Earnings szn is spoOooOking us
Plus, how greenback is crushing every other currency
Good morning. Of the spookiest decor we've seen, this giant 12-foot skeleton named Skelly from Home Depot (and its devoted fan base) has to be our favourite. It's so popular that the hardware retailer sells out of the skeletons just mere hours after getting them in stock.
In this edition:🆘 Portfolio pain🤑 Seeing green🍪 Scrumptious biz
— Vindhya Kolluru, Editor
* Market data as of 9:00 pm ET Sunday, October 30.
The good times are coming to an end...for now
After last week’s mixed earnings report from Big Tech, many analysts and executives are calling it the end of an era, with Intel’s CEO Pat Gelsinger stating, “It’s just hard to see any points of good news on the horizon.”
What’s going on? Tech giants like Google parent Alphabet, Amazon, and Facebook parent Meta shared their quarterly results, which were below analyst predictions, causing their stocks to tumble.
For Meta and Google, the reduction in ad spending hurt their results. YouTube’s ad revenue dropped from last year and Meta saw the lowest revenue spend per user in two years. The reduced demand for PCs hurt Microsoft and Intel, which both slashed predictions for Q4 sales. Cloud service revenue at Amazon and Microsoft also were below expectation by nearly $1 billion.
It wasn’t all bad news though. Apple met investor expectations and saw record revenue driven largely by Mac sales, while Shopify beat expectations with smaller-than-expected losses after a successful acquisition of Deliverr, an e-commerce shipping company.
Zoom Out: For the past decade, the big tech companies commonly referred to as FAANG (Facebook, Apple, Amazon, Netflix and Google) were considered growth machines and a profitable bet for investors, even during uncertain economic times like the pandemic, which saw record-breaking profits. Flash forward to 2022, and investors in those five companies have lost more than $218 billion combined through Friday’s market close after quarterly earnings pummeled their stocks. Their losses totalled more than $3 trillion this year. The economic reality of *deep breath* high inflation, increasing interest rates, energy shortages, fear of a recession, and the war in Ukraine are coming to a head with reduced consumer and business spending, dragging profits, and growth down.
The pain felt in the public markets is trickling down to private companies, too. A recent report found venture funding in Toronto—home to buzzy companies like Clearco and Wealthsimple—dropped to almost a two-year low in the second quarter.
Looking ahead: Across the board, companies shared that they will be looking for cost savings into 2023 to increase profitability (which is often corporate-speak for job cuts or hiring freezes). It’s clear that with a looming recession, even the world’s biggest tech companies are starting to feel the effects. Now that’s some seriously spooky stuff.
— Sabrina Dotsch
On our radar
Gillian Hadfield, director of the Schwartz Reisman Institute for Technology and Society at the University of Toronto, is one of eight new AI chairs appointed by the Canadian Institute for Advanced Research (CIFAR). The chairs will help CIFAR better understand and implement AI across the science, health, and energy sectors.
The Globe and Mail’s Report on Business has named Christina Anthony one of Canada’s top wealth advisors. Prior to her current role as vice president, director, portfolio manager, and investment advisor at Vancouver-based wealth management firm Odlum Brown, Anthony worked at Goldman Sachs.
Get to know Amanda Robson, a partner at San Francisco-based venture capital firm Cowboy Ventures, in this profile. Originally from Ancaster, Ont., Robson cold-called her way into her first job in the U.S. at William Blair, a tech-focused investment bank.
The strong greenback spells financial pain for Canadians
The 411 dishes, well, the 411 on a personal finance topic you need to know by cutting through the jargon and empowering you to take control of your finances. Have a topic you want us to tackle? Let us know!
The U.S. dollar (USD) is the go-to currency for most of the world’s global trade and its value has been rising as of late. So why do Canadians feel squeezed in the face of a strong dollar? And is there anything you can do about it? This week’s 411 dives into the hugely influential greenback.
