Friday, August 26, 2022

This week's interesting finds

This week in charts

European electricity prices

Median monthly mortgage payments in America

Methane hunters: what explains the surge in the potent greenhouse gas? 

Many researchers initially assumed the increase was linked to fossil fuel production. Methane is the primary ingredient in natural gas but is also produced by other human activities such as landfills, rice paddies and raising cattle.

In the past few years, however, that uptick has accelerated into a surge. The implications for global warming are immense: of the 1.1C increase in global temperatures since pre-industrial times, about a third can be attributed to methane. Atmospheric methane had its highest growth rate ever recorded by modern instruments in 2020, and then that record was broken again in 2021. Nobody knows exactly why.

Atmospheric methane (CH4 mole fraction, parts per billion)

“Methane is a very interesting type of greenhouse gas because it has so many kinds of sources and sinks that you have to keep track of,” says Dlugokencky. “You have to look at it like you are a detective trying to solve a criminal mystery, that is how I think of it.”

Global methane emissions and sinks estimate (2008-17 annual average, million tonnes)

Wetlands and cattle appear to be the biggest culprits, says Euan Nisbet, professor of earth sciences at Royal Holloway, University of London. “The biological sources are increasing faster,” he says. “The most intense growth seems to be coming from the tropics.” A global increase in cattle-raising, and in landfills, is also fuelling the growth in microbial emissions.

In an upcoming paper, Lan and Dlugokencky reach a similar conclusion: 85 per cent of the increase in atmospheric methane since 2007 is due to microbial sources. And about half of that is from the tropics.

This popular type of investment fund nearly always loses money

"When people chase these popular investment themes, they are going to be disappointed," said Itzhak Ben-David, co-author of the study and professor of finance at The Ohio State University's Fisher College of Business.

"These hot-topic funds are based mostly on hype and tend to lose value relative to the general market almost as soon as they are launched."

"These specialized ETFs are all about areas hyped in social media and other platforms as the 'next big thing.' But by the time these ETFs are launched into the market and available to investors, it is already too late to make money," Ben-David said.

"Specialized ETFs are basically boiled down to a soundbite: 'You should invest in electric vehicles,' for example. That's it. Most of the investors in this don't know anything about the stocks in the ETF's portfolio, the fees, the price to earnings ratio. They just want to be part of the trend."

This week’s fun finds

NASA posts what a black hole sounds like. One review: ‘Cosmic horror.'

 My handwriting is terrible. Should I be worried?

But the data show that, when it comes to learning, handwriting definitely matters. Several studies have found that both children and adults learn and remember more when they write by hand. “It stimulates the brain in a very different way than a keyboard does,” says Audrey van der Meer, a neuropsychology professor in Norway whose research on the topic is widely cited.

The withered state of writing has begun to affect other lives too, like those of courtroom handwriting experts. “It’s a concern,” says Steve Cosslett, a British forensic document examiner who has given evidence in hundreds of court cases since he began his career at a Home Office forensic science laboratory in 1983. To check the authenticity of, say, a signature on a will, you need a number of genuine signatures by the writer. But these are harder to find now that people don’t sign things like cheques any more. “People can’t provide sufficient reference material,” he says.

Chicken wing prices down ahead of football season 

Friday, August 19, 2022

This week's interesting finds

This week in charts

The 2020s might be the most volatile period in modern stock market history based on day-to-day change

SPAC Activity in July Reached the Lowest Levels in Five Years

Why invest in nuclear and natural gas?

The world is hungry for energy. Global energy consumption more than doubled between 1971 and 2020, and it’s projected to increase nearly 50% by 2050. It’s clear that we’re going to need a lot more energy than we’re generating now. Some people believe that when we learn to harness new sources of energy, we will stop using our current sources. But that has never been true. Historically, whenever we learned to harness a new energy source, we did not stop using the sources we previously relied on.

Nuclear and natural gas are reliable, affordable, and produce low emissions. They’re not perfect. But their shortcomings are more manageable than the alternatives, and their advantages can’t be beat.

