Hold on For the Ride

The Week in Review

Hold on For the Ride

Definitely a red week for the major North American stock markets. Faring worst was the Nasdaq, losing 3.71% of its value over the past five trading days. The Dow Jones Industrial Average declined by 2.56%, the Toronto Stock Exchange dropped by 2.93%, and the S&P500 was down 3.41%.

There were very few places to hide, but as you'll see by some of the stories in this week's edition of Pulse, there was a bit of good news and few big names actually had a strong week.

In this edition we'll review a recent report on the high cost of rent in Canada, and check out a story from Alberta, where there is a possible attempt to extract the province from the Canada Pension Plan program to set up provincial plan instead. We also cover the latest Canada Inflation report, Netflix had a great week, BC punches Airbnb in the face, the Chinese economy is still struggling, and we'll update you on the ETF disaster that is unfolding with Emerge ETFs.

Hottest Trend: Roommates

If you've always dreamt of living by yourself, having your own space and doing whatever you want to do, maybe it's time to rethink your strategy. According to a recent report from rentals.ca, Canada’s rental crisis is getting worse. The report says the average asking price for rent across the country in September was $2,149, up from 11% compared with a year ago.

If you live in Toronto, you're obviously renting in one of the most expensive markets in the country and there you'll see the average rent for a one bedroom property now at $2,614. The only sliver, and I do mean sliver, of good news is that the average price of rent slowed by 0.2% compared to August. But when you look over a one-year number, rents have increased 4.9%.

Now, if you think Torontonians have it bad, it’s even worse in Vancouver. A one bedroom apartment there costs almost $3,000 a month on average, up 10% from a year ago. Need a little more space? A two bedroom unit costs almost $4,000 a month.

So this is where the roommate issue comes into play. The report saw a 27% increase in people choosing to live with others to help manage rent payments. And you can do the math. An average roommate in Toronto is paying over $1,300 a month, and in Vancouver it’s $1,500.

Perhaps a bit surprisingly, the third highest provincial average in Canada falls to Nova Scotia, where the average rent for an apartment is $2,088 last month.

Alberta: "It's mine.. all mine!"

So, let's crunch the numbers. Alberta represents 11½% of Canada‘s population but is claiming the province is entitled to $334 billion, or 53% of the existing Canada Pension Plan funds. Not sure how much the rest of the country feels about that calculation.

The Alberta provincial government held a Townhall on Monday to hear arguments as to whether it should quit participation in the Canada Pension Plan. About a month ago, the province launched an online survey to gauge how the Alberta residents feel about this proposal.

The stated purpose of this week's Townhall was to hear from Albertans, listen to their concerns, so that the government can make note and ultimately address their concerns and questions. Popular questions that needed to be answered are issues like portability, investment management, and death and disability issues. A caller also asked how this program would integrate with the current federal Old Age Security system.

Now, another obvious question that can’t be answered yet is how many people will move to Alberta to take advantage of an Alberta Pension Plan if it’s deemed to be superior to the Canada Pension Plan? Calgary is already seeing a massive influx of population migration and I can only imagine how this would pick up if the province was successful in extracting over half of the current CPP funds.

Grapes & Cheese Anyone?

Statistics Canada reported on Tuesday that Canada’s inflation rate decelerated to 3.8% in September, down from the 4% reported in August. They noted that the drop in the cost of living was broad-based and affected goods and services, travel, durable goods, and some grocery items.

On a monthly basis, for the first time since November 2022 the cost-of-living declined in September. The drop was only 0.1%, but it was at least moving in the right direction.

As is always the case, the price of gasoline played a big role in the numbers. Gas prices fell by 1.3% during the month, but are still up 7½ % year over year. If gasoline was stripped out of the inflation numbers the rate would have come in at 3.7%, down from 4.1% in August.

Planning to travel anytime soon? If you'll be taking a flight in the near future you’ll welcome the fact that airfares were down 21.1% in September when compared to last year. Still expensive for the most part, but just not as much.

Probably no surprise here but yes, grocery prices did continue to go up last month. A silver lining is that we saw the rate of growth decline when we compare it to what we've been seeing over the past number of months. On an annual basis the cost of groceries went up 5.8%. And in what was excellent news to me, the price actually declined for bacon, grapes, and some types of cheese. Sounds like the fixin's for a delicious low carb feast.

Airbnb Knuckle Sandwich

Huge AirBnB news out of British Columbia this week. BC premier David Eby and Housing Minister Ravi Kahlon stunned the short-term rental world when they announced the Short-Term Accommodations Act on Monday.

In the announcement, Eby highlighted the fact that thousands of homes that used to be available to either buy or rent are now off the market and people who are looking for a decent place to live are struggling to find accommodation. The province estimates that there are around 28,000 short term rental units operating in communities across BC and about half are not compliant with existing municipal bylaws.

According to the new legislation, in May 2024 the province will make it mandatory that short term rentals can only be made to people who are renting out a part of their principal residence. In other words, if you have a spare room or secondary suite within your home you will be able to rent it out, but only if you also live in the residence.

The legislation does carve out a couple of exceptions. The new rule will apply to communities with 10,000 or more residents, but resort destinations like Whistler, Tofino and Osoyoos will be exempt. In addition to that, cities with a vacancy rate of more than 3% can apply for an exemption.

As part of the new legislation, the penalty for illegal operators will increase from $1,000 per infraction per day, to $3,000.

Finally, in a move sure to infuriate privacy advocates, starting next summer short term rental platforms such as Airbnb will be required to share data with the province, including information specific to the hosts.

ETF Disaster

ETF provider, or perhaps I should say former ETF provider, Emerge Canada Inc. announced this week that effective on or about December 20, 2023 it would be terminating its entire ETF lineup, liquidating the holdings and returning money to unit holders.

Back in April of this year, the Ontario Securities Commission placed a cease-trade order (CTO) on all of Emerge's ETFs, becoming the first time in history that a CTO was placed on an ETF provider in Canada. Since then, investors have not been able to access their money and have been waiting in limbo to find out what would happen to their investments. Although the news isn't great, at least now there is a small degree of clarity.

The Emerge funds will now liquidate all holdings and the net proceeds will be distributed to investors. Before distributions, though, the fund will have to repay all liabilities and expenses related to the dissolution, and this will undoubtedly leave investors with a value less than what they would otherwise be entitled to.

In the time since the CTO was issued, the company has made efforts to find an auditor that would work with them to audit their 2022 financial statements and continue to work with them going forward, however were unsuccessful. The company also made efforts to find another ETF management company willing to take over the management contracts of Emerge, however were also unsuccessful in that effort.

Weekly Winners & Losers

Winners

It was pretty much a red week in the markets, but as always, there were a few companies that went up in spite of the headwinds.

The Top Gainers were:

Grayscale Bitcoin Trust (GBTC), up 16.80%
Dexcom Inc. (DXCM), up 12.73%
Netflix (NFLX), up 12.73%
Wyndham Hotels & Resorts (WH), up 9.11%
Snap (SNAP), up 8.76%
Barrick Gold (ABX), up 7.77% 

Losers

There was no shortage of companies losing value over the past 5 trading days.

The Biggest Loser were:

Enphase Energy (ENPH), down 20.13%
Moderna Inc. (MRNA), down 18.21%
Lucid Group (LCID), down 17.05%
XPeng Inc. (XPEV), down 16.85%
Tesla (TSLA), down 15.58%
Rivian Automotive (RIVN), down 13.37%
Albonquin Power (AQN), down 12.54%
NVIDIA (NVDA), down 8.96%