This week's interesting finds

 

Luke, partner since 2022 (Calgary, Alberta)  

This week in charts 

Fixed income   

Housing   

Investors spend $200mn on ‘worthless’ Bed Bath & Beyond shares 

Investors have spent almost $200mn trading theoretically worthless shares in Bed Bath & Beyond since the homewares retailer went bankrupt at the start of May, in the latest manifestation of the meme stock craze. 

Bed Bath & Beyond was one of a handful of unloved consumer brands that became popular with retail investors during the coronavirus pandemic, with small investors arranging on social media to push share prices far above what most professionals considered rational. 

Many of the companies used the enthusiasm as an opportunity to prop up their ailing businesses by issuing new shares, but Bed Bath & Beyond eventually filed for Chapter 11 bankruptcy protection earlier this year and was delisted. 

Nevertheless, an average of 18mn of the company’s shares have changed hands each day on over-the-counter markets since then, according to Bloomberg data. Users of the Reddit website have been sharing highly speculative theories about possible turnround plans for the retailer. 

When a company declares bankruptcy, it is delisted from the major exchanges and its stock trades on the pink sheets for a fraction of its original value. “These stocks will lurk around until the bankruptcy estate is settled, which can take months or years,” said Steve Sosnick, chief strategist at Interactive Brokers. 

Whether shareholders receive anything at the end of bankruptcy proceedings depends on whether bondholders, who get paid before equity holders, can recover their money. 

However, the bonds of Bed Bath & Beyond are trading at less than 2 cents on the dollar. “The bond market is telling you the stock is worthless,” Sosnick added. 

Subprime Auto Bondholders Face Possible First Hit in Decades 

Bonds backed by car loans made by U.S. Auto Sales and American Car Center, two used-car dealers that shut their doors earlier this year, have been veering into distress in recent weeks. Borrowers have been falling behind on payments, and Citigroup believes that some of the riskiest parts of three different asset-backed deals could fail to return principal to investors. 

Any lost principal would be a rare event in the ABS market, where subprime auto bonds haven’t failed to return investors’ money since the 1990s, Citigroup said. Prices on a bond issued by U.S. Auto Sales, owned by private equity firm Milestone Partners, have dropped to distressed levels, trading at a little over 18 cents on the dollar on June 26, according to Trace data. 

The disruption is a major test for the subprime auto ABS market, where issuance grew by more than 70% to $40.5 billion in the five years through 2021, according to data compiled by Bloomberg News.

The deterioration of the bonds issued by ACC and U.S. Auto Sales comes months after both companies announced they were closing their dealerships. Both firms transferred the collection of payments on their loans, known as servicing, to Westlake Portfolio Management after going bust. A spokesperson for Westlake declined to comment. 

“The bonds are deteriorating in part” because it takes a few months to transfer the servicing of the loans “and meanwhile consumers may cease making payments,” Eugene Belostotsky, a securitized products strategist at Citi, said in an interview. “The lenders went under because borrowers were not paying back the debt, now that’s just accelerating.”’ 

One of the reasons auto ABS losses are almost unheard of is the use of investor protections known as overcollateralization. That means the amount of loans backing the bonds exceeds the size of the principal on the bonds, allowing at least some borrowers to default without any losses for bondholders. 

But for the two subprime issuers that ran into difficulties this year, those protections have waned dramatically on some securities. The overcollateralization for the 2022 U.S. Auto bond has fallen to just 5.5%, compared with a target of 35%, according to a Citigroup report dated June 30.   

This week’s fun finds 

Meghan brings Detroit to the office 

Meghan’s moai (our version of bringing EdgePointers together for a meal) was Detroit-style pizza. Now that’s deep and delicious! 

EdgePoint Football Club “ties” another one on 

After leading for most of the game, the opposing team scored a late goal to tie the match 3-3. With a record of 2-0-2, the team’s still on track to make the playoffs.   

An otter in Santa Cruz is hassling surfers — and stealing their boards 

An aggressive sea otter in California is hassling locals by riding boards she stole from surfers in the lineup. 

Steamer Lane is a legendary point break nestled along the rocky shores of Santa Cruz, home to swaths of experienced surfers, as well as a 5-year-old female sea otter with a growing reputation for repeatedly confronting surfers and kayakers. 

A team from the California Department of Fish and Wildlife (CDFW) and the Monterey Bay Aquarium is looking for the otter to catch and rehome her. Unfortunately, once the otter is caught, Monterey Bay Aquarium spokesperson Kevin Connor told NPR, she won't be able to return to the wild. 

