Thursday, December 22, 2022

Season's greetings from the EdgePoint team!

Happy Holidays!

From our EdgePoint family to yours, wishing you all the joys of the season, health, and happiness throughout the coming year! 

Plaid Day at our Toronto and Montreal offices

Friday, December 16, 2022

This week's interesting finds

Zack Chetrat – Partner since 2017 (Cambie & West Broadway – Vancouver, British Columbia)

This week in charts

More Americans are joining the ‘cashless’ economy

Young adults are staying with their parents


More Canadian renters than ever before

Sea Change (Howard Marks memo)

“The overall period from 2009 through 2021 (with the exception of a few months in 2020) was one in which optimism prevailed among investors and worry was minimal. Low inflation allowed central bankers to maintain generous monetary policies.  These were golden times for corporations and asset owners thanks to good economic growth, cheap and easily accessible capital, and freedom from distress. This was an asset owner’s market and a borrower’s market.  With the risk-free rate at zero, fear of loss absent, and people eager to make risky investments, it was a frustrating period for lenders and bargain hunters.

“Inflation began to rear its head in early 2021, when our emergence from isolation permitted too much money (savings amassed by people shut in at home, including distributions from massive Covid-19 relief programs) to chase too few goods and services (with supply hampered by the uneven restart of manufacturing and transportation). Because the Fed deemed the inflation “transitory,” it continued its policies of low interest rates and quantitative easing, keeping money loose.  These policies further stimulated demand (especially for homes) at a time when it didn’t need stimulating.

“Inflation worsened as 2021 wore on, and late in the year, the Fed acknowledged that it wasn’t likely to be short-lived. Thus, the Fed started reducing its purchases of bonds in November and began raising interest rates in March 2022, kicking off one of the quickest rate-hiking cycles on record.  The stock market, which had ignored inflation and rising interest rates for most of 2021, began to fall around year-end.

“How has this change manifested itself in investment options? Here’s one example: In the low-return world of just one year ago, high yield bonds offered yields of 4-5%. A lot of issuance was at yields in the 3s, and at least one new bond came to the market with a “handle” of 2. The usefulness of these bonds for institutions needing returns of 6 or 7% was quite limited.  Today these securities yield roughly 8%, meaning even after allowing for some defaults, they’re likely to deliver equity-like returns, sourced from contractual cash flows on public securities.  Credit instruments of all kinds are potentially poised to deliver performance that can help investors accomplish their goals.”

Quebec Shuns Bitcoin Mining in Bid to Conserve Power

The government-owned utility Hydro-Quebec asked a provincial regulator last month to reallocate the 270 megawatts of energy, equivalent to the energy consumed by roughly 97,000 households, that it had set aside for crypto mining.

It is also a sharp reversal from 2018, when the then-CEO of Hydro-Quebec said bitcoin business was necessary to boost provincial consumption to offset what he feared was declining demand that would put the utility into a “death spiral.”

At the end of the last year, Canada was the fourth-largest producer of bitcoin, behind the U.S., China—where illicit bitcoin mining continues despite a 2018 government ban—and Kazakhstan, according to the University of Cambridge Judge Business School.

Hydro-Quebec charges the lowest rates for industrial power in North America, with average prices as of April 1 of 3.93 cents per kilowatt-hour in Montreal, its largest city, according to the utility’s data. Industrial customers in Houston paid an average of 10.33 cents. The average cost in North America is 8.22 cents, according to Hydro-Quebec.

Now, the utility says that demand for electricity in the province will grow 14% over the next 10 years and it needs to direct energy to higher priority areas, such as exports.

Quebec has signed agreements to provide power to New York City and Massachusetts. The provincial utility is trying to build transmission lines through Maine to supply power to New England, a project that could bring the province more than $7 billion in revenue over the next 20 years.

This week’s fun finds

Becoming Athletic In My 50s

This was a new feeling — and one that was, for me, incredibly weird and foreign. What had changed? Why was I suddenly digging the feeling of exercise?

Part of it was that really vigorous cycling crept into my life as a functional activity. I wasn’t having to “set time aside to exercise”, or fit it into my calendar. I was just, well, moving around town and doing errands. I was Getting Stuff Done. I didn’t classify it as an athletic activity or a sport: It was “mobility”, autonomy. Since I’m also a big ol’ treehugger focused on climate-change mitigation, it also felt rad and empowering to suddenly schlep all over town — and carry heavy loads — without using a car.

But along the way, I also realized I was vibing with many of the thrills of athletics. I enjoyed pushing the limits of my endurance. In the fall of 2020, for example, my son and I decided to try cycling a full “century”, 100 miles in a single day. We hit the road one morning in early September, and holy moses by dinner we’d made our way to Philadelphia. When I arrived at Philly’s city hall, it felt astounding to have hauled such ass entirely under my own steam. It was a wild, giddy boost to one’s self-esteem. “After you’ve traveled a serious distance on a bike,” as I later wrote, “it’s hard to feel down on yourself.”

But most obviously, long-distance cycling finally helped me figure out what motivated all these sporty folks, who I’d regarded for decades with such dank suspicion. I now understood them, a little. Specifically, I felt the pleasure of figuring out what my body — and what my willpower — was capable of.

