Plus: Pandemic Santa gets slayed September 26, 2022 Made in Canada IN THIS ISSUE Estimated read time: 7 mins 🇬🇧 Tax cuts for Britons 📦 Fewer deliveries for FedEx 🐄 AI for cows WHAT HAPPENED LAST WEEK Europe’s energy crisis is ballooning into a full-blown economic fiasco. Read about it below. | Getty Images THE WEEK IN MARKETS Before we get to the numbers, we know many of our East coast readers have bigger problems than markets right now, and our thoughts are with everyone affected by Hurricane Fiona. Now, the numbers: last week was somehow worse than all the other bad weeks recently. The Fed raised interest rates by another 75 basis points, and central bankers across the world followed suit. In response, rates of all flavours surged, bond markets collapsed, and stock markets everywhere rolled over and died. The S&P, Nasdaq, and TSX were all down between 4% and 5%; all are flirting with year-to-date lows (of -23%, -31%, and -13%, respectively. Driving this week’s narrative is, of course: the fight against inflation. But now the story comes with a darker sense of foreboding; Fed Chair Powell struck a particularly ominous tone about the measures that might need to be taken. More fallout below... IMPORTANT The U.K. announced the biggest tax cuts in 50 years on Friday. Although meant to stave off a recession, so far it’s only worsened the crises. How? Stimulus like this tends to exacerbate inflation, so the cuts sapped investors’ confidence in the government. Bonds and stocks tanked even more in the U.K. than they did everywhere else, and the pound also fell. It’s a sign of the catch-22 facing governments everywhere — and one more voice in the opera of economic tragedy that is Europe at the moment. (See our Big Story below for more.) It got more expensive to eat last month but cheaper to drive to the grocery store. Canada’s new inflation numbers show food prices are 10.8% higher than they were a year ago, which is bad. But gasoline, housing, and clothing prices fell enough to pull overall inflation down to an encouraging-in-context 7%. Maybe, like peyote or deciding to have children, it took a minute for the effect of those rate hikes to start kicking in. The news isn’t enough to stave off more hikes, but it is a pinprick of light at the end of this loooooong tunnel. If you’re tracking FedEx profits, expect delays. After announcing its third-straight quarter of declining delivery numbers, FedEx is looking to cut costs and raise prices to counter a 20% drop in profits. Pandemic Santa is in the same boat truck as a lot of big retailers, who upped capacity to accommodate the boom in e-comm and are now stuck with it as online spending returns to earth. INTERESTING Walmart is building its first-ever fulfillment centre in Quebec. Though the big-box discounter is slowing things down in preparation for a recession, the announcement is a good sign of its commitment to Canada — and to, you know, trying to keep ahead of Amazon. The fulfillment centre is part of a multiyear $3.5-billion plan to improve both online and in-store shopping nationwide. Lots of governments were talking crypto this week. Fine, it was two, but they’re big ones. Along with providing a little mud for the first slinging session between Trudeau and Poilievre on the floor of Parliament, crypto was the subject of a new draft bill in the U.S. Congress. The House is working on a temporary ban on algorithmic stablecoins (cryptocurrencies pegged to another token instead of a traditional currency), hoping to save the next batch of dreams and retirement funds from a Terra-style collapse. THE FOMO INDEX by Stacey Woods IMPORTANT 🍺 CO2 supply issues could lead to craft beer shortage. World secretly relieved they can stop pretending to like Cranberry Bacon IPAs. Source 💸 Whaddup, creditors? Investors trying to recover $35M from Ontario’s 23-year-old “Crypto King,” who didn’t keep, like, records. Source 🚨 NY files $250M fraud lawsuit against Trump & Co. Put it over there with the others, says family. Source 🔎 Google searches for “How to leave Russia” skyrocketed last week, and they weren’t all by Putin. Source CRASH & BURN TO THE MOON 🍗 The FDA warning against a TikTok trend of cooking chicken in NyQuil fails to note that it pairs much better with Robitussin. Source 👃 It was research! Beyond Meat COO arrested for allegedly biting a man’s nose in a parking lot. Source 🗞 Dilbert gets downsized: Comic