Plus: why Canada slapped tariffs on (some) Teslas September 3, 2024 Sign Up | View online IN THIS ISSUE 7 min read 🤖 AI earnings 🚘 Tesla tariffs 🏡 Home help It’s a weird time to buy a house or renew your mortgage. We made a handy little guide to help you navigate it. Scroll down to the Big Important Story. | HGTV THE WEEK IN MARKETS Are rate cuts for real this time? We hope you had a pleasant Labour Day! After taking us on a midsummer rollercoaster ride, the stock markets ended August right where they started — dancing around record highs. The big change? Investors are now betting that interest rates will fall by about twice as much as they expected a month ago; the bond market seems to think the Bank of Canada will cut rates by 1.5% (!) over the next year, and the U.S. Fed will cut 2% (!!). That would bring rates for mortgages and car loans down to somewhere around 5%, which is the lowest they’ve been since mid-2022. Why are investors now expecting such deep cuts when stocks are at record highs? It’s not fear of a recession — it’s optimism that inflation is finally under control and that a soft landing is within reach. But this isn’t the first time investors have bet on big rate cuts. We’ll see if we actually get them this time. SMART CHART The NFL decided that it would allow private-equity funds to buy stakes in teams. The decision largely has to do with the fact that franchises have gotten so valuable that there aren’t enough super-rich people out there willing to buy them. WHAT HAPPENED LAST WEEK IMPORTANT Where were you when Nvidia announced its earnings? If you want an example of the mania over AI, look no further than the quarterly earnings release for industry bellwether Nvidia — a moment so eagerly anticipated that finance bros gathered for watch parties. So how did the chip designer do? It beat expectations by raking in US$32.5 billion in revenue, up 122% from a year ago. But investors still got nervous and pushed Nvidia stock down by 6% on Thursday (it’s still up 147% YTD and the year’s top-performing S&P 500 stock). That’s because it’s an open question whether the Mag Seven tech giants will keep spending more and more money on Nvidia-powered data centres to build out their AI capabilities. Some investors think we’re approaching peak AI spending, while others hold that the race to create a “Digital God” will keep the party going. We’ll see! Trudeau doubles the price of (some) Teslas. PM Justin Trudeau followed the U.S.’s and the EU’s lead by announcing a 100% tariff on Chinese-made EVs, effectively doubling the price of imported models (including some Teslas). Why? Well, China’s EV makers are subsidized by the communist government, hence they make artificially cheap cars that threaten to put the world’s automakers in a bad spot. Tariffs have already begun to slow Chinese EV sales in Europe. Trudeau plans to go further by slapping a 25% tariff on Chinese steel and aluminum. Fingers crossed China doesn’t retaliate like it did when it restricted our canola imports after Canadian police arrested that Huawei exec for the U.S. INTERESTING Coming to a Shoppers near you: cancer vaccines? Here’s some news that could have trillion-dollar ramifications for the pharmaceutical industry and save millions of lives: last week, doctors began trials on the world’s first lung-cancer vaccine, which uses the same mRNA technique that tamed COVID-19. The vaccine is made by the German firm BioNTech, one of several pharmaceutical giants that’s competing to develop various cancer vaccines. If the jab works, it’ll teach your immune system to destroy cancer cells — without killing healthy cells the way chemotherapy often does. It’s way too early to celebrate: only 10% to 20% of drugs that reach the trial stage actually make it to market. But if this vaccine proves effective, it might, with some luck, be available within the next decade. FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 💳 Canadians’ average credit card debt rises to $4,300. Do you have another card you can put that on? Source 🚗 Park’N Fly data breach affects 1 million Canadians. Now hackers know who can’t get a ride to the airport. Source 🪑 IKEA is launching a resale website called IKEA Preowned. Good news if you lack the money for a new LACK. Source 🍕 Pizza Hut introduces pizza box that folds into a table. Good news if you can’t get a used LACK. Source CRASH & BURN TO THE MOON ⚾ You win some, you lose some, and you win and lose one: Danny Jansen plays for two teams in one game. Source 🎮 Employees in China given time off to play new game, “Black Myth: Wukong,” then it’s back to “Bleak Truth: Working.” Source 🏸 Don’t just stand there with your shuttlecock in your hand: Hong Kong tells sexually frustrated teenagers to play badminton instead. Source 🦅 Rescued bald eagle not injured, just “too fat to fly” after devouring raccoon. “That’s our bird!” cries America. Source WHO CARES WHAT’S UP THIS WEEK A crucial U.S. jobs report drops on Friday. Fingers crossed it doesn’t change the narrative around those expected