The biggest advantage is that nuclear and natural gas are both extremely reliable sources of power. Nuclear is, in fact, the most reliable of all energy sources.

In addition, both nuclear and natural gas reduce greenhouse gas emissions. Nuclear power plants don’t emit any greenhouse gases or air pollution while operating. And natural gas produces about 50% of the carbon dioxide and just 10% the air pollutants that coal does.

Contrary to what many investors think, the biggest greenhouse gas reductions over the past 15 years haven’t come from increased solar and wind power, but from shifts away from coal and toward natural gas.

This week’s fun finds

EdgePoint shares the pitch with Insigne

To get warmed up for upcoming World Cup, we organized an internal “friendly” between EdgePointers. We happened to meet Toronto FC’s recent signing and Euro 2020 champion, Lorenzo “Il Magnifico" Insigne after the game. He graciously took a picture with us, possibly because he was impressed with the talent he saw displayed.   

Welcome to one of the newest Canucks

Congrats to Compliance team member Akhil becoming a Canadian citizen on Wednesday. We’re confident that he’ll keep his promise to faithfully observe the laws of Canada since his daily tasks include helping us follow the rules. 

Ranked: The Most and Least Livable Cities in 2022

Friday, August 12, 2022

This week's interesting finds

This week in charts

The growth in Canadian rentals

Differing inflation across eurozone countries makes monetary policy challenging for the ECB

Long-term CEO incentives (Twitter thread)

Waste Connections Inc. (TSX: WCN)

Alimentation Couche-Tard (TSX: ATD)

This week’s fun finds

Inside out

The Inside members of the Relationship Management team were able to find time between calls to get in some team building on the Toronto Islands.

The End of Manual Transmission

When it comes time to replace my current car, I probably won’t be able to get another like it. In 2000, more than 15 percent of new and used cars sold by the auto retailer CarMax came with stick shifts; by 2020, that figure had dropped to 2.4 percent. Among the hundreds of new car models for sale in the United States this year, only about 30 can be purchased with a manual transmission. Electric cars, which now account for more than 5 percent of car sales, don’t even have gearboxes. There are rumors that Mercedes-Benz plans to retire manuals entirely by the end of next year, all around the world, in a decision driven partly by electrification; Volkswagen is said to be dropping its own by 2030, and other brands are sure to follow. Stick shifts have long been a niche market in the U.S. Soon they’ll be extinct.

But the manual transmission’s chief appeal derives from the feeling it imparts to the driver: a sense, whether real or imagined, that he or she is in control. According to the business consultant turned motorcycle repairman turned best-selling author Matthew Crawford, attending to that sense is not just an affectation. Humans develop tools that assist in locomotion, such as domesticated horses and carriages and bicycles and cars—and then extend their awareness to those tools. The driver “becomes one” with the machine, as we say. In his 2020 book, Why We Drive, Crawford argues that a device becomes a prosthetic. The rider fuses with the horse. To move the tool is to move the self.

The decoupling of humans from their driving machines will accelerate in years to come. If the automatic transmission made the stick shift a monument to lost control, the autonomous (self-driving) vehicle aims to do the same for steering wheels. At that point, the loss will be so complete that it may not feel so alienating. Any pretense that the automobile is a prosthetic will be eliminated, so car passengers can move on to other things. Like people on a train, they might settle into a book or take a nap or open up an Excel spreadsheet.

The Michael Scott Theory of Social Class

I’m happy to finally share a thesis I’ve been chewing on for a little while. I call it The Michael Scott Theory of Social Class, which states: The higher you ascend the ladder of the Educated Gentry class, the more you become Michael Scott. 

(Spoiler warning)

Before You Fly The Nest: Advice for kids heading to college

  • Explore, get outside your comfort zone, and experiment
  • Seek balance
  • Choose good friends
  • Adopt good habits
  • Avoid irreversible / catastrophic outcomes
  • Don’t worry if it’s hard, especially at first

Hey, I know that guy: AI shows what the average Toronto man looks like

Someone very familiar with artificial intelligence asked a bot to show them what the average Torontonian looks like and then shared the results on Reddit.

