This week's interesting finds

Jason, partner since 2018 (Toronto, Ontario)  

Huawei NearLink Technology Promises a Paradigm Shift in Wireless Connectivity 

NearLink technology represents a significant leap forward in wireless connectivity, a culmination of the efforts of over 300 domestic and international leading enterprises and organizations. This innovative technology harnesses the strengths of traditional wireless technologies such as Bluetooth and Wi-Fi, resulting in an unparalleled performance boost. 

Compared to conventional wireless connections, Huawei NearLink boasts an impressive array of advantages. With 60% lower power consumption, it’s a step towards a more energy-efficient future. Its lightning-fast speed, six times faster than current technology, ensures smoother and more efficient data transmission. Moreover, NearLink reduces latency to a mere fraction, 1/30th of traditional connections, elevating the user experience to new heights. Additionally, it supports up to 10 times more group connections, making it ideal for multi-device and industrial applications. 

This cutting-edge technology finds extensive application across various sectors. From consumer electronics to smart home systems, new energy vehicles, and industrial manufacturing, NearLink is set to revolutionize the Internet of Everything in HarmonyOS. Imagine seamless connectivity and enhanced performance in cell phones, PCs, and cars, all while consuming lower power and offering broader coverage, leading to a more secure and integrated experience. 

Apple disputes French findings, says iPhone 12 meets radiation rules 

France's Agence Nationale des Fréquences (ANFR) told Apple on Tuesday to halt iPhone12 sales in France after tests that it said showed the phone's Specific Absorption Rate (SAR)- a gauge of the rate of radiofrequency energy absorbed by the body from a piece of equipment - was higher than legally allowed. 

The watchdog said it would send agents to Apple stores and other distributors to check the model was no longer being sold and a failure to act would result in the recall of iPhone 12s already sold to consumers.

Industry experts said there were no safety risks as regulatory limits on SAR were set well below levels where scientists have found evidence of harm. 

The limits - based on the risk of burns or heatstroke from the phone's radiation - are already set ten times below the level where scientists found evidence of harm. 

Croft said the French findings could differ from those recorded by other regulators because ANFR assesses radiation with a method that assumes direct skin contact, without intermediate textile layers, between the device and user. 

France's junior minister for the digital economy, Jean-Noel Barrot, said a software update would be sufficient to fix the radiation issues. 

Germany's radiation watchdog BfS also said the French decision could have implications for all of Europe.   

Defending the portfolio’: buyout firms borrow to prop up holdings 

Private equity firms have started to borrow against their funds to backstop overly indebted portfolio companies, a new financial engineering tactic meant to cope with higher interest rates and a slowdown in dealmaking. 

The manoeuvres, which lenders have dubbed “defending the portfolio”, have cropped up as many older private equity funds run low on cash just as the companies they own struggle with their own debt loads. 

Buyout firms have turned to so-called net asset value (NAV) loans, which use a fund’s investment assets as collateral. They are deploying the proceeds to help pay down the debts of individual companies held by the fund, according to private equity executives and senior bankers and lenders to the industry. 

By securing a loan against a larger pool of assets, private equity firms are able to negotiate lower borrowing costs than would be possible if the portfolio company attempted to obtain a loan on its own. 

The Financial Times has previously reported that firms including Vista, Carlyle Group, SoftBank and European software investor HG Capital have turned to NAV loans to pay out dividends to the sovereign wealth funds and pensions that invest in their funds, or to finance acquisitions by portfolio companies. 

The borrowing was spurred by a slowdown in private equity fundraising, takeovers and initial public offerings that has left many private equity firms owning companies for longer than they had expected. They have remained loath to sell at cut-rate valuations, instead hoping the NAV loans will provide enough time to exit their investments more profitably. 

But as rising interest rates now burden balance sheets and as debt maturities in 2024 and 2025 grow closer, firms recently have quietly started using the loans more “defensively”, people involved in recent deals told the FT.“ 

Private equity executives who spoke to the FT noted that the borrowings effectively used good investments as collateral to prop up one or two struggling businesses in a fund. They warned that the loans put the broader portfolio at risk and the borrowing costs could eventually hamper returns for the entire fund.“ 

We get pitched left and right,” said one executive at a large US buyout firm that has resisted such loans. “To me, it seems like pretty risky financial engineering.”   

EU to launch anti-subsidy probe into Chinese electric vehicles 

Brussels will launch an anti-subsidy investigation into Chinese electric vehicles that are “distorting” the EU market, a probe that could constitute one of the largest trade cases launched given the scale of the market. 

The investigation has been planned for months, and the EU’s concerns regarding China’s electric vehicle trade practices were conveyed by von der Leyen to Chinese premier Li Qiang in a bilateral meeting on the sidelines of the G20 summit in New Delhi last weekend, according to a person briefed on the discussion. 

