Plus: Galen Weston Jr. = VINDICATED?! August 7, 2023 Sign Up | View Online IN THIS ISSUE 7 min read 💸 No greedflation ☢️ Yes, nukes 🏠 Maybe buy a house Ontario announced major projects to boost the province’s nuclear-power capacity. Fingers crossed they hire more adept employees than Homer Simpson. Read more below. | 20th Century Fox THE WEEK IN MARKETS The Rally Is MIA We’re calling this week’s drama “the mystery of the missing rally.” It goes like this: we got strong earnings reports and good U.S. employment numbers. So why did the S&P 500 drop 2.3% and the TSX 1.5%? Because of a spike in long-term bond yields! Duh. Don’t get it? What happened was that the U.S. issued a lot of bonds to finance spending, which pushed up bond yields (i.e., how much investors earn from holding bonds) to attract buyers. (U.S. bonds also got downgraded, but it’s debatable whether that means anything.) And the rising yields made investors think, If I can get such a good return on a nice safe bond, why risk money on stocks? Ergo: stock prices fell. Is this a short-term market dynamic? Maybe not? Check this space next week to see how it plays out. WHAT HAPPENED LAST WEEK IMPORTANT We can’t blame big inflation on big corporations. At least according to a recent paper by Bank of Canada economists, whose findings seem to vindicate all those poor besmirched grocery tycoons. So what did drive inflation? A lot of folks have weighed in, including writer Noah Smith, who argued that supply-chain snarls bear most of the blame. But perhaps the bigger question is why inflation fell so fast. Matthew Yglesias contended that supply shocks abated but also that people simply began buying less stuff. The Atlantic’s Derek Thompson added that recession doomers might have spooked us all into spending less, thereby cooling inflation and helping to avert the recession they insisted was nigh. Meta begins Canadian media blackout. Angling to avoid another Australia — where lawmakers strong-armed Meta and Google into paying media outlets a combined C$174 million for distributing their stories — Team Zuck began denuding all news from Canadian users’ feeds, not just local coverage, in response to a new law that forces tech companies to pay publishers. The stakes are high: Meta doesn’t want Canada to set a profit-hurting precedent if the U.S. or the EU decides to follow suit, while Ottawa doesn’t want the Canadian press to entirely wither. INTERESTING Uber finally turned a profit, and it only took …14 years. The rideshare pioneer posted its first-ever real profit — US$394 million in Q2 — and the consensus is that much of the credit belongs to CEO Dara Khosrowshahi, who’s spent his six years at the helm proving you can root out a toxic culture and become profitable at the same time. Dara did it by dumping dead-weight divisions and also by dumping more than 7,200 employees. Uber’s stock price has left Lyft’s in the dust as a result. Ontario? More like Oppenheimerio. Nuclear power plants are expensive to build and, as watchers of prestige HBO dramas know, potentially dangerous. But climate change is also very dangerous. Which explains why Ontario recently announced a plan to expand the Bruce Power generating station into the world’s largest nuclear-power plant and build three small modular reactors at the Darlington plant, outside Toronto. These sites need to come online quick; Ontario’s power agency predicts it needs to more than double its capacity by 2050 to meet demand, especially as more folks buy electric cars. TSwift announces TO shows in response to TLDR criticism. OK, maybe we’re taking too much credit. But, after we suggested she was rude for skipping Canada on her Eras Tour, she announced last week that she’ll do six shows at the Rogers Centre in 2024. Why are we mentioning this in a money newsletter? Partly because one of our favourite economic theories is that it was, in fact, Swift who saved us from a recession. Her current tour will generate something like US$5 billion in economic impact — more than the GDP of 50 countries — and that estimate is from June, before she added more dates. FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 💔 Trolls, start your engines: Justin Trudeau and Sophie Grégoire are separating. Source 🌮 Taco Bell sued because the Crunchwraps look different than in the ads and it’s affecting everyone’s ability to live más. Source 🚨 Trump indicted for the third time. Booking goes pretty fast since the ink on his fingers was still wet. Source 🔥 Man takes it upon himself to save dozens of pets from wildfires. Now has to go back for their toys. Source CRASH & BURN TO THE MOON 🐻 Of course bears smoke! Chinese zoo denies that its bears are just men in bear costumes. Source 🍔 MrBeast suing his ghost kitchen for making “inedible” food even though ghost kitchen not suing him for making unwatchable