(Or at least it’s trying to) January 09, 2023 Made in Canada IN THIS ISSUE Estimated read time: 7 mins 🧼 NFT wash trades 🛁 BB&B washed up 🔮 Hogwash? Not our 2023 predictions WHAT HAPPENED LAST WEEK Will outrageous grocery prices get less outrageous? We take that on, and other big questions for 2023, below. | Getty Images/Wealthsimple THE WEEK IN MARKETS And we’re back! Immaculate disinflation, anyone? Markets started the year on a high note. Strong U.S. and Canada jobs reports revived hopes that a so-called soft landing is possible. Digging in, the data showed two good things: wage growth slowed (suggesting there’s no wage-price spiral) while hiring cooled but remained robust. The possibility that we could avoid both a serious recession and an endless string of rate hikes put investors in a (relatively) good mood. The S&P ended the week up about 1% and the TSX finished up about 2%. The big question now is whether this “immaculate disinflation,” as christened by fintwit, is real. If it is, we may see a quicker-than-expected return to The Good Times™, with the economy, profits, and stocks outperforming investors’ very gloomy 2023 outlook. But if the disinflation is a mirage and the big rate hikes continue, what’s going on in tech (layoffs and selloffs) could be in store for the rest of us. THE WEEK IN ONE NUMBER 47% The surge in Chinese stocks ($MCHI) since October, as Covid restrictions and regulatory pressures eased, providing investors with some optimism for 2023. IMPORTANT The housing crisis has been solved! OK, maybe not solved. A new law kicked in on January 1 to try to muzzle this rabid raccoon we call a real estate market: a two-year federal ban on foreign buyers. (Toronto added its own tax on homes that are empty for more than half the year.) This might alleviate some of the factors pushing prices up. But it won’t solve the cost of homeownership, thanks to the highest mortgage rates in 14 years. Welcome to Canada, all 431,000 of you. Ottawa approved more permanent residency applications than ever last year. (That’s not out of character: in 2020, we ranked fourth in the world for immigration friendliness!) One reason our welcome mat is so big? With nearly a million unfilled jobs (104,000 of which were added in last month) we’re going through one of the biggest labour shortages in our nation’s history. In case the FTX fallout wasn’t enough, U.S. regulators added their own crypto drama. On Wednesday the SEC objected to Binance.US’s $1.5-billion acquisition of bankrupt lender Voyager, mostly because they’re not convinced Binance.US can afford it. And Thursday the New York attorney general told the former CEO of bankrupt lender Celsius that his pants were on fire — and to get ready for a lawsuit. INTERESTING Bed Bath & Beyond Saving? The big-box store we’ve never shopped at without a coupon announced it may not be able to afford to stay open. Its stock dropped 40% for the week and is down 90% in the past year. Big tech keeps slimming down. Salesforce (8,000 jobs), Amazon (18,000 jobs), and Vimeo (1,200 jobs) all announced cuts. So far the economic pain has been concentrated in speculative areas like tech, where stocks got hit the hardest. We’ll have to wait to see if disinflation can happen quickly enough to keep the hurt from spreading elsewhere. Wash trading NFTs is way dirtier than it sounds. Last week a researcher released a report suggesting that nearly 60% of all NFT sales on the Ethereum network last year were something called wash trades. What’s a wash trade? When a seller tries to illegally boost prices by buying their own NFTs with another wallet they own — kind of like using your mom’s account to bid up the bent Pokémon card you posted on eBay. THE FOMO INDEX IMPORTANT 🚔 SBF pleads not guilty to all charges against him but thinks he should definitely be grounded and lose gaming privileges. Source 👋 Tesla stock at lowest level since August 2020, but don’t worry about Elon. He’s fine. He just sold a bunch. Source 🔍 Microsoft reportedly adding human-like ChatGPT to Bing so you can feel less alone when you get your bad search results. Source 💰 Nearly cashless Denmark celebrates its first year with no bank robberies. Country’s bank robbers, getaway drivers face uncertain futures. Source CRASH & BURN TO THE MOON 🏡 Toronto couple returns from trip to find home sold by couple who not only impersonated them but totally undervalued it. Source 🎵 Canada extends copyright protections, won’t add anything to public domain for extra 20 years. There goes your Ezra Pound musical. Source 🐥 Tech company develops hens that lay only female eggs to save billions spent killing male chicks. Male chicks touched, really. Source 🍽️ San Francisco dog cafe offering $75 tasting menu on Sundays if your dog’s