YouTube Stars Cash In Video Rights for Millions of Dollars

Spotter Inc. and Keli Network Inc., which does business as Jellysmack, are flooding the personalities behind top YouTube channels with offers to license their old videos, pitching the deals as timely infusions that can help them expand their businesses.

The startups offer cash sums in exchange for the future advertising sales generated by a YouTube creator’s old videos, striking deals that can stretch for as long as five years.

Spotter said it had spent $740 million on content licensing agreements since 2019 after announcing earlier this year that it planned to invest $1 billion by the middle of 2023. Jellysmack has put aside $500 million for similar deals.

SoftBank Group Corp.’s Vision Fund invested in both companies, betting the videos would increase in value as YouTube stars attract larger audiences. Other smaller firms are also pitching deals to creators.

The Murky Path To Becoming a New York Times Best Seller

No one outside The New York Times knows exactly how its best sellers are calculated—and the list of theories is longer than the actual list of best sellers. In The New York Times’ own words, “The weekly book lists are determined by sales numbers.” It adds that this data "reflects the previous week’s Sunday-to-Saturday sales period" and takes into account "numbers on millions of titles each week from tens of thousands of storefronts and online retailers as well as specialty and independent bookstores." The paper keeps its sources confidential, it argues, "to circumvent potential pressure on the booksellers and prevent people from trying to game their way onto the lists." Its expressed goal is for “the lists to reflect what individual consumers are buying across the country instead of what is being bought in bulk by individuals or associated groups.” But beyond these disclosures, the Times is not exactly forthcoming about how the sausage gets made.

Laura B. McGrath, an assistant professor of English at Temple University who teaches a course on the history of the best seller, compares The New York Times’ list to the original recipe for Coca-Cola: “We have a pretty good idea of what goes into it, but not the exact amount of each ingredient.”

Although the list claims to be a numerical ranking with full autonomy from The New York Times Book Review, some of the sources I spoke with believe that an element of editorial curation must be at play. “To my knowledge, The New York Times tracks sales of books, and the sales are what is ‘supposed to’ decide where those books sit on the list. However, the truth is, it's much more editorialized,” Sarah*, a book publicist who has worked at two Big Five houses, suggested to me. “There is quite a bit taken into consideration—i.e., are the book sales mostly bulk buys? Are they mostly indie bookstore sales? Are they mostly Amazon sales? Even which list the book would be considered for has a huge effect.” For example, whether a book is considered for the Hardcover Nonfiction weekly list or the Advice, How-To, & Miscellaneous weekly list might affect whether it becomes a best seller at all.

Times spokesperson Melissa Torres denied in an email that any editorial judgments are involved in constructing the best seller list.

Friday, December 9, 2022

This week's interesting finds

Alex Gramegna – Partner since 2019 (100 St. – Edmonton, AB) 

This week in charts 

Pandemic saving habits have ended 

Vanguard quits net zero climate effort, citing need for independence 

Vanguard Group Inc is pulling out of a major investment-industry initiative on tackling climate change, the world's biggest mutual fund manager said on Wednesday, explaining it wants to demonstrate independence and clarify its views for investors. 

One focus of criticism has been the effort known as the Net Zero Asset Managers (NZAM) initiative, launched in late 2020 to encourage fund firms to reach net zero emission targets by 2050 and limit the rise in global temperatures. As of Nov. 9, NZAM counted 291 signatories representing some $66 trillion in assets under management. 

As recently as May Vanguard was touting commitments it had made in line with NZAM's goals. On Wednesday Vanguard posted a statement on its website saying industry initiatives like NZAM can create confusion. 

"We have decided to withdraw from NZAM so that we can provide the clarity our investors desire about the role of index funds and about how we think about material risks, including climate-related risks—and to make clear that Vanguard speaks independently on matters of importance to our investors," Vanguard said in the statement. 

Vanguard rivals including BlackRock Inc (BLK.N) have taken the opposite stand and said their NZAM participation does not conflict with their independence. A BlackRock spokesman said on Wednesday the company remains part of NZAM. 

Daniel Wiener, chairman of Adviser Investments in Newton, Massachusetts and a longtime Vanguard observer, said the firm's withdrawal showed it lacked a strong leader on ESG issues that BlackRock has in its CEO Laurence Fink. 

"Backing out of this thing is simply Vanguard blowing with the winds of constant change. They don’t have a strong personality like Fink to champion a cause," Wiener said. 

German strategy paper targets China trade dependence 

Germany's Economy Ministry recommends excluding using components from providers from authoritarian states in critical infrastructure and imposing stricter requirements for firms dealing with China, a strategy paper seen by Reuters shows. 

Those German firms particularly exposed to China should share details on that business with the government and undergo regular stress tests, according to the ministry's "Internal Guidelines on China", marked confidential. 

Deep trade ties bind Asia and Europe's biggest economy, with rapid Chinese expansion and demand for Germany's cars and machinery fuelling German growth over the past two decades. China became Germany's single biggest trade partner in 2016. 

Germany did not aim to decouple from its top trade partner, China, said the paper, first reported on by online portal The Pioneer. But Russia's invasion of Ukraine had shown the high risks of close economic relations with autocratic states seeking alternative world orders. 

KLM chief encourages passengers to take the train to cut emissions 

KLM’s chief executive has encouraged passengers to take the train rather than fly on some short-haul journeys to help cut carbon emissions, saying the airline sector should stop viewing rail as a competitor. 

