Department Store Disaster

Department stores have been on the ropes for a long time, and COVID-19 is proving to be the knockout blow for many of them. Lord & Taylor, America's oldest department store, filed for bankruptcy on the weekend, adding to a growing list that includes: 
  • J.C. Penney
  • Neiman Marcus
  • Stage Stores
  • Tailored Brands (Men's Wearhouse)
What's Behind The Fall: Retail market share for department stores has dropped from 7.7% in 1990 to 0.8% this year. Competition from e-commerce and boutique stores have decimated the department store model.
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The Balkanized Web

The Internet used to be one big, border-less network. That is changing, as states and regions begin to assert their power over how the Internet functions for people inside their borders. So far the web is fragmenting into three distinct zones:

China: The Great Firewall and generous state support for domestic businesses has created a Chinese Internet that is very different from the Internet elsewhere, with tight censorship and Chinese-based corporations dominant.

Europe: European regulators are aggressively cracking down on tech giants, pursuing robust anti-trust measures against Amazon, Google, and Apple. EU lawmakers are drafting at least a dozen new laws that will shape how tech companies operate inside their borders.

U.S: The American response to TikTok and last week's Congressional hearing on the power of big tech corporations is a signal that the country's laissez-faire attitude towards tech is probably coming to an end. What direction the U.S. will move in remains to be seen...

And a fourth zone may also be emerging: India. China has long been a big market for Chinese tech, but with tensions between the two countries rising, those days may be coming to an end. The question now is what will take its place: American investment or Indian-made businesses? 
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The Tik Tok Saga

The great Tik Tok drama of the past few weeks marches on. Let's catch up on the latest: 
  • Donald Trump threatened to ban TikTok from the U.S, prompting the emergence of a potential $50B deal in which Microsoft would buy TikTok's American operations.
  • TikTok founder Zhang Yiming publicly backed the sale.
  • Trump has said the U.S. Treasury should capture some of the proceeds of the deal.
  • But China's state media has blasted the deal, calling it "theft" and labelling the U.S. a rogue country.
 Basically, we don't know what's going to happen yet. It seems likely that Microsoft will end up owning TikTok's American business, but far from certain. There are powerful interests on all sides who remain hostile to a deal.

Key Takeaways: 
  • This process is a signal to the world that the U.S. plans to favour domestic tech businesses. This is a major departure from historic policy. 
  • China's Internet has developed largely within its own borders. TikTok is one of the first consumer businesses to cross over into Western markets. But the difficulty its facing could spell trouble for any other Chinese companies looking to make the jump. 
  • Zoom might be feeling nervous right now. The company is based in California, but its software is developed in China and a number of privacy snafus in the past have drawn criticism.
Who Benefits? Competing apps based outside China, for one. TikTok influencers are already migrating to apps you've likely never heard of, like Clash, Triller, and byte. And of course, Instagram's Reels product is a big winner too.

Zoom Out: The hostility to TikTok is part of a larger trend of growing suspicion with tech and major industry players on the part of regulators and the public.
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Bob and Doug are Back!

No, not Bob and Doug Mackenzie. I'm talking about the much more competent test pilots Bob Behnken and Doug Hurley who returned to Earth yesterday after two months in orbit aboard the International Space Station. Bob and Doug are US astronauts but their space craft was operated by Elon Musk's SpaceX, who was on hand for the splash down in the waters of off Florida, the first of this type of landing in 45 years. The successful mission clears the way for SpaceX to launch their own private pilots potentially next month and tourist flights next year.

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Ontario's True Infection Rate

According to a new study, Ontario's true rate of Covid-19 infections is 4x the reported amount, around 160,000 cases. This is a very good thing according to experts who point to the US where the true number of cases is estimated at 24x the official count. Without testing everyone it's impossible to get a perfectly accurate case count but the Ontario study tested for covid antibodies in blood that was being sent to labs to test for other diseases.

The Takeaway:

The closer our testing number is to our 'true" number the better we're doing in identifying cases and treating them. It also shows that our public health measures our working, keep wearing your mask!