The animal, officially known as otter 841, was born in captivity — because its mother had also been too friendly with humans — and then successfully released into the wild in June 2020, Connor told NPR. It wasn't until September 2022 that she started exhibiting her bizarre behavior at Steamer Lane.   

The mathematically correct way to tie your shoes 

If you’re wearing shoes right now, this is something you can tell simply by looking at them. Look at the bow in your shoes and notice how it sits. 

• Does the knot sit “squared up” above your shoelaces, do the loops want to orient themselves horizontally across your laces, and if you try to move them to an angle in either direction, do they revert to that horizontal position? 
• Or does the knot twist at an angle above your laces, do the loops want to twist to the side at a severe angle rather than sit horizontally across your laces, and if you try to move them to an angle to the horizontal, are they happy to remain there? 

If you’re in the first camp, you’ve likely tied a good (reef) knot that will remain tied all day long. If you’re in the second camp, you’ve likely tied a bad (granny) knot that will come undone at some point throughout the day. Some people, in an attempt to mitigate a bad knot, have adopted the tactic of simply “double-knotting” their shoelaces, but even that is often insufficient to keep them from coming undone throughout the day. (This also applies to any bow tie-wearers out there. If your bow tie wants to twist at an angle, you’re probably granny-knotting it without even thinking about it!) 

With three either/or decisions to affect the configuration of your knot, these eight total possibilities can lead to either a reef knot (which is good) or a granny knot (which is bad), all dependent on which combination you choose.

This week's interesting finds

Miguel, partner since 2022 (Toronto, Ontario)  

This week in charts 

Housing   

Equities 

Asset classes   

Time to accept that wind farm costs are not falling 

There has been a consistent narrative that the cost of building new wind farms is falling, with falling subsidy prices being offered as evidence. I have challenged this narrative in the past, pointing out that evidence from the accounts of windfarms themselves does not support this argument, citing the work of Professor Gordon Hughes at the University of Edinburgh, and indeed his work as subsequently been replicated by Andrew Montford of the Global Warming Policy Foundation (“GWPF”). However, there is another big reason to question this narrative: turbine manufacturers are losing money hand over fist. 

Falling subsidy prices at the same time as massive manufacturing losses makes no sense and is clearly not sustainable. Of all the projects that secured Contracts for Difference (“CfD”) agreements in the most recent subsidy round, known as AR4, only two have actually taken their Final Investment Decision (“FID”) – ScottishPower’s East Anglia 3 project, and Moray West which is a joint venture between EDP Renewables and ENGIE. Ørsted has warned that Hornsea 3 could be at risk without Government action “to maintain the attractiveness of the investment environment”. It has said it will make its final investment decision later this year. 

The Government has said that the CfD is structured to take inflation into account, but other than introducing 100% capital allowances for a limited period in a bid to stimulate business investments in the Spring Budget, it has offered little additional help to renewable developers. “Long-life assets” only benefit from 50% relief, with many commentators believing that wind turbines will be considered to be “long-life assets” – these are typically assets with a life of at least 25 years, which tends to be the upper limit of the life of a wind turbine. 

Turbine manufacturer losses began to be commented upon last year, and largely explained away as being a result of supply chain costs increasing due to covid and the Ukraine war. But looking at the figures more closely it is clear that the losses pre-date these events: 

Ratings agency Fitch, said that “while turbine manufacturers’ profitability is under pressure due to increased raw material prices, supply chain difficulties and temporarily reduced orders”, the long-term sector fundamentals remain supportive. It pointed to significant cost increases in a market where most customer contracts are fixed-priced putting pressure on OEMs’ (Original Equipment Manufacturers) margins, and while OEMs have increased their selling prices over the past year, the pace of cost growth has been higher, leading to negative margins. Fitch expects margins to recover later in the year as manufacturers adjust selling prices, and raw materials costs fall, however, it says that the rate of new orders has slowed over the past year, due to adverse economic conditions and slow permitting processes in Europe. 

Professor of Economics at the University of Edinburgh Gordon Hughes compared actual capital costs with costs reported in public announcements before or during construction – both adjusted for inflation (to 2018 prices). He found that on average, actual costs were 18% higher than reported costs and in a third of cases the cost overrun was at least 30%. Reported capital costs were clearly affected by an “optimism bias”, but even so, there was a large increase in the reported capital cost per MW of capacity for off-shore wind farms over the 20-year period, with the main change being between projects completed up to 2009 and those completed in 2015-2018. 

Clean Energy’s Latest Problem Is Creaky Wind Turbines 

Siemens Energy fell 36% on Friday morning after the company withdrew its fiscal 2023 profit guidance late Thursday. Components in wind turbines made by its subsidiary Siemens Gamesa are wearing out faster than expected. The news isn’t just a blow for the company’s shareholders, but for all investors and policy makers betting on the rapid rollout of renewable power. 

