Warren Buffett’s new right-hand man is … Albertan?! December 4, 2023 Sign Up | View Online IN THIS ISSUE 7 min read 🗞️ Publisher payouts ⛽ Inflation insights 👶 Berkshire’s new blood Google’s parent company agreed to cut cheques to Canadian news publishers. Will that lead to fully staffed newsrooms like back when Woodward and Bernstein were scoop kings? Probably not but, hey, it’s something! | Warner Bros. THE WEEK IN MARKETS Optimism Everywhere What a November! The TSX finished the month up 7%, while the S&P 500 logged its second-best month since 1980, climbing close to 9%. Why? Mostly hopes that falling inflation and rate cuts will lead to a soft landing. Individual investors are now more optimistic than any time since April 2021, and they’ve been bidding up growthy, speculative-ish tech stocks, like Roku (+155% YTD), Shopify (+104%), and Uber (+126% YTD). So is all the newfound optimism warranted? Goldman Sachs and others certainly think we could be in for another disinflationary boom in profits and stocks like we saw in the late-2010s. Then again, as with any surge in rosy sentiment, investors could be getting over-excited and setting themselves up for disappointment. What’s clear is that whatever happens next will not be dull. WHAT HAPPENED LAST WEEK IMPORTANT Google hits a paywall. On the heels of a deal struck last week between Ottawa and Google, the search behemoth will pay Canadian news publishers $100 million/year for the privilege of hosting their content. Is that a win for Ottawa? Well, on one hand, Canada is now one of the first countries to compel digital platforms to pay (and help keep alive) news publishers. On the other, $100 million is the exact number Google offered pre-standoff and 42% less than what the government wanted. Either way, at least the public can once again access news through Google. (Meta is still playing hardball.) We doubt our newsletter team is getting a cheque, but if we do, Google can make it out to “TLDR 🤑” — all one word, uppercase, don’t omit the emoji. Meet the Oracle of Edmonton. His name is Greg Abel. He’s a Canadian now living in Iowa. And he’s the guy who Warren Buffett, now 93, described in 2021 as his heir apparent at Berkshire Hathaway — an anointment that’s getting renewed attention after the death, on Wednesday, of Charlie Munger, Buffett’s longtime right-hand man. Abel, a spry 61, was the CEO of a geothermal-energy producer when Berkshire bought the company in 2014, and he quickly impressed Munger, who once declared him “better than Warren” in some respects. “Greg understands capital allocation as well as I do,” Buffett himself conceded. Investors sure hope so. Berkshire has consistently and handily outperformed the S&P 500 since 1965, and it’s never had a top-leadership transition. Good luck, Greg! INTERESTING Mark Cuban turns a cool 1,128% profit on the Mavs. Gotta hand it to the (soon-to-be-former) Shark Tank blood hunter for pulling off the sale of the week. Not only did he flip the Dallas Mavericks — the NBA franchise he bought for US$285 million in 2000 — to casino heir Miriam Adelson for US$3.5 billion, he also retained control of basketball operations. He cashed out, in other words, and still kept the toy. Sports franchises have become extremely coveted investments, in part because they’re relatively recession-proof. And, of course, it’s just cool to say you own a team. Admit it: you don’t know the first thing about Visa. None of us does! The company that processes 40% of the world’s credit-card transactions is a US$527-billion mystery box. Where is it located? Who’s in charge of it? What does it actually do? Last week, the Acquired podcast released a captivating deep dive on the company that answers these questions and more. A few interesting tidbits: Visa was created by Bank of America; it’s now basically a government-sanctioned duopoly; it extends no credit itself; and its blue-and-gold logo represents California’s golden hills and blue skies. Who knew!? TLDR PODCAST Martin Short v. AI! We talked with Martin Short — the Martin Short — about money, tattoo removal, and creative resilience. On our next episode, out Tuesday, we discuss why no one makes cheap cars anymore. Listen on Apple Podcasts, Spotify, Google Podcasts, etc. — Sarah Rieger FROM OUR SPONSORS THE FOMO INDEX by Stacey Woods IMPORTANT 🇨🇦 Canadian life expectancy drops to 81.3 years. Still plenty of time to think about when you pushed that pull door. Source 🤖 Sports Illustrated caught publishing articles by AI-generated authors. First clue was they could spell “Novak Djokovic.” Source 🐶 Biotech company developing a longevity drug for dogs. Now just need a longevity drug for squeaker toys. Source ✈️ Plane powered by used cooking oil makes transatlantic flight, emitting very little carbon and smelling only slightly of onion rings. Source CRASH & BURN TO THE MOON 🧑‍💻 Man revealed to be behind a popular female