Plus: a new trillion $$$ company May 29, 2023 Sign Up | Made in Canada IN THIS ISSUE 8 mins read 🤖 An AI gold rush 🏦 A Treasury trust fall 🏎️ A cinema standout The Fast & Furious movies may frequently defy the laws of physics, but they also demonstrate the laws of international-box-office success. The new Fast X was no exception. | Universal Pictures THE WEEK IN MARKETS Nvidia Goes Vertical Tech stocks are cool again. At least for now. If you want to know why, just Google “$NVDA” (or, better yet, read our write-up below). It’s not every day that a mega-cap (i.e., really big) company rallies 25% during one trading session and basically pulls an entire index — the Nasdaq-100, in this case — up 3.5%. But that’s exactly what AI-tech builder Nvidia did after posting oversized quarterly earnings. (Meanwhile, the S&P finished flat last week, and the TSX was down a bit.) What does it all mean? For all the chatter about a potentially overheated market for AI stocks, investors are still happy to stoke new fires. So, is there an AI bubble, and if so, just how bubbly is it? Yes, we’ll say it again: only time will tell. WHAT HAPPENED LAST WEEK IMPORTANT Nvidia nears the four-comma club. As we mentioned above, it had an eventful earnings call on Wednesday. Investors (other than Cathie Wood, sadly for her) had high hopes, but nobody thought Nvidia would leave such a smouldering hole in expectations. Demand for AI components is so stratospheric that the company, which makes graphics cards and data centres that train language models like ChatGPT, beat its first-quarter revenue goals by US$670 million— and upped its second-quarter goals by an astounding US$4 billion. $NVDA shares spiked like a meme coin in response, bringing the company a bull’s sneeze from becoming the sixth member of the US$1 trillion valuation club. The banks are worried about you. Not as, like, a human with complex emotions who deserves happiness (don’t be silly), but because they’re worried you might miss your mortgage payment. Four of the Big 5 banks (shout out to CIBC!) missed expectations last quarter, largely because they set aside a lot of money to cover bad loans, as high interest rates squeeze customers. Don’t worry about the banks, though! They continue to pull in boatloads of cash. They’re just conservatively keeping their rainy-day funds full as the economy slows. Don’t believe the debt hype. The Canada Mortgage and Housing Corp. sounded an apocalyptic alarm, announcing that Canadian debt has been rising dramatically and has now reached the most debt relative to GDP of any G7 country. So, we’re doomed! But not really, because here’s the thing: GDP isn’t the same as income. Yes, Canadian consumers have taken on more debt, but we’re also making more money. So the ratio of our debt to income has actually been pretty flat for about a decade. And that ratio is still pretty cheap to service. As University of Calgary economist Trevor Tombe told TLDR, for every $100 that Canadians have, we owe about … $15. Which, he says, “doesn’t look dire at all.” INTERESTING Global finance is one big Jenga tower. Money Stuff’s Matt Levine offered an excellent explanation of the U.S. debt ceiling. The entire financial system, he points out, is basically people promising to pay for or do things in the future, whether they’re getting a mortgage or trading stocks. But, because the world isn’t one big kumbaya church retreat, the system can’t just rely on trust; if you want to borrow money, you have to put up collateral that’s stable, liquid, and easy to determine the value of. And that collateral is often U.S. Treasury bills. The trouble is that if the value of all this collateral suddenly shifts — like if the U.S. fails to raise its debt ceiling and defaults — well, Jenga. Or at least expect some wobbles. The good news is that, over the weekend, President Biden and Republican leadership reached a deal to prevent the tower from falling. Fingers crossed their debt-ceiling bill passes both chambers of Congress this week. Vin Diesel owes China a thank you note. There are a few things we should all be able to agree on with the Fast & Furious movies: 1. They’re fun. 2. They’re not good. 3. If it weren’t for China’s US$4.4-billion movie market, Diesel would probably still be making babysitting movies. The numbers came in for Fast X last week: while the North American box office sputtered to a US$67.5 million opening weekend, the movie’s US$319 million global take (including US$78 million in China) was the second best of the year. That shows just how important the international market is for blockbusters — and how well F&F has mastered getting past the censors with the universal language of explosions and cars that plummet from planes and drive off just fine. FROM OUR SPONSOR 4% interest on Cash account balances available to new and existing clients with over $100,000 in net deposits with Wealthsimple. Annualized rate, subject to change. Learn more. For more information on CDIC and eligible coverage, read more. THE FOMO INDEX by Stacey Woods IMPORTANT 🚢 Orcas attack and sink third boat off coast of Europe. Still mad about the theme parks, perhaps. Source 🥃 Vancouver liquor store taking only in-person applications to buy 81-year-old bottle of Scotch for $288K. Paper bag not included. Source 🏖️ New ranking of the world’s best beaches includes two Canadian ones, and not in some kind of special category either. Source 🏃🏻‍♂️ A 74-year-old Ontario man ran his 200th marathon this weekend, beating everyone in the under 75, over 199 marathons group. Source CRASH & BURN TO THE MOON 💉 Ozempic users report drug works for addictions like drinking and smoking, so