not busy eating cat poop that day. Source WHO CARES FROM OUR SPONSOR You Can Put More in Your TFSA This Year 💰 Welcome to 2023. One improvement? This year’s TFSA contribution limit is $6,500 – and all that money grows totally tax-free. If you don’t have a TFSA yet, Wealthsimple makes it super easy to get started. Open a TFSA If you already have a TFSA account with Wealthsimple, click here to make a deposit. WHAT’S UP THIS WEEK The U.S. House of Representatives stops voting, starts working. (Monday). And by “working” we mean “fighting about the debt ceiling.” Shaw Communications reports its quarterly earnings (Tuesday/Wednesday). Even though what it would rather be reporting is an approved merger with Rogers. THE BIG IMPORTANT STORY OUTLOOK What Awaits Markets in 2023? Three Quasi-Predictions Back in October, we asked a group of sharp thinkers to opine about what the future might hold for markets and the economy in the upcoming quarter based on their go-to indicators. Well, we’re doing it again. Sure, some things haven’t changed: investors are still worried about inflation, interest rates, and the war in Ukraine. But some things are different: we’ve seen mass tech layoffs and mounting recession risks, and yet, as we mentioned up top, investors have found reasons to be a smidge less pessimistic about 2023. Here’s what our three experts are wondering about, and how they’ll figure out the answers. If there’s a recession, how bad will it be? A lot of investors suspect that a recession is en route. If that’s true, the big question is how large will it be? The yield curve is a reliable recession indicator, says Stephen Poloz, a former Bank of Canada governor and the author of “The Next Age of Uncertainty.” But it only tells you one thing: whether or not a recession is coming. Business closures, meanwhile, speak to the depth of a downturn. “Usually around 40,000 companies close every month in Canada,” Poloz says, but most months a larger number open. So far, even with big-name crypto and tech failures, we’ve seen only a small uptick in closures, which is encouraging: the latest Stats Canada data, out in December, showed 45,000 shutterings and 40,600 openings. Still, looking ahead, “we’ll probably have a period of excess closures,” Poloz says, and the degree of that excess will be telling. How high is workforce participation? If you want to know what’s happening in the labour market, you can’t just look at the unemployment numbers, says Sheila Block, senior economist with the Canadian Centre for Policy Alternatives. One data point she’s closely watching is the employment-to-population ratio, which, unlike the unemployment rate, captures people who aren’t actively applying for jobs. “I look at prime-age workers” — referring to the 25-to-54 age-group, Block says. So far, workforce participation in that cohort remains high, and has actually increased over this time last year. (Yay!) But if hiring slows dramatically, people may become discouraged and quit job hunting entirely, which could leave long-term economic scars. Let’s hope that Canada continues to post encouraging jobs reports as interest rates rise... Will the government crack down on greedflation? The grocery store is one place where Canadians have really felt the sting of inflation, and there’s much debate about whether rising costs — for labour, for fuel, for everything — are getting passed to shoppers, or if grocery chains are using inflation as an excuse to jack up prices. (The supermarket chain Loblaws made something like $1 million more a day last year over 2021, no doubt thanks to charging, for instance, $37.03 for a pack of “premium” chicken breasts.) Bea Bruske, president of the Canadian Labour Congress, who’s decidedly in the greedflation camp, says she expects that, given the market dominance of Loblaws and Sobeys, grocery prices will keep rising unless the government follows the U.K. or Spain by taxing excess corporate profits. “We’re getting way less now for the same cost,” Bruske says, “and it seems to be on an upward cycle.” —Interviews by Sarah Rieger and Brennan Doherty 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 Gospel of Deglobalization The potential perils of limiting cross-border trade. | Foreign Policy 🐎 What Ian Tyson Left Us We’ve lost a chronicler of the West. | The Sprawl 🛍️ Why the Bay’s Future is in Question HBC got its start during one plague. It might end after another. | The Walrus 🌳 Fighting the Tree A story of two fathers. | Sun THE WISDOM OF TWITTER OK, 2023, off to a not-terrible start. 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). 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. 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. 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