Plus: of course, inflation September 19, 2022 Made in Canada IN THIS ISSUE Estimated read time: 8 min ✈️ Air Canada’s new planes 🎩 Amazon’s old monopoly 🏠 Housing’s same old headaches WHAT HAPPENED LAST WEEK What is one thing that affected market sentiment this week? Survey says... | Wealthsimple THE WEEK IN MARKETS Pain was absolutely everywhere last week, with the three major U.S. stock indices finishing down from 4% to 6% and Tuesday marking the single-worst day for stocks since June 2020. Tech stocks suffered the most, with the Nasdaq 100 down more than 6% on the week and about 30% on the year. Big-name Silicon Valley shops like Meta (-13% to -57% on the year) took some particularly spectacular dives. Crypto fared about as poorly. The oil-heavy Canadian TSX did slightly better, finishing the week south 3% — down about 10% on the year. Which is comparatively good but still pretty ... eek. The cause for all this bloodletting was, of course, one very hot U.S. inflation report... IMPORTANT That's right: inflation is inflating again. (We’re not just cutting and pasting this from old newsletters, we promise.) Everyone’s been predicting a fall in inflation, but U.S. numbers didn’t care: prices remained stubbornly high. And if you look deeper, the core basket (which leaves out volatile food and gas and is more concerning to policymakers) surged. Bring on the predictions of jumbo rate hikes and recession. Survey says ... investors are freaking out. Even if you read it in Steve Harvey’s (or Gerry Dee’s, if you prefer) voice, that doesn’t sound like a great sign. A highly anticipated new Bank of America survey shows people in Patagonia vests fund managers (people who invest other people's money) are taking less risk, stockpiling more cash, and holding fewer stocks than basically anytime in the past 20 years, including the financial crisis. But! The more optimistic read: all this selling could signal that we’re near the bottom. Home prices keep falling, but affordability keeps getting worse. Last week, the association of people who put their faces on their business cards lowered their forecasts for home prices after six straight months of falling values. The problem is those rate hikes — designed to slow the market — have caused mortgage rates to skyrocket so much that the month-to-month cost of owning a home is the most unaffordable it’s been since 1981. With more hikes on the way, it’s likely to get worse before it gets better. INTERESTING Anybody wanna buy some PharmaCoin? Old-school private-equity firm KKR tokenized a $4-billion health-care fund. Along with opening private equity up to those who don’t know the feel of a gold toilet, moving to the blockchain lets investors see returns in under a decade, since you can now just sell your tokens to someone else. It’s the latest example of a traditional company using the blockchain to do something, well, traditional. Amazon had itself a real week of monopoly accusations. First, California filed an antitrust suit claiming the company penalizes retailers who offer lower prices somewhere else. Then a recording was released of an exec threatening to shut down Amazon Marketplace in Canada — used by 40,000 Canadian merchants — if the country strengthened its competition laws. THE FOMO INDEX by Stacey Woods IMPORTANT 💸 Rich get richer: last decade saw corporate profits increase at twice the rate of worker wages in Canada. Source ☕️ Starbucks launches NFT program to give people “immersive coffee experiences.” What, like spilling on yourself? Source ✈️ Air Canada among first to order new hybrid planes and, we hope, some extra-long extension cords. Source 🥣 Hold on, it just might work: new Kellogg’s Insta-Bowls feature cereal and powdered milk in their first-ever collab. Source CRASH & BURN TO THE MOON 💻 Gaming chairs don’t buy themselves. Tech workers say they need even higher salaries to keep up with inflation. Source ❤️ Hey, Muskheads: Elon’s college girlfriend is auctioning off his love notes. Just cross out her name and write yours. Source 🧑‍🍳 The Michelin guide came to Toronto and Burrito Boyz was znubbed. Source 👑 My queen died and all I got was this lousy day off: Canada makes today a holiday for federal workers. Source WHO CARES STUFF THIS WEEK The Fed announces its benchmark interest rate (Tuesday). Analysts anticipate another 75-basis-point hike. (We actually did cut and paste this one.) Canada’s consumer price index for August comes out (Tuesday). Analysts anticipate — oh, forget it, you already know what they anticipate. THE BIG IMPORTANT STORY SUPERPOWERS China’s Self-Inflicted Slowdown If it weren’t for everyone freaking out about inflation, the most