rate cuts we talked about up top. THE BIG IMPORTANT STORY HOUSING How Do I Pick the Right Mortgage? It’s a weird time to try to buy a new house or to renew your mortgage. Interest rates have already begun coming down a bit, which means if you buy or renew now, your rate will be lower than it would have been a few months ago. But what if rates keep falling? Should that affect what type of mortgage you get? More specifically, is it worth locking in a longer-term rate now, or would a shorter-term one be better? To help you answer such questions, we put together this quick mortgage guide, which we tried to make as simple and non-boring as humanly possible. Let’s dive in. The basics: Fixed or variable? A fixed-rate mortgage, as the name suggests, has an interest rate that doesn’t change over the term of the loan. If your rate is 4% in the first month, it’ll be 4% in the last. A variable-rate mortgage refers to a loan in which the interest rate fluctuates in lockstep with whatever the Bank of Canada’s benchmark interest rate is at the moment. When the rate rises or falls, your mortgage rate follows suit. Which to choose? It depends on your risk tolerance. A fixed rate is the conservative choice, so if you can’t afford or don’t want any surprises mortgage-wise, that might be the way to go. The catch is that fixed-rate loans tend to carry higher rates than variable loans. A variable rate, on the other hand, is a dice roll — your mortgage rate could go up if inflation and interest rates shoot up again. But if rates are already high (as they are right now), your mortgage might get cheaper if rates come down. Three- or five-year term? The next big thing to think about is the mortgage term, which is the period of time you are locked into your particular interest rate, payment structure, and lender. Most mortgages in Canada tend to have three- or five-year terms (though more lenders are starting to offer seven- and 10-year options). Here’s the rule of thumb: if interest rates are on the high side, you probably want a three-year term, though your rate might be a smidge higher than if you did five years. The trade-off is that you’ll be able to renew sooner at a (let’s hope) lower rate. But conventional wisdom holds that if rates are already low when you’re mortgage shopping, you should lock in that rate with a five-year (or longer) term. Does amortization matter? Yes! Amortization schedule is a fancy way of saying how long it’ll take to pay the bank back. In Canada, the typical amortization schedule is 25 years, although that can change with each renewal. The longer your amortization period, the lower your payments will be — but the longer it’ll take you to pay off your loan and the more interest you’ll pay. When, why, and how to shop around. Whether you’re getting your first mortgage or renewing for the third time, remember that mortgage lenders are businesses. They compete against one another. They want to make money off of you, and they’re often willing to lower their rates to do it. But they’re not going to make things easy. You have to bring the incentive to them. Tip #1: Give yourself options. Talk to as many places as you can. (A mortgage broker who’s not affiliated with a particular bank is one efficient way to do this.) Get quotes. Share those quotes like they’re hot gossip. And be willing to jump through low hoops: a lot of banks will knock an eighth of a point (or so) off your rate just for opening an account with them. Tip #2: Don’t get complacent if you’re renewing. Most people, when their term expires, get a mortgage from the financial institution they’re already working with to avoid the hassle of qualifying with another lender. But being a loyal customer doesn’t mean you’ll get the best mortgage rate. Just the opposite. The first rate offer you get from a lender is what’s known as “the sucker’s rate,” and it’s rooted in the assumption that folks won’t know better and will just say yes. Don’t be a sucker. Revisit Tip #1: Get options. If you get a better offer, take it back to your bank. Negotiating with your lender during a renewal can often save you about 0.25% on your interest rate. Even over a three-year term, that’s real money. OTHER VERY GOOD READS 🧟 Real-Estate Shopping for the Apocalypse* What if the end is, in fact, nigh? | The New Yorker 🗞️ OpenAI’s Copyright Problems, Explained The New York Times is ready for court. | The Verge 🦕 The Asteroid-in-Spring Hypothesis* There’s a feud tearing apart the paleontology world. | New York 🤑 The Budget for People Who Hate Budgeting… … and also want a bidet. | Wealthsimple Magazine *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. POSTS OF WISDOM What a time to be alive… 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). Correction: In last week’s edition, we erred in saying that no developed country has a birthrate above the 2.1 replacement level. There is at least one: Israel. We regret the error. 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. 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