What Happens When Canadians Fight Back?
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Hello and welcome to the TLDR podcast, a show about the culture, gossip, and business of money. And this week, elbows up, passports down. My name is Devin Friedman. I am here with my co-host, Matt Keres, who is the director of product for WellSimple, our sponsor. Matt, how are you? I'm doing well now. I was actually questioned very intensely at the border this week, which was the

The first time I've ever gotten such foie d'oeil from my northern colleagues. It's humbled you. Sarah Rieger is the markets and business correspondent for the Webby Award-winning TLDR newsletter. Sarah, how was your week? Busy. I was up in Calgary for a bunch of appointments, which was interesting because I was up in Calgary for a bunch of appointments.

I stopped into this food court there, and it's one that I know is owned by people who I know are very Trump-supporting Canadians. And they had these banners up that were all like zero percent tariffs, kind of driving home their Canadian-ness. It was really wild to see. You guys, is there a vibe shift happening? It's a wild vibe shift.

Okay, well, we have a pretty, I'm not going to say, like, every week I'm like, we have a great show for you this week. Like, what am I going to say? The show sucks this week? Let me just say that we are going to talk about the major vibe shift in the feelings economy of Canada through the prism of Canadians voting with their wallets and their feet when it comes to how they feel about America. And I'm going to talk about the major vibe shift in the feelings economy of Canada through the prism of Canadians voting with their wallets and their feet when it comes to how they feel about America.

And what's going on in the markets, the mechanisms at play that have shaken everything. And we are going to get to all of those things with a very simple question. Sarah Rieger, who is making or losing money this week that's interesting to you and whose elbows are in fact up?

Canadians' elbows are very, very up. And that's because they're actually changing their spending habits a ton to kind of stick it to the U.S. with this trade war right now. They are significantly decreasing their travel down there. It's really interesting because, I don't know, I've been through a lot of stuff where people are like, we're changing our spending habits. We're really mad. But a lot of times it's just people saying stuff on social media and not really doing anything.

But it seems like there's actually already been a major decline in Canadians who are going to America.

Can you quantify that for us? Yeah, so car trips returning from the U.S. dropped 23% last month. WestJet says it's seen about a quarter drop in demand for U.S. travel. And at least one travel agency, Flight Center, says Canadians booked 40% fewer vacations to American cities in February. So that's a pretty steep decline. Yeah, that's a lot. We'll see how long it lasts.

But for things to change that quickly and that much, a quarter of the people who had been going to America stopped going. Do we know why that is? Is it actually because people are mad at America and they're like, we're not going there, I can't stand to be there? Or are there other reasons maybe?

Yeah, it seems to be for a mix of reasons that are all kind of adding up. So for one thing, it's just more expensive right now, right? The loonie is worth just 69 cents U.S. when a couple of years ago it was more like 80 cents. So your dollar isn't going as far. There's also this new surtax Canadian Border Services is administering. So if you used to, say, drive down from like Lethbridge to Montana to buy a couple hundred bucks worth of groceries at Trader Joe's, it's not only costing you more because of the exchange rate,

exchange rate. You also might be paying that 25% tax at the border on

on your way home. It's basically a tax on shopping in America. Yeah. Why put a tax on people going to America? What's the thinking there? It's part of the policies Canada is enacting to fight back against the U.S. You know, if it costs more to drive down and buy groceries or electronics or whatever in the States, the thinking is that people will be incentivized to spend that money inside Canada instead. And people are not getting pissed off about this because...

there's an intrinsic understanding that it's wartime? I think people are a little mad at it, but they're not, as far as I've seen, really directing that anger at Canada. It's being directed at the U.S. for starting this and kind of forcing Canada to put those policies in place in response. Right. Insofar as it is meant to be a punitive policy,

attack on America and, you know, make America suffer as well. Can that actually work? Like, is the population big enough? Is the economy big enough that it can inflict damage on America? Or is this just like a flesh wound? Yeah, like, it's fair to ask because I think Canadians often overestimate how much economic weight we can really

really throw around. But I think the biggest thing here is our proximity. Like Canada is the top source of visitors to the U.S. We made more than 20 million trips to the states last year and spent more than $20 billion USD. So U.S. travel associations are kind of nervous about this changing behavior. The U.S. Travel Association has warned that even a 10% drop in travel means a loss of $2 billion USD in spending, and it would cost 14,000 jobs in the states. So it's

If this quarter drop in travel is sustained or even increases, it would cost the U.S. economy a couple billion, which I know is small in the face of the whole economy. I can hear Matthew being like bigger, small number, but it would be concentrated in certain sectors and regions. That's the other thing is that it starts to get to be a problem when there's a constituency that feels acute pain. So where is this going to hit Americans?

It seems like two of the biggest hit states are going to be Florida and California. Those are the top two that Canadians travel to. So think any travel sector, right? Hospitality, retail, Canadians love to drive down shop. That's going to hit border states too. Okay, so you have, for lack of a better term, economic patriotism as a factor of people saying, I'm not going to America anymore.

You also have the fact that, like, it's way more expensive. Are there other reasons? Yeah. One piece that I think is feeding into it is anxiety or uncertainty around stricter border policies. So a lot of people are concerned. Yeah. Yeah. It's just an overall vibe of like, we don't want you here. Totally. Well, and it's scary to think of traveling, right? If you're like, am I going to have troubles? Yeah.

At the border, right? Like, is this going to be an easy trip or not? Yeah. And there's, you know, there's a environment of uncertainty around what you can be arrested for and if you can be made a symbol. So that makes it a little bit dicier.

Totally. And I think that combined with this general anti-U.S. sentiment right now make it just so unattractive to travel there. So is this maybe like if you're trying to seduce Canada to become your part of your country?

Is this maybe not the most seductive set of policies? Yeah, not super seductive. And it's bad for Canada's economy, too. CBC recently surveyed tourism boards across the country, and they found that most provinces say they've seen these huge increases in interest from Canadian tourists who want to travel within Canada instead of the U.S. Sarah, is it time to open your bed and breakfast?

Oh, I think so. This is my moment. So maybe in a few weeks, it's going to be like, who's making money? Sarah Rieger with her new bed and breakfast. Is there a concept? What's like the vibe of it? Not America. That seems to be selling really well right now as a slogan. Yeah, but you know, is it like mountain lodgy with like stuffed bear heads on the wall? Oh, big time. It's going to be rustic. Antler chandeliers, that whole sort of thing. Rieger's antler barn. I like it.

And I thought your place was very charming, nice and rustic. Okay, so before we get to Matt, Matt, don't worry. We'll be there in a minute. The vibe shift situation cannot be overstated, I think, at this point. And, you know, it was obviously a big week politically as well. And I can't help but think that these are all part of the same story, which is like this...

galvanizing of Canadians into a stance of anti-Americanism. Yeah, it's been a really huge change in political polling over the last couple of months. I feel like a few months ago, most Canadians were pretty done with Trudeau, at least according to polling. A lot of the talk was around the housing crisis. The Conservatives were looking like they would have a sure, very easy victory once an election is called. But

But now, you know, the liberals have come out really hard against the U.S. And I think people have found that really attractive. And any similarities between conservative leader Pierre Polyev and Trump are maybe raising some eyebrows. So I think people are thinking he may need to find a way to handle that or possibly distance himself once the race is like officially underway. So it's become much more of a neck and neck race. I mean, my...

Mark Carney is like the picture of the establishment. He lived in New York for a