Plus: Thank a robot for your raise. September 12, 2022 Made in Canada IN THIS ISSUE Estimated read time: 6 min 💸 Jumbo rate hikes 🥶 Freezing Germans 🐴 Equine mayors WHAT HAPPENED LAST WEEK Queen Elizabeth leaves behind some big shoes. And hopefully a leash or two | Getty Images/Wealthsimple THE WEEK IN MARKETS Last week, the TSX, the S&P, and the Nasdaq all finished up about 2%, with the latter two indices snapping three-week losing streaks. Speculative assets did better, with the tech-heavy ARK Innovation fund up more than 6%, and ETH and BTC up about 5%. Some of this teeny-tiny optimism surely owes to falling gasoline prices and recession fears abating. More optimism could come from Ukraine. Last week, Ukrainian forces launched a lightning offensive and quickly recaptured two strategically significant cities. A Ukrainian victory, which seems increasingly possible, would likely relieve commodity pressures and push down inflation. The market seems to be in wait-and-see mode, anticipating the next big thing to happen. But whether that’s more breakthroughs in Ukraine or surprising inflation numbers, we’ll have to wait and see. IMPORTANT The Kremlin is mounting a (freezing) cold war against Europe. In a not-so-surprising twist, Putin decided not to reopen the Nord Stream 1 pipeline after all, putting natural gas exports in a choke hold ahead of winter, sending fuel and electricity prices from record highs to higher-record highs, and nudging everybody’s favorite bloc dangerously close to ’70s-era economic flatlining. Just like in the ’70s, policymakers are sending out subsidies — which feel good in the moment but could end up pushing inflation higher. If things are this bad now, imagine when we actually get to winter. The experiment continues: central banks hike rates more than any time in the past 40 years. Last week, both the Bank of Canada and the European Central banks raised interest rates another 75 basis points (aka 0.75%) in the world’s increasingly desperate bid to (please, please) slow inflation. Next Tuesday, the Fed is expected to do the same. And everyone’s planning more. A heads up to any lobsters who still think this is just a warm bath: that’s the steepest set of rate hikes since a different Trudeau was PM. What worries economists (other than the straightness of their bowties) is that these hikes are a blunt tool. The more we use them, the more unpredictable the results. The fiery labour market now burns with the heat of only 999 suns. In a sign that the blunt tool all those banks are swinging may be working, the number of jobs in Canada shrank by 40,000 in August (as opposed to an expected jump of 10-15%), and unemployment bumped up to 5.4%. This is a stat that Team Tiff watches closely, and seeing progress here may help get that rate hike situation we just talked about down to a somewhat-less-historic level. INTERESTING Apple launched some new stuff, but its advertising push is a lot more interesting. The company says it’s cracked the code on how to collect and monetize your personal data without making you feel like that’s what it’s doing. It’s one more step in Apple’s shift from hardware manufacturer to service provider, now that everyone’s already bought an iPhone (other than a particular TLDR writer; 👋 Brennan!). Hope everybody’s okay with getting a new toonie. What does the death of the U.K.’s longest-reigning monarch mean for us Canadians? We don’t have to change our money (and as of right now no one’s said we will), but if we did, King Charles III would probably face the opposite way his mom did on our coins. Also, institutions like the Court of Queen’sKing’s Bench have already been renamed. More robots = more jobs? Automation — and fear of its taking over — has been one of the stories of the last decade. But what if the story for North America is that there hasn't been enough automation? That’s what the excellent financial thinker/writer Noah Smith argued. What's his evidence? Unemployment is low, despite robots’ rise. (In fact, robots can actually lead to more hiring by boosting productivity.) And wages for blue-collar jobs have shot up since 2012 even though automation has skyrocketed. But his hottest take is that in order to save jobs, North America needs ... way more robots so we can compete with China. THE FOMO INDEX by Stacey Woods IMPORTANT 🪪 Rogers checking IDs at stores to curb robberies and fraud. Only criminals with valid ID are allowed to enter. Source ⚜️ Quel triggeur! CAQ leader Legault apologizes for using English on party’s website. Source 🍗 Eleven herbs & spices, zero chickens: KFC and Ruffles release Original Recipe-flavoured chips in Canada for a (mercifully) limited time. Source 🍎 New Apple Watch