Shares in Chinese electric-vehicle makers sold off on the prospect of greater regulatory scrutiny from Brussels, with Warren Buffett-backed BYD falling about 2 per cent and rival Xpeng dropping almost 3 per cent. Other electric carmakers, including Great Wall Motor and Li Auto, were also lower following the announcement. 

Action against Chinese carmakers in Europe has been demanded by member states, concerned that major domestic carmakers risk losing their leadership as the green transition reshapes the market. 

The probe could constitute one of the largest trade cases launched as the EU tries to prevent a replay of what happened to its solar industry in the early 2010s when photovoltaic manufacturers undercut by cheap Chinese imports went into insolvency. 

If found to be in breach of trade rules, manufacturers could be hit with punitive tariffs. 

In the case of the solar industry, Brussels launched a tariff regime against imports of Chinese photovoltaic cells in 2012 but later scrapped the controls in order to boost installations of renewable power.“ 

This is an important move by the commission, signalling the willingness to use trade instruments more proactively to protect the European industry and avoid the replication of the solar panels failure experience in the past to the crucial car industry,” said Simone Tagliapietra, senior fellow at the Brussels-based think-tank Bruegel. Europe also needed to “step up” on economic security, she said, in response to China’s own measures such as export controls on critical metals gallium and germanium.  

This week’s fun finds 

Hiker is Saved After He Begged ‘Help Me’ on Wildlife Bear Camera 

A wildlife bear camera saved a stranded hiker’s life after viewers spotted him pleading “Help me” on a livestream. 

The unidentified hiker got lost while hiking a remote mountain range in Katmai National Park in Alaska, U.S. on September 5 as a result of bad weather and poor visibility. 

With no cell signal and worsening weather on the trail, the panic-stricken hiker was left stranded seemingly without any hope of rescue — until he spotted a wildlife camera set up on Dumpling Mountain in Katmai National Park. 

The wildlife camera, which is operated by Explore.org on behalf of the U.S. National Park Service (NPS), is set up to give brown bear enthusiasts a glimpse of animals in the national park. 

However, Explore.org’s camera has seen a recent surge in live viewership ahead of the Katmai National Park’s annual Fat Bear Week tournament, which takes place in early October. 

The fat bear competition encourages viewers to try to identify the largest bear spotted on wildlife cameras as the creatures bulk up ahead of their winter hibernation, ultimately crowning one fan-favorite bear the fattest of them all. 

The big idea: why we need to learn to fail better 

For most people, failure is pretty simple: it’s bad, even shameful. Life is going well if you’re not experiencing failures, and we think that avoiding failure is obviously the right goal. We worry about what it says about us when we get something wrong (we’re not good enough!). The social stigma of failure exacerbates that spontaneous reaction. 

But what if we could learn to habitually reframe failure as a source of discovery and personal development? What if we could face problems and setbacks with honesty, determination and a healthy sense of realism? What if failure, as a token of our shared humanity, provided us with feelings of inclusion, not ostracism? 

Intelligent failures are to be welcomed, because they point us forward towards eventual success. They shut down one path and force us to seek another. The category encompasses wildly different phenomena, ranging from, say, a tedious blind date to the failed clinical trial of a promising new treatment. People who design clinical trials minimise the risks as much as possible. But there is no way to ensure it all works out before the trial is launched. The same can be said of that blind date. 

Many of today’s medical miracles – such as open-heart surgery to repair diseased vessels and valves – were once the impossible dreams of pioneers. Without their willingness to tolerate and learn from intelligent failures along the way, most of the life-saving advances we now take for granted would not exist. As cardiologist Dr James Forrester wrote: “In medicine, we learn more from our mistakes than from our successes.” But the truth of Forrester’s statement does little on its own to make it easy for the rest of us to navigate failure’s painful side effects. 

Fortunately, failing well can be learned. We can replace fear and shame with curiosity and growth. To facilitate this shift, it helps to recognise the human tendency to play in order not to lose, which holds us back from new challenges – and choose instead to play to win. Playing to win comes with the risk of failing, but it also brings rewarding experiences and novel accomplishments.

This week's interesting finds

Kevin, partner since 2022 (North Vancouver, British Columbia)  

This week in charts 

Real estate 

Crude oil 

Automakers find a tax credit loophole to increase EV leasing and boost sales 

Fed up with high gas prices and enticed by federal tax credits, Dave Walters decided he wanted an all-electric Hyundai Ioniq 5 for his next vehicle. 

The Orange County, California, resident initially thought about purchasing a used model, until he learned he could lease the vehicle and take advantage of a key loophole under the Inflation Reduction Act. 