According to AI, this is what an average dude in the city looks like:

Friday, August 5, 2022

This week's interesting finds


Wealthsimple valuation slashed nearly in half by largest shareholder, Power-controlled IGM

IGM Financial Inc., a subsidiary of Power Corp. of Canada, revealed in its second quarter financial statements released late Thursday that it had cut the valuation of its 24-per-cent stake in Wealthsimple to $492-million as of June 30, a 47-per-cent drop from its $925-million carrying value on March 31. IGM now carries its Wealthsimple stake at 42.6 per cent of its $1.153-billion valuation as of last Dec. 31.

In May, 2021, Wealthsimple became one of Canada’s most highly valued private technology companies when it raised $750-million at a $5-billion valuation. It was the second time in seven months that Wealthsimple had raised a nine-figure sum from private investors, as interest in its U.S. analog, Robinhood Markets, Inc., soared as millennials flocked to trading platforms to buy into meme stocks and cryptocurrencies.

Both have been hit by bad news this year. Robinhood this week said it would cut its head count by 23 per cent and revealed in its second quarter report it had experienced a drop in monthly active users and assets under custody. Robinhood previously cut 9 per cent of staff in April.

Meanwhile, Wealthsimple laid off 13 per cent of its work force in June. Wealthsimple CEO Mike Katchen said at the time clients were now “living through a period of market uncertainty they’ve never experienced before.” IGM’s statements Thursday suggest that uncertainty is weighing on Wealthsimple’s outlook and performance.

Unwanted debt from buyout boom stuck at investment banks

It is a dramatic shift from the start of the year, when banks were finalising debt for megadeals such as Advent International and Permira’s buyout of McAfee, worth more than $14bn, and Hellman & Friedman and Bain Capital’s $17bn purchase of Athenahealth. Even better, they were getting calls from buyout giants such as Blackstone, KKR and Carlyle as they plotted a $25bn carve-out of Sandoz from Novartis and soon would have a surprise deal, Elon Musk’s $44bn takeover of Twitter, to finance.

But then interest rates shot higher. Investors began to bet that the Federal Reserve would need to dramatically tighten policy to curb inflation, a move that sent bond prices tumbling, including the debt banks were holding on their own balance sheets to fund deals. In quick succession, Russia’s invasion of Ukraine and lockdowns in China to slow the spread of Covid-19 hit markets, and investors began to prepare for recession.

Banks provide a critical function for the leveraged buyout industry, as buyout funds take companies private with a mixture of their investors’ own cash and a substantial portion of borrowed money that is raised from groups of lenders.

Wall Street lenders step in when a takeover is first struck, guaranteeing to provide loans, junk bonds and revolving credit facilities for the deal. But there is often a significant lag between when a deal is agreed and when it is consummated, as the companies must win shareholder backing if they are publicly traded and clear any regulatory hurdles.

The financing packages can be hugely lucrative but they carry sizeable risks if the market shifts from when banks and private equity groups initially set the terms of the debt packages. Those terms include the yield on the debt, covenants that will protect buyers and discounts banks can offer the funds and investors who will ultimately be the long-term holders of the bonds and loans.

If they are unable to sell the bonds at those terms, banks deepen the discounts, first eating into the profits they had hoped to earn on the deal. As the discounts rise, banks begin to pay for the difference out of their own pockets.

Airplane-Parts Shortage Threatens More Disruptions to Air Travel

“We’re finding it really hard to get our hands on parts,” said Steve Rossum, chief executive of Florida-based Silver Airways LLC, which flies primarily to Caribbean destinations.

Mr. Rossum said one or two of his airline’s roughly 20 planes have been grounded on any given day due to needing parts, often those related to air-conditioning. One plane was marooned for more than a week with a broken axle because it was difficult to get specialized tools, he said.

German airline Deutsche Lufthansa AG has had to ground some aircraft because of waits for various components that are taking longer to source, people familiar with the matter said. Whereas the airline group had previously been able to source missing items from within Europe, it has had to broaden the search for some parts across the globe, especially for rarer items such as panels for its cabin interiors, one of the people said.