What’s happening: Lately, the dollar has been rising in value compared to other currencies on the foreign exchange market. For our American friends, this comes at a huge advantage because you have more spending power abroad and imported goods are cheaper which can lead to more disposable income.
But here in Canada, a strong dollar can have some real disadvantages: everything USD related is more expensive. This can hurt exports, tourism and the foreign governments holding onto USD.
Why it matters: American dolla billz are the world’s “reserve currency” which means that multinational corporations and banks tend to price goods and work in USD, regardless of where they’re located in the world. Markets trading energy and food tend to do so in USD, and the currency is held in reserve by central banks.
So will everything stay expensive...forever? Post-pandemic, global markets are climbing out of a period of low interest rates and central banks are increasing rates to tackle stubborn inflation. Everything may feel expensive now, but the goal is that a cooler economy will lead to a course correction over time. Until inflation simmers down, repaying debts is more expensive, and ‘over borrowers’ (those who took on way more debt than they could afford) may find themselves unable to make ends meet, which can lead to economic instability.
Market instability is caused by anything from bad earnings reports to unexpected events that can cause currencies to suffer. We saw this play out recently with the (very) short-lived Truss mini-budget that sent the British pound to all-time lows against the dollar. When currencies are down against the dollar, it becomes more expensive to borrow and everyday people suffer the consequences.
Big picture: So far, the loonie hasn’t fallen as far against the USD compared to other global currencies because of our country’s commodity exports—everything from fertilizer to oil—that gives us an advantage. While around 40% of the world’s transactions are done in USD, the International Monetary Fund has noted that banks are stockpiling more of other currencies in recent years, like China's renminbi.
Looking ahead: In the future, we may feel less pinched when faced with a strong dollar, and things may not remain so pricey, so hang tight.
— Paisley Sim
Other things we read and we liked
🎃 We’re obsessed with these last-minute Halloween costume ideas.
🤓 An in-depth look at what might be stopping you from reinventing your career.
❤️ The mom-led activist group that’s pushing for a new approach to Canada’s raging opioid crisis.
🐦 ICYMI: Elon Musk now owns Twitter. What happens now?
🐜 If we had to see an ant’s face up close then so do you.
MONEY CRUSH MONDAY
How her fitness journey led Erica Rankin to launch healthy cookie dough
Credit: Robert Okine
Trick-or-treat! How does cookie dough sound? Today, we're spotlighting Erica Rankin, the founder and CEO of Bro Dough. Launched in 2019, Bro Dough makes vegan protein-filled cookie dough that was designed for people who want to stay healthy but need to satisfy that occasional sweet tooth (🙋🏻♀️). If you haven't seen Bro Dough on the shelves of your local grocery store, you might have seen it on TikTok, a platform that Rankin relies on to market her delicious creation.
A breakthrough moment in her career: It has to be scaling this company because I initially launched it for fun. But then, in mid-2021, when I started to sell and outgrew my current operations and had to start outsourcing operations to a manufacturer in Toronto — that was the biggest breakthrough for me.
Her best advice: Don’t be afraid to fail. I think a lot of people have a hard time accepting failures and taking them personally, rather than as lessons. The way that I look at failures is: “OK, you tried something and it didn't work, so you take that knowledge and you learn from it and then you try something else, right?”
Her biggest money regret: A warehouse I rented for Bro Dough. I thought that I needed to have it for my business to separate my personal life from my business life. But I was spending close to $1,000 a month on this space that I did not need.
Her most recent splurge: Orders from a meal prep company. I order like 30 meals at a time and then just put them in the freezer and pull them out when it’s time to eat. It’s hard because I live alone and whenever I buy groceries I end up throwing out so much, so this ends up being a lot less wasteful.
What's on her bookshelf: Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones by James Clear and The Power of One More by Ed Mylett.
➡️ Get to know Rankin and how she grew Bro Dough using TikTok by reading the full Q&A here.
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