coder’s Instagram. Unfollow, unless you like getting codesplained. Source 🍤 Red Lobster CFO blames Endless Shrimp promotion for its $15M Q3 loss. Endless Caviar campaign put on indefinite hold. Source 🍔 McDonald’s revamping its burgers with brioche buns and randomly scattered sesame seeds. Still no plans to fix the soft-serve machine. Source ♀️ After a short break, Jezebel is coming back. Luckily, there’s still some patriarchy left to smash. Source WHO CARES WHAT’S UP THIS WEEK COP28 continues (until Dec. 12). The UN Climate Change Conference is underway. The focus is ostensibly on compensating poor countries for climate damage. But host nation Dubai is reportedly treating the whole thing like an oil-and-gas trade show to broker deals in countries like, uh, Canada. DON'T BE A TLDR HOG 🐷 Like TLDR? The first five million people to click this link can share it with a friend for free. (You can share it with enemies too but only if you’re ready for them to love you.) THE BIG IMPORTANT STORY MACRO Investors Want To Know If Inflation Will Keep Falling. We Asked an Economist As we mentioned up top, the big market-driving story of late has been the continued fall in inflation sort of everywhere. In Canada, inflation, now at 3.1%, is within spitting distance of the Bank of Canada’s 2% goal. Even better, inflation has cooled without a recession, which often happens when central banks raise rates to control prices, and stocks have rallied on the news. The thing is, the market jubilation will likely last only if inflation keeps falling, which is why many investors are trying to understand what caused inflation and disinflation in the first place, to get a sense of whether current trends will continue. University of Calgary economist Trevor Tombe just published an interesting paper about inflation in Canada. We talked with him about it and what the future might hold. Rising food prices have really stung Canadians. But your paper’s big takeaway is that oil was a main contributor to Canada’s rising and falling inflation. Explain that. Well, food and oil are connected. Oil and energy prices rose sharply in 2022 amid concerns that Russia’s invasion of Ukraine would affect supply, since Russia is a leading energy exporter. So gasoline and energy prices went up. And since food is an energy-sensitive product — it takes energy to both produce and ship it — food prices rose too. At the same time, Russia cut back its fertilizer exports, which increased fertilizer prices dramatically and affected food prices in turn. It was a supply shock. But oil prices have fallen a lot this year, right? Yes. The war didn’t end up disrupting energy or oil markets as much as many people feared, which is partly why oil prices and inflation have fallen. Pandemic supply-chain bottlenecks also drove up the cost of goods — another supply pressure that eased. [Note: Tombe didn’t say this exactly, but it’s presumably good news for the Bank of Canada that inflation resulted more from supply shocks than from unusually high demand that needed to be restrained. Since that’s the case, the BoC might be able to cut interest rates, and thus prop up demand, without driving up inflation.] Goldman Sachs published a report saying that it expects inflation to keep falling and that a nasty recession is unlikely. Does that align with your view? I think so. Food prices are already rapidly cooling. The one area that’s still materially adding to inflation is, no surprise, housing. Supply is low and costs are high. And, as a result, shelter costs are adding a full percentage point to the inflation rate. Still, I don’t anticipate that the BoC will need to raise rates further to cool inflation. Next year, we’ll likely see rates remain roughly the same or start to fall as inflation gradually returns to the target level of 2%. —Interview by Ben Mathis-Lilley. This conversation was edited for length and clarity. OTHER VERY GOOD READS 🤖 Inside Microsoft’s Partnership With OpenAI* How the House of Altman almost came tumbling down | The New Yorker 🌩️ Climate Change Is Costing the Insurance Industry a Fortune What happens when no one wants to pick up the tab? | Hakai Magazine 🤑 How to Pick a Charity That Does the Most Good We included the wrong link last week. Sorry!! | Wealthsimple Magazine *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER X There’s also wealth level 3.5, where you can say GFY to the worst guy in your office. THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Ben Mathis-Lilley (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), Matthew Karasz (markets editor) 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 Google and Visa. 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 Wealthsimple charges a foreign exchange fee for USD trades equal to the daily corporate rate x 1.5%. See wsim.co/fee-schedule for details. 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