Plus: stocks notch a new ATH May 20, 2024 Sign Up | View online IN THIS ISSUE 8 min read ⌛ Long loans 🌤️ Optimistic investors 🦁 Roaring kitties A YouTuber known as Roaring Kitty sparked a meme-stock revival last week. Which presented us with a rare opportunity to include a cute kitten photo in TLDR, so, yeah, that’s what we did. Read more below. | Getty Images THE WEEK IN MARKETS Why Stocks Just Hit Fresh Highs To paraphrase the Geto Boys: Damn, it feels good to be a stock investor. A promising U.S. inflation report — it’s still slowing down! — plus more strong earnings announcements across a wide swath of industries (Merck, Sony, Walmart) powered U.S. and Canadian stock markets to all-time highs. The S&P 500, after gaining 1.3% last week, is now up almost 12% since Jan. 1; the TSX gained 0.75% to reach almost 8% on the year. But the real news of the week? GameStop’s (semi)triumphant return, if only for a hot minute. Keep reading for more about the market’s brief flashback to 2021. WHAT HAPPENED LAST WEEK IMPORTANT Should Canada offer 30-year fixed mortgages? Most Canadians’ mortgages have a term of five years or less, and people are becoming very familiar with the downside: if your rate resets when interest rates are high, homeowners can, and often do, get hit with a massive jump in their monthly payment. Desjardins, North America’s biggest credit-union group, thinks Canada’s mortgage market should be more like the U.S.’s, where most buyers take out 15- or 30-year fixed-rate loans, which insulate homeowners (and the broader economy) from the shock of sudden rate changes. According to Desjardins, 10 years is the sweet spot. But longer terms also tend to come with higher rates, and right now that probably doesn’t look too appealing. Fort McMurray is facing down another fire. The blaze comes eight years after Fort Mac — the heart of Canada’s oil-and-gas operations, which make up 5% of the national GDP and 21% of Alberta’s economy — suffered a wildfire that destroyed 2,400 buildings, caused more than $9 billion in damage, resulted in two deaths, and halted production of more than one million barrels of oil per day. A regional fire chief expressed “a high, high level of confidence” that firefighters will be able to keep the current blaze out of the remote Alberta city (an evacuation order was lifted on Saturday), and the fire seems unlikely to affect any major oil infrastructure. Still, it’s evoking painful memories of the 2016 fire — the costliest natural disaster in Canada’s history. INTERESTING OpenAI mimics Her, but did they even watch the movie? OpenAI’s impressive new model, GPT-4o, which debuted last week, allows users to have audio conversations with an AI chatbot. In a blog post, OpenAI CEO Sam Altman (sort of) compared the new feature to the lifelike AI chatbot voiced by Scarlett Johansson in the 2013 techno dystopian drama Her, prompting Wired magazine to run a story titled “I Am Once Again Asking Our Tech Overlords to Watch the Whole Movie.” Note to Altman: Her is about how technology drives humans apart and makes us lonelier. Unless that’s what you liked about it? Investors, meanwhile, think things look pretty utopian. Bank of America’s monthly fund-manager survey, which polls the Wall Street vest set about their views on markets, showed that investors are ramping up their stock positions, a sign that they feel pretty confident the current rally, which began last October, has legs. That said, the last time BofA’s survey showed this much bullish sentiment was November 2021 … and then, well, 2022 happened, so things can change. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🧊 Venezuela’s last glacier downgraded to an “ice field.” Next it’ll be downgraded to a “big ice cube for a Negroni.” Source 🏢 Toronto asking the public what to do with empty office buildings. Apparently, it’s rude to just assume people want affordable housing. Source 🏄‍♂️ Canada sending its first surfer to the Summer Olympics. Hawaii triggered, threatens to take up curling. Source ❓ It’s the new Prime Video Jeopardy! spin-off with all the hard questions removed. “What is Pop Culture Jeopardy! ?” Source CRASH & BURN TO THE MOON 💻 Squarespace is going private, and, no, it won’t be sponsoring a podcast about it. Source 🕹️ Cineplex is amping up its arcades to bring in business. If that doesn’t work, it might try adding notary publics. Source 🚗 Ontario will suspend your licence if you steal cars. Don’t risk it — driving without a licence is a serious crime. Source 🌮 Judge rules that tacos are legally sandwiches. Finally, they’ll have the right to be represented in food court. Source WHO CARES THIS WEEK ON THE PODCAST THE BIG IMPORTANT STORY 2021 REDUX Meme Stocks (Briefly) Roared Back to Life. Investors Learned a Few Big Lessons One very 2021 thing happened last week. No, people didn’t bake an absurd amount of sourdough or binge Squid