The problem appears to involve critical parts like bearings and blades. The average lifespan of a wind turbine can be up to 20 years, but the wear and tear has been spotted in both newly installed and older turbines. 

The creaky components, which affect 15% to 30% of the installed onshore fleet, will be expensive to fix. Management thinks the cost could run upward of €1 billion, equivalent to $1.09 billion, effectively wiping out more than a third of the profit the company is expected to make doing maintenance on wind turbines it has already installed, according to Bernstein analyst Nicholas Green.

Siemens Gamesa has been a problem child for years due to cost overruns and supply-chain challenges. Siemens Energy recently took full control in a roughly €4 billion buyout of minority shareholders to turn it around away from the full glare of the public market—or so it hoped. 

One risk for investors is that the same faults crop up at other wind-turbine manufacturers as a result of shared supply chains. Shares in rival Vestas Wind Systems were down 7% on Friday morning. 

A fundamental design flaw is an even more worrying possibility. Turbine makers have been under pressure to make bigger, more powerful wind turbines and may have overstretched the technology. When things go wrong with such massive pieces of equipment, they are costly to fix. The nacelle that holds all of the turbine’s generating components can be as large as a house.

This week’s fun finds 

EdgePoint Football Club remains undefeated 

The only thing that’s slowed the team down so far is the long weekend. A shorthanded roster resulted in a 2-2 tie, bringing the season record to 2-0-1.   

A taste of the Ionian sea 

For her moai (our version of bringing EdgePointers together for a meal), Florika brought in Albanian food for the internal partners to try. 

This Year Might Be the Worst Tick Season Ever. Here's Why 

“From 2020 to this year, I would say it’s a 100% increase in the number of ticks humans have encountered,” says Saravanan Thangamani, professor in the department of microbiology and immunology at SUNY Upstate Medical University who tracks ticks and tick-borne diseases across New York. Until recently, Thangamani invited people from across the state to send in ticks they had encountered for identification and counting, but the sheer number of submissions and the lack of operational funds to keep up with them forced him to shut down the program. 

As with so much else, climate change is playing a big role in extending ticks’ breeding and biting seasons. Brief, mild winters and long, hot springs and summers are incubators for ticks, especially in the Northeast and the Midwest, which once featured punishingly cold winters, but increasingly do not.

Rising temperatures affect not only the presence of ticks native to a given area, but the migration of new ones. “We’re starting to see southern species of ticks coming north,” says Dina Fonseca, professor and chair of the department of entomology at Rutgers University. “The Gulf Coast tick is now established in New Jersey. Staten Island [New York] has had the Gulf Coast tick for three or four years already, maybe five. It wouldn’t be here if it wasn’t for the fact that it’s warmer.” 

In some cases, climate change actually reduces the population of ticks. Fonseca points out that the southwest is getting increasingly dry as climate change-related droughts persist, and that tends to kill off tick populations. The same is true for the plains and the western range. But elsewhere, a warming climate is a boon to ticks. 

The black-legged tick—also called the deer tick, which carries Lyme disease, “used to be in the Northeast and now it has moved all the way to Eastern Canada,” says Moulaei. 

As for what you can do to protect yourself from any tick bites, the advice remains the same: If you live near an area that has ticks or you venture into forested or grassy parts, tuck your pants into your socks, use insect repellent on yourself and your clothes, do a complete tick check of yourself and your pets when you get home, shower shortly after you conduct your check, and run your clothes through the washer and especially the dryer on high heat, because hot temperatures can kill ticks. 

Junk websites filled with AI-generated text are pulling in money from programmatic ads 

Over 140 major brands are paying for ads that end up on unreliable AI-written sites, likely without their knowledge. Ninety percent of the ads from major brands found on these AI-generated news sites were served by Google, though the company’s own policies prohibit sites from placing Google-served ads on pages that include “spammy automatically generated content.” The practice threatens to hasten the arrival of a glitchy, spammy internet that is overrun by AI-generated content, as well as wasting massive amounts of ad money. 

Most companies that advertise online automatically bid on spots to run those ads through a practice called “programmatic advertising.” Algorithms place ads on various websites according to complex calculations that optimize the number of eyeballs an ad might attract from the company’s target audience. As a result, big brands end up paying for ad placements on websites that they may have never heard of before, with little to no human oversight. 