strip dropped from 77 papers after anti-ESG jokes. Source 🐮 Why, Bessie, I never noticed your eyes before. Albertan start-up lets ranchers use facial recognition to monitor their cows. Source WHO CARES STUFF THIS WEEK Nike announces its quarterly earnings (Thursday). Good news isn’t a slam dunk thanks to currency issues and weaker Chinese sales. Alibaba holds its annual general meeting (Friday). The tech giant still makes Beijing nervous and still finds its business handcuffed by ultra-strict COVID protocols. THE BIG IMPORTANT STORY ENERGY What Happens When Russia Turns Off Your Economy? On September 30, EU member states will meet to decide how to address perhaps the most dire issue facing the bloc: energy prices. Before the war in Ukraine, Europe imported roughly 40% of its energy-generating natural gas from Russia — an overdependence that brought pain when Russia limited gas shipments in retaliation against sanctions. Electricity prices have quadrupled throughout Europe as a result, and pushed the zone toward an “almost inevitable” recession, according to Bloomberg. Worse, energy demand will likely spike further this winter, as will prices. The results could be tragic. All this has left policymakers in a bind, since subsidies to reduce the energy strain would likely drive up inflation, kill investor confidence, and ultimately prove self-defeating (as the U.K. perhaps demonstrated last week). TLDR’s Sarah Rieger spoke with energy researcher Anna Mikulska, of Rice University, about how Europe landed in this precarious position. Why was Europe not better prepared for this crisis? Not all countries were unprepared. The Eastern Bloc had long warned Western Europe against depending on Russian energy. To avoid that themselves, Lithuania built terminals for importing LNG (liquified natural gas), and Poland is building a pipeline from Norway. The West just didn’t heed their warnings. Some people even argued that importing lots of Russian gas gave Germany a geopolitical advantage, on the assumption that Russia wouldn’t act against one of its main buyers. That was a big miscalculation. How could the crisis economically affect countries like Germany? German plants are decreasing production, owing to energy costs. If the situation worsens, industrial activity may relocate, which will complicate an economic recovery. Can Canada help? Canada lacks the infrastructure to export LNG, so the most it can do is produce enough gas to free up U.S. supply. But even the U.S.’s capacity is limited, owing to the small number of LNG export facilities. Beyond storing gas, how is Europe preparing for winter? For starters, to import more LNG, Germany, Italy, and others have rushed to bring in floating storage-and-regasification terminals. These are ships that regasify LNG from the slushy state it’s transported in, and they’re the closest thing to a quick fix for importing LNG. How might the crisis affect Europe’s energy priorities? We’re seeing renewed interest in nuclear power. There will continue to be a push for renewable energy. But, in the short term, countries might delay phasing out coal generation. What do you make of the emergency energy plans the EU has put forward? The EU is hoping for solidarity. But we still don’t know if all, or most, countries will be willing to share resources, especially if there’s widespread scarcity. Could that scarcity affect us here in Canada? It could, indirectly, through global economic reverberations. Canada doesn’t depend on LNG for its energy, but the markets are all interconnected. (Note: after Mikulska spoke with TLDR, the euro zone’s economic crisis appeared only to worsen.) This interview was edited for clarity and concision. Read a slightly longer version here. 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 🏚 No Place to Live A public-housing system stretched to its limits | The Walrus 🎮 GameStop Employees Are Not Your Babysitters Parents keep dropping off their kids at the store | Kotaku 💁🏽‍♀️ The Women-Led VC Firms Changing the Financing Game Trying to bring diversity into venture capital | Canadian Business 🐅 Why We Take Animal Voyages* How we lost our connections to animals | The New York Times *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF TWITTER We’ll take optimism wherever we can find it these days, even from Goldman... THOUGHTS ON TODAY’S ISSUE? 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