Plus: Bitcoin just reached a benchmark. December 9, 2024 Sign Up | View online IN THIS ISSUE 8 min read 🍁 Low loonie 🃏 Mighty Magic players 🫧 Soaring stocks Depending on who you believe, U.S. stocks are on the verge of a roaring ’20s redux — or in the mother of all bubbles. We explain below. | Getty Images THE WEEK IN MARKETS Bitcoin’s big milestone Large round numbers are arbitrary and meaningless but still: holy cow, Bitcoin hit US$100,000 last week! Maybe those fire-breathing crypto bulls everyone has been mocking since 2022 were onto something. The return of Donald Trump has fuelled much of the crypto giddiness — Bitcoin is up nearly 50% since his victory on November 5. That’s because people suspect that the Trump administration will lay a path to real legitimacy for crypto. These tailwinds have benefitted some meme coins, like Doge and Bonk, more than even Bitcoin. And, while it's hard to take seriously any currency promoted by people with laser-eye profile pics, maybe it’s no surprise, given the anti-establishment frenzy sweeping the world, that anti-establishment assets are soaring. The question is how high Bitcoin could fly, and what sort of mess it might make coming down. THE WEEK IN ONE NUMBER 67 The number of new stores Dollarama plans to open across Canada every year for the next 10 years. The fast-expanding discounter has been raking in profits as shoppers look for lower prices on food and other essentials. WHAT HAPPENED LAST WEEK IMPORTANT The loonie hits a five-year low. And for that we can largely thank/blame investors worldwide who have been piling into U.S. stocks, strengthening the greenback relative to CAD. And if Trump ends up acting on his tariff threats, some analysts believe CAD could sink to 66 cents on the U.S. dollar. We’ve previously covered the pros and cons of a weak loonie. (Con: travelling abroad is more expensive, as are imports; pro: your U.S. investments are killing it.) One teeny-tiny silver lining: a weak loonie makes our exports cheaper to Americans and other folks abroad who buy our stuff, which could help counterbalance the extra cost of U.S. tariffs on our goods. Québec bets on a garment-industry rebirth. The province’s investment arm, Investissement Québec, has purchased a $25-million stake in the popular Montreal-based textile company Sheertex, whose strategy is to replace nylon tights with an “indestructible” tear-proof alternative made from the same fibres used in bulletproof vests. Montreal was the historic centre of Canadian garment manufacturing until it was undercut by cheap labour overseas in the 1980s and ’90s. Officials are hopeful that innovative startups like Sheertex, whose investors include H&M and clean-tech VCs, can help make the city a garment hub once again. And, who knows, maybe Sheertex will make it happen: the clothing industry has been disrupted by outsiders before, most notably in the case of Spanx. INTERESTING The masters of the universe are playing Magic: The Gathering. Poker has long been the backroom game of choice for investors and politicos — a forum for schmoozing and sharpening those betting and bluffing skills. But, according to Sherwood Media, poker has been supplanted by Magic: The Gathering among the C-suite crowd. The collectible card game is Hasbro’s first billion-dollar brand and boasts more than 38 million global players. But unlike in poker, a game of skill and fortune, powerful Magic cards trade online like stocks, with the rarest going for millions. You can buy your way to victory, in other words, just like in the real world. Which might explain some of its elite appeal. Wanna guess how well the feds’ housing plan is going? Back in April, the Trudeau government unveiled an ambitious goal to build almost 4 million new homes by 2031 to relieve Canada’s cost-of-living crisis. Well, turns out, things are off to a slow start! According to a new report by The Hub, every Canadian home builder would need to double its current productivity to hit the government’s supply goal, based on the current (low) number of housing construction starts. —Sarah Rieger THE FOMO INDEX by Stacey Woods IMPORTANT 📚 Costco will stop selling books year-round, so, Dad, bring an old John Grisham to read while you eat your $1.50 hot dog. Source 🚗 Jaguar reveals its new EV, which answers the question: what would it look like if a Cybertruck threw up? Source 👔 Embattled Metrolinx CEO Phil Verster resigning to immediately take another job, proving there’s at least one thing he can do quickly. Source ✈️ Air Canada using facial recognition at Vancouver airport to make it as easy as possible to board your delayed flight. Source CRASH & BURN TO THE MOON ⛔ Elon Musk’s US$56 billion Tesla pay package rejected again. Luckily, he’s got a good government job to fall back on. Source 💰 Gen Z defines financial success as making $823,000 a year — at least, while they’re still getting their allowance. Source 🍗 KFC introduces a fried chicken drumstick digital pet. The goal is to keep you both from dying of heart disease. Source ⏰ New app uses AI to predict your exact time of death. If it’s