To take advantage, content farms have sprung up where low-paid humans churn out low-quality content to attract ad revenue. These types of websites already have a name: “made for advertising” sites. They use tactics such as clickbait, autoplay videos, and pop-up ads to squeeze as much money as possible out of advertisers. In a recent survey, the Association of National Advertisers found that 21% of ad impressions in their sample went to made-for-advertising sites. The group estimated that around $13 billion is wasted globally on these sites each year. 

Now, generative AI offers a new way to automate the content farm process and spin up more junk sites with less effort, resulting in what NewsGuard calls “unreliable artificial intelligence–generated news websites.” One site flagged by NewsGuard produced more than 1,200 articles a day. 

NewsGuard says that most of the AI-generated sites are considered “low quality” but “do not spread misinformation.” But the economic dynamic of content farms already incentivizes the creation of clickbaity websites that are often riddled with junk and misinformation, and now that AIs can do the same thing on a bigger scale, it threatens to exacerbate the misinformation problem.

This week's interesting finds

Greg L. (Lake of the Woods, Ontario) 

Featuring one of our advisor partners, Lonn Vokey.  

This week in charts

Power supply 

Supply chain   

Mental health   

Moody’s warns of ‘serious challenge’ to $1.4tn private credit market 

A sharp rise in rates could cause some of these businesses to struggle to afford their interest payments. Moody’s found that the interest coverage ratios on the Ares and Owl Rock funds’ loans — the earnings available to make interest payments — would eventually fall by about half. While Moody’s has sounded a warning, it did not downgrade the ratings or credit outlook of either of the Ares or Owl Rock funds, which are publicly traded lending vehicles called business development corporations. Ares and Owl Rock declined to comment.   

This week’s fun finds 

Four EdgePointers make the pilgrimage 

Claire, Mimi, Patrick and Sarah made their way to P.E.I. for a meeting with advisor partners and took the opportunity to visit the inspiration for Cymbria’s name.   

EdgePoint Football Club undefeated in its first two games 

A 5-1 win keeps the team near the top of the standings.   

Webb telescope just found something unprecedented in the Orion Nebula 

A team of scientists found this Holy Grail compound in the Orion Nebula, a baby star nursery about 1,350 light-years away. That may seem absurdly far, but it's actually the closest large star-forming region to Earth. 

(Image source) 

Using the James Webb Space Telescope, a preeminent cosmic observatory led by NASA and the European and Canadian space agencies, the researchers not only captured a vibrant new picture of the celestial region — blowing the socks off Hubble's version — but found the new molecule lurking in a young star system, known as d203-506. This system has a protoplanetary disk, a sort of Lazy Susan of gas and dust rotating around the core. 

Astronomers are on a quest to find signals of carbon compounds in the greater universe because this chemistry is at the root of all life, at least as far as we understand it on Earth. Coincidentally, ancient Mayan culture referred to the Orion Nebula as the cosmic fire of creation. 

The mysterious signal turned out to be methyl cation, a molecule that until this week was relatively unknown to the layperson. With the announcement, NASA went so far as to provide a pronunciation guide for the term. (For the record, it sounds like "CAT-eye-on," not the last two syllables of "vacation.") Organic chemists say methyl cation assists with the formation of more complex carbon-based molecules. 

Since the 1970s, scientists have predicted this substance was a missing link between simple molecules and more complex organic molecules. But direct evidence of its existence in space had eluded them — until now. NASA likens the role of methyl cation to a train station, where a molecule can remain for a time before routing in one of many different directions to react with other molecules. 

"This detection not only validates the incredible sensitivity of Webb but also confirms the postulated central importance of (methyl cation) in interstellar chemistry," said Marie-Aline Martin-Drumel, one of the coauthors on the new study, in a statement.

 

This week's interesting finds

Christen, partner since 2018 (Los Angeles, California)  

This week in charts 

Yields 

Mass Immigration Experiment Gives Canada an Edge in Global Race for Labor 

A country about as populous as California has added more than all the residents in San Francisco in a year. Last week, Canada surpassed 40 million people for the first time ever — with growth only expected to continue at a rapid pace as it welcomes more immigrant workers, refugees and foreign students across its borders. 

Now, as people flow into the country like never before, Canada has an immediate challenge: how to propel growth in rural regions in dire need of newcomers while minimizing the strains to urban centers already bulging with people. 

The rewards are apparent. Population gains have boosted hiring and consumption, helping the economy withstand a rate-hike campaign by the Bank of Canada — so much so that the central bank this month had to resume tightening after a pause. Yet in a country that’s long been home to one of the world’s hottest housing markets, the government’s plan has drawn criticism that increasing immigration targets merely boosts economic output without raising living standards for individuals. 

Even some prominent, pro-immigration economists are now saying Canada is going too far, too fast.