“If [you] have a good alternative you should really use it,” Marjan Rintel told the Financial Times in an interview. “If you’re serious on reaching your sustainability goals, the train is not a competitor. We need to work together.” 

Rintel said KLM had already block-booked seats on the train service linking Amsterdam to Brussels and Paris in response, and she had urged the business “to develop the relationships with the Dutch railways, to see what we can do at short notice to motivate our customers to go by train to Brussels or Paris”. 

KLM was also looking at making it easier to buy flight and train tickets in a single booking and was in discussions with rail companies in the Netherlands and France about making transfers easier, Rintel said. 

However, she expressed no interest in becoming directly involved in running train services and said the airline would work with NS and the Eurostar Group, owner of the cross-Channel Eurostar service and of the Thalys service linking France, Belgium, Germany and the Netherlands.   

Music Deal Maker With Rights to Tens of Thousands of Songs Faces Chorus of Investor Unease

Investors are demanding a change of tune at Hipgnosis Songs Fund Ltd., the London-listed investment vehicle that owns the rights to tens of thousands of songs written by artists such as Shakira, Lindsey Buckingham and the Red Hot Chili Peppers. 

A spokesman for the investment adviser to the fund said it adds value through active song management. It is benefiting from growth in premium streaming services and other new sources of revenue that are boosting the global music industry, he said. 

When times were good, Hipgnosis tapped investors repeatedly for new equity funding to buy more songs, acquiring catalogs at what some music executives viewed as high prices. 

The rush of deals fed into higher sales, boosting the stock price and its ability to raise more money. From its 2018 listing onward, Hipgnosis has raised about 1.3 billion pounds in equity, equivalent to about $1.58 billion, and borrowed hundreds of millions of dollars more. 

[Founder] Mr. Mercuriadis has struck separate deals with Blackstone, which agreed in late 2021 to take a majority stake in Hipgnosis Song Management Ltd., which advises the listed fund. The investment adviser also manages a second private fund for Blackstone, known as Hipgnosis Songs Capital. 

This year, however, Hipgnosis stock has fallen roughly 35% and now languishes below its listing price.

This week’s fun finds 

Santa came early to the EdgePoint office 

Our littlest partners came into the office to see Santa and his elves. There was mad science, presents and a lot of laughter. 

Changing the wrap game 

Several EdgePoint partners and volunteered their time with Holiday Helpers to wrap presents for families in need. 

Fortunately, there were no reported paper cuts.   

EdgePointers go back to school 

Internal partners and alumni of Michael Power – Saint Joseph High School, Anna, Stefania and Daniela, along with Chief Camp Counsellor Montana, presented our Edge-ucation Camp on financial literacy at their old high school.

Friday, December 2, 2022

This week's interesting finds

Alex O’HaraPartner since 2021 (Queens Quay – Toronto, ON)   

It's back – The EdgePoint ornament 

Like most people, we took down our holiday ornament in the new year, but we’ve brought it back to the EdgePoint store for a limited time. Spread joy this season by lowering our investors' fees with any profit from store sales.   

This week in charts 

Neither stocks nor bonds have done well this year   

Saying no to cryptocurrency was a glorious moment for Canada’s investment advisers 

Crypto is still in its infancy and may yet turn out to be a reliable financial asset we commonly invest in or use for making payments. What advisers got right was the idea of staying away during a speculative frenzy that could only end badly. The price of bitcoin, ethereum and other coins is down by half to two-thirds or more this year. FTX, a once-celebrated crypto exchange, has filed for bankruptcy protection with debts in the billions of dollars. 

For the most part, though, crypto has mostly been a story of individual investors buying in on their own while advisers and money managers mainly watched from the sidelines. Back in March, 2021, I wrote a piece with the headline Why Your Investment Adviser Hates Bitcoin. I surveyed advisers on LinkedIn and found a stern resistance to incorporating it into client portfolios on the basis that it was hard to value and thus too risky. 

Resisting crypto at its peak took some conviction because prices were rising so fast. Bitcoin pretty much quadrupled from November, 2020, to the same month last year, and other cryptocurrencies soared as well. To stand against crypto as an adviser was to risk coming off like an apologist for an outdated and decaying financial system – just the sort of thing crypto investors saw themselves as rebelling against. 

The pressure on advisers to accept crypto must have been intense, given how much faith individual Canadians put in the sector. “Polls seem to indicate that Canadians are more likely to be invested in crypto than American, Australian, or British households,” says a recent report from the independent analysis company Morningstar. 

Big traders flock to US equity options with fleeting lifespans 

Options provide the right to buy or sell assets at a fixed price by a given date. Zero-day options provide this right for the shortest possible period, expiring the same day they are purchased. 

While options trading has risen broadly since the start of the coronavirus pandemic, Goldman Sachs strategist Rocky Fishman said ultra-short-dated options have been “the strongest area of volume growth”. He estimated that roughly 44 per cent of S&P 500 index options that have been traded in the third and fourth quarter of this year had less than one day to expiry. 

The vast majority of the volumes appear to be flowing from professional traders such as asset managers, hedge funds and banks and not retail investors, research shows. 