Buying a used Ioniq, which is produced in South Korea and Indonesia, wouldn’t earn him $7,500 off through a federal tax credit. Leasing the vehicle would. 

“I ran the numbers — what it would be without the leasing credit and with the leasing credit — and that kind of put me over the top and that was the main thing of why I went in that direction,” he said. “It was a few hundred dollars less a month.” 

Under the IRA, leasing is categorized as commercial business and therefore exempt from regulations that require the vehicle and battery components to be made in North America. Most EVs for sale today do not qualify for the full tax credit because of where the vehicles or components are built. 

But leasing could save drivers thousands, as long as the companies receiving the credits pass the savings on to consumers. 

“I’m not surprised that the manufacturers are saying that they’re going to do more leasing,” said Charlie Chesbrough, Cox Automotive senior economist. “The IRA rolling on EVs and allowing them to qualify for that $7,500 really is a game-changer, and that makes a huge impact on our monthly payment.” 

For a $50,000 EV and a 36-month lease, Chesbrough estimates the full $7,500 tax credit equates to $222 in monthly savings for a consumer. 

Auto research firm Edmunds reports about 37% of EVs bought in April were leased, up from 25% during the first quarter and 13% last year. 

“It kind of creates a loophole for automakers to target more affluent customers who are probably more likely to be able to afford and actually get approved to buy an EV,” said Jessica Caldwell, Edmunds executive director of insights. “It also allows them to level the playing field against competitors who get the full tax credit when purchasing.” 

New player' in Calgary apt. market buys 263-unit property for $54M 

Vancouver real estate investor Wendy Cheung has purchased a 263-unit apartment property in southeast Calgary from Canadian Apartment Properties REIT (CAPREIT) for just under $54 million. 

And Cheung has plans to grow and increase her exposure to multifamily assets in Calgary and Edmonton. 

Nadeem Keshavjee, president of GreenBirch Capital, which helped facilitate financing for Cheung, said the Cedar Ridge Apartments at 135 Lynnview Road S.E. sold for $53,880,000 or $204,867 per door. 

“She has a number of real estate and commercial real estate holdings, but this is a notable transaction for her and she is actively looking for more,” he said. “She’s a new player in the (multifamily) market . . . 

"The financing that they were able to achieve was through CMHC’s MLI (Canada Mortgage and Housing Corporation) Select program. The buyer got 95 per cent leverage and a 50-year amortization, so really attractive financing. 

"There was also an element of affordable housing here. They designated 60 per cent of the units in the building to be affordable, meaning there’s a limit of how much they can raise those rents for the next 10 years. "And there’s also an energy efficient component to it as well with a commitment to improving the energy efficiency of that project by 15 per cent.” 

Cheung said the most attractive part of the deal was the MLI Select financing program. 

“That was the biggest reason that the numbers worked because we were able to capture a good financing component to it and then equity outlay was affordable," she explained. "Also because the building has good income and cash flow, which has runway where the rents are creeping up.” 

Cheung said she has been investing in real estate for several years. Over that time, she bought single-family homes initially and land in Surrey and Langley, B.C., long before the cities developed to the current degree. 

The transaction was one of a series CAPREIT has made in recent weeks as it continues to reposition its portfolio to focus on newer assets. The REIT has made six non-core dispositions in Canada – aside from the Calgary property – for a total of $121.4 million. 

Walmart Cuts Starting Pay for Some New Hires 

The country’s largest private employer changed its wage structure for hourly workers in mid-July, according to documents reviewed by The Wall Street Journal and Walmart employees. 

Under the new structure, most new hires will earn the lowest possible hourly wage for that store. In the past, some new hires, such as those who collect items for online orders, would have made slightly more than other new staff members, such as cashiers. 

The wage-structure change comes after Walmart and other large employers have for years steadily raised wages and added benefits to attract workers in a tight labor market. The retailer’s latest move suggests that the stresses companies are facing in trying to find employees are easing and that they need to find ways to offset those wage increases. 

Retailers are looking at ways to reduce costs in anticipation of some consumer weakness heading into the end of the year, including the holiday shopping season, said David Bassuk, global leader of the retail practice at consulting firm AlixPartners. In general, retailers face more sales and therefore higher labor costs through the late-year holidays. 

Walmart’s moves “signal the industry where things are either headed or what they should be considering,” he said. “I think we are starting to see the pendulum start to swing back to a different set of priorities.” 

The broader U.S. job market is cooling. Hiring slowed this summer and the national unemployment rate rose in August to 3.8%, up from 3.5% in July—reflecting more Americans seeking work. Workers’ average hourly earnings rose 4.3% in August from a year earlier, well above the prepandemic pace. 