The looming threats of an aging population — leading to dwindling tax revenue and shrinking budgets — are playing out in different ways around the world. France’s plan to raise the retirement age by two years to 64 led to nationwide protests. Germany risks having 5 million fewer workers by the end of the decade, and already is struggling with strains in its industrial-heavy economy. Japan, where the government has long resisted immigration, is facing acute labor shortages, a rapid population decline, and dying rural towns. 

CIBC under banking regulator’s remediation orders to fix mortgage underwriting lapses 

Canadian Imperial Bank of Commerce has been under remediation orders from Canada’s banking regulator for more than a year after an audit of its mortgage portfolio uncovered breaches of rules that limit how indebted borrowers can be, sources say. 

The problems surfaced last year in a routine regulatory audit of the bank’s mortgage portfolio conducted by the Office of the Superintendent of Financial Institutions (OSFI), which regulates large banks in Canada, according to two sources with direct knowledge of the issue. 

The issues involve thousands of clients, many of whom had lines of credit that were secured against their homes. When these lines were combined with a CIBC mortgage, the total credit available exceeded allowed regulatory ratios. 

The problems discovered did not involve fraud, the sources said. 

The bank still doesn’t know the full extent of the issue, and has already spent tens of millions of dollars screening for problems and creating remedies, according to one of the sources. Internal estimates suggest it could take as much as two more years to fully solve the problems, the source said. However, the cases are not expected to result in noticeably higher losses on loans or have any material financial impact on the bank. 

While the issues CIBC and OSFI uncovered affect only a small part of the bank’s $266-billion Canadian mortgage book, and are largely administrative in nature, stemming from back-office oversights and flaws in IT systems, their discovery has created more turbulence in one of CIBC’s core businesses. The issue also came to light at a moment when OSFI has voiced concerns about Canada’s competitive housing market amid higher interest rates. 

MiFID U-Turn Plan Would Reverse Ban on Free Research for Clients 

A piece of European Union legislation that forced financial firms to separate the cost of investment research from that of trading could be reversed under plans being championed by member states. 

Their proposals would mean an investment firm would only have to inform clients whether they are paying for research and trading jointly, and record the charges attributable to each. 

That’s a dramatic shift from current regulations, which separated the two in a bid to eliminate conflicts of interest that could distract money managers from seeking the cheapest transaction costs for investors. But evidence suggests research provision across the region has suffered as a result. 

The prospect of a major rollback of the rules comes at a key moment for the research industry globally. In the US, a waiver that has allowed brokers to charge European clients separately for trading and research is about to expire, forcing them to finally adapt to the regulatory mismatch between the regions. Meanwhile, the UK is undertaking a review of investment research that’s expected to lead to its own easing of unbundling rules. 

OpenAI plans app store for AI software, The Information reports 

Enterprise customers using ChatGPT often tailor the technology to their specific uses, which range from identifying financial fraud from online transaction data to answering questions about specific markets based on internal documents. According to the news report, makers of such models could offer them to other businesses through OpenAI's proposed marketplace. 

Such a marketplace could compete with app stores run by some of the company's customers and technology partners - including Salesforce and Microsoft - and help OpenAI's technology reach a broader customer base. 

The Information also reported that two of the company's customers, Aquant, which makes software that manufacturers use to guide customers through device maintenance and repairs, and education app maker Khan Academy, might be interested in offering their ChatGPT-powered AI models on OpenAI's marketplace. 

Since its release late last year, hundreds of businesses have adopted ChatGPT to automate tasks and increase efficiency. Companies are also racing to offer their customers new tools and capabilities based on the AI software's advanced large language models (LLMs).   

This week’s fun finds 

EdgePoint Football Club launches with a win 

In our inaugural game, EdgePoint won a squeaker 3-2. 

How clams help keep Polish water clean 

A water pump known as Gruba Kaska (Fat Kathy) is a local landmark in Warsaw. To get there, you must walk 300 metres through a slimy tunnel under the Vistula river. There you will find eight clams hooked up to computers. They are monitoring the city’s drinking water. 

(Image source) 

The system is nifty. When the molluscs encounter heavy metals, pesticides or other pollutants, they close their shells, explains Piotr Domek of Adam Mickiewicz University in Poznan, who has worked on the project for three decades. To create a natural early-warning system, Mr Domek and his colleagues collect the clams from rivers or reservoirs, and attach a coil and a magnet to their shells. Computers register whether their shells are open or closed by detecting changes in the magnetic field. 

“In the case of a terrorist attack, an ecological disaster or another contamination of the water supply, the clams will close,” says Mr Domek. This, in turn, will automatically cut off the water supply. The clams, he thinks, are life-savers. “If contaminated water goes straight to our taps, we will get poisoned,” he says in “Fat Kathy”, a short film that celebrates the invaluable bivalves. 