Some have pointed to the surge in options trading as one propellant of the wild intraday market swings registered this year. Market makers that sell options contracts will hedge their positions to avoid making a bet on the market’s direction. 

That hedging can, at times, accelerate broader shifts. If market makers sold a large number of call options that would pay out if the S&P 500 were to rise, for example, they could hedge their position by purchasing S&P 500 futures. Some believe that index futures trading can in turn affect the prices of underlying stocks. 

Starlight Investments, one of Canada’s largest owners of apartment buildings and multifamily properties, is halting monthly payouts on two of its funds, another sign that higher interest rates are causing trouble across the real estate sector – even for the most sophisticated managers and investors.

Starlight, which owns $25-billion worth of properties and real estate securities in Canada and the United States, paused distributions on two funds that specialize in U.S. properties: the U.S. Residential Fund and the U.S. Multi-Family (No. 2) Core Plus Fund. Combined, the two funds have $840-million in assets under.  

The Starlight portfolios benefitted from this strength, with average rents on properties in the larger U.S. Residential Fund jumping 17 per cent year-over-year in the third quarter. Yet rising interest rates are now biting because both funds rely on short-term, variable-rate mortgages to finance their purchases. 

“The size and pace of interest rate increases has been unprecedented and has resulted in interest rates that are significantly higher than projected at the time the fund financed its properties,” Starlight wrote to investors Friday. In response, the company is halting distributions that paid a 4-per-cent annual yield.

Investor Howard Marks: ‘The short run is by far the least important thing 

I arrive 10 minutes early for our lunch at Il Gattopardo, near the Museum of Modern Art in Midtown Manhattan, to find that my guest is already sitting at his usual corner table. He’s dressed in a smart grey suit and tie, and his customary clear-framed glasses. As befits a man whose entire world view is predicated on anticipating what could go wrong, he is, in his own words, “pathologically prompt. I can’t be late if I want to.” 

As we enjoy our simple main course, Marks expounds one of his core philosophies: that economic cycles are driven by the pendulum of human emotion. “In real life, things fluctuate between pretty good and not so hot, but in the market, things go from flawless to hopeless,” he says. “Nothing’s ever flawless and nothing is ever hopeless, but when people reach those extremes, it’s a good opportunity for the contrarian.” 

We’re lunching in late September. The US Federal Reserve has quickly raised interest rates to curb inflation and there has been a correction in equity markets. For Marks, “we’re in what I call the zone of reasonableness . . . And when it’s in fair territory, there’s nothing brilliant to do.”   

This week’s fun finds 

Here are the ages you peak at everything throughout life

‘Zombie’ virus revived after 50,000 years trapped in Siberian permafrost 

Scientists are thawing out these ancient viruses in order to assess their impacts on public health. As the permafrost, or permanently frozen ground, melts in the Northern Hemisphere, the thawing ice releases tons of trapped chemicals and microbes. 

“Due to climate warming, irreversibly thawing permafrost is releasing organic matter frozen for up to a million years, most of which decomposes into carbon dioxide and methane, further enhancing the greenhouse effect,” the study’s authors wrote. “Part of this organic matter also consists of revived cellular microbes (prokaryotes, unicellular eukaryotes) as well as viruses that remained dormant since prehistorical times.” 

Is Wine Fake?

Just because wine experts can judge the characteristics of wine doesn’t mean we should care about their assessments of quality. Most of the research I found showed no blind preference for more expensive wines over cheaper ones. 

Here my favorite study is Goldstein et al., “Do More Expensive Wines Taste Better? Evidence From a Large Sample of Blind Tastings.” They look at 6,175 tastings from 17 wine tasting events and find that, among ordinary people (nonexperts), “the correlation between price and overall rating is small and negative, suggesting that individuals on average enjoy more expensive wines slightly less.” But experts might prefer more expensive wine; the study found that if wine A cost 10 times more than wine B, experts on average ranked it seven points higher on a 100-point scale. However, this effect was not quite statistically significant, and all that the authors can say with certainty is that experts don’t dislike more expensive wine the same way normal people do.

Friday, November 25, 2022

This week's interesting finds

Adam Young and Sydney Campbell – Partners since 2019 and 2020 (Yonge-Dundas Square – Toronto, ON) 

Our holiday gift guide – 2022 edition 

For those fearing winter (and those looking forward to it), we have a new list of gift recommendations tested by EdgePointers. As always, they’re as varied as the partners who recommended them. From digital to analog, there are things for the home and even something in outer space. We hope they help inspire your presents for those closest to you these holidays. Just like last year, we’re also featuring some items made by some of our Portfolio companies (although this isn’t a recommendation to by a company’s securities). 

EdgePointer of the Month 

The latest EdgePointer of the Month is Nataliya Goreva, head of Trading Operations. 

Read more about our multilingual, world traveler Nataliya.  

This week in charts 

Returns by asset class since 2011 

Home owners with variable-rate mortgages face difficult squeeze as interest rates rise, house prices drop, Bank of Canada warns. 

About 670,000 variable-rate mortgages have been issued since the start of the pandemic, according to the Bank of Canada. Variable-rate mortgages accounted for around 50 per cent of all mortgages issued since mid-2021, compared to an average of 20 per cent in the years before the pandemic. 
Borrowers have sought the variable-rate products because borrowing costs have typically been cheaper 
Financial markets expect the bank’s benchmark interest rate to reach 4.25 per cent by early 2023, up from 3.75 per cent today. 