Walmart’s move isn’t likely to lower short-term payroll costs because it is being offset by pay increases to thousands of other store staffers, some analysts said Thursday. 

Some economists have found that Walmart’s market power is a primary determinant of wage levels in local economies where the company has a large presence, especially at other retailers and grocery stores.  

This week’s fun finds 

Drenched doubleheader 

On an incredibly hot evening, EdgePoint Football Club played two tough games. The first match was close, but the heat took its toll in the second half resulting in a loss. As the sun disappeared, the squad recovered enough for a tie. The team’s season record stands at 1-2-1.   

Kyle takes us on a food trip to the Middle East 

For his moai (our version of bringing EdgePointers together for a meal), Kyle gave us a wealth of options to choose from. 

A group of radioactive boars are trotting through Europe 

Encountering a radioactive wild boar in the dark forests of Germany isn’t top of everyone’s bucket list. But, while their populations have been soaring in Europe, it’s not meeting, but rather eating them, that you need to worry about. That’s because they contain unsafe radioactive cesium (a liquid metal). 

The shaggy, tusked pigs roaming around the forests of Germany and Austria were thought to have been made radioactive by the 1986 Chernobyl accident. In fact, scientists from the Vienna University of Technology, in Austria, now show that Oppenheimer-style nuclear weapons testing is responsible for their long-lasting radioactivity. 

When nuclear weapons explode or nuclear energy is produced, radioactive cesium is created. When it enters the environment, it can threaten human health – and did just this when the Chernobyl power plant exploded in Ukraine almost four decades ago. 

But the study, published in the journal Environmental Science & Technology, shows that the radioactive contamination affecting the boars was also caused by atmospheric nuclear weapons testing by nations across the world in the 1950s and 1960s. 

Both events contaminated the radioactive boars’ food sources, including underground truffles.

This week's interesting finds

Judy, partner since 2018 (Toronto, Ontario)  

This week in charts 

Inventory levels 

Office real estate   

‘Deal of the century’: how UBS’s rescue of Credit Suisse proved a boon 

UBS’s top managers were sceptical when they were forced to rescue their scandal-ridden rival Credit Suisse. Five months on, the deal has made the bank Europe’s second most valuable lender. 

On Thursday UBS said the state-sponsored takeover had fuelled a $29bn gain, a record quarterly profit for any bank. Chief executive Sergio Ermotti also confirmed that UBS would get to keep its rival’s “crown jewel” — the domestic consumer bank — while also cherry picking the most attractive assets, clients and staff from the investment bank and wealth management divisions. 

The stock rose to its highest level since the 2008 financial crisis, extending a 31 per cent surge this year. This means that UBS’s market value has vaulted over that of BNP Paribas — ranking the bank second in Europe after HSBC — and has trumped that of US lender Citigroup. 

“The Credit Suisse acquisition will act as an accelerant to our plans,” Ermotti told analysts. 

Since the merger was sealed over a frantic weekend in March, UBS chair Colm Kelleher and Ermotti have overcome political concerns over its dominant market position — the combined bank’s $1.7tn assets eclipse Swiss GDP — notably by exiting taxpayer-funded government support facilities early. 

Now the pair faces the tricky task of integrating the businesses and matching expectations for what looks like one of the biggest steals in financial history. 

While removing state guarantees has damped political objections, UBS’ record gain prompted angry reactions in Switzerland, which is holding general elections in October.“ 

UBS’s figures are nothing but shocking,” said Cédric Wermuth, co-president of Switzerland’s second-largest political bloc, the Social Democratic Party. The takeover was the “deal of the century” he said, and had come at the expense of the Swiss people. 

The $29bn accounting gain on the Credit Suisse takeover — known as negative goodwill, or badwill — largely reflects the fact that the price paid for Credit Suisse — $3.4bn — amounted to only 6 per cent of its tangible book value. 

UBS also announced that the integration of Credit Suisse’s domestic retail unit would result in 3,000 redundancies in Switzerland in the coming years. Deeper job cuts from the group’s more than 100,000 combined workforce are expected to follow, but executives are being tight-lipped about their plans to avoid more controversy. 

“It must not be that in the end, it is the counter clerks who pay for the irresponsible behaviour of their bosses,” Wermuth said. Absorbing Credit Suisse is now expected to take up to three years — shorter than the four years initially signalled by UBS. Some analysts feared that when the deal was agreed it would derail UBS’s longer-term ambitions of growing its business in Asia-Pacific and the US, where it trails Morgan Stanley, the world’s largest wealth manager, in market share.   

This week’s fun finds 

EdgePoint Football Club’s fun in the sun 

Despite being slightly understaffed, the team notched a 2-0 win to level their season record to 1-1.

