Plus: Revenge of the Redditors? March 18, 2024 Sign Up | View online IN THIS ISSUE 8 min read ☢️ Amazon gets atomic 🇨🇳 Bing gets backlash 💰 Redditors get revenge (maybe) The Great Wall of China was built by Emperor Qin Shi Huang. The Great Firewall of China, which limits what users can search, was built in part by ... Microsoft? More below. | Look and Learn / Bridgeman Images THE WEEK IN MARKETS Stocks shrug off inflation On Tuesday, something happened that six months ago would have caused real market pain: U.S. inflation data came in hot. Not crazy hot — 3.2% in February compared to 3.1% in January — but hotter than central bankers would like. As regular TLDR readers know, more inflation means higher interest rates for a longer time, which, in turn, usually means less spending, lower corporate profits, and worse stock performance. At least in theory. But on Tuesday, the S&P 500 rose by 1.12%, hitting a new all-time high, despite the real possibility that stubbornly high inflation will cause the U.S. Fed to delay cutting rates until this summer. Why? One reason is that corporate profits have boomed despite high rates, which no one expected. But if profits don’t remain resilient, the stock rally could get derailed in a hurry. Watch this space. THE WEEK IN ONE NUMBER 70% Remote Canadian workers who are being surveilled by their company. AI spying, via programs that screenshot your laptop or even record your biometrics, is on the rise, and experts warn that worker-protection laws haven’t kept up. WHAT HAPPENED LAST WEEK IMPORTANT Your money apps should talk more — at least the government thinks so. Ottawa has promised to include a framework for open banking in the federal budget. Who cares? Well, open banking lets financial companies securely share customer data, which will make it easier for you to switch banks and use third-party budgeting apps. Switching banks is currently such a pain that 80% of Canadians have never done it. Once moving accounts is simpler, banks will have to work harder (e.g., charge smaller fees or offer better savings rates) to keep clients happy, which explains why the Big Five aren’t doing cartwheels over the idea. Amazon goes nuclear. The tech giant recently spent US$650 million on a fancy new data centre in Pennsylvania that it has connected to a nuclear power plant. Why does a web retailer that sells sea-moss oil want to be next door to two fission reactors? And why does Microsoft want to build small nuclear reactors inside its data centres? Because AI, crypto mining, and cloud computing require a ton of terawatts: power used by the three technologies is expected to double, to 1,000 TWh, from 2022 to 2026. That’s roughly the same amount of power that Japan currently uses each year. INTERESTING Turns out, Bing is big in China. The search engine you forgot still exists recently became China’s most-used desktop search tool. It’s a dubious honour with a big asterisk: Google doesn’t operate there because it doesn’t want to help maintain the Great Firewall, China’s web-censorship system. Last week, a U.S. senator urged Microsoft to pull Bing from China after it stopped displaying photos of the 1989 Tiananmen Square protest for U.S. and European users. Microsoft blamed the issue on “human error,” and said it would rather stay in China since Bing is the nation’s “least censored search engine.” Which, sure. But the company also probably sees huge growth potential in China. Will Reddit’s IPO come up short? The “front page of the internet” is going public on Thursday in one of the year’s most anticipated IPOs. Which has people wondering: How funny/ironic would it be if Reddit, the birthplace of the meme-stock movement, watched as its bid for a US$6.5 billion valuation got kneecapped by short-selling Redditors? It could happen! Last year, Reddit inflamed users after it restricted its API access. It’s trying to smooth things over by setting aside almost 2 million shares of its stock for power users (sorry, Canadians, we’re not eligible). But many Redditors are lining up to WallStreetBet against Reddit’s stock anyway. Reddit went as far as to list retail traders as one of the risk factors in its IPO. Are we in for another meme-stock frenzy? Pop some popcorn. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🛏️ Average price for Canadian rentals up 10.5% since last year, but living with your parents is 11% more annoying. Source 🧓 Related: Young renters are moving into retirement homes. It’s less expensive, and there’s always someone to watch Matlock with you. Source 🕺 U.S. one step closer to banning TikTok. The future of living-room dancing hangs in the balance! Source 🍺 Federal government holding off on full alcohol tax increase for two years. They want you to be sufficiently buzzed first. Source CRASH & BURN TO THE MOON 🛜 Google’s new Bay View facility has very spotty WiFi, and, yes, Gemini, they’ve tried restarting the router. Source 💔 Bumble is rethinking its “women message first” strategy in favour of “please don’t delete us” strategy. Source 📹 Airbnb bans use of all indoor security cameras. Homeowners will have to use OnlyFans like everyone else. Source ✈️ Baby born on Air Canada flight to Toronto. Airline is so proud it might waive the extra-blanket charge. Source WHO CARES THE BIG IMPORTANT STORY Q&A Cathie Wood Lost Big Betting on Tech Moonshots. She Thinks She’ll Win in the End There are two types of fund managers that the mainstream press tends to focus on: time-tested titans and rogues who spark controversy. Cathie Wood falls into the latter category. She’s the CEO of ARK Invest, an investment-management firm that takes big bets on super-speculative tech companies, including Coinbase, Tesla, and various gene-editing firms. ARK’s flagship Innovation Fund ($ARKK) was fairly obscure until 2020, when average investors began YOLO-ing their pandemic stimulus cash on moonshot-y stocks, which sent $ARKK up by more than 300% in less than a year and made Wood something of a household name. Then interest rates shot up, and $ARKK tanked. It’s currently down 68% from its peak at a time when stocks are broadly up. Morningstar dubbed it one of the decade’s top “wealth destroyers.” But $ARKK’s dramatic drawdown hasn’t sapped Wood’s tech enthusiasm. We spoke with her for the TLDR podcast about why she thinks that some highly valued tech stocks are, in fact, undervalued. You should listen to the full interview, but here’s an edited excerpt: How do you pick the companies you invest in? The first thing we’re doing is taking 14 different technologies — robotics, energy storage, EVs, AI, etc. — and trying to size the future market for each. Then we’re trying to gauge when a segment of the population will be willing to buy this new technology and at what price. We assume we’re going to face headwinds over the next five years [because our companies have high valuations and will need to boost profits to live up to them]. But if we are right, the pendulum will start shifting and these new technologies will start disturbing the old world order. And we think that’s going to happen quite dramatically during the next five to 10 years. Explain that more: how will the world order be disturbed? Everyone thinks the Magnificent Seven will win AI, but some of the companies, like Google, are not moving fast enough and breaking things. I can already bypass Google with [OpenAI’s] GPT-4 when I’m researching something, so what is that going to do to its advertising model? So if you’re right that AI is going to be the big thing, how do you know you’re betting on the right companies or even the right kind of companies? You have to be asking the right questions, and today I think the most important one is: Is this company using its proprietary data aggressively, and is it harnessing AI? We need to see our companies execute on their AI strategies and capitalize on this opportunity. If they don’t, we will pull away. You caught flak for selling off shares of AI bellwether Nvidia before it rallied big last year. Explain why you did that. We bought Nvidia at US$5 in 2014. Today it’s about US$900. We have pulled away from it because we’re investing in the next beneficiaries of AI. Nvidia is a hardware company; it makes GPUs. The trouble is that, by our estimates, for every $1 of hardware sold historically, $5 or more of software has been sold. So we’re expressing our investment call on AI by investing in software. One last crucial question: what is the dumbest thing you ever bought? Once, in the early ’90s, before I founded ARK, I bought a lot of Mexican stocks when I shouldn’t have. I was thinking more like did you ever buy a Bentley and then think, Oh God, why did I buy a Bentley? I really hate shopping. I go two times a year with a shopper. That’s it. When I was raising three children, I had my nanny go buy our cars, and I almost didn’t care. Editor’s note: We don’t give investing advice at TLDR, and we don’t endorse any of Wood’s views or analysis; we just find her takes interesting. As always, research before investing. —Interview by Devin Friedman and Matthew Karasz OTHER VERY GOOD READS 🍁 Loblaws Has Become an Everything Company And they’re showing no signs of slowing down | The Walrus 🤳 Will Children of Influencers Ever See a Share of the Money? What’s the price of a childhood turned into content? | Cosmopolitan ⚰️ Death and the Salesmen Boardroom and legal battles as Toronto runs out of burial space | The Local THE WISDOM OF X Ditto when we use the 🤣 emoji in response to our manager’s joke. 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), Clare Douglas (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 shares 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? 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