Plus: predatory loans for pricey cars. April 15, 2024 Sign Up | View online IN THIS ISSUE 8 min read 👵 Reduced retirements 🤯 Catastrophic car loans 🥫 Sit-ins at Superstore (?) The steely look of every Loblaw protestor waiting for the May 1 boycott to begin. We explain below. THE WEEK IN MARKETS Golden Age Stocks fell a bit last week, but the S&P 500 and TSX still sit at or near all-time highs. Rather discuss again why that is, we thought we’d talk about the furious rally in commodities. That’s right: oil, silver, and copper are all up big, but maybe the most noteworthy is gold. Since Jan. 1. an ounce has shot up 14% (the S&P is +8% YTD), hitting an all-time high of US$2,400. Why? Investors tend to buy gold whenever inflation is running hot, since it’s a reliable store of value. But Chinese investors (markets in China are, let’s say, not doing terrific) have been huge buyers, as have Russian and Middle Eastern investors, who are looking for a safe (and hard-to-sanction) place to park cash amid escalating geopolitical tensions. Will it last? Commodity markets fluctuate a lot. But judging by the events in Israel and Iran over the weekend, the tensions driving up gold likely won’t fade soon. CHART! Housing costs have risen +35% over the past four years, but that seems downright mild compared with the 50% spike in used-car prices. Why is that? We get into it below. WHAT HAPPENED LAST WEEK IMPORTANT Ottawa makes it easier to buy a house. All you have to do is rob your retirement savings. The federal government announced new real-estate rules that, if implemented, will allow first-time buyers to pull as much as $60,000 (up from $35K) from their RRSP for a downpayment. Another change will let buyers get an insured mortgage amortized over 30 years, instead of 25, which will lower their monthly payment. But wait, you might be wondering, couldn’t this increase demand, since buyers will have access to more cash? And won’t buyers pay more interest over more years? Yes and (deep sigh) yes. That said, the government is also trying to incentivize construction and make it easier to build modular homes, in a bid to boost the housing supply. We’ll find out how they plan to pay for it all when the budget is tabled Tuesday. The rate-cut wait goes on. The Bank of Canada held interest rates at 5% last week, and though Governor Tiff Macklem hinted that a rate cut isn’t out of the question this summer, he also reminded everyone (who could forget?) that inflation, at 2.8%, is still above the BoC’s 2% target. Some investors are now wondering if the first cut will come in June as expected; they’re now putting the odds at 56%, down from 84%. The U.S. Fed, meanwhile, was even more blunt, all but ruling out any cuts this summer. INTERESTING A disastrous car loan becomes a cautionary tale. In a viral TikTok that illustrates how expensive owning and paying off a car has become, a woman says her husband still owes $74,000 on his $78,000 truck two full years after buying it, even though his monthly payment is $1,600 (!). That’s because he agreed to a loan with a 14% APR (!!). (She also over-shared that she pays $1,400/month for an SUV.) Steep car prices have forced many people to borrow. Meanwhile, borrowing costs are also up, especially for people with less-than-great credit. Predatory lenders have taken advantage of the situation by offering subprime borrowers no-credit-check loans, or a “fast and easy” application process, then gouging them with hidden fees after they sign a contract. Which is how you end up with a $1,600/month car note. No Frills, no peace. Nearly 50,000 Canadians have joined a subreddit that’s trying to mount a boycott of all Loblaw-owned companies for the month of May in protest of exorbitant food prices ($30 feta!) and corporate profits that have more than doubled since the pandemic began. Customer activism has gotten Loblaw’s attention in the past: last year, shoppers successfully pressured the company to reinstate its discount on expiring foods. But an all-out boycott is a far more ambitious goal that faces some serious hurdles — namely, Loblaw’s 29% market share. In many parts of the country, Loblaw-owned brands like Superstore are the only grocery option. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🥩 Inflation driving up demand for cheap meat like Vienna Sausage. Plus, it tastes good after a hard day of train-hopping. Source ✍️ Data shows over 22 million student papers were likely written by AI, putting too many human plagiarizers out of work. Source 💉 Ozempic-like drugs now showing potential to help Alzheimer’s, Parkinson’s, heart disease, and other things. Common cold getting nervous. Source 🤖 Federal government investing $2.4 billion to accelerate AI in multiple areas, except cheating on homework, where it’s doing fine. Source CRASH & BURN TO THE MOON 🍔 Uber Eats is testing a TikTok-like feed. Need to figure out how to use an if-you-were-blond filter on a sandwich. Source 😎 “Why do my eyes hurt” searches surging since the eclipse. “Why can’t I read these search results?” searches surging soon. Source 🖼️ Museum employee fired for hanging his own art on the