Microsoft prepares to face the final boss July 17, 2023 Sign Up | Made in Canada IN THIS ISSUE 8 min read 🔪 Interest-rate resurrection 🕵️ Corporate misconduct investigation 📗 Financial jargon explanation BoC Governor Tiff Macklem is having a Jamie Lee Curtis moment — and by that we mean he’s having to stab something a bunch to finish it off. We explain why below. | Getty Images THE WEEK IN MARKETS The Rally Rolls On The big news last week was surprisingly small. We’re talking about the inflation numbers out of the U.S., which came in at a glorious 3% year-over-year, down from 8% last July. The markets celebrated this as a sign we may actually see that mythical no landing (see below). The S&P and TSX both ended the week up about 2%; the Nasdaq did even better, at +3.5%. The inflation clouds haven’t completely cleared, as we explain below, but Wall Street is feeling optimistic. The next big test is earnings season. We’ll hear from Tesla and more U.S. banks this week and then big tech the week after, so stay tuned to see what narrative they tell and if the rally will continue. THE WEEK IN ONE NUMBER 35% Canadians who say they don’t make enough money to cover all of their bills at the end of the month, a record high since MNP Ltd. started tracking consumer debt five years ago. WHAT HAPPENED LAST WEEK IMPORTANT Inflation isn’t dead until the BoC sees the body. Like a traumatized Jamie Lee Curtis stabbing Michael Myers one more time just to make sure, Team Tiff hiked the BoC’s benchmark interest rates yet again — up to 5%. Inflation is half what it was last summer, but Tiff has seen this movie before: in the 1970s, central banks prematurely slashed interest rates and paid dearly for it when inflation proved very undead. Investors expect only one more rate hike from the U.S. Fed and maybe another hike from the BoC. But whether Tiff, and the Fed’s Jerome Powell, will plunge the knife yet again ultimately hinges on whether inflation continues its so-called immaculate disinflation. Fresh consumer-price data out Tuesday will speak to that. Nike Canada is facing a forced-labour probe. A federal watchdog is looking into partnerships the shoe giant has with six Chinese manufacturers known for committing human-rights abuses. Nike, which denies the allegations, has a bit of a history using abusive manufacturers, but this new investigation comes as lawmakers are pressuring companies to divest from China. The probe could result in blocked Nike imports, but, perhaps more likely, the bad optics and political climate could compel the shoemaker to shift manufacturing out of China, following Apple’s and Samsung’s lead. INTERESTING Microsoft beats the antitrust boss. The House of Gates notched a W last week after a judge rejected the U.S. government’s attempt to block its US$69 billion acquisition of Activision Blizzard, the studio behind Call of Duty and Candy Crush, over antitrust concerns. Activision’s stock jumped 10% on the news, signalling that investors think the deal will probably close. Acquiring Activision should help Microsoft boost its mobile-game offerings. And mobile is where the big money is at in the US$347 billion (with a b) video-game industry. (That’s something like 4.5x the global film industry.) FTC is appealing last week’s decision, so Microsoft likely has one more boss to beat. Regulators are making banks play it safe. Canadian and U.S. regulators have both proposed new rules that will force banks to hold larger cash reserves as a sandbag against loans they made — specifically underwater mortgages in Canada. This is a big deal, because having to stockpile more cash might force banks to issue new stock to raise cash or return less money to shareholders — which explains why U.S. and Canadian bank stocks are trailing the rest of the market despite strong earnings. More consequently for homeowners, Canadian banks might make folks with variable-rate mortgages pay more each month if they hit their trigger rate, to reduce the risk on those mortgages. Disney boss Bob Iger dunked on striking writers, calling their push for better pay “not realistic.” Which didn’t go over terrific, considering that Iger pulls about US$31 million annually and TV script writers, who typically make less than 1% of that, are asking for just a 6% increase on minimum rates. Last week, actors joined the striking writers, bringing Hollywood to a halt, which is unwelcome news for Disney, since it’s already racking up losses from streaming and traditional TV. FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT ⛔ Where’d you learn that, America? Canadian teen accused of carving a name into a 1,200-year-old Japanese temple. Source 💸 Where’d you learn that, America? StatsCan says gap between rich and poor is growing faster than ever. Source 🍂 Canadians advised to get an updated COVID booster this fall. Doesn’t have to be pumpkin spice. Source 👍 Judge rules thumbs-up emoji can be an admissible signature, though fire emoji still not considered arson. Source CRASH & BURN TO THE MOON ⏲️ Shopify uses secret cost calculators to shame employees for having pointless meetings. Bathroom timers