Plus: Why Siri could be coming for your kneecaps June 13, 2022 Made in Canada IN THIS ISSUE 📜 A crypto-friendly crypto bill 🏦 Apple turns into a bank 👑 Queen Elizabeth turns into a hologram WHAT HAPPENED LAST WEEK Bloomberg | Vitalik Buterin, the founder of Ethereum. The week in markets 🏦 🤒 🛢️ 😐 👾 🤕 Ouch. The S&P was down another 6% — nearly 20% on the year. Once again, speculative tech stocks were hit the hardest and, by staying relatively flat, oil producers outperformed. That meant the oil-heavy TSX held up a bit better. But only a bit: it was down 3% on the week and 5% on the year. US & Canadian bonds joined the sadness party, with S&P government bond indexes each down nearly 10% since December. And crypto. Poor crypto. Bitcoin fell 7% and Ethereum about 12%. IMPORTANT Inflation keeps inflating. Waiting for rate increases to bring down inflation has started to feel like throwing change in a fountain: plenty of crossed fingers, not a lot of results. U.S. inflation jumped to 8.6% last month. In this case, the number hits even harder: it’s driven mostly by increases in gas, food, and shelter, which is bad news for consumers and probably the markets. Canada’s number comes out June 22. More 🤞. Maybe Parliament can help? Both the Conservatives and NDP are yelling directions from the back seat as the Bank of Canada tries to steer the country away from the pain of April’s record 6.8% inflation. The Tories would make a hard right by pausing a bunch of taxes (fuel, carbon, fertilizer), while the NDP would cut left by taxing big companies and giving the money to regular Canadians. Hope they don’t just drive into a wall. New ETH, who dis? After years of teasing and delays, Ethereum announced a successful trial run of its new proof-of-stake network. The blockchain claims it will be faster and 99% more energy efficient than the current plodding proof-of-work system. With only two more tests to come, it could actually be ready by late summer or fall. For real this time. INTERESTING AAPL comes for BNPL. Apple has shown it’s good at selling computers. And phones. And watches. And music. But can it also be a bank? The trillion-dollar company announced it would launch and finance its own version of the pandemic-popular but recently suffering Buy Now Pay Later (BNPL) programs. Their interest-free loans can be paid off over six weeks — after which you’ll have to deal with Siri. The water’s boiling around Binance. Again. Reuters reported that the world’s biggest crypto exchange had enabled $2.35B of hacks, fraud, and drug dealing. The SEC also announced an investigation into the launch of the platform’s native token, BNB. This kind of news is probably a big part of why, on Tuesday, two U.S. senators (including Bitcoin superfan Cynthia Lummis) proposed a long-awaited, crypto-friendly bill that would take oversight away from the SEC. THE FOMO INDEX IMPORTANT 🤖 Someone trained AI using rhetoric on 4chan. It produced a “shockingly effective” hate-speech machine. So if we need that, we have it. Source 🐹 While attempting to engineer nicer hamsters, gene-editing scientists make really mean ones instead. But are they mean enough for 4chan? Source 🫅 Queen Elizabeth takes Jubilee carriage ride as a hologram. Beefeaters wonder why they never thought of that. Source 🌮 Defy, Taco Bell’s new four-lane self-serve drive-thru, promises to defy any shame you might feel on your next 1 a.m. gordita run. Source CRASH & BURN TO THE MOON 🏌️ Players on LIV, the Saudi answer to the PGA, prefer to “focus on the golf” rather than the human rights violations. Source 🚫 Netflix chief Reed Hastings is banned from Russia. Putin reportedly already binged all the Swedish crime dramas. Source 🍺 The Molson Coors strike reaches a tentative agreement. Everyone kicks back and has a few Molsons, but tentatively! Source 🍾 The New York Times reports that caviar bumps are “all the rage.” Just as expensive as cocaine, and the conversations are just as dull. Source WHO CARES WHAT’S UP THIS WEEK THURSDAY June 16 Another Fed meeting, another likely rate bump. Even before last week’s inflation surprise in the U.S., many expected the Federal Reserve to follow Canada’s lead and raise the benchmark interest rate another 0.5 to 1.5%. Hope it works — we’re all eager to fix the shrinkflation travesty of five fewer Kleenex in the tissue box. FRIDAY June 17 If a home price falls in Toronto, can anyone still afford to hear it? Both StatCan and the Canadian Real Estate Association will release home sales numbers for May. Expect another slight drop in the country’s average housing price — one of the welcome effects of Tiff’s rate increases. But as to the nightmare of paying a mortgage… see below. THE BIG IMPORTANT STORY INEVITABILITY The ticking time bomb of Canadian mortgages If you bought a home during the pandemic, you weren’t alone; 1.4 million Canadians did the same. With mortgage rates at record lows, you may feel pretty lucky to be watching all of the increasing housing drama from the comfort of your already-moved-into living room. But before you drizzle any more butter on your popcorn, remember there could be some drama in store for you, too — just as soon as it’s time to refinance. The Bank of Canada issued a somewhat terrifying warning this week, estimating that households that took out five-year term mortgages in 2020-1 could see monthly payments grow by as much as 45% in 2025-26. How does that work? Here’s an example. Say you bought a home in Winnipeg for $400,000, put 10% down, and got a typical Canadian mortgage: a five year fixed-term at 2.5%. Right now, your payments would be about $1,600 per month. When that mortgage goes up for renewal, however, if your new rate is 4.5% (the median rate BoC predicts mortgages will renew at) those payments would be $2,000 — a jump of 25%. The scariest part of this little financial fable? That 4.5% rate is a somewhat conservative estimate. BMO senior economist Robert Kavcic pointed out that the last time the five-year bond yield was at this level in 2008, five-year fixed mortgage rates were above 5%. It’s smart to start planning for that increase now (which of course is easier said than done). With the astronomical increase in home prices during the pandemic, many Canadians had to stretch themselves to the limit to afford one, and now many will be asked to stretch even more. It’s too soon to say what greater effects this will have on homeowners and the economy as a whole, but it’s probably wise to keep an eye on that ticking clock. — Sarah Rieger OTHER VERY GOOD READS 🍳 Meet the TikToker Going Viral by Baking His Way Through Great Depression-Era Cookbooks A 7UP Jell-O salad?! | Eater 🙅 A Full Return to the Office? Does ‘Never’ Work for You? Employees rebel against back-to-office plans | The New York Times 🚢 A Titanic fraud? Whether a $300 million “Titanic Experience” is a possible scam | The Coast THE WISDOM OF TWITTER Cardi B, financial visionary: 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), Sara Black McCulloch (fact checker), Meaghan Wray (copy editor), Peter Martin (senior editor), and Kat Angus (managing editor). 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