don’t wait, call your Ozempic dealer today! Source 🌫️ Train that left Wyoming with 30 tons of white powder arrives in California empty. Jack Nicholson had no comment. Source 💰 Poll finds 7 in 10 Canadians consider themselves financially fluent, at least enough to curse. Source 💍 Jeff Bezos and his girlfriend are engaged, so put a little something in your Amazon cart for them. Source WHO CARES WHAT’S UP THIS WEEK Game 6 in the NHL Western Conference Finals (Monday). The Dallas Stars take on the Las Vegas Golden Knights — two fertile crescents of ice sports. Whoever survives the week will play the Florida Panthers in the Stanley Cup Finals, which begin June 3rd. The NBA Finals start (Thursday). You’d think the people in charge would have coordinated their season-ending megaevents better by now. DON’T BE A TLDR HOG 🤝 Like TLDR? The first five million people to click this link can share it with a friend for free. (Don't like TLDR? Afflict it on an enemy! We'll appreciate you either way.) THE BIG IMPORTANT STORY REAL ESTATE How the Housing Crisis Keeps Us Poor Canada does a lot of things right. We wouldn’t have one of the highest standards of living in the world if that weren’t true. But one thing that’s (arguably) very broken in Canada is — and you’ll never guess this — housing. The country has one of the highest house-price-to-income ratios in the world, and our high real-estate costs get passed down to renters, who now in many cases spend 45% of their income on housing, if not far more. Which helps to explain why many Canadians struggle to meet their basic needs. Matthew Desmond, a Princeton sociologist and Pulitzer-winning journalist, has devoted his career to exposing the main drivers of poverty. And he has done this through extensive, boots-on-the-ground reporting that has won him comparisons to 19th-century muckraker Jacob Riis. For Desmond’s landmark 2016 book, Evicted, he embedded with families struggling to stay housed in Milwaukee, an experience he used to highlight housing’s outsized role in keeping the poor teetering on financial ruin. But he also followed landlords to capture their perspective. In his powerful new book, Poverty, by America, he goes further, revealing how well-off families benefit from the housing crisis — a problem endemic in the U.S. but also in Canada. Desmond recently spoke with TLDR’s Jared Sullivan. Canada’s housing crisis owes to many factors, no doubt, but recent data showed that one in five Canadian homes is owned by investors, most of whom are Canadian. How does this sort of thing affect low-income families? It’s hard to build wealth as a renter, but many people have no choice but to rent, in part because investors scoop up homes and drive up prices. But investors aren’t the entire problem. Everyday homeowners benefit from the housing shortage, because a scarcity of homes props up their real-estate values. And homeowners protect their wealth by actively participating in segregation, by making it illegal to build affordable housing or multi-family housing in their neighbourhoods. It’s illegal to build anything other than a single-family detached home on most residential land in the U.S., and the same has historically been true throughout Canada. This leads to a housing crisis but also concentrates wealth in certain neighbourhoods and poverty in others. [Toronto recently passed a measure to allow multi-unit residences to be built in all city neighbourhoods; British Columbia is expected to adopt similar legislation.] Throughout your new book, you urge readers to view themselves as poverty abolitionists. What’s one way individuals can live that out in terms of affordable housing? Homeowners can give families, as opposed to investors, the first rights of refusal whenever they put their places on the market. Beyond that, you can show up to your city’s zoning-board meetings and say, “Let’s build bigger, denser housing.” Let them know you refuse to deny other children the same benefits your kids had living in a neighbourhood. It might be awkward, but we have to own this issue. I’m not dismissing the importance of policy or politics, but I’ve grown skeptical of the idea that individual change and structural change are different, as if the latter wasn’t just made up from a bunch of moves by the former. I get that. But what’s one way the government could encourage communities to build more affordable housing? The federal government could do more to leverage its power to confront housing segregation, by, say, denying communities with segregationist policies federal grant money. That would be a stick approach. A carrot strategy would be to reward communities for building affordable housing. For instance, the government could give a town money for a new gymnasium but only if it accepts money to build affordable housing at the same time. Read more: “Forced Out,” by Matthew Desmond (The New Yorker) OTHER VERY GOOD READS 👯 How Some People Get Away With Doing Nothing at Work Hanging out, 9 to 5 | Vox 🪚 The Sharpest Tool in the Shed* How Lee Valley built a cult following | Globe and Mail 🍁 Canada’s First Inuk Governor General Eyes Reconciliation Mary Simon’s path to the role was unlike any before | The Walrus 📚 Six Totally Worthwhile Personal Finance Books Money books are important. But they’re not all very good | Wealthsimple *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER Forget an investment property — how about a home, period. 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), Nikki Holmes (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). 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. 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