wrong, they’ll give you a lifetime subscription. Source WHO CARES THE BIG IMPORTANT STORY STOCKS 2024 U.S. Stocks Are Booming. No One Agrees on What Will Happen Next As regular TLDR readers know, 2024 has been a banner year for stocks generally and for U.S. stocks specifically. In November, American equities beat world markets by the largest degree in something like 26 years, putting the S&P 500 on pace for one of its best years in a century. This impressive performance has created two camps: one that says U.S. stocks will likely keep on booming, while another, equally adamant group insists that a painful correction is coming. Last week, a Financial Times columnist went as far as to claim that U.S. stocks are in the mother of all bubbles. And since a lot of Canadians invest in U.S. stocks — and a U.S. crash could trigger sell-offs worldwide — it’s worth discussing! View #1: U.S. stocks are about to slow down, bigly Goldman Sachs recently made headlines by claiming that the S&P 500 may be on the verge of a “Lost Decade,” wherein it will grow a mere 3% annually, which would be well short of the index’s 13% annual return over the past 10 years. Goldman believes such a glum view is warranted because U.S. stocks, which have rocketed up by more than 40% since October 2023, are now so expensive that it will be nigh on impossible for corporate profits to grow fast enough to justify their sky-high prices. On that note, J.P. Morgan pointed out that U.S. stocks’ current price-to-earnings ratio — aka the price of a share in a company relative to the profits it generates — is near the highest it has been this century, which suggests stocks are overvalued. Concentration is another concern. The so-called Magnificent Seven tech stocks have soared by more than 90% since October 2023 and now compose about a third of the S&P 500’s total market cap, up from 14% in 2017. Goldman and others worry that the tech giants could disappoint investors if their bets on AI don’t fully pay off. And if your market’s success is largely contingent on the performance of a few companies and those companies lose steam — well, that’s bad. View #2: U.S. stocks are just getting started For every doomer, there’s an optimist who thinks U.S. stocks will keep ripping basically forever. Among them is banking giant UBS, which suspects that the U.S. is on the verge of another “roaring ’20s.” Investors who share such views argue that, yes, the price of U.S. stocks has soared, but U.S. companies have also grown their profits much faster than companies elsewhere. And because of that, stock valuations, though high, aren’t nearly as high as they were in 2020 or 2021 if you look at companies’ estimated future earnings (aka what really matters). In other words, U.S. stocks’ sky-high prices might be totally justifiable. As for the concentration concern, the non-Magnificent Seven companies in the S&P 500 — the Other 493, if you will — have recently been reporting increasing profits, so they might catch up. What should you do about all this? If you’re a loyal TLDR reader, you know what’s coming here, which is us saying that, since no one knows what the future holds, it’s probably a good idea to diversify your investments. That PSA aside, the deciding factor as to whether U.S. stock returns will be great or ho-hum over the next few years will no doubt be those aforementioned earnings. Promising corporate profitability has already driven some skeptics, including Canada’s David Rosenberg, to revise their bearish outlooks. And if you too believe U.S. companies will keep growing their profits like wild, you can invest in a way that reflects this view — just be prepared if you’re wrong. On the flip side, if you invest too conservatively, suspecting stocks will soon crash, you risk missing out on an epic rally. Since 1949, the average bull market has lasted for 5.5 years and returned 192%, while the current run has lasted only 2.2 years so far, with stocks up 69%. Either way, remember this: for all the hoopla about potential booms and busts, the reality is that stocks tend to rise by a fairly moderate amount over the long term. In the 20th century — the American century — U.S. stocks rose by about 7% annually after inflation, and many forecasts expect returns in a similar range going forward. Point being: all big stock swings, up or down, look tiny if you’re investing for the long run. —Ben Mathis-Lilley OTHER VERY GOOD READS 💡 The War Against Headlight Brightness Do internet crusaders know what’s best for the auto industry? | The Ringer 🌆 Your Landlord is a Billion-Dollar Corporation REITs are reshaping Canadian cities. | The Walrus 👶 OMG You’re Having a Baby! A guide to that and other big life moments that’ll affect your taxes. | Wealthsimple Magazine THE WISDOM OF SOCIAL Turns out, hawk tuah girl might’ve sort of did a rug pull (allegedly). 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 (lifecycle marketing manager), Matthew Karasz (markets editor) Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 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. © 2024 Wealthsimple Media Inc.