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
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.
