Plus: falling home prices fall short of rising mortgage rates October 11, 2022 Made in Canada IN THIS ISSUE Estimated read time: 9 mins 🐄 Video-game cash cows 🦒 NFT giraffe plushies 🐇 Destroyed chocolate bunnies WHAT HAPPENED LAST WEEK The good news (after a terrible weekend) is that the Jays might be able to make the playoffs a habit, and not (just) because of Vladimir Guerro, Jr. | Rick Madonik/Toronto Star via Getty Images THE WEEK IN MARKETS How was your Thanksgiving? Early in the week, it looked like we had a lot to be thankful for. After Monday and Tuesday, the TSX, S&P, and Nasdaq were all up at least 5% — among the biggest two-day rallies since the pandemic started. Then came Friday’s strong employment numbers from the US (the unemployment rate ticked down to 3.5%). Good news, right? No, because we’ve all climbed into the looking glass with Alice, where good job numbers are bad because it means central bankers are more likely to hike rates to ward off more inflation. On Friday, markets basically gave back all of those hard-won gains and ended the week just about flat. At least we can be thankful for ... the TSX being closed yesterday. IMPORTANT Breaking news: you still can’t afford a house. The Bank of Canada’s interest rate hikes managed to cool the housing market a few degrees, but they also strapped mortgage rates to a rocket. The average home price in Canada dropped 3.9% in the past year; meanwhile, the average five-year-fixed-mortgage rate jumped from 3.2% to 5.58%. If you put 20% down, that means the $2,500-a-month mortgage payment that got you a $650,000 house last year is only good for a $500,000 house today. With Tiff hell-bent on raising rates till inflation gives in, there’s more pain ahead for homebuyers. Credit Suisse ($CS) is not Lehman Brothers 2.0. Quick recap: the enormous Swiss bank saw its stock plummet and credit default spread (the market’s take on the chances a company won’t pay its debts) spike. Twitter ($TWTR) got all atwitter and people talked like this was the first in a new line of 2008-style dominoes. While it’s true the bank lost billions last year and will go through some pain as it covers its losses, the company says it has a US$100 billion buffer, and, just as importantly, no other banks are at risk. Canada ramps up economic sanctions on Iran. It’s a show of support for the protests roiling the country after 22-year-old Mahsa Amini died in the custody of Iran’s “morality police.” Besides the crowds in the streets, economic pressure continues to mount on the regime: the rial just hit a new low for the year, inflation is at 52%, and youth unemployment topped 25%. INTERESTING The F in NFT now stands for “fuzzy.” The highly fungible entrepreneur Gary Vaynerchuk struck deals with Macy’s ($M) and Toys ‘R’ Us ($VNO) to carry stuffed-animal replicas of his shockingly successful VeeFriends digital collection. While they don’t come with NFTs, each has its own insufferable inspirational “bespoke trait” and — unlike NFTs — won’t cost you more than US$30 if you buy it on the wrong day. That Blue Jays playoff run didn’t last long, but odds on future appearances are looking good. The team seems economically built to last. Their US$188 million payroll was the fourth-lowest of the playoff teams — nearly $100 million behind the Mets and the Dodgers — even though Toronto is no one’s idea of a small market. With their top four starting pitchers coming back next season and franchise cornerstone Vlad Guerrero still three years from free agency, there’s plenty to build on (and room to dream about putting Aaron Judge in royal blue). Canada’s pretty close to having two of the three largest railway companies in the world. If Calgary-based Canadian Pacific Railways ($CP) succeeds in its $27 billion bid to acquire Kansas City Southern Rail, it will become the second-largest railway company (in terms of market cap) and unite Canada, the U.S., and Mexico by train for the first time. The deal could also get an estimated 60,000 tractor-trailers off the highway every year, which seems like a nice, if minor, side effect for people who don’t like global warming (or those naked-lady mud flaps). THE FOMO INDEX by Stacey Woods IMPORTANT 🐦 Musk re-offers US$44 billion for Twitter but insists they throw in power windows and clear coat. Source 😎 Meta describes recent downsizing as “vibe planning” since “spiralling out of control” sounds a bit negative. Source 🎮 Tim Hortons’ new metaverse game is a fun coffee obstacle course and not a scheme to track your movements. Source 💸 Hey, guys, my friends at the SEC just told me about, like, disclosures. Kim Kardashian fined $1.3 million for illegally hawking crypto. Source CRASH & BURN TO THE MOON 🍁 Vibe killing: report shows Canadian corporations avoided $30 billion in taxes last year. Source 🍔 Collect all four! And then have a word with yourself. McDonald’s launches first Happy Meal for adults. Source 👾 Coin: A Founder’s Story, now streaming for Coinbase fans, insomniacs, and people who’ve seen everything else. Source 🍫 Swiss chocolatier Lindt wins right to have lesser German chocolate bunnies systematically destroyed. Fondue anyone? Source WHO CARES WHAT'S UP THIS WEEK Q3 earnings season begins in earnest (Monday). Will mediocrity continue to be the new success? Amazon has Prime Day ... again (Tuesday and Wednesday). Will you convince yourself to buy a SodaStream? U.S. inflation numbers for September come out (Thursday). Many people think inflation will be down, but after OPEC+ decided to limit oil production there’s a risk it won’t last. THE BIG IMPORTANT STORY ENTERTAINMENT Video-Game Wars: The Overlooked Media Story of 2022? This year, while most culture obsessives have been fixated on whether Netflix will add ads or whether House of the Dragon or The Rings of Power will eke out better ratings, tech giants have been quietly duking it out in one of the most lucrative yet low-key corners of the media industry: video games. The global game industry is expected to generate $273 billion this year, more than twice streaming video’s $107 billion. To secure a slice of the pie, tech companies are gobbling up, Pac-Man-style, every game developer in sight, all in a bid to have the best content. There has been more money spent on mergers and acquisitions in 2022 than every year from 1989 to 2021 combined. Here’s what the big three legacy console makers have been up to: Sony ($SONY): In July, Sony dropped $6.7 billion to acquire “Halo” developer Bungie. Sony has a deep catalogue of bestsellers (“God of War”) which explains why its streaming service, PS Plus, has an industry-leading 47 million subscribers and why its game division pulled in $32 billion last year. So why did it buy Bungie? Well, Sony is trying to expand its lackluster lineup of live-service games, which are an ever-expanding (and profit-driving) online multiplayer experience. Sony also scooped up developer Savage to bolster its meh mobile division. Microsoft ($MSFT): Microsoft Gaming made about $10 billion less than Sony last year, but that could change if its staggering $95 billion purchase of Activision Blizzard goes through. Microsoft’s Xbox Game Pass service has 30ish million subscribers, and Activision mega-titles, like “Call of Duty,” would surely boost that number. But perhaps Microsoft’s biggest advantage lies in cloud computing. Both PS Plus and Game Pass offer online play, but with Game Pass you can stream new titles on your PC, console, or phone, while PS Plus has no Android or iOS app. Nintendo ($NTDOY): Nintendo has notably sat out the acquisition frenzy, says Daniel James Joseph of Manchester Metropolitan University. Why? Nintendo already owns arguably the most iconic game franchises: Pokémon, Super Mario, Zelda. Also, despite its mobile hit “Mario Kart Tour,” Nintendo is still console-centric, especially compared to Microsoft. Nintendo’s strategy is working OK: its $21 billion 2021 revenue was only a little south of Microsoft’s. A potential bright spot is Nintendo’s new film studio, Nintendo Pictures. THE UPSHOT Giant game companies are fighting to win our eyes by pumping out lots of quality content, and, for now, consumers are paying little for it (about $12/month for a PS Plus or Game Pass subscription). But who wins could depend not on content alone but who can conquer mobile in the process. Thanks to the ubiquity of smartphones, mobile games are expected to account for more than half of 2022 game revenue, and that proportion will likely only increase in the future. Just consider this: Chinese conglomerate Tencent is now the world’s largest game company, and it doesn’t even make a console — it’s all about mobile. A boon for Microsoft, beyond its cloud capabilities, is that its Activision deal comes with “Candy Crush,” a mobile cash cow that raked in nearly $1.6 billion last year. The risk for Nintendo and Sony is that, by sleeping on mobile, they could find themselves in a similar position to countless other media companies in the streaming era: desperately trying to play catchup. — Sarah Rieger 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! CHALLENGE Next week, we’re publishing a special edition of TLDR (so, fair warning, things will look a little different). And for this special edition, we have a special request: we want your best haiku describing the markets in Q3 (07/01 – 09/30). Need a haiku refresher? It’s a three-line poem: five syllables in the first line, seven in the second, five in the third. Example: Lots of ups and downs Well, mostly downs, honestly I’ll work forever You can beat that, right? Click here to submit yours! We’ll (probably) publish the best submissions.** OTHER VERY GOOD READS 🤖 The Artificial Men On Hinge Like, actually artificial, not the usual kind | Wired* 🧊 Goodbye to Peyto Glacier Alberta’s losing so much more than a nice view | Alberta Views 🎃 You Must Respect Candy Corn It’s neither good nor bad: it’s persistent | The Atlantic* ⛽ Real-Time Statistics on Europe’s Gas Supplies Clear, compelling data visualization | Der Spiegel *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER It might be time to update the ol’ résumé... 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). Correction! Last week, we mistakenly reported that Enbridge operates 5,000 km of oil pipeline in North America. That’s only one particular pipeline network — and a small percentage of the nearly 29,000 km the company actually maintains. It’s important to us to be accurate in everything we write, and despite having a system in place to catch mix-ups like these, unfortunately we still missed it. We hope they (and you) will forgive us. **Also, just so we’re clear, there’s no prize if we publish your haiku, beyond the sweet, sweet satisfaction of knowing that you’re wittier than all the other TLDR readers. And, really, what better reward is there? 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. 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. © 2022 Wealthsimple Media Inc.