Meanwhile....As most of Canada reopens, other cities and countries, and international waters are shutting down again.
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UK Fund Picks TO

It's always a challenge to raise money as an early stage startup, especially in Canada, but a new UK based fund is looking to change that. Entrepreneur's First (EF) has selected Toronto as its North American base with the intent of investing in "ultra early stage" startups. EF has hired Rachel Zimmer to head up the Canadian operation, who says "a disproportionate share of the next decade’s big tech giants will actually be built in Canada" because of "Canada’s world-class university programs and research labs."

The Specs
  • EF selects 50 individuals and provides them with a $3,500 US stipend for three months, during this time founders will come up with a business idea, find co-founders and build a business case.
  • The teams will pitch leadership for a $100,000 investment, which they will be competing for against their peers in Canada, Asian and Europe.

The Big Picture


There's always a swell of Canadian pride when we're selected over our American neighbours for just about anything, and we should take it as a nod to our strong institutions both academic and political, a fine accomplishment. But, let's be realistic this is not a major injection of cash into our start-up scene, we'll wait and see.

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Trump to TikTok: Buh Bye!

How was your long weekend? Probably not as wild as TikTok's. After weeks of speculation President Trump told reporters Friday that he intends to ban TikTok by Executive Order. Over the weekend, just like whenever Trump opens his mouth, there have been an avalanche of hot takes and developments. Let's dive in.

The Breakdown

The proposed TikTok ban is part of ongoing antagonism between the United States and China. The app's parent company ByteDance is a Chinese owned and like any Chinese owned company they are required to provide the state with user data for "national security purposes." It has been revealed that TikTok is taking and storing data from users' phones outside the app.

Let's not forget there's an election in November, China has become a key boogeyman for Trump, banning TikTok gives him the appearance of being tough on China while only inconveniencing millions of teens not big business.

Hot Takes

The Resistance: The most angrily online opponents of the President think he's banning TikTok because the creators on the platform were mean to him, crediting Sarah Cooper and K-Pop teens with creating a multi-billion dollar international conflict.

The Trust Busters: Fresh off last week's monopoly grilling of tech CEO's skeptics see the TikTok ban as a way to kill Facebook's competition ahead of the rollout of their knock-off product.

The Distraction: As economic stimulus funds for individuals dry up with no plan to keep millions of Americans fed and paying their rent, critics see the TikTok ban as a convenient distraction for leaders on both sides of the aisle.

The Rescue

Microsoft, potentially still sore from not being invited to Congress last week, has emerged as the surprise saviour for TikTok. They're confirmed to be in talks to purchase TikTok from ByteDance, a deal that would see them acquiring the companies offices in the US, Canada and other Western nations. Microsoft's CEO Satya Nadella had a personal call with President Trump over the weekend to get his buy-in, the company aims to close the deal by September 15th.

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Remote For What

I hope you like your home office because it's probably going to get a lot more use. Canada's Big Four banks told employees to expect to work remotely until 2021, even as Canada's cities are set to enter Phase 3.

Why the wait: Canadian corporations aren't taking risks when it comes to COVID-19. If they can maintain operations remotely, companies far prefer that to risking an outbreak among their staff.

An even bigger issue are elevators. With most offices in downtown skyscrapers, banks are particularly concerned about transmission in densely populated buildings.

When will we go back: Your guess is as good as mine. If we keep social distancing, it could be as early as 2021 but another outbreak could set that timeline back months...

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Schools In?

Parents are waiting with baited breath to hear if their kids will be going back to school in the Fall. This is one of the most important decisions that provincial governments will have to make around COVID-19.

And there's lots to consider... Will sending kids to school produce a COVID-19 outbreak? Are teachers at higher risk? What does social distancing in schools look like? How will parents go back to work if their kids aren't in school?

Proceed with Caution: Our governments are leaning heavily on experts to provide their advice on whether school should proceed in the fall. Yesterday, Sick Kids released their recommendations on a path forward for Ontario.

Here's where provinces are at:

  • BC: Most student will return to school in the Fall. Students will divided up into learning groups of between 60-120, which are the number of students that other students will be able to interact with – not class sizes.
  • Alberta: Students will head back to school with full-time schedules in September with a number of new health measures in place.
  • Quebec: Full-time classes set to resume in September with plans to divide classes up to Grade 9 into "bubble groups" of up to six students who will not need to socially distance.
  • Ontario: Province to announce this week on plans but expected to follow Sick Kids guidance.
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Fusion Frenzy

Dragons, I have an energy source that's going to transform how we generate power. It's called: Fusion. Not to get too scientific but nuclear fusion is a form of energy production that supporters believe can produce clean and unlimited power.