The Story of Why Over 500 Pubs in the United Kingdom Share the Same Name 

As with most things in England, there's plenty of history and tradition to back up the trend. The name Red Lion adorns the sign above hundreds of drinking holes throughout the country and even the world. In London alone, there are more than 20, according to the latest count of open restaurants on Google. The reason why is up for debate but on a recent trip to London, my tour guide shared the following story, which was corroborated by Historic UK. 

All the way back in 1603, James VI of Scotland inherited the throne to become James I of England. The only problem was that he wasn't incredibly fond of England, seeing as though his predecessor and mother, Mary, Queen of Scots, spent over 18 years in captivity before ultimately being beheaded. The charge against her being a plot to assassinate Queen Elizabeth I. So when he ascended to the throne, he ordered that all buildings of importance display the red lion of Scotland — and that included pubs. The idea was that any Englishman or woman would constantly be reminded that their king was Scottish every time they went for a tipple.

This week's interesting finds

Teresa, partner since 2010 (North York, Ontario)   

This week in charts 

Wages 

Debt 

Cap rates

The Investors Podcast: Mastering the Art of Investing: A Deep Dive with Sam Zell 

On today’s show, we have the honor of interviewing legendary real estate investor and entrepreneur, Sam Zell. Sam Zell has an impressive background, having started his career in real estate in the late 1960s. He is the founder and chairman of Equity Group Investments, a leading private investment firm. Over the course of his career, Sam has made many bold moves and investments, earning him a reputation as a savvy and fearless investor. One of Sam's most notable achievements was his role in creating the modern-day real estate investment trust (REIT) industry. He did this by founding Equity Office Properties Trust in 1997, which became the largest office REIT in the United States. In 2007, he sold the company for a record-breaking $39 billion. Joining us today as a co-host is David Greene, an accomplished real estate investor, and host of the BiggerPockets podcast, one of the most popular and highly-rated podcasts in the real estate investing space. 

Hudson’s Bay utility corridor agreement reached among Prairie provinces 

After years of fits and starts, a memorandum of understanding between the Alberta, Saskatchewan and Manitoba governments has been reached to explore the feasibility of building a deep water harbour at Port Nelson on the Hudson Bay to export natural resources such as potash and liquified natural gas.

Marriages in China slump to historic low 

Marriages in China dropped in 2022 to their lowest since records began, local news outlet Yicai reported on Sunday, continuing a steady decline over the past decade although the matrimonial total may have been affected by stringent COVID lockdowns. 

Just 6.83 million couples completed their marriage registrations last year, data published on the website of the Ministry of Civil Affairs showed, down about 800,000 from the previous year. 

The drop in couples tieing the knot, which follows pandemic restrictions keeping tens of millions locked in their homes or compounds for weeks last year, comes as authorities deal with a declining birth rate and a falling population. 

Demographers warn China will get old before it gets rich, as its workforce shrinks and indebted local governments spend more on their elderly population. 

To encourage marriage and boost the country's flagging birth rate, China said last month it would launch pilot projects in more than 20 cities to create a "new-era" marriage and childbearing culture.   

This week’s fun finds 

Summer 2023 Investment team book and podcast list 

School’s almost out, so we’ve asked the Investment team for some of their recent reading recommendations and podcast proposals to help kick off the start of summer! 

Caribbean treat 

Aisha brought in some West Indian dishes for her moai (our version of bringing EdgePointers together for a meal). There was a lot of flavour packed into those containers! 

US Supreme Court's dog toy ruling puts parody products on notice 

The U.S. Supreme Court handed brand owners a win against parody products on Thursday when it ruled that "Bad Spaniels" dog toys resembling Jack Daniel's whiskey bottles are not shielded by the U.S. Constitution from the liquor maker's trademark lawsuit. 

But in a 9-0 decision, the justices said a precedent known as the Rogers test for assessing the use of trademarks in artistic expression did not apply to VIP's products, reversing a U.S. appeals court and raising the bar for parodies to survive trademark claims. 

The Rogers test is "not appropriate when the accused infringer has used a trademark to designate the source of its own goods - in other words, has used a trademark as a trademark," Justice Elena Kagan wrote. 

Kagan contrasted the case with situations where she said applying the Rogers test was justified, including when Danish pop group Aqua's label MCA Records defeated a trademark lawsuit by Mattel over the band's song "Barbie Girl." 

Can You Change Your Metabolism? 