Sriracha: The good kind of heat 

Huy Fong Foods’ sriracha sauce—bottled in the instantly recognizable plastic bottle with a green squeeze cap and a large rooster logo—has inspired numerous tattoos, songs, merch, and even a custom Lexus car. 

Everyone from TV show host Alton Brown to venture capitalist Chris Sacca stocked up bottles of the iconic hot sauce amid the “#srirachapocalypse” in 2013, when Huy Fong’s factory was ordered to shut down for emanating odors so spicy they were a “public nuisance.” 

In 2022 and 2023, there has been an even bigger #srirachapocalypse, during which Huy Fong has claimed that the red jalapeño peppers used to make their version of sriracha have become unavailable due to supplier issues. Many small businesses have had to switch to less familiar, and beloved, hot sauces, and some devotees have resorted to paying far above normal supermarket prices for bottles on resale sites like eBay.

The company has reportedly spent no money on advertising—it’s earned its fabled status completely by word-of-mouth. “Run free, my child, and spread the sweet, spicy gospel of truth,” the company’s website reads. 

The original sriracha sauce—a mix of chili peppers, distilled vinegar, garlic, salt, and sugar—was created by Gimsua Timkrajang and Thanom Chakkapak more than 80 years ago in the port town of Si Racha, Thailand. Though it began as a homemade recipe, friends and family soon encouraged them to sell it commercially. The family eventually began distributing it under the brand Sriraja Panich, which was bought by Thai food manufacturing giant Thaitheparos in 1984. 

But the man responsible for inspiring much of the American mania for sriracha is Chinese-Vietnamese immigrant David Tran. In 1979, amid the Sino-Vietnamese War, Tran fled Vietnam on the Huey Fong and settled in Los Angeles the following year. He began his operation by grinding peppers by hand and selling the hot sauce from his blue Chevy van.

This week's interesting finds

Etienne, partner since 2012 (Shediac, New Brunswick – “Lobster Capital of the World”)   

This week in charts 

Asset classes 

Shareholder returns  

KKR’s Latest Bankruptcy Deal Is a Bad Omen for Lenders 

The bankruptcy of GenesisCare, a cancer treatment specialist backed by private equity powerhouse KKR & Co. and China Resources Pharmaceutical Group Ltd., is the latest cautionary tale of how much value is being destroyed when companies go bust now. 

In previous default cycles, leveraged-loan providers would expect to get 70% to 80% of their cash back from failing companies. Those days are over. Some GenesisCare investors are bracing for a mid-teen percentage, according to people familiar with the matter who aren’t authorized to speak publicly — a new blow to a lending market headed for record low recoveries. 

It’s yet another financial weak spot exposed by the end of the easy-money era, as tighter credit pushes overindebted businesses toward the brink. While some investment banks hope for a softer economic landing than feared, the crash in leveraged-loan recoveries is ominous for lenders. 

Like last year’s blowup of KKR-backed Envision Healthcare, the GenesisCare situation shows how companies are taking advantage of the looser loan protections that lenders swallowed as they hunted for yield in a low interest-rate world. GenesisCare has snagged a so-called “debtor in possession” financing, including a $200 million pledge to let it keep operating, that disadvantaged existing loan-holders, the people familiar say. 

GenesisCare joins an expanding list of restructuring deals that have scarred US lenders lately. A first-lien loan to Envision is expected to recover close to zero, according to an August report from Bank of America strategists. Media firm Diamond Sports and air-miles specialist Loyalty Ventures have implied recovery rates running at about 10%, the report says, while tech company Avaya Inc. and energy firm Heritage Power are around 30%. 

The strategists estimate recoveries from bankrupt companies are running at 25% on average this year — based on loan prices 30 days after a default — and they predict 50% in the long term. 

The outlook for lender rights isn’t bright either. In June a Texas judge upheld a 2020 emergency refinancing by Serta Simmons Bedding, which handed the mattress maker $200 million of new cash to stay afloat but pushed some lenders including Apollo back in the repayment line. 

Many lenders have started to include “Serta blockers” in their loan documents by hardening up the legal wording, according to a recent report from Moody’s Investors Services. But about half the leveraged loans it examined still didn’t include protective language. 

One glimmer of hope is the brightening economic outlook and the knowledge that market prices for loans don’t reflect precisely how much lenders will ultimately claw back. The sample size is relatively small still. 

Nevertheless, even the most upbeat estimates see recoveries way below previous cycles. Leveraged loans involve a balancing of two risks: the likelihood of a borrower going under, and how much money you get back when they do. Even if default rates are better than feared, the result will be ugly for lenders if recoveries crater.   

