Second quarter commentaries are now live!
This quarter, Sydney Van Vierzen talks about three structures at EdgePoint that guide almost every decision we make, while Derek Skomorowski discusses why market timing, especially with fixed income, is so difficult.
Amy and Bryan, partners since 2016 and 2015 (Toronto, Ontario)
This week in charts
Healthcare
Private equity
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Tech stocks
China flexes critical metals muscles with export curbs
China's threat to curb exports of gallium and germanium from the start of August marks an escalation in the global competition for critical minerals and metals.
Both are esoteric metals with multiple applications across a spectrum of cutting-edge technologies, particularly silicon chips for the semiconductor sector.
As such, China's move seems a calibrated response to the U.S. Chips Act and the increasing pressure on U.S. allies to restrict sales of sensitive microchip technology to the country.
Both gallium and germanium are extremely rare metals and are derived only as by-products from the aluminium and zinc processing streams respectively.
China's supply-chain dominance results from the country's status as the world's largest producer of aluminium and refined zinc.
China last year accounted for around 98% of the world's production of low-grade primary gallium, the core feed-stock for the gallium supply chain, according to the United States Geological Survey (USGS). Exports last year were 94 metric tonnes, up 25% on 2021.
Rare earths are again in the spotlight. As is just about every other critical mineral China dominates.
Gallium and germanium controls "are just the start" if the West continues to target China's high-tech sector, former Vice Commerce Minister Wei Jianguo told the China Daily newspaper.
The warning raises the prospect of further escalation in the simmering critical minerals war between the West and China.
China has no shortage of pressure points to push, from rare earths to cobalt to lithium and even electric vehicle batteries.
China’s Drop in Exports Signals Deepening Slowdown in Global Trade
Exports are crumbling in China and across Asia, showing the deepening toll that rising interest rates are taking on global trade and economic growth.
Chinese exports fell at their steepest annual pace in June since the early days of the pandemic in February 2020. China isn’t the only Asian export powerhouse reporting sinking overseas sales. Exports from Taiwan fell 23% in June compared with a year earlier, while Vietnamese exports were down 11%. Exports from South Korea were down 6%, according to official figures compiled by data provider CEIC.
Global trade has been softening for months as Western consumers quit spending so much on electronics, home improvements and other consumer goods after splurging during the pandemic. Instead, they have chosen to spend more of their income on eating out, traveling and other services.
Now, trade is facing new pressure from cooling growth in the U.S. and Europe as surging borrowing costs squeeze consumer and business spending. Many economists expect the U.S. to tip into recession this year.
Longer term, the outlook for global trade has taken a hit as major economies push to reorder global supply chains and bring a bigger slice of manufacturing and investment back home. Some economists now see global trade growing more slowly in the years ahead than the global economy, reversing a years long trend that was a hallmark of deepening economic integration.
A growing share of China’s exports are heading to regions including the Middle East and Latin America, reflecting strengthening economic links thanks to Chinese investment and its hunger for natural resources. Exports to Russia surged in June, reflecting close ties between Moscow and Beijing and the effect of Western sanctions on Russian imports.
The International Monetary Fund said in a recent report that it anticipates global investment by rich countries will increasingly flow toward other advanced economies, to the detriment of developing nations that need foreign investment to spur economic development.
Opinion: When allies seek Canada’s natural gas, we say ‘sorry’ – that has global consequences
Last year, Germany – and more recently Japan, in trade discussions in line with Canada’s Indo-Pacific strategy – made it known that access to Canadian energy was among its top priorities.
Yet no deals were struck.
While export facilities for liquefied natural gas (LNG) do take time to build, getting the ball rolling did not appear to be part of the conversation when Germany and Japan asked for our help.
Canada has 1,373 trillion cubic feet of natural gas resources available for production – enough to power British Columbia for centuries. With our country’s environmental policies, Canadian natural gas is some of the lowest emission, most sustainably produced in the world.
Natural gas is a reliable, affordable, lower-carbon ready-now fuel source. It can significantly reduce global emissions by displacing coal (which today generates 40 per cent of the world’s electricity and produces roughly double the emissions of natural gas) and supporting renewables, which require a backup fuel source because the sun isn’t always shining and the wind is not always blowing.
Our allies share Canada’s climate ambitions – we’re all working to achieve net zero. Both Germany and Japan see a role for reliable natural gas as part of the equation. So should Canada.
Canada also needs to be less myopic when it comes to energy security and fighting climate change. As global citizens, we need to think more broadly about how we can help reduce the 98.5 per cent of emissions produced beyond our borders.
There’s a success story just south of us: in the past 15 years, switching from coal to natural gas in the U.S. has accounted for nearly two-thirds of all U.S. greenhouse gas emissions reductions. This formula can and should be replicated in the rest of the world – and Canadian LNG can make it happen.
We also can’t overlook that there are more than 700 million people in the developing world with no access to electricity. Connecting them to reliable energy could lift millions from poverty and drive economic growth. Canadian LNG should be helping here, too.