“This is not a large share of households, but it is larger than it would have been based on historical trends,” [Bank of Canada Senior Deputy Governor Carolyn] Rogers said. 

than fixed-rate mortgages. Part of the motivation was that federal banking rules require borrowers to prove they can make their monthly mortgage payments at an interest rate at least two percentage points higher than their actual mortgage contract. 

Problems in the mortgage market can infect the broader financial system if borrowers default on payments. Ms. Rogers said Canada’s banking system is in a good position to handle potential shocks, thanks to reforms following the 2008-09 financial crisis that increased capital and liquidity requirements for lenders and bolstered mortgage stress tests. 

Moreover, the central bank is “not expecting a severe economic downturn with the kind of large job losses typical of past recessions,” she said. 

But tens of thousands of homeowners will be pinched as interest rates continue to rise. The Bank of Canada is widely expected to raise interest rates again on Dec. 7, either by a quarter-point or half-point. 

What Really Matters? (Howard Marks memo)

“What really matters is the performance of your holdings over the next five or ten years (or more) and how the value at the end of the period compares to the amount you invested and to your needs. Some people say the long run is a series of short runs, and if you get those right, you’ll enjoy success in the long run. They might think the route to success consists of trading often in order to capitalize on relative value assessments, predictions regarding swings in popularity, and forecasts of macro events. I obviously do not. 

“I think most people would be more successful if they focused less on the short run or macro trends and instead worked hard to gain superior insight concerning the outlook for fundamentals over multi-year periods in the future. They should:

• “study companies and securities, assessing things such as their earnings potential; 
• “buy the ones that can be purchased at attractive prices relative to their potential; 
• “hold onto them as long as the company’s earnings outlook and the attractiveness of the price remain intact; and 
• “make changes only when those things can’t be reconfirmed, or when something better comes along. 

This week’s fun finds 

Walk this number of steps each day to cut your risk of dementia 

People between the ages of 40 and 79 who took 9,826 steps per day were 50% less likely to develop dementia within seven years, the study found. Furthermore, people who walked with “purpose” – at a pace over 40 steps a minute – were able to cut their risk of dementia by 57% with just 6,315 steps a day.

“It is a brisk walking activity, like a power walk,” said study coauthor Borja del Pozo Cruz, an adjunct associate professor at the University of Southern Denmark in Odense, Denmark, and senior researcher in health sciences for the University of Cadiz in Spain. 
Even people who walked approximately 3,800 steps a day at any speed cut their risk of dementia by 25%, the study found. 

The largest reduction in dementia risk – 62% – was achieved by people who walked at a very brisk pace of 112 steps per minute for 30 minutes a day, the study found. Prior research has labeled 100 steps a minute (2.7 miles per hour) as a “brisk” or moderate level of intensity. 

The editorial argued that individuals looking to reduce their risk of dementia focus on their walking pace over their walked distance. 

Coffee vs. tea smackdown 

Do you start your mornings with a potent dose of caffeine from a freshly brewed cup of Joe? Or do you prefer a slightly less caffeinated nudge from a warm and gentle cup of tea? 

Whatever your preference, scientists have found that regularly drinking coffee or tea can provide a variety of health benefits. But how do coffee and tea compare in a head-to-head matchup? We took a look at the research, and here’s what we found. 

Meet Pearl, a local Halifax mascot who has garnered worldwide attention online. 

Pearl is the mascot of the Halifax Oyster Festival — a giant oyster with over a dozen eyes, luscious lips and long legs. 

The Coast, a digital-first news outlet in Halifax, puts on the Halifax Oyster Festival every year. They created Pearl six years ago to represent the festival. 

Note: OysterFest is this weekend, November 25 and 26.

Friday, November 18, 2022

This week's interesting finds

Juan Gomez – Partner since 2016 (Peace Love Austin Mural – Austin, TX)

This week in charts 

Food and Agricultural Organization of the United Nations food price index first YoY drop in two years

Bear markets usually mean new market darlings

Japan Weighs Raising Taxes On EVs With "Higher Output Motors"

The country's internal affairs ministry is reportedly weighing whether or not to raise taxes on electric vehicles in order to make up for a shortfall in income from taxes on traditional gas powered cars, Bloomberg reported Thursday morning.

Currently, electric vehicle owners pay a flat fee of 25,000 yen per year to local governments, but the ministry is interested in potentially altering this framework for vehicles that have "higher output motors", the report says.

The ministry will reportedly ask the ruling coalition to "consider the change" for inclusion in the 2023 tax code, Bloomberg reports. Even then, the change could take several years to come into effect.

Recall, we wrote back on November 5 that UK chancellor Jeremy Hunt is expected to put an electric vehicle excise tax in place by 2025-2026.

This month's Autumn Statement will include the measures, according to FT, who said people familiar with the road tax is part of a larger plan to address a fall in motoring tax revenues caused by the shift to EVs, which leave out fuel-related taxes. Fuel duty raises about £35bn, but the Treasury has warned that a growing number of EVs on the road could cause this number to plunge by £2.1bn by 2026-27. Ergo, a new excise duty on EVs could take place by 2025-2026.