This week’s fun finds 

No rest for the wicked 

The leaves are still on the trees, but the fall season’s already started. It was a matchup against last season’s semifinal opponent, but unfortunately the result was again a loss. The squad loves a challenge and looks to start a new regular-season winning streak next week. 

Bonus points to anyone who can spot the team’s new mascot, Louis!   

Bringing a taste of Montréal to the Toronto office 

Four members of EdgePoint’s Québec team brought us the freshest possible Montréal-style smoked meat for their moai (our version of bringing EdgePointers together for a meal) by ordering from Scarborough deli SumiLicious. (The head chef worked at Montréal’s Schwartz’s for almost 20 years!)

Merci to Sylvie, Sabrina, Marc-Antoine and Catherine!   

The Republic of Cows 

A remote island in the Gulf of Alaska, Chirikof is about the size of two Manhattans. It lies roughly 130 kilometers southwest of Kodiak Island, where I am waiting in the largest town, technically a city, named Kodiak. The city is a hub for fishing and hunting, and for tourists who’ve come to see one of the world’s largest land carnivores, the omnivorous brown bears that roam the archipelago. Chirikof has no bears or people, though; it has cattle. 

At last count, over 2,000 cows and bulls roam Chirikof, one of many islands within a US wildlife refuge. Depending on whom you ask, the cattle are everything from unwelcome invasive megafauna to rightful heirs of a place this domesticated species has inhabited for 200 years, perhaps more. Whether they stay or go probably comes down to human emotions, not evidence. 

Russians brought cattle to Chirikof and other islands in the Kodiak Archipelago to establish an agricultural colony, leaving cows and bulls behind when they sold Alaska to the United States in 1867. But the progenitor of cattle ranching in the archipelago is Jack McCord, an Iowa farm boy and consummate salesman who struck gold in Alaska and landed on Kodiak in the 1920s. He heard about feral cattle grazing Chirikof and other islands, and sensed an opportunity. But once he’d bought the Chirikof herd from a company that held rights to it, he got wind that the federal government was going to declare the cattle wild and assume control of them. McCord went into overdrive. 

By 1980, the government had created the Alaska Maritime National Wildlife Refuge (Alaska Maritime for short), a federally protected area roughly the size of New Jersey, and charged the US Fish and Wildlife Service (USFWS) with managing it. This meant preserving the natural habitat and dealing with the introduced and invasive species. Foxes? Practically annihilated. Bunnies? Gone. But when it came to cattle? 

Alaskans became emotional. “Let’s leave one island in Alaska for the cattle,” Governor Frank Murkowski said in 2003. Thirteen years later, at the behest of his daughter, Alaska’s senior senator, Lisa Murkowski, the US Congress directed the USFWS to leave the cattle alone.

This week's interesting finds

Syd, partner since 2017 (Toronto, Ontario)   

This week in charts 

Imports and exports 

Return on capital by region

Private mortgage lender Romspen cuts monthly distribution for fourth time, cites ‘disappointing’ loan repayments 

On Tuesday, Romspen informed investors in its flagship Mortgage Investment Fund that their monthly distribution was cut to two cents a unit, down two-thirds from July, 2022. 

As a private mortgage lender, Romspen raises cash from individual investors, then lends the money out to real estate companies, often in the form of short-term construction loans. The company has $2.7-billion in assets under management and has delivered an average annual yield of 7.3 per cent in its Mortgage Investment Fund over the past 10 years. 

Because of its high payout, Romspen’s assets swelled over the past two decades as investors searched for yield when benchmark interest rates were close to zero. Yet the real estate industry is now adjusting to central banks’ aggressive rate hike campaigns, and the development sector that Romspen specializes in is one of the most hobbled. 

With troubles mounting, Romspen froze redemptions from its fund in November, an act known as “gating” in the investment industry, to conserve cash. But it wasn’t enough, and multiple distribution cuts have also been necessary. The fund now yields 2.5 per cent annually, roughly half of what investors can earn from ultrasafe guaranteed investment certificates. 

Romspen also told investors in a quarterly report earlier this month that 2023 is proving to be “one of the most challenging for the fund since the mid-90s.” 

Romspen’s portfolio is largely comprised of construction and predevelopment loans across the United States and Canada. Because the borrowers are often higher-risk development companies, Romspen occasionally has to take control of some properties when their associated loans aren’t repaid. 

In a normal market, Romspen would sell the properties to recoup the cash it is owed, but commercial real estate transactions have slowed considerably. “The challenge these days is not so much signing a purchase agreement, but finding the funds to close,” Romspen explained in its quarterly commentary. 

Even when buyers emerge, banks are much less likely to extend the financing to complete the purchase. “We have already seen two anticipated unconditional sale transactions fall through this year, each with seven figure deposits forfeited,” Romspen explained. 