wall. Will hang his framed pink slip at next job. Source 🐐 Attention petting zoos, Satanists: Sicilian island overrun with goats is giving them away to whoever wants them, no questions asked. Source WHO CARES THE BIG IMPORTANT STORY Q&A How Strong, or Not So Strong, Is the Canadian Economy? Lately, there’s been an argument about Canada’s economy. On one hand, some less-than-rosy articles in the newspapers have sounded the alarm about Canada’s lagging productivity and its falling per capita GDP — which together might mean the country is growing less prosperous. Then, on the other hand, you have people like Bloomberg Opinion columnist/economist Tyler Cowen who argue that Canada is doing just fine and the op-ed doom-and-gloomers are overreacting. In a recent essay (that’s paywalled, sorry), Cowen pointed out that, sure, the Canadian economy isn’t as productive as the U.S.’s, but most developed economies aren’t; plus, in Canada workers’ incomes have been steadily growing for two decades and the economy has expanded at a reliable clip. “In the simplest possible terms,” concludes Cowen, “Canada is not only a great place to live, it is also getting better.” So who’s right, the hand-wringers or Tyler Cowen and the like? We asked someone who knows a thing or two about the economy: Stephen Poloz, who ran the Bank of Canada from 2013 to 2020. What do you think about Cowen’s argument that Canadians should be more optimistic about the economy? Poloz: That article illustrates that contrarian views get headlines, not much else. We’re in uncertain times. There are some positive things, as Cowen points out, but there’s lots to worry about. Businesses should be paying attention to the Bank of Canada’s recent announcement that our productivity levels are so low it’s an emergency.* Low productivity results from low business investment and leads to low economic growth. [Canada currently produces 71% of the value generated by the U.S. economy per hour, down from 88% in 1984.] Should we be entirely pessimistic? No, because the opportunities to fix productivity are right in front of us, namely through greater investment in technology. *[Note: low productivity basically means that Canadian goods and services aren’t as sought after as those offered by other countries, not that Canadians aren’t hard-working. Tech companies tend to juice productivity since they create a lot of value with a relatively small number of employees.] So if tech will boost our productivity, why aren’t Canadian businesses investing more in it? Poloz: Canadians have been investing in the U.S. instead of at home because there’s uncertainty around trade risk. The North American Free Trade Agreement barely got renegotiated at the end of Trump’s term. [Trump threatened to exclude Canada from the deal, which would have resulted in higher tariffs on Canadian goods.] And in 2026, the deal will need to be renegotiated. Will Trump be in office or Biden? Would you risk your business on that? I wouldn’t. The other concern that’s hurting investment is that we have too much uncertainty in our resource industry, partly from lots of regulation. It’s well-intentioned, but it’s hard on the market. What are some policies Canada should be pursuing to change that? Poloz: I’m not suggesting more policy; we need less policy. Consultation [with stakeholders] and regulation often sound like the right thing to do, but they dramatically increase the timeline to get projects done. That’s why the private sector walked away from the Trans Mountain pipeline. At this rate, we’re not going to have enough investment in this country in five years. Your book, The Age of Uncertainty, is about preparing for economic risks. What are some risks that could affect the Canadian economy? Geopolitical conflicts and rising income inequality are two big ones. The former could disrupt trade and cause supply shocks. Take the food- and fuel-supply issues we saw because of the war in Ukraine — that sort of thing will happen more often, I suspect. Fortunately, the federal government is putting more focus on trade policies [with the Philippines, Vietnam, etc.], which I think is really important in a world where growth is going to be in other countries. We need to be able to take advantage of it. This interview was conducted by Claire Porter Robbins and edited for length and clarity. OTHER VERY GOOD READS ☠️ The Toxic Culture at Tesla Racial harassment, sexual abuse, and injuries on the job | The Nation 🛍️ What if We Turned Abandoned Malls Into Housing? Just think: you could sleep in the old Cinnzeo | Vox 🏚️ Should You Buy or Rent? A quick formula to help you decide | Wealthsimple Magazine *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF X “Will you bring snacks?” is actually the first question we ask prospective hires at TLDR. 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 marketing specialist), Matthew Karasz (markets editor) 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. VIEW IN BROWSER PRIVACY POLICY UNSUBSCRIBE TLDR is offered by Wealthsimple Media Inc. and is for informational purposes only. 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