Good afternoon. We’re always experimenting with different formats for this newsletter, and today we’re trying to include a few more stories, with shorter blurbs on each, and a bit more personality and original takes.
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—Taylor Scollon
In today’s letter: the energy crunch is starting to hit in some parts of the world, suspiciously “lucky” oil trades, HST savings for home buyers in Ontario, making $$$ on Substack side projects, and more.
Today’s reading time is 3 minutes.
IF YOU ONLY READ ONE THING…
The energy crunch is coming
Unlike much of what seems to go on in financial markets these days, things like war have negative real-world consequences that are difficult to avoid just by posting through it (though that hasn’t stopped the Trump administration from trying). Some of the consequences of the Iran war are now rippling out across the world, starting in Asia and Africa. Here is a small sample:
The Philippines declared a national energy emergency and said it only has enough fuel to last 45 days.
Bangladesh ordered rolling blackouts to households.
Egypt ordered malls and restaurants to close early and turned off electronic billboards.
Laos told civil servants to work from home.
Slovenia implemented fuel rationing, the first country in the EU to do so.
South Korea called on people to ride bikes and take shorter showers to conserve fuel.
We in Canada (and also the U.S.) are starting to feel these consequences through higher gas prices (up around 30% since the start of the war), but certainly nothing like what Asia and Africa are experiencing. Some of this is a function of our position as net energy exporters, but these markets are global, and so eventually we’re going to feel more pain if the conditions creating scarcity (the war and closure of Hormuz) don’t change.
The map from JP Morgan above offers some timelines for when different parts of the world will stop getting oil deliveries from the Persian Gulf, and you can see that shipments to Asia and Africa are just about finished. Europe’s supply will dry up in 10 days, just after Trump’s “deadline” to reach a deal expires. Australia and New Zealand follow 10 days after that.
North America doesn’t depend on oil and gas from the Middle East, but as other parts of the world bid up prices for energy to fuel their industry (something they will have to do to avoid even worse economic outcomes), our energy will get more expensive too.
Stocks are up today because Jerome Powell said he doesn’t see a need to hike interest rates and that inflation expectations are in check, meaning people are so far viewing this energy shock as temporary and limited: “By the time the effects of a tightening in monetary policy take effect, the oil price shock is probably long gone, and you’re weighing on the economy at a time when it’s not appropriate. So the tendency is to look through any kind of a supply shock.”
The real question is if the war continues, and energy prices keep going up, raising prices of a much broader basket of goods (energy is an input into everything, after all), how long before people’s inflation expectations drift up? It will be very difficult in that scenario for central banks to “look through” inflation, especially after the post-COVID experience.
MORE MONEY STUFF
Ontario is scrapping the HST on new homes. The change only applies to new builds valued up to $1.5 million, but only homes under $1 million will qualify for the full 13% rebate. That means eligible buyers could get back a max of $130,000.
Oil traders bet half a billion dollars that oil prices would fall 15 minutes before Donald Trump posted about “productive talks” with Iran on Truth Social. Trump’s post triggered a drop in oil prices, earning a tidy profit for these suspiciously well-informed traders. It’s interesting to see how announcements around what’s happening in this war are now being obviously timed to move markets, certainly for political reasons and also probably for personal enrichment as well.
Hopper is going to run RBC’s Avion travel rewards program. Hopper’s tech will now power the platform RBC cardholders use to book flights, car rentals, and hotels through the program. Hopper offers some interesting features, like being able to buy the right to cancel a flight for any reason and get a full refund.
The NDP’s new leader wants a wealth tax. Avi Lewis campaigned on a wealth tax on fortunes above $10 million, taxing capital gains at the same rate as employment income, and higher corporate taxes, among other things.
The Cut published a roundup of how much some hobbyist Substack writers are earning on the platform. It does seem like a genuinely good way to make a few extra bucks if you enjoy writing, and much more realistic than the old blog model of depending on AdSense revenue. Of course, many Substackers earn nothing, so results may vary.
Wealthsimple got approved to create a Canadian prediction market. But they’ll be fairly limited in what sort of markets they can offer: they’re only cleared to take bets on economic indicators, financial markets, and the weather. No sports or elections.
BlackRock CEO Larry Fink is worried about inequality.
Anthropic says its new AI model will be really good. The company said the model, called “Mythos,” will be a “step change” from current models, and scores higher on coding, reasoning, and cybersecurity tests.
GameStop reported lower sales and profits. I know GameStop is not an Important Company, but I like to follow it as one that wraps up a lot of the weird dysfunctions of today’s markets. One of the reasons for its stock falling ~8% in the past month is that it has lost more than $100 million on its bitcoin holdings.
Wealth managers are helping their clients flee the Middle East. It’s not so easy to get out of war zones, but rich people have their wealth managers are on the case. “Another Zurich-based director for a Swiss boutique wealth manager said they had helped a high-net-worth client get his family out of Dubai via a private jet, and assist with residence permits for Switzerland. ‘Most of their money was already in Europe anyway,’ they said.”