This week’s fun finds

Mapping The Most Used Words On Every Country and U.S. State's Wikipedia Page

Can You Get a Full-Body Workout in 20 Minutes?

Maillard Howell, head of fitness at Reebok and co-owner of Dean CrossFit in Brooklyn, said the key to getting an effective workout in a short amount of time is focusing on compound exercises.

A compound exercise is one that uses multiple muscle groups at the same time to perform a movement — like squats, push-ups or deadlifts. Isolation exercises, like bicep curls or calf raises, won’t raise your heart rate as quickly as compound exercises and primarily work one muscle group at a time.

If you’re short on time, “you want big movements that use big muscles,” Mr. Howell said.

[Cardiovascular physiologist Dr. Stephen J. Carter] recommended a three- to five-minute warm-up with the goal of increasing your circulation. “I keep it dynamic. I just want to start moving, and I’m a big fan of raising your body temperature before a workout,” Mr. Howell said.

Once you’ve completed the workout — and caught your breath — Mr. Howell suggested a three- to four-minute cool down. He recommended static floor stretches, like the pigeon pose — with one leg stretched out straight behind you, and the other leg bent in front with the side of your calf resting on the ground. You can rest your calf up on a bench to make it easier, or just go through any stretches that feel good.

Life in the Slow Lane

I was being a snob. Slow cookers are useful for all sorts of people, but particularly for a specific kind of cook: the person who wants to do things from scratch, but lacks the time, culinary knowledge, or confidence to do so on the hob or in the oven. It is a sympathetic tool, unlikely either to burn your food or leave your meat undercooked. Your timings can be out by hours with little impact on the end result. It’s economical, too — first in its ability to make the most of cheap cuts of meat and tough vegetables, second in its small energy footprint (it costs about the same to run as an energy-saving lightbulb).

The common thread within the slow cooker community is convenience. The slow cooker is inherently domestic: Chefs have no interest in leaving their pots unattended, and the prospect of having to keep a lid clamped on them and leave them untasted and unadjusted is anathema. It’s not a terribly glamorous piece of kit. “They’re not sexy!” Megan Allen, another slow cooker fan tells me, laughing. It’s not aspirational. It might be prosaic, but the slow cooker is a purely functional device: it gets the job done.

Friday, November 11, 2022

This week's interesting finds

Sarah Ford – EdgePoint Partner since 2008 (Duckworth St. – St. John’s, NL) 

Photo by one of our advisor partners: Jim Mason 

Wondering why you’re seeing this? Click here to find out more about our beliefs at EdgePoint and why our internal partners are proud to stand behind (or in this case beneath) them.   

This week in charts 

Institute of Supply Management (ISM)’s Services Purchasing Managers Index (PMI) Prices Paid Index vs. CPI 

Note: The Services PMI report are the opinions of purchasing managers in non-manufacturing industries about business conditions, with 50 as the midpoint. The higher the number, the better they think things are.

Venture capital has been patient   

An inverse relationship   

This week’s fun finds 

No such thing as too many cooks in the kitchen for the Operations team 

As a team building exercise, Operations had an after-work social where they made then ate their dinner. The department was split into teams of two and challenged to make one dish (a soup, appetizer, main or dessert). I think everyone won this one. 

Compliments to the chefs!   

EdgePoint hot sauce review crew 

Because there are so many saucy individuals at EdgePoint, we’ve offered up our services to review hot sauces on behalf of our external partners. 

First up, Ass Kicking Whoop Ass Ghost Pepper Sauce

Heat: 7.2 (out of 10) 

Flavour: 6 (out of 10) 

Just enough flavor that I wasn’t regretting the pain from the heat. An ideal match for someone who prefers hot sauce with pizza instead of garlic dip. 

• Got a bit of that vinegar and spice. But a little goes a long way to be able to actually enjoy the flavour. The heat gets progressively hotter, which is why I am giving it a high rating. 

• This hot sauce has a nice heat but light in flavour. Good for those who are looking to just add heat but not one for those looking to add heat and enhance a dish. 

A face only a mother could love: Terrifying photo shows what an ant looks like close up 

It's an award-winning close-up photo of ... an ant. 

The eye-popping photo is one of 57 Images of Distinction in Nikon's Small World Photomicrography Competition.  The terrifying portrait was captured by Eugenijus Kavaliauskas, a Lithuanian photographer.

Friday, November 4, 2022

This week's interesting finds

Jinhyung Kwon – EdgePoint Partner Since 2020 (Toronto, ON – Financial District)

Science or tobacco (Go West) - Geoff MacDonald talks about how fossil fuels have become the "new tobacco" in the media.

Note – Due to technical issues, we’re giving our readers another chance to read Geoff’s commentary.

This week in charts

Inflation was supposed to be done by now…

Maybe two years from now? 

Where Canadian workers went

Nuclear Shutdowns Have Already Harmed the Planet

In total, since 2012, the carbon costs of nuclear phaseout policies in developed countries add up to about 800 million tons of CO2. To place that number into context, that’s enough CO2 emissions to melt 2400 km2 of Arctic summer sea ice, plus or minus another 240 km2. It equates to a full two years of nationwide fossil CO2 emissions from a medium-sized country like Turkey, Australia, or the United Kingdom, or more than 0.1 parts per million of the 416 parts per million of carbon dioxide in the planet’s atmosphere.