There isn’t a method to boost metabolism “in a way that’s durable or real,” says Herman Pontzer, an evolutionary anthropologist at the Global Health Institute at Duke University. He says most things people promise will boost metabolism fall into two categories. “There are things that are dangerous and illegal and things that are BS, and you should probably avoid both of them,” Pontzer says. 

Basal, or resting, metabolic rate refers to work performed by cells when we are doing nothing. It’s the baseline hum of being alive as cells keep blood circulating and lungs functioning. Formally, it’s the calories per minute used for these housekeeping duties. That adds up to about 50 to 70 percent of the total you burn through each day, depending on age, says Samuel Urlacher, an anthropologist and human evolutionary biologist at Baylor University in Waco, Tex. 

A common perception is that having a higher metabolism means you can get away with eating more while doing less, without gaining weight. The relationship between basal metabolism and weight is complicated, however, Pontzer says. “The larger you are, the more cells you’re made of and the more energy you burn because your metabolism is all your cells at work, all day,” he adds. But each individual cell is not more active or burning more calories per minute just because there are more cells, Pontzer says. 

“If we go to the gym, and we successfully lose some fat and gain some muscle, we will have a very small result on increasing metabolic rate,” says Susan Roberts, a nutrition researcher and leader of the Energy Metabolism Team at the Jean Mayer USDA Human Nutrition Research Center on Aging at Tufts University. “Changing body composition can make a little difference but not a lot.” 

In terms of weight loss, the timing of a gym visit also might make a tiny difference, Urlacher says. “Those who exercise early in the day have better success with weight loss because it helps control appetite throughout the course of the day.” 

Intuition might whisper that a brisk resting heart rate would also correlate with an increased basal metabolism, but that isn’t the case. A resting heart rate of 50 beats per minute for one person versus 70 for another just means the heart with the slower resting rate might be more efficient at getting oxygen to tissues, Pontzer says.

This week's interesting finds

Olivia, partner since 2008 (Port Credit, Ontario)   

This week in charts

Business debt

Manufacturing 

Young adults in the U.S. are reaching key life milestones later than in the past   

China set to account for less than half of US’s low-cost imports from Asia 

“By the end of 2023, China’s portion of US imports” from low-cost Asian countries, which excludes Japan and South Korea, “will definitely have dropped below 50 per cent”, said Patrick Van den Bossche, one of the report’s authors. 

The US and China are each other’s largest respective trading partners. Last year, Chinese goods made up 50.7 per cent of US manufactured imports from Asian countries, according to the Kearney Reshoring Index, which is based on US trade data. That was down from nearly 70 per cent in 2013. 

While exports from China, once hailed as the world’s factory floor, have declined, imports from Vietnam have doubled in the past five years and tripled over the past 10, according to the Kearney index. India, Taiwan and Malaysia have also contributed a greater share of products from Asia consumed by Americans. 

“US imports from other countries such as Vietnam [are] rising as producers shift manufacturing away from China,” said Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing. 

Hedge Funds at War for Top Traders Dangle $120 Million Payouts 

The hunt is no different from the bidding war for Premier League or NBA players, one executive said. Last year, a senior portfolio manager was lured by a major New York fund with more than $120 million in guaranteed payouts, according to a headhunter who said he’d done several deals paying north of $50 million. Contracts worth $10 million to $15 million are increasingly becoming common for traders, said another. 

Hedge funds have long been the land of eye-popping rewards, but a few recent trends are converging to take it to new levels. The stellar track record of several giant firms that spread money across teams of traders following multiple strategies has caused their assets to surge. That’s prompted a hiring spree to add more traders and strategies so the existing ones aren’t over-stretched. 

The performance — and resulting wait lists of investors wanting in — has also given the firms leverage over clients to charge many times than the traditional 2% management fee and use that for recruitment and retention. And as the firms increase rewards and defer more of them over several years, it’s taking even bigger offers to tempt traders into leaving. 

“In a world where there’s a lot of liquidity, the bigger challenge in developing a platform business is investing in talent rather than attracting capital,” said Chris Milner, the chief operating officer of London-based Eisler Capital, which is transforming itself into a multi-strategy hedge fund from its roots in macro trading. 

Millions of dollars in signing bonuses and a higher cut of trading profits during initial periods — aimed at replacing any pay lost from leaving a past employer and having to sit out non-compete periods — are now becoming the norm at multi-manager investment firms ranging from Millennium, Citadel, Point72 Asset Management to BlueCrest Capital Management and Balyasny Asset Management. While the rest of the hedge fund industry grapples with outflows, the biggest are beefing up. 

Clients mostly do not get to see details of the payouts and guaranteed bonuses though they foot the bill through an opaque blank check for a “pass through” fee. That payment allows hedge funds to charge clients for anything from compensation and research to entertainment. 