Qatar Airways has been avoiding disruptions by taking the unusual, and expensive, step of keeping aircraft—including one of its eight Airbus A380 superjumbos—on standby in case planes can’t fly because of parts shortages, said CEO Akbar Al Baker.

Toronto rents soar 20% to record amid high demand, fewer listings

The pandemic led to a sharp increase last year in apartments listed as people left city centres. Now, as the COVID crisis eases, some of them are returning. Rising interest rates, meanwhile, will price many potential homebuyers out of the market and keep demand elevated for rental units.

“Expect rental market conditions to tighten further in the coming months,” Kevin Crigger, president of the real estate board, said in the statement.

Rents hit four-year lows last year as demand dried up and listings surged. The previous record for one-bedroom rents was $2,262, reached in the third quarter of 2019.

Record container ship traffic jam as backlog continues to build

Port congestion had finally looked like it was easing in May and early June. Ship queues had fallen back to double digits. There were 92 vessels waiting offshore as of June 10, led by 25 off Savannah, Georgia, 20 off Los Angeles/Long Beach, 18 off New York/New Jersey and 14 off Houston.

Then things turned for the worse. The tally rose to 125 on July 8, 136 on July 13 and 140 on July 19.

With the count now rising to 153, the North American container ship queue has increased in size by 66% over the past seven weeks.

Fun finds

EdgePoint anniversaries

Internal EdgePoint partners have a tradition of bringing in food or treats on their work anniversaries. A recent example was a Hot Ones - inspired hot sauce tasting challenge with nuggets and chips. The sauces were chosen more for flavour than heat because we like each other, but they definitely had some kick to them.

Nine EdgePointers started the gauntlet, with only two failing to make it to the end. The rest of the sauces went into the communal fridge to help spice up future meals.

The Disastrous Record of Celebrity Crypto Endorsements

Matt Damon started touting crypto investing when Bitcoin was worth twice as much as it is now. Mike Tyson’s NFTs have plunged more than 90% since he introduced his collection. And investors who allege they lost millions on a pump-and-dump scheme are suing Paul Pierce.

Months into a rout for crypto assets, the full extent of the financial pain suffered by millions of everyday Americans is still being calculated. What's clear, though, is that scores of celebrities touted the life-changing power of crypto investing at the worst possible time — just as the speculative mania was approaching its peak. The entreaties to get involved in the space came in multiple forms — everything from big-budget TV ads trumpeting particular exchanges to cryptic tweets touting obscure tokens.

Scarcity is an Ally of Appreciation 

I never really put much thought into time management when I was young.

Now I’m much more deliberate with how I spend my time, mostly out of necessity. Responsibilities tend to increase with age so juggling work, family, friends, health and hobbies is no easy feat.

No one has it all figured out when it comes to balancing out your time allocation but here are some thoughts from my experience:

  • I’ve learned to love routine when it comes to time management. There’s still room for chaos and spontaneity on occasion especially when you have kids but it’s nice to have a regimen to fall back on for some stability in an unstable world.
  • Downtime in middle age is harder to come by. When kids come along one of the biggest things that goes to the wayside is downtime.
  • Spending money on time is a good investment. One of the unsung reasons a lot of people choose to work with a financial advisor is because they value their time.
  • Trading too much time for money probably won’t pay off. The perfect amount of balance in life is probably unattainable but too much time spent chasing money typically isn’t a good investment.
  • Scarcity can add meaning and clarity. Maybe knowing the time you have to spend with loved ones is fleeting can help you appreciate it even more while you have it.

People Spend Too Much Time On Decisions with Equally Satisfying Outcomes

Researchers found that people spent longer choosing between options that were roughly equal in value than between options in which there was a large value disparity.

“Value” here means how much participants said they would be willing to pay for each item at the start of the study.  

When shown a disfavored food alongside a favored food, people chose fast. When shown a favored food alongside another favored food, people took a while. But this is irrational (at least in the economic sense).

When making decisions, we spend too much time choosing between options with roughly equal utility.