These totally unnecessary carbon emissions will continue to grow over the coming decades, with one academic paper estimating that added global emissions from Germany’s nuclear phaseout alone will total 1100 Mt of CO2 by 2035. With each additional year, the consequences of reactor shutdown decisions made years ago continue to accumulate around the world.

Why do shutdowns of nuclear power plants increase a country's fossil carbon emissions? This effect occurs because to date, low-carbon electricity formerly generated by decommissioned nuclear power plants in the wealthy world has largely been replaced by fossil fuels, causing added carbon emissions as a direct result of nuclear phaseout policies.

But even to the small degree that falling nuclear electricity generation has been replaced by renewable power, this represents “treadmill decarbonization” where low-carbon energy is simply replacing other low-carbon energy sources instead of reducing overall fossil fuel consumption. At a time when governments should be seeking to maximize the pace of clean energy deployment and taking fossil fuel power off the grid, treadmill decarbonization counterproductively expends resources swapping out clean nuclear energy for renewables while letting fossil fuel plants continue to run. 

UBS Global Real Estate Bubble Index 2022

Real house price levels in Vancouver and Toronto have more than tripled in the last 25 years. An urban housing shortage amid strong population growth and falling mortgage rates are typically seen as the two main culprits of the long-term property bonanza in both Canadian cities. High investment demand has also added significantly to the price increases. The index has been flashing warning signals in the last couple of years.

The housing boom has become more of a countrywide phenomenon and is therefore hardly driven by a shortage of construction. In such overheated markets, with already very stretched housing affordability, the recent rate hikes by the Bank of Canada could be the last straw that broke the camel’s back. New buyers and owners during mortgage renegotiations not only need to pay higher interest rates but are also required to provide more income to qualify for a mortgage. Price correction is already in the making.

This week’s fun finds

Halloween – EdgePoint’s favourite holiday

Not just because it’s associated with orange, but because our fun-sized partners (and a few full-sized ones) get to dress up. A few even came into the Toronto office to trick-or-treat.

Edge-ucation camp

For “Take Our Kids to Work” day, we were able to bring back Edge-ucation camp, our financial literacy camp for teenagers. We talked about compounding, inflation and other basics.

Larry Bird remembers when players that later went bankrupt made fun of him for saving his money - "They'd just laugh and make jokes about me stashing my money away"

"Some of the guys who made far less than me bought the $700,000 homes, and the Rolex watches, and the big luxury cars. I used to tell them, "You're crazy, you should be saving your money." They'd just laugh and make jokes about me stashing my money away. But I could see what they were doing. They were throwing away their future. So many of them were living for today and not even stopping for a minute to think about ten years down the road when their playing careers were over and the money stopped pouring in. And by the time they realized what I was telling them was true, it was too late.I can't tell you how many ex-teammates have asked me for money. It's heartbreaking for me to say no, but I do because I warned them. I told them to save."

Friday, October 28, 2022

This week's interesting finds

Daniela Orla – EdgePoint Partner since 2015 (Toronto, ON – Queen & Spadina) 

Science or tobacco (Go West) - Geoff MacDonald talks about how fossil fuels have become the "new tobacco" in the media.

This week in charts 

Back to brick and mortar 

CPI contributor change – August vs. September 2022 

Where Canadian immigrants are coming from   

Immigrants make up the largest share of the population in over 150 years and continue to shape who we are as Canadians 

More immigrants are now working in Canada than before the pandemic, and, from 2016 to 2021, immigration contributed to 79.9% of the growth in Canada's labour force. 

According to 2021 Census data, almost 1.9 million children younger than 15 years had at least one parent born abroad, accounting for almost one-third (31.5%) of all children in Canada. This proportion was up from 26.7% in 2011 and 29.2% in 2016. 

BASF to downsize ‘permanently’ in Europe 

BASF, which produces products from basic petrochemicals to fertilisers and glues, spent €2.2bn more on natural gas at its European sites in the first nine months of 2022, compared with the same period last year. 

[CEO Martin] Brudermüller said the European gas crisis, coupled with stricter industry regulations in the EU, was forcing the company to cut costs in the region “as quickly as possible and also permanently”. 

The company announced two weeks ago that it would reduce costs by €1bn over the next two years, targeting mainly “non-production areas” such as IT, communications as well as research and development. 

Brudermüller, who has previously warned that an embargo on Russian gas would plunge Germany into its biggest crisis since the second world war, said on Wednesday the cost cuts were necessary to “safeguard our medium and long-term competitiveness in Germany and Europe”. 

German exporters rethink €100bn ‘love affair’ with China 

Since the turn of the millennium, China has gone from accounting for just over 1 per cent of German exports to commanding a 7.5 per cent share of sales abroad, making it second only to the US. In 2021, more than €100bn worth of German goods were sold there. 

Source: Financial Times 

Thorsten Benner, director of the Global Public Policy Institute in Berlin, described the ties as the main factor in the “golden age of the German economic model”, seen during the latter stages of Angela Merkel’s 16-year reign as chancellor, which ended last year. 

Alicia García-Herrero, a senior economist at think-tank Bruegel, said the buoyancy of the links between the two export powerhouses had been replaced by a sinking feeling in Berlin as exports slide. “Germany is losing its trade surplus and part of its competitiveness, partially because China has moved so rapidly up the value ladder.” 