Sound too good to be true? It is, at least for now.

In France, they've kicked off construction of the Iter project, the world's largest nuclear fusion project and it's expected to be operational in five years.

But what does operational mean? A functional fusion generator releases vast amounts of energy when heavy hydrogen atoms fuse together but this requires extreme heat, like 10 times hotter than the sun heat. And all it takes is seawater to power it. Crazy, right?

Zoom out: If produced, fusion generators can produce vast amounts of energy without harmful carbon dioxide fumes and radioactive waste. Carbon free energy could dramatically reduce greenhouse gas emissions slow down the effects of climate change.

We won't know if the project will work until five years from now but we're all crossing our fingers that it does.
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Five Hours in Hell

It seemed surreal. Yesterday, the CEOs of the Apple, Amazon, Facebook and Google video-conferenced into the Congressional Antitrust Hearing to face five hours of questioning over their business practices.

We used to love tech companies. What happened? They got greedy. Russian election interference on Facebook, tax avoidance by Apple, tech companies have been up to no good and politicians are starting to take notice.

So what was the hearing about? The Antitrust Committee is specifically interested in the monopolistic practices of Amazon, Apple, Facebook and Alphabet (Google). They asked pointed questions of if and how these tech giants may be using their size to crush competitors.

What did we find out?

  • An extensive investigation by the Committee found documents where Mark Zuckerberg describes Instagram a threat before acquiring the company.
  • Rep. McBath (D., GA) played an audio recording of a woman who's business took a hit after an action by Amazon
  • Google's Sundar Pichai was on the hot seat for using their search engine to manipulate traffic to certain sites and their presence in China
What's next?

The Committee's investigation will influence future legislation by Congress to 'break up' big tech. President Trump also weighed by saying he will take executive action against tech behemoths if Congress doesn't.

Either way, it's not looking great for tech companies...
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Peak Picks

Trouble for DJ D-Sol: Did you know that Goldman Sachs' CEO David Solomon moonlights as a DJ? And that he played a charity concert in The Hamptons featuring The Chainsmokers over the weekend? And that this concert is now attracting controversy for failing to enforce social distancing guidelines? Hard to believe, but all true!

Miserable in Disney: I don't know about you, but the idea of going to Disney World under normal circumstances fills me with a certain dread. Going during a pandemic is positively terrifying. Fortunately, an enterprising journalist has braved the park for us and reports from the frontlines of Disney World during COVID.

Drive-Thru Strip Clubs... are apparently now a thing. It was bound to happen at some point.
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Leftovers

Vaccine bets paying off: Biotech executives at companies working on vaccines are pocketing big profits by selling their shares at juuuust the right time. The windfalls are creating strong incentives for companies to announce positive news that may or may not be totally accurate. Like many finance stories these days this will almost certainly end in some people making a lot of money, some people losing a lot, and more than a few securities fraud lawsuits.

Better masks: If we're going to be wearing masks for a while, we should probably make them a bit nicer, right? That's what some new companies and designers are betting on at least with better fabrics, cooler prints, and even self-cooling attachments.

Back from the Deadspin: The well-liked sports and culture website Deadspin has been resurrected by its writers and editors under a different name. Deadspin was popular and apparently profitable, but was nonetheless shut down by its private equity ownership in 2019. It's one of many new independent media ventures that have popped up in the past few months.
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TikTok Wars

The drama around what to do with TikTok continues. Zuck is probably going to try to shift attention to the Chinese-owned app in Congressional hearings tomorrow, while at the same time Facebook is now working to lure TikTok stars on to their new Instagram Reels platform. 

Potential payments to TikTok stars could climb to hundreds of thousands of dollars for bigger influencers.

At the same time, TikTok has announced a $200M fund for creators on their platform.

Why do people have a problem with TikTok anyway?


TikTok is basically facing the same criticism as other social platforms in that it hosts conspiracy theories, misinformation, and extremism.