videos. Source ❌ Elon forced to remove new flashing X sign from above headquarters. Might try it over the crib in the nursery. Source 🚀 NASA regains contact with Voyager 2 after messing with its antenna, but spacecraft now just transmitting old Degrassi episodes. Source WHO CARES WHAT’S UP THIS WEEK Lots of earnings calls this week, including three giants: Ozempic-maker Eli Lilly (Tuesday), Disney (Wednesday), and Alibaba (Thursday). The U.S. drops a fresh inflation print (Thursday). And we are obligated by the laws of financial journalism to write about it. It’s just how it works. SHARE TLDR WITH YOUR FRIENDS 🤝 Put this link in your group chats, your Slack threads, tattoo it on your back — whatever works for you! THE BIG IMPORTANT STORY REAL ESTATE A Regular Person’s Guide to Saving for a Down Payment There was once a time, in the pre-pandemic halcyon days of yore, when Canadians didn’t need to be loaded to buy a home. But now that the average Canadian home costs about $700,000, it sure seems like being rich is a prerequisite. And yet people still really want to own houses, which means they’re having to ask themselves questions like: is it possible to save up for a down payment? And if so, how? We looked into it. How to save for a down payment OK, so if you want to put down 20% (or $140,000) on a $700,000 home, how much would you need to save each month to reach your goal within a decade? First, let’s set our assumptions: (1) You start with a grand total of $0. (2) You invest your money in a portfolio composed of 80% equity — stocks, ETFs, etc. — and 20% bonds. (3) You’ll get an 8% return on your investments. (From 1997 to 2021, the TSX returned 7.9% annually, while the S&P 500 returned almost 9.4%.) And (4) home prices will appreciate 6% annually, as they’ve done the last 25 years. Which means a $700K house today will cost $1.25 million in ten years. How much would you have to save per month A 20% down payment on a $1.25-million house a decade from now would be $250K. So that needs to be your true goal if you want a median-priced home. To get there with our assumptions, you would need to invest $1,900 a month. We know that this is a lot and it won’t be possible for a ton of people, but that’s a problem for another day. We’re just crunching the numbers! (And, for what it’s worth, the new First Home Savings Accounts can take some of the sting out of saving.) One important thing to remember about investing is that markets might underperform, or overperform, your expectations. We accounted for underperformance: if you get an 8% return and consistently invest $1,900 a month, you’ll actually hit your $250K down-payment goal in eight years. Congrats! But if markets return only 2%, you’ll still be OK and reach your goal within a decade. Saving for a down payment is a lot easier if you already have some cash. With our same assumptions above, if you start with a lump-sum investment of, say, $20K, you should hit your $250K goal in ten years no problem with $1,600 monthly contributions. If you start with $30K, $1,500/month should do the trick. THE UPSHOT So, if you only care about making money, is buying a house with all that down-payment cash really the best thing to do? That’s a question you’ll have to answer for yourself. Because it’s complicated! Home ownership has long been considered a reliable way to build wealth in Canada, and having a mortgage forces you to save money by building equity, which is good. But it’s an open question now whether people would be better off renting, given the sky-high prices. Plus, from an investment perspective, RBC found that in Canada stocks tend to outperform real-estate investments, so you might be better off leaving your money in the markets. The trouble, of course, is that you can’t build memories or raise a family in a stock portfolio! Which are things we can’t really give you advice about. —Jared Sullivan OTHER VERY GOOD READS 🔍 The Little Search Engine That Couldn’t* It’s faster and simpler than Google — so why haven’t you heard of it? | The Verge 📈 Can You Ask For a Raise Due to Inflation? Everything’s more expensive, and wages aren’t keeping up | Canadian Business 🥵 Global Boiling We’re living through the Age of Consequences | Phenomenal World 💻 The Code That Controls Your Money How a decades-old computer language controls the financial world | Wealthsimple Magazine *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER A cornerstone of fiscal policy in 2023: bring TSwift to town. 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), Nikki Holmes (copy editor), Sara Black McCulloch (fact checker), Mohini Tailor (senior lifecycle specialist), Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Contributors to this newsletter own stock in Google. 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. © 2023 Wealthsimple Media Inc.