To this end, Romspen has been locked in a court battle with its largest borrower this year after multiple loan defaults allegedly totalling $333-million. To recoup the money, Romspen asked the Ontario Superior Court to appoint a receiver to take control of three properties that underpin the distressed loans, and then sell them. The three affected properties are located in Toronto: Woodbine Mall and Rexdale Mall, in the city’s northwest corner, and 1500 Birchmount Rd., in the city’s northeast corner.

This week’s fun finds 

EdgePoint Football Club finishes its first season 

While the season ended with a loss in penalties during the consolation final, the team met its pre-season goal of making the playoffs. The squad is looking forward to recovering from injuries and building on their experience during the fall season starting next week!   

EdgePoint – even faster and more furious 

Several partners made their way to Bowmanville to live their racing dreams on the asphalt. In the final race of the day, Ruairi edged out Teddy and Norm for the gold. 

  

Why Everyone's Worried About Their Attention Span—and How to Improve Yours 

Most people without chronic attention issues could likely focus fairly well if given a task in a quiet, empty room—but they'd probably perform worse if they did the same task in a room where people are talking and music is playing. In modern life, [professor of psychiatry and behavioral sciences Margaret] Sibley says, we’re essentially living in a room filled with distractions all the time, thanks to the competing demands of work and home life, societal stressors like the pandemic, and the constant temptation of phones, social media, and the internet. 

Human brains want novelty, excitement, and social connection, and devices play into those desires. Checking a notification flashing across your screen can provide a small hit of dopamine, creating a sense of reward that keeps you coming back for more. 

Despite the draw of technology, Barbara Shinn-Cunningham, director of the Neuroscience Institute at Carnegie Mellon University, says she’s not convinced we’re losing the ability to focus. Instead, she says, we’re using devices in exactly the way tech companies want us to: constantly. “I’m not sure that it’s changing how our brains operate,” Shinn-Cunningham says, "but [rather] leveraging how our brains operate to keep us engaged with our electronics." 

In [co-director of the Center for Attention, Learning, and Memory at St. Bonaventure University Adam] Brown’s opinion, there’s one adjustment that’s more important than any other: “Remove the device. In times of needed focus, take that device and put it someplace else,” he says. Turning your phone facedown isn’t always enough; research suggests that simply having a phone within eyesight can make it harder to focus, and the buzz of a single notification can ruin concentration. 

When you have a big task at hand, putting your phone in another room is the best option, Brown says. But it’s also important to learn how to be around screens without letting them derail your concentration, a process that he says largely comes down to muscle memory. Just as you get used to constantly checking your phone, you can build a habit of not looking at it all the time, Brown says. “When your phone goes off, you want to go look at it,” he says. “But over the course of weeks and months, if you deliberately ignore it…you will get better at focus.” 

It’s also important to assess your priorities and focus your energy there, rather than trying to split your limited time and attention in a million directions, Sibley says. That might mean dropping non-crucial commitments in pursuit of being fully present for the ones that really matter to you, she says.

This week's interesting finds

Greg, partner since 2017 (Toronto, Ontario)  

This week in charts

Industrial robots installed: China vs Rest of the World

Trends in payrolls by high, medium, and low-median wage industries

How China cornered the market for clean tech 

Late last year in Beijing, officials from several of China’s technology, trade and defence agencies were called to a series of secret meetings with a single purpose: to respond to America’s sweeping restrictions on selling computer chips to Chinese companies. 

In July, Beijing announced its response: it imposed restrictions on the exports of gallium and germanium, metals used in the production of a number of strategically important products, including electric vehicles, microchips and some military weapons systems.

Matthew Funaiole, a China expert with the Center for Strategic and International Studies, a US think-tank, says the move was a “shot across the bow” which caught some in Washington off guard.

“Outside of technical circles and the defence industry, it [gallium] is not a critical mineral that people were aware of,” he says.

The episode has highlighted an inconvenient truth for the west: China is by far the lowest-cost and biggest supplier of many of the key building blocks for clean technologies. The two metals are among a series of products vital to the energy transition in which China dominates. 

China is responsible for the production of about 90 per cent of the world’s rare earth elements, at least 80 per cent of all the stages of making solar panels and 60 per cent of wind turbines and electric-car batteries. In some of the materials used in batteries and more niche products, China’s market share is close to 100 per cent. 

China’s cornering of the clean tech supply chain has drawn comparisons to the high level of influence that Saudi Arabia enjoys in the oil market. Just as petrochemical production provides an immovable strategic buffer for the Gulf state, China’s dominance over these clean energy sectors is adding to growing geopolitical competition and has the potential to complicate the world’s fight against global warming. 