Of course, all of this might be overlooked if it wasn't owned by a Chinese tech company...
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Let's Get Ready To Grill (Tech CEOs)

The CEOs of Amazon, Apple, Facebook, and Alphabet are set to testify before Congress today over whether their companies are monopolies, hurting consumers and crushing rivals.

What to expect: This is the government's most aggressive move to date to counter the power of tech, though the CEOs are likely to argue that they aren't really that powerful (despite controlling companies valued at almost $5 trillion collectively).

Patriots or Pirates? Zuckerberg is reportedly preparing to argue that Facebook is a good ol' American company, and that the real problem is Chinese companies like TikTok.

Quotable: One F.C.C. adviser said the hearings "[have] the feeling of tech's Big Tobacco moment".

You'll be able to watch the proceedings live online as they will be conducted via videoconference. Bets on whether anyone has to ask "can you all hear me?"...
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When The Dam Breaks

This is maybe the most important story you likely haven't heard anything about.

After months of record rainfall, China's massive Three Gorges Dam is under mounting flood pressure.

The dam is now discharging 60,000 cubic meters of water per second, causing flooding in cities and towns downstream along the Yangtze River.

Zoom out: A Xinhua report last week conceded that the dam had suffered "slight deformation", but the dam's operators have said that there is no risk of dam collapse and that Three Gorges could withstand a nuclear bomb blast.

Flood damages: $3.6 billion in economic damage, 141 people missing or killed, and 38 million people evacuated.

Worst case scenario: If the dam breaks, hundreds of millions of people in megacities along the Yangtze would be endangered and the economic heart of Central China would suffer a massive blow.
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The "Dumb Money" Is Winning

The conventional wisdom is that you can't beat the market unless you're a professional. Someone tell that to the amateur traders on RobinHood, because they're up on the year while the average S&P500 stock is down.

The most popular stocks on RobinHood are up 1% in 2020, compared to a decline of 7% for the typical S&P constituent.

Why they're winning: Experts aren't really sure. One theory is that amateur traders are creating a self-fulfilling prophecy. Using online forums like Reddit's WallStreetBets, they drive up interest in a stock among enough people to influence its share price. Or maybe their risk tolerance has served them well in this period when many are risk averse. Or maybe they're just getting lucky.

Who are they: Individual investors now account for a fifth of stock market activity, more than double the usual level.

Why it matters: This is of course great business for companies like RobinHood and other discount brokerages. But it's also creating large amounts of risk for people who can't necessarily afford to pay the price if their luck turns. How will these investors fare in the next market crash?

The Canadian angle: RobinHood-style easy zero-fee options trading doesn't yet exist in Canada, but with the explosion of interest in the U.S. market you can be sure someone is eyeing the opportunity to be the first to market.
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Ford Finds $4B for Cities

Premier Doug Ford announced that his provincial government will allocated another $4B in funding to Ontario municipalities to help them deal with the Covid crunch on services. The funding, which will come equally from provincial and federal coffers, is to be used support shelters, food banks, public health and about half of the funding will be allocated to public transit systems, which have seen a 90% decrease in fares since the start of the pandemic. 

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Air Canada's Turbulent Takeover

Air Canada's attempted takeover of Transat A.T., the parent company of Air Transat. has once again been delayed. The agreement, valued at $720M, gives each party three delays of the date the deal must close or fall apart. This is the second delay by Transat. Factors in the slow close include awaiting Canadian and European regulators to approve the deal, and the near collapse of the airline industry through the pandemic.

Market Impact:

  • Transat's share price fell another 2% on the news to $5.30, a significant discount to the $18 price tag Air Canada agreed to pay
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Baseball's Bad Start

Positive tests and baseball seem go hand in hand, but unlike PEDs positive tests for Covid-19 could cancel games and perhaps the whole season. MLB's opening day was just last week, at the time of this writing they've already had to cancel two games, a result of 14 Miami Marlins players and staff testing positive for Covid. Sunday night's matchup between the Marlins and Phillies went ahead after 4 Miami players had already tested positive, a decision reportedly made on a text chain.

The Big Picture
The MLB's shortened season was doomed from the start, unlike the NBA and NHL who have adopted a hub city bubble approach to saving their seasons, the Big Leagues have teams travelling from stadium to stadium with limited restrictions on players activities off the field.

I'm not betting on another week before the whole thing is shut down again.
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