not Ryan Gosling, proving once and for all that men rule. Source 🌯 Chipotle hiring 19,000 workers for “burrito season,” which is when the cheese ripens and the beans start to turn. Source 📺 Jon Stewart and The Daily Show getting back together. Neither one of them could find a match on SilverSingles. Source CRASH & BURN TO THE MOON 💸 $64 million lottery ticket sold in New Brunswick still unclaimed. Someone check under that pub table that used to wobble. Source 🧑‍⚖️ Indian judge to decide who invented butter chicken, but there’s no question it’s guilty of being delicious. Source 💩 If it didn’t sh*t, you must acquit: Italian detectives using dog poop DNA to bust irresponsible owners. Source 🚔 Police arrest woman who allegedly stole US$2,500 worth of Stanley cups. They just followed the trail of Nestea drops. Source WHO CARES WHAT’S UP THIS WEEK 5/7 of the Magnificent Seven to announce earnings. Can big tech keep up its monster earnings growth? We’ll find out when Microsoft and Google report Tuesday, followed by Apple, Amazon, and Meta on Thursday. And we finally get some big Canadian earnings, including from Canadian Pacific Kansas City, Rogers, and CGI. THE BIG IMPORTANT STORY TRADING Stocks Hit Fresh Highs. Is It a Bad Time to Invest? The boom times are back! (For now, anyway.) In recent weeks, the S&P 500, Dow, and Nasdaq have all notched all-time highs for the first time in two years, and the TSX could join the party soon. Every investor has heard the chestnut “buy low, sell high.” So now that stocks are decidedly not low, does that mean it’s a rotten time to buy? Should you instead hoard cash, like some sort of cave-dwelling, WSJ-reading goblin, until stocks fall and then go all in to maximize your returns? We don’t give investing advice here at TLDR, but we thought we’d unpack some data behind all-time highs to help you make sense of this moment. Why do all-time highs make some investors nervous? Well, it comes down to the basic principle that to make money in markets, you have to sell a stock (or ETF, etc.) for more than you paid for it. And if prices start out high, that might be harder to do. For this reason, investors try to avoid buying stocks that are overvalued — that is, you’re paying too much for what you get (a company’s earnings). And sometimes entire stock indexes get overvalued, leading to a painful correction, or fall, when investors across the board realize that companies aren’t making enough money to justify their high stock prices. OK, so you shouldn’t buy at the top, then, right? Seems like a good assumption, but the data doesn’t necessarily agree. North American stocks have marched steadily upward over the past century, and some bull markets have run for decades, partly since rising stocks and a booming economy can self-reinforce each other. So, if you’re waiting for a crash before you get in, you could wait for a long time and miss out on big returns. For instance, if you thought stocks were overheated in 1980 and delayed investing until the next bear market (that is, a 20% downturn), you would have waited seven years and missed out on something like 117% in returns. And even that downturn was a four-month blip in a historic 20-year bull market during which the S&P 500 rose north of 1,000%. So, all-time highs don’t mean a correction is imminent? History suggests no, not usually. If you look back to 1957, when the S&P 500 was created, the index has notched a new all-time high about every 14 trading days, or 7% of the time. What’s more, the S&P has been within 5% of its latest high about 60% of the time and has been in a bear market only 12% of the time. But what if there is a correction? Is your portfolio ruined forever? Probably not if you’re diversified and investing long term. The New York Times recently pointed out that if you invested in an S&P index fund on October 9, 2007, right before the stock market fell by more than 50% during the global financial crisis, you still would have gained 9.3% annually in the years since then for a cumulative return of 325%, provided you reinvested your dividends. That said, some foreign stock markets, like Japan’s, have had “lost decades” of little to no growth, so there’s that. So what about the current rally? It’s been largely driven by rising corporate earnings, which was not the case in 2021, when stocks surged beyond what earnings realistically justified. Hence the hard 2022 correction. Right now, tech stocks are more expensive, relative to earnings, than the rest of the market, but they’re nowhere near as pricey as they were in 2021, much less in the dot-com bubble. That said, there’s risk everywhere all the time. No one knows what fresh hell, or blue skies, might await. But history has shown that, for most investors, time in the market is more important than timing the market. If you’ve heard that before, it’s because someone’s been giving you historically good advice. —Sarah Rieger & Jared Sullivan OTHER VERY GOOD READS 🥫 Inside One of the Food Industry’s Most Guarded Secrets* Why food brands use private labels to compete with themselves. | Toronto Star 🔦 The Woman Who Spent Five Hundred Days in a Cave* Shocker: living underground is tough. | The New Yorker 💰 How to Save $1.7M for Retirement We crunched the numbers for you. | Wealthsimple Magazine 💉 The Complete History & Strategy of Novo Nordisk A deep dive into the company behind Ozempic. | Acquired podcast *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF BLUESKY If our phones don’t make us happy, surely the Apple goggles will… 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). Disclosures: Contributors to this newsletter own stock in Amazon, Google, and Microsoft. 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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