Many Indigenous groups have natural resources they want to develop to make a future for themselves and provide wealth for generations to come. The energy industry has an opportunity (in fact, I feel an obligation) to help them become full economic partners.
However, Indigenous groups too often struggle to access capital, which is why a national Indigenous loan-guarantee program is so needed. There are already successful loan-guarantee programs at the provincial level in Alberta, Saskatchewan and Ontario that can be used as a model – but to truly take advantage of the opportunity, a national program is essential.
This week’s fun finds
EdgePoint Football Club puts on a clinic
Tired of ties and inspired by a guest coach and a player from Québec, the team drubbed the opposition 10-2. Their record now stands at 3-0-2 with two games to go before the regular season ends.
How to learn something new every day
Learning changes the brain: Existing bonds between neurons — nerve cells that send messages signaling everything from breathing to thinking — are strengthened; new pathways between neurons are developed. Repeated exposure to an activity, like knitting or driving a car, strengthens these connections, and thus, we learn. Over time, recalling these skills or memories becomes easier.
By adulthood, people usually have an idea of how and where they learn best, [associate professor of psychology Rachel] Wu says. Think back on your previous schooling or hobbies. Do you grasp concepts through trial and error? Did you feel a mastery over a topic when you were able to explain it to others? Maybe you prefer to learn at your own pace with a lot of practice along the way. Think about what will motivate you more, Agarwal says: learning on your own, or with an instructor. Some people favor self-guided instruction at their own pace; others are inspired when surrounded by fellow students.
One way to ensure you’re advancing is through feedback. An instructor can correct your pronunciation; a tutor can show you where you went wrong on a math problem. Even self-guided learning has feedback built in, Wu says: If you start beekeeping with the help of YouTube, but produce no honey, that’s a clear sign something went awry. “Even with trial and error by yourself,” Wu says, “you would still get feedback. It’s just from the environment and a little bit slower than feedback from an instructor.” Struggle, mistakes, and “failure” are essential parts of the learning process, Wu says. These missteps are valuable forms of feedback you can learn from. In turn, you’ll improve your subsequent performances — and that’s learning. “Learning, in general, happens,” Wu says, “when you make a mistake, and then you change your behavior to adjust to that.”
Instead of trying to cram knowledge in, focus on verbalizing what you’ve learned, [assistant professor and cognitive scientist Pooja] Agarwal says. Known as retrieval practice, simply recalling and reflecting on information can help you retain those details. Thinking back on what you read in a book yesterday, telling a friend something funny you heard on a podcast, mentioning what you ate for breakfast — that’s retrieval practice. An easy way to put retrieval practice to work is to write down — or tell your partner or roommate — one thing you learned at the end of every day. “That will boost your memory and your long-term learning,” Agarwal says, “without taking more than 30 seconds and without any cost at all.”
Why Songs Get Stuck in Your Head—and How to Stop Them
Scientists call earworms involuntary musical imagery, or INMI, because they burrow into our heads uninvited and without warning. At our house, we leave a local alternative-music radio station on in the background. The DJs favor a song called “Heatwaves,” by Glass Animals. Let’s just say I’m not a fan, and yet, that’s the song that frequently plays in my mind when I awaken from a dreamlike state: “Sometimes, all I think about is you. Late nights in the middle of June. Heat waves been fakin' me out. Can't make you happier now.” And I know I’ll be singing those few catchy lines while I’m brushing my teeth later that night.
Music that is simple, repetitive, and easy to sing (or hum) is most likely to get stuck. Think Miley Cyrus’ “Flowers,” and Queen’s classic “Bohemian Rhapsody,” and the title-says-it-all track “Can’t Get You Out of My Head,” by Kylie Minogue. Even the Rocky theme song can fight its way in. Nursery rhymes and kid-friendly tunes are also strong earworm contenders. They’re composed to be catchy, with an ear toward repetition, and as a result, memorization. If the “Itsy Bitsy Spider” crawls into your head, now you know why.
It turns out that certain emotional states, such as when we’re tired or overworked, can trigger earworms. (In a Goldilocks-like quandary, you may be more vulnerable if you’re too stressed or not stressed enough—in other words, bored.) Maybe that’s why I frequently wrestled with earworms when my three sons were young. The combination of simple music and sleep deprivation created a fertile breeding ground for the pesky tunes to take hold.
If an earworm has a hold on you, scientists believe the following strategies may help obliterate it:
- Complete the song.
- Distract yourself.
- Diversify your playlist.
- Mix up the lyrics.
While you may be tempted to try to suppress earworms, [marketing professor James] Kellaris cautions against it. They’re like a cognitive itch. Scratching them (or in this case, fixating on how to annihilate them) will only make the episode last longer. Instead, when a pesky earworm does get trapped in your head, try to remember that “you can’t always get what you want … but if you try sometimes, you get what you need.”