gargantuan economic story of the year would surely be China’s recession. For years, economists have predicted that China would overtake the U.S. by 2030 to become the world’s largest economy. But now many are second-guessing whether that will happen at all, with China’s GDP growth expected to lag behind the U.S.’s for the first time since 1976. There’s reason to think the Chinese government orchestrated the decline itself. We’ll get to that. First, let’s review all the ways China’s wheels have (arguably) come off. China’s juggernaut economy was already slowing before the pandemic, partly because its labour-intensive manufacturing sector had “reached its limits,” and partly owing to its decelerating population growth. Beijing crushed risky sectors. In August 2020, as the economy surged back from its pandemic nadir, Beijing decided to rein in a potentially destabilizing, speculation-fueled housing bubble, by forcing developers to pay off some of their hundreds of billions of dollars in debt. That left many developers without enough cash to finish buildings they had “presold.” Which caused a housing crisis and a banking crisis, because once people realized their new places might go unfinished, they stopped paying their mortgages en masse. Beijing brought the hammer down on its internet and gaming sectors, too, believing that they were destabilizing in their own rights. China decided to lock down cities again and again throughout the pandemic, even as the rest of the world largely returned to normal. The lockdowns have left millions out of work and have made consumers hesitant to spend money, but China keeps doing them anyway (most likely) because of its weak vaccines. Western companies started eyeing the exits. So we mentioned that Beijing hammered Chinese internet companies, right? Well, Western companies didn’t like that. Then Beijing shot missiles over Taiwan this summer, and already-anxious foreign tech companies, like Apple and Google, began shifting their production elsewhere posthaste. THE UPSHOT What’s interesting about China’s economic woes is that they were all more or less engineered by President Xi Jinping. The enigmatic Xi has clearly opted to embrace economic pain for the sake of stability, which can be undermined by things like high housing costs and disruptive internet companies. “Stability” is the watchword. That’s because Xi seems to think that stability will help the Communist Party (CCP) retain its grip on the country as growth slows, giving it a stronger economic position once the West inevitably (in Xi’s view) fractures. In other words, Xi has chosen pain now for gain later. So what does all this mean? China, despite its downturn, will likely remain the world’s second- or third-largest economy in the coming decades. A big question moving forward, though, is whether Xi’s bid for stability will cause an economic crisis that Beijing truly can’t control and sow the very sort of discord that it hoped to avoid. Xi’s policies have already sparked bank runs and those mortgage revolts we mentioned, and pushed out a lot of the foreign investment that has fueled China’s rise. Xi’s bid for stability, by that measure, has yet to pay off. — J.R. Sullivan READ MORE: “The Chipmaker at the Center of the Taiwan-China Standoff, and Global Trade” SHARE TLDR WITH FRIENDS 🤝 Put this link in your group chats, in your Slack threads, on a tattoo on your back — whatever works for you! OTHER VERY GOOD READS 🍼 Johnson & Johnson’s War Against Consumer Protection How they’re trying to avoid paying settlements | The New Yorker 🦵 The Men Who Get Leg-Lengthening Surgery Ow ow ow ow ow | GQ 📺 The Vast Wasteland of Internet Television* Thanks a lot, Facebook | Wired 🧑‍💻 A New Disturbing Form of Human Trafficking Forcing victims into cyberscamming | ProPublica *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER TFW your grandpa wants to save the planet (and also save $700 million in taxes)... 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), Ciara Rickard (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). Full disclosure: contributors to this newsletter own stock in Amazon and Alphabet. Correction: Last week, we made a mistake: we overestimated how much Shakespeare you’ve read. Our subject line, “Et tu, Apple?,” was not botched French, as some readers were quick to email us about, but a reference to “Julius Caesar.” We promise to never do that again. 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. The content in TLDR is not investment advice, a recommendation to buy or sell assets or securities, nor any other kind of professional advice. 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