Game. Meme stocks meme’d again. From the opening bell on Monday through Tuesday’s close, shares in GameStop ($GME), the video-game store, rose by almost 130%, adding something like $3 billion to the company’s value. AMC, a meme stock that also screens movies, followed suit, jumping by 300%. The surge of these two stocks resembled their Reddit-fuelled rallies of 2021, which, as you probably don’t need reminding of, was a weeks-long cultural phenomenon that became the subject of a Netflix documentary and a feature film. But, in some critical ways, the latest rally played out differently, which may tell us something interesting about the stock market. What happened? Remember @TheRoaringKitty, aka DeepF—ingValue, aka Keith Gill? He’s the headband-wearing YouTuber and Redditor who more or less kick-started the 2021 $GME frenzy. Well, on May 12, after three years of silence, he tweeted a drawing of a gamer leaning forward in a chair. What did the drawing mean? Who knows, but some traders assumed it was a bat signal to start buying GameStop shares again, so that’s what they did. So how big was the rally? According to Wealthsimple, our sponsor, orders for GameStop and AMC shares on its trading platform were 100 times higher than the week prior and comparable to the 2021 spike — at least for a day or two. By Wednesday, though, the rally started to look more like a dust devil than a hurricane. $GME finished the week down almost 70% from its high on Tuesday and is still way south of its 2021 peak. AMC’s drawdown was similarly severe. Why didn’t the rally keep going and going like last time? For one, in 2021, Gill and other traders argued that GameStop shares were undervalued. This time, there was no such debate; the rally was purely (instead of just mostly) fuelled by FOMO and YOLO. But perhaps the biggest reason last week’s meme-stock mania faded was that the market dynamics have fundamentally changed. People are no longer sheltering in place or have COVID stimulus dollars to burn. Interest rates have risen. Savings have dwindled. The world is different, and the novelty of meme stocks seems to have worn off. What does all this teach us about piling into speculative investments? Shares in all sorts of companies — from biotech to telecom to tech — occasionally shoot skyward before settling at a price far below their peak. But investing in meme stocks is especially risky. Some traders made a mountain of money trading meme stocks in ’21, as well as last week, by buying shares early and selling before the Jenga tower collapsed. But data suggests it’s really tough to come out ahead trading these stocks, since they swing so wildly. During the 2021 mania, 67% of Wealthsimple’s clients who bought $GME lost money. So will there ever be another huge meme-stock rally like in 2021? It’s impossible to know for sure, but Bloomberg Opinion’s Matt Levine pointed out that it would be odd if there were frequent months-long, 1,000% meme-stock rallies, because it’s really hard for stocks to become cultural phenomena, like they did during COVID. That said, last week’s rally proved that some traders are still willing to pile into meme stocks, so an occasional days-long, 100% rally might not be uncommon. Is there one other really practical lesson about investing in meme stocks? After the 2021 mania, our sponsor, Wealthsimple, also reported that the majority of its clients who bought $GME purchased five shares or fewer, meaning most gambled money they could afford to lose. We try not to be too prescriptive here at TLDR, but only risking money you can live without might not be a bad policy whenever it comes to trading a hyper-speculative asset, especially one that’s surging in response to a tweet from a guy with a cat-related Twitter handle. —Claire Porter Robbins OTHER VERY GOOD READS 🎉 Imagine Your Last Day of Work Ever. Here’s Theirs. People creating their own retirement celebrations. | The New York Times 📈 Canada Just Started the Largest Tax Increase You’ve Never Heard Of It might be more consequential than the capital-gains tax. | The Hub 🩺 Private Health Care Is Here How a two-tiered system crept into Canada. | Maclean’s THE WISDOM OF X We can’t be the only ones who put CPI release dates on our calendars… 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), Clare Douglas (copy editor), Sara Black McCulloch (fact checker), Mohini Tailor (senior lifecycle specialist), Julian Mirijello (lifecycle marketing intern), Matthew Karasz (markets editor) Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Correction: In last week's newsletter, we erroneously reported that Nintendo's Switch successor will be released by April 2025. In truth, Nintendo said it will be revealed by April 2025, with the product launch coming later. We regret the error. 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. 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