Clients also can be on the hook for expenses such as fitness plans for traders at Point72, relocation expenses at Balyasny, investment and litigation-related costs at Verition Fund Management and key-man life insurance premium for Englander at Millennium, according to their client offering documents reviewed by Bloomberg News. 

Bank governor: Carbon tax boosts inflation rate by nearly half-a-point 

The federal carbon tax has boosted inflation by nearly half-a-percentage point, Bank of Canada Governor Tiff Macklem told members of the House of Commons Standing Committee on Finance in a letter obtained by Global News. 

In his letter to finance committee members, Macklem repeated an observation he made at the committee’s March 3 meeting that the annual increase in what he called the “carbon pollution charge” was adding 0.1 points to the consumer price index each year. In other words, he said, had the federal carbon tax not increased, inflation in January would have been 5.0 per cent instead of 5.1 per cent.

This week’s fun finds

The latest EdgePointer of the Month features relationship manager Sarah Ford. 

Sarah Ford “like the car”, as she explains her name’s spelling, applies a “quality is job one” mantra to everything she does. Whether it’s cooking (and eating), “cheer mom” duties or working as a relationship manager with EdgePoint advisor partners, she’s driven to pursue excellence. With one of the most eclectic territories in Canadian wholesaling, at any point in time you may find Sarah bounding up Bay St. in Toronto, hustling down Water Street in St. John’s or skipping across Queen Street in Charlottetown. Before EdgePoint, Sarah worked at NEI Investments as an inside sales representative and a manager, information systems and marketing. She holds an Honours B.Comm. from McMaster University as well as the CIM designation. 

As her gift to readers, Sarah decided to share some of her favourite dessert recipes. We can’t thank her enough for her diligence in tasting each one! 

Lime mousse cake 

Chocolate pavlova   

White chocolate-raspberry cake 

Milk chocolate soufflé with nougat whip 

Banana bread 

Note – we aren’t responsible for any “long-term growth” caused by eating these treats. 

Robot Pizza Startup Shuts Down After Cheese Kept Sliding Off 

A robot pizza delivery startup that raised almost half a billion dollars has shut down after a series of technological setbacks, according to The Information. 

The company, founded back in 2015, was working on a mobile pizza-making machine for years, but struggled to turn it into a reality. As a result, the company pivoted to working on sustainable packaging back in 2020. 

It's a shocking turn given the sheer amount of money investors — including $375 million from multinational giant SoftBank, which is renowned for its poor investments like the infamous WeWork — have poured into the startup. And in an even broader sense, it once again shows that even as AI makes incredible strides in the market, practical robotics ventures remain enduring difficult. 

According to Bloomberg, the company struggled to physically keep melting cheese from sliding off pies that were being baked in its moving trucks. 

In early 2020, the company laid off over half of its workers before being bought by the appropriately named compostable packaging company Pivot Packaging. At the time, Zume CEO Alex Garden blamed the cuts on the pandemic and a number of deals that fell through, according to Insider. 

Surprisingly, the robot pizza industry is much bigger than one might think. Zume is only one of several robotic pizza-making companies in Silicon Valley trying to automate pizza-making. For instance, Stellar Pizza, which was founded by former SpaceX engineers, is working on a robot that can make dough, roll it out, and cover it in various toppings before baking it. 

Seaweed farming may help tackle global food insecurity 

Producing and selling seaweed could boost incomes for farmers in low- and middle-income countries (LMICs), particularly in coastal regions of Africa and Southeast Asia, said Patrick Webb, the Alexander McFarlane Professor of Nutrition at the Friedman School and senior author of the study. The other authors were Natalie Somers, and Shakuntala Thilsted, who works for the Consultative Group on International Agriculture Research and won a 2021 World Food Prize for research and innovation in aquaculture and food systems. The team reviewed research papers, existing databases, United Nations and World Bank Group reports, and more. 

A more sustainable alternative to raising livestock, seaweed cultivation requires no land, freshwater, or chemical fertilizers, and could become particularly profitable as demand for nutrient-rich seaweed products grows around the world, the study found. Those profits would mean more buying power for those households and communities who produce, process, package, and export the microalgae, which in turn would translate into healthier diets. 

On top of being relatively easy to grow, seaweed has a miniscule carbon footprint, and may even help lower the ocean's carbon levels. Though little is yet known about how much CO2 seaweed releases during harvest, research has found that perennial brown algae farms absorb up to ten tons of CO2 per hectare of sea surface per year. In addition to its "carbon sinking" powers, when added to livestock feed, seaweed could help dramatically reduce methane gas emissions.