Plus: How the olds conquered Spotify July 25, 2022 Made in Canada IN THIS ISSUE ⛽ A fire sale on gas stations? 📹 Martin Shkreli gets a new job 😮 Yep, probably more rate hikes Estimated read time: 6 minutes WHAT HAPPENED LAST WEEK We told DALL-E to make us a bear pumping gas. Not bad, DALL-E! The week in markets 🥱 🤝🏽 🌾 🦥 How’s earnings season going? Well, overall the earnings part of earnings seasons came in a bit weaker than normal. Companies with disappointing reports didn’t fare so well (sorry $SNAP). But the markets mostly didn’t do much about it — would it be judgy to call them sleepy? Both the S&P 500 and TSX managed to eke out positive returns, but barely. On the bright side, commodity prices continued to fall as recession fears rose, and news broke of a deal between Russia & Ukraine to export more grain. This led US & Canadian government bond yields to continue their month’s long decline. That means some reprieve for borrowers, since mortgage rates are tied to those yields. And crypto? Pretty sleepy, too: Bitcoin and Eth were both roughly flat. IMPORTANT New report suggests inflation continues to inflate. June prices were up 8.1% from a year before, the largest jump since Patrick Roy looked like this. We could go through the specifics — gas is up 56%, and both cars and the groceries you load into them cost 8–9% more — but two lobsters who’ve finally realized they’re in a pot don’t need to mention it every time they feel a little warmer. A little good news? Some things actually got cheaper! Home prices and rents dropped for the first time since August 2019, and gas prices are looking much better this month: The national average dropped to $1.81/L after hitting $2.10 in June. INTERESTING Wanna buy a gas station? Or 1,500? Clamped tight in the talons of vulture fund Elliot Investment Management — the same financial mercenaries who once repossessed an Argentinian battleship to collect on defaulted bonds — Calgary-based Suncor Energy (SU) is looking to offload its Petro Canada chain of gas stations for an estimated $5–$8 billion. It’s a solid sign of how nasty things can get when companies can’t pay their debts. Old people are statistically cool again — or their music is, at least. Only 27% of the music people listened to this year was either released in the past 18 months or is still in the top half of the Billboard 200. That means 73% of what people want to listen to is old — a jump of 13% in only five years. Which calls into question the underpinnings of human society! Aren’t old things boring? Maybe the biggest question is what this means for music innovation in the future. We’ve all seen what happens when an industry focuses only on existing IP that sells. THE FOMO INDEX IMPORTANT 🚢 The Rhine river is drying up too much for shipping. We'd make a joke about cuckoo clocks, but we're too freaked out. Source 🦠 Joe Biden has Covid. Vows not to let it interfere with all his other problems. Source 📵 Rogers names new CTO after country-wide outage. Promises he knows where the "reset" button is. Source 📈 Toronto rents are rising at the fastest pace in a decade. Guess we’re headed to Saskatoon! Source CRASH & BURN TO THE MOON 🙃 Broke Pharma Bro Martin Shkreli joins Cameo. Vanilla Ice says it’s really going downhill. Source 🇨🇦 Joe Rogan describes Canada as "communist." Communism describes Joe Rogan as "confused”. Source 😿 Chinese office cats laid off after start-ups fold. Good thing all their crap’s already in a box. Source 🧑‍💻 Snapchat finally gets a desktop version. Landlines and fax machines coming soon. Source WHO CARES TLDR is better with friends! 👯 Share this link in the group chat, Slack thread, or print it out and mail it to anyone who wants to sign up. WHAT’S UP THIS WEEK TUESDAY July 26 In the U.S., Jerome Powell hosts another rate-hike party. There’s no reason to think the Fed’s meeting this month will be any different than the others. The market expects another big bump in interest rates — likely 75 basis points but possibly a Tiff-worthy 100 — as the Americans keep copying us also fight inflation. If there’s any reason to hope we won’t be writing this exact same item after the next meeting in September, it’s commodity prices. If they keep creeping down, all the things made from them could actually get cheaper too, and the need to hike rates may be reduced. WEDNESDAY July 27 Meta earnings report: will it be bad-ish? Since it launched in 2003, Meta/Facebook has never seen a revenue drop. But that was before inflation, Apple came in and sapped the ad market, and TikTok sapped people’s desire to wish their high school lab partner a happy anniversary. It’s tougher than ever to be a tech company that needs ad money. Just ask Snap. THE BIG IMPORTANT STORY CURRENCY By the way, the loonie is looking pretty strong. Is that good? Wow, everybody really likes talking about the strength of the U.S. dollar. Especially because it was briefly worth almost precisely as much as a euro last week. Hey, 1:1 is such a captivating parallel — parity is a fun word to say! — and of course the USD deserves attention, since it’s the world’s de facto currency and all. But over here in Canada, the loonie is quietly flexing nearly as much muscle (at five-year highs against the euro, the yen, and the pound) and getting nowhere near the credit. But understanding why that’s happening and what it’s going to mean to Canadians is definitely worth talking about. What’s making CAD so strong? Just like the Fed, the Bank of Canada has responded more aggressively to inflation than the central banks of England, Europe, and Japan. (Tiff beat Powell to the 100-point raise. Just sayin’.) Then there’s higher energy prices. Byrne Hobart, who writes one of our favorite finance and tech newsletters, The Diff (if you want some deep understanding of the culture of technology and markets, you should subscribe), told us that a lot of the USD’s strength came after Russia disappeared from the market, sending the price of oil — and everything that relies on oil — up like a geyser. “You have this combination where oil and gas is up but the euro is also down,” he says. The loonie benefitted for similar reasons, Concordia University economics professor Moshe Lander told us, because we also produce a lot of energy — when people need to buy Canadian oil, they need Canadian dollars. What’s all this mean for Canada? A strong loonie is good if all you want to do is travel to Europe, buy a new foreign-made TV, or sit down to a dinner of sushi-grade tuna. It’s not so good for Canadian manufacturers or exporters, whose products suddenly cost more in countries with weaker currencies. (Just look at the struggles U.S. companies who operate in Europe are going through.) One fortunate thing there, though, is that our biggest export is oil, which is much less affected by price changes: there aren't a lot of places to buy oil, and people tend to need it whether it's expensive or not. How long will the loonie stay strong? Movements in currency markets are notoriously hard to forecast, but it's mostly a question of whether the factors that got us here — inflation, the central bank being more aggressive about fighting it than lots of its foreign counterparts — persist. If they do? Look for more of the same. — Sarah Rieger OTHER VERY GOOD READS 💁‍♀️ Meet the Lobbyist Next Door* Some influencers aren’t peddling products, but ideologies |Wired 🇺🇸 How an Unstable US Threatens Canada’s Security Will America’s political violence spill over here? |The Walrus 🍁 The Three Arrows Founders Speak Out* What went wrong when the hedge fund imploded |Bloomberg *article may be behind a paywall THE WISDOM OF TWITTER Housing prices may have dipped recently, but to put them into perspective: 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), Sara Black McCulloch (fact checker), Ciara Rickard (copy editor), Peter Martin (senior editor), and Kat Angus (managing editor). Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Replies to this email address are not monitored. Have questions? 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