It comes at a sensitive moment for the broader relationship between the two countries. Russia’s invasion of Ukraine has given fuel to German critics of Beijing, who argue the country’s economic ties are trumping foreign policy goals and leading to collaboration with prospective geopolitical rivals. Olaf Scholz, who will fly to Beijing next week for his first meeting with Chinese leaders as German chancellor, is set to unveil his new China strategy next year. He is under pressure from his coalition partners, the Greens and the Free Democrats, to loosen ties and courted controversy when he asked ministries to back an investment from Cosco, a state-owned Chinese shipping conglomerate, in a container terminal at the Port of Hamburg. The deal was approved earlier this week, though Cosco took a smaller-than-planned stake, which will limit its capacity to influence decision-making. 

“The China strategy will include clear messages on the need to reduce dependencies, and diversify supply chains and trading partners,” said Benner. 

Misreading Xi and the rise of Li 

The professional China commentariat and its echo chamber in the Western media were blindsided by the appointment of Shanghai party head Li Qiang as the country’s premier, the number two position to Xi Jinping. 

Li is a tech-savvy supporter of high-tech entrepreneurship who believes that China’s future lies in the digital economy. Xi, the Western press insisted with near unanimity, had reverted to Maoism. 

In fact, Li’s appointment as premier-designate was foreseeable as well as foreseen. Asia Times wrote as much on October 21, forecasting that Xi would opt for retiring four out of the seven Politburo Standing Committee members, including not only Premier Li Keqiang, but also the widely touted premiership candidate Wang Yang, and would not miss the opportunity to install a new, younger and different cast of leaders. 

Li is the Shanghai party chief. Few if any previous Shanghai leaders have failed to advance to the Standing Committee, Xi included. That his advance to the number two position nonetheless came as a surprise to most Western analysts merely proves how much so many have misread Xi in particular and Chinese governance in general.   

This week’s fun finds 

Discovery Unlocks Potential of 'Special' Muscle 

And Marc Hamilton, professor of Health and Human Performance at the University of Houston, has discovered such an approach for optimal activation – he’s pioneering the “soleus pushup” (SPU) which effectively elevates muscle metabolism for hours, even while sitting. The soleus, one of 600 muscles in the human body, is a posterior leg muscle that runs from just below the knee to the heel. 

Building on years of research, Hamilton and his colleagues developed the soleus pushup, which activates the soleus muscle differently than when standing or walking. The SPU targets the soleus to increase oxygen consumption – more than what’s possible with these other types of soleus activities, while also being resistant to fatigue. 

So, how do you perform a soleus pushup? 

In brief, while seated with feet flat on the floor and muscles relaxed, the heel rises while the front of the foot stays put. When the heel gets to the top of its range of motion, the foot is passively released to come back down. The aim is to simultaneously shorten the calf muscle while the soleus is naturally activated by its motor neurons. 

While the SPU movement might look like walking (though it is performed while seated) it is the exact opposite, according to the researchers. When walking, the body is designed to minimize the amount of energy used, because of how the soleus moves. Hamilton’s method flips that upside down and makes the soleus use as much energy as possible for a long duration.   

Save Like A Pessimist, Invest Like An Optimist 

But there was another side of Bill Gates. It was almost paranoia, virtually the opposite of his unshakable confidence. 

From the day he started Microsoft he insisted on always having enough cash in the bank to keep the company alive for 12 months with no revenue coming in. In 1995 he was asked by Charlie Rose why he kept so much cash on hand. Things change so fast in technology that next year’s business wasn’t guaranteed, he said, “Including Microsoft’s.” In 2007 he reflected: 

"I was always worried because people who worked for me were older than me and had kids, and I always thought, ‘What if we don’t get paid, will I be able to meet the payroll?’” 

Optimism and pessimism can coexist. If you look hard enough you’ll see them next to each other in virtually every successful company and successful career. They seem like opposites, but they work together to keep everything in balance. 

What Gates seems to get is that you can only be an optimist in the long run if you’re pessimistic enough to survive the short run. 

The best way for most people to apply that is: Save like a pessimist, invest like an optimist. 

1 in 3 Gen Z Adults Have Seen a Horror Movie in Theaters in the Past Month 

It's spooky how fast Spirit Halloween stores pop up. Here's how the retailer does it 

Beneath the songs and the memes, the story of Spirit Halloween is really one of urban development patterns. 

Perhaps above all, Spirit's business model hinges on space. Lots of it. Spirit looks for anywhere between 5,000 and 50,000 square feet of space, but in the company's own words, "no store is too large (or too small)" — and the company has no problem finding the space it needs. 

Drop any ZIP code or address into the company's store locator, and a flurry of orange arrows is almost sure to pop up. 

The company finds this space largely in abandoned buildings — malls that have shut down, retailers that have filed for bankruptcy and so on. 

"Spirit is pretty much a bottom-feeder business that works only at the expense of other stores; if there weren't vacant storefronts, this business wouldn't exist," writes Rachel Quednau, program director for Strong Towns, an urban planning advocacy group that emphasizes incremental city planning. 

From January to August, the company spends its time scouring the country and scoping out properties for temporary leases, and a big part of what makes this a reliable process for Spirit Halloween is that these abandoned spaces are otherwise unusable within local economies.