Western governments are now desperately attempting to catch up with China’s ascendance to the top of the world’s critical minerals and renewable energy industrial supply chains. US president Joe Biden and his counterparts in Europe have started deploying hundreds of billions of dollars in taxpayer-funded subsidies. 

Analysts, however, diverge on how long it will take the west to extricate itself from Chinese control of large swaths of the clean tech supply chain — or if this can be achieved at all.
 

This week’s fun finds 

Semifinals! 

After an exciting inaugural season, EdgePoint Football Club qualified for the playoffs. The excitement was evident with most of the roster showing up for a holiday Monday match. After taking a 2-0 lead into half, the opposing squad tied it up in regulation to force penalty kicks. In the end it was a 3-4 loss, but it left the team with a lot to build on for the future. 

   

Starting off the long weekend right 

Oyster afficionado Jeff shucked a lot of bivalves in the kitchen to get everyone ready for the Civic Holiday! 

Meanwhile, Adam and Claire also added some spicy margaritas to the mix.

Forget 10,000 steps – walking just 5,000 is enough to lower your risk of death, says science 

Published in the European Journal of Preventive Cardiology, the paper brought together data from 17 existing studies involving 226,889 people. 

It’s the first to assess the impacts of walking up to 20,000 steps a day, as well as whether the risk of dying differs depending on age, sex, or where in the world people live. 

The answer? The study found that the more you walk, the better – regardless of your age, sex, or the climatic conditions of your region. 

In fact, the scientists found that every additional 1,000 steps a day you do on top of the minimum reduces your risk of death by 15 per cent. 

These benefits keep increasing with no upper limit, according to the scientists. The data reveals that for those walking fanatics who stride as many as 20,000 times a day, the benefits only continue to build. Insufficient physical activity is the fourth biggest risk factor for death across the world, according to World Health Organization – being associated with 3.2 million deaths a year.

This week's interesting finds

Vanita, partner since 2023 (Toronto, Ontario)   

This week in charts 

Retail sales  

Large-cap stocks 

Canadian mortgages   

This week’s fun finds 

EdgePoint Football Club closes out the regular season undefeated 

The squad showed that their chemistry extended outside of the office as they seamlessly integrated two first timers onto the pitch for an 8-2 win. With a 5-0-2 record, they enter the playoffs hungry for more.

Take them out to the ballgame 

With the Blue Jays currently holding the last American League Wildcard spot, EdgePointers cheered on the hometown team against the league-leading Baltimore Orioles to a 4-1 win. Looks like the event was a hit! 

Drake’s Korean moai 

Drake called in a few favours at home and his mom made an amazing Korean meal for his moai (our version of bringing EdgePointers together for a meal). Several partners stated it was the “best they ever had”.   

An ultra-processed diet made this doctor sick. Now he's studying why

Amid the global boom in diet-related diseases, including obesity and Type 2 diabetes, Dr. Chris van Tulleken, the author of Ultra-Processed People, made himself a test subject for a brief, one-month experiment. 

Van Tulleken, an infectious disease physician in his mid-40s, swapped his normal, healthy diet full of fruits, vegetables, lean proteins and whole grains for foods that mostly came from packages, boxes and bottles. 

We spoke to van Tulleken about his book and his research. 

“Overall, about 80% of my calories came from ultra-processed foods, and that's very easy to do. Most bread in the supermarket is ultra-processed, almost all of our breakfast cereals and snack foods are ultra-processed, and most of our convenience foods are ultra-processed too.” 

“I became very unwell very quickly. I felt terrible. I stopped sleeping, I developed anxiety and became very unhappy. I was the pilot patient in a study I'm running with colleagues at University College London. We found there were effects on my gut hormones. So inside all of our bodies we've got hormones that tell us when to stop eating. They're very well evolved. All animals have them and ultra-processed food interferes with those hormones. So at the end of a meal, my hunger hormones would still be sky high.” 

“There is a very reputable scientist, Kevin Hall, in the United States. He ran a clinical trial and found that when people eat an ultra-processed food diet, they eat about 500 calories more per day, compared to people on a whole food diet, eating the same amounts of fat, salt, sugar and fiber. And there's a lot of epidemiological evidence that shows it is the ultra-processed food that interferes with our body's ability to say, "you know what, I can stop eating now." 

“There isn't an absolutely clear boundary between traditional food processing and ultra-processed foods. We chop, cook, smoke, pickle, salt, grind, pulverize — we've been doing all that for millennia and we have to do it. So processing is fine. But ultra-processing is where food is made in factories. It's wrapped in plastic. It has strange additives in it that you don't find in kitchens. And the purpose of the food is profit. So, I eat cheese, but I don't eat processed cheese. I eat butter, but I don't eat margarine. I eat traditional flour bread, but I don't eat emulsified, supermarket bread.”