will be in plain sight, though. Source 🫒 NY Times reports that “Girl Dinner,” or what men call “appetizers,” might crush the patriarchy, one olive at a time. Source 🦍 Toronto Zoo asks people to stop showing gorillas videos on their phones until they can learn to like and subscribe. Source 🍺 Bar at Toronto police HQ closing after one drunk cop ruins it for everyone. Firefighters now rethinking pole dancing classes. Source WHO CARES WHAT’S UP THIS WEEK Canada’s June inflation numbers drop (Tuesday), which will tell us a lot about how many more rate hikes we can expect. Two giants report earnings (Wednesday). Tesla earnings are expected to go 0 to 60 thanks to record delivery numbers. ASML’s earnings will give us a read on whether the AI frenzy is leading to higher sales for chip makers. Barbenheimer drops a bomb (Friday) and Tom Cruise’s new Mission: Impossible release is way too close to the blast zone. 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 MARKETS Six Buzzwords That Explain Our Weird (and Exciting?) Moment in Money Financial reporters love two things: Succession and esoteric terms. And chaos, apparently, according to Pew. So, three things. At any rate, we wouldn’t blame you if your eyes glaze over whenever you see financial insidery words or phrases, but some are actually worth knowing if you want to understand our strange, novel, and — dare we say it? — thrilling economic moment. Let’s dive in: No Landing: A scenario in which, as interest rates rise, the economy avoids both a hard landing (a recession plus a sharp rise in unemployment) and a soft landing (a growth slowdown sans recession) and instead the economy keeps chugging along mostly fine. Team No Landing has been adding to its ranks amid encouraging jobs and inflation data. Permabears: Investors who get a lot of press by habitually predicting bleak things about markets — like hedge-fund-guy Mark Spitznagel, who in January said we were in “the greatest tinderbox-timebomb in financial history.” Well, no recession has come, and stocks are up about 16% YTD globally. And yet, because it’s easier to find things to be scared about in this economy than it is to know whether the scary things will actually affect markets, permabears keep stealing headlines. Tiff: This is what people say when they really mean Richard Tiffany Macklem, the Governor of the Bank of Canada. People get mad at us in this newsletter for not spelling it out. Sorry! Headline Inflation and Core Inflation: When people say that inflation has risen or fallen, they’re usually talking about headline inflation, which accounts for all sectors of the economy and how prices are affecting households in every which way. Core Inflation is headline inflation minus the volatile food and energy sectors. This measure is farther from what consumers feel, since everyone has to buy gas and food, but economists think it’s more indicative of the future. And right now, core inflation in Canada and in the U.S. is higher than headline inflation, hence central bankers might keep raising rates. Liquidity: Shorthand in the world of high finance for “how much money is sloshing around.” Since last spring, central bankers have been sucking liquidity out of the markets by raising interest rates, which encourages saving over lending and borrowing, and that slows the economy and hurts stock prices. Once central bankers cut rates, they’ll inject liquidity back into the markets. 0DTE: This stands for zero days till expiration, a type of options contract that’s uber-popular right now. These contracts, which expire at the end of the current trading session, let traders take bets on the day’s price movements and, with some luck, make quick money. Investors have been using 0DTE contracts to take advantage of this year’s choppy markets. But some investors worry these contracts fuel market volatility by — well, it’s complicated but basically the banks and brokers that sell 0DTE contracts have to buy or sell the underlying assets to hedge against loss, and that can move markets quick. —Sarah Rieger and Jared Sullivan OTHER VERY GOOD READS 🏠 Could the Missing Middle Solve the Housing Crisis? Victoria, B.C., could be a blueprint for the rest of Canada | The Walrus 🐦 How to Blow Up a Timeline Why Twitter imploded | Remains of the Day 🤑 How to Save $1.7M for Retirement There are some ways to make it easier | Wealthsimple WE’RE HIRING A DESIGNER! Do you ever read TLDR and think: the writing is great, and yet there is a vast, uncharted world of visual storytelling that this newsletter has only scratched the surface of? And do you ever think that you are perhaps uniquely qualified to create such dynamic graphic communications? If that’s the case, we’re looking for a senior editorial designer. Apply here. THE WISDOM OF TWITTER How to rack up a record US$12.7B in Prime Day sales… 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), Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Disclosures: Contributors to this newsletter own stock in Microsoft. 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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