can tell if you’re ovulating or if you’ve been in a car crash and won’t judge you for either. Source CRASH & BURN TO THE MOON 🍺 TFW you can’t even because government. Canadian soldier TikToks himself drinking beer while parachuting over Ontario. Source 💵 So this has all just been about money? Kim Kardashian launches private equity firm. Source 🐴 Donkey running for mayor of B.C. town says he’ll be available for ribbon-chewings whether he wins or not. Source 💧 Harry Styles didn’t spit on Chris Pine at the Venice Film Festival, but he did threaten to sing to him. Source WHO CARES STUFF THIS WEEK New U.S. inflation numbers come out. (Tuesday) Last month held steady. With rates continuing to increase, maybe this time they’ll actually drop? The Ethereum Merge is here. Finally. (Thursday) Whether you’re a crypto HODLer or HAETer, all this buildup was kind of exciting. THE BIG IMPORTANT STORY PERSONAL FINANCE Canadians are Hoarding Cash. It’s Risky. It’s a weird, anxiety-producing time. War, climate change, inflation, political unrest: the apocalypse pile grows daily. All sorts of data suggest that, in response to these uncertainties, Canadians have been hoarding cash at levels not seen in years. That markets are taking a beating has only further fuelled the cash trend. Holding some cash is smart, to be sure: any personal-finance book will tell you to keep three-ish months’ worth of expenses in an emergency fund. But hanging onto more cash than that is actually, yes, risky in the long run. Let us explain. Wait, isn’t cash the safest way to hold your money? Not really. Cash has outperformed stocks, bonds, and other assets this year, but it’s a money-losing proposition over time thanks to inflation (yes, that jerk again). Interest helps, but savings rates haven’t kept up with the cost of living. So whatever money you stash in the bank will likely lose value over time. What should you do with your money instead? That’s the big question, isn’t it? If you’re near retirement or will need cash soon, you’d be smart to keep it in, say, an interest-bearing savings account. But if that’s not you, history suggests you’re way better off investing in something like an index ETF. Why? Well, markets look very Armegeddonlike this year, but, over the past century, stocks have had an average annual return of about 10%, with bonds returning roughly 5%. That’s why people who steadily invest have had the best returns. Get this: even with this year’s stock bloodbath, if you invested in an S&P 500 index exactly two years ago and held it, you’d still be up about 21% today, whereas your return on a high-interest savings account would be about 2%. But how do you get back in if you’ve been on the sidelines? Don’t time the market. It’s notoriously hard, and if you delay investing in hopes of buying the bottom, you risk missing a massive rebound. A good strategy is to figure out how much you have to invest and just do it. If that feels scary, pick a rally point you’re comfortable with — say, 5% up — and dive in. You may lose money at first, but remember that markets tend to go up over time. Minimize decision-making. Another way to avoid timing (or, really, mistiming) the market is by setting up automatic deposits, so you invest the same amount of money every month. That way, you get a variety of entry prices. This is called dollar-cost averaging, and it’s considered a fairly reliable risk-lowering investment strategy. Don’t forget to diversify. When people hear the word “invest,” they often think “stocks.” But bear in mind that no asset class stays on top forever, as this chart shows. Which is why it’s important to invest in a big basket of stuff, including global bonds, REITs, commodities, etc. OK, that’s the gist. Again, it’s fine to keep some loonies on hand. You know your cash needs better than anyone. But if you catch yourself stuffing your mattress with Robert Bordens, maybe it’s time to put your cash to work. — 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! OTHER VERY GOOD READS 🚨 The Victim Who Became the Accused* A cop claims she was assaulted, then ends up on trial | The New Yorker 👾 The Crash of a Minecraft Crypto Empire More blocks, less blockchain | Rest of World 📰 Did The New York Times Kill Wordle by Buying It? We’ll give you six guesses | Slate 🎨 Canada’s Largest Art Heist Why isn’t anyone looking for the masterpieces? | The Walrus *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER Let’s face it: we’ll buy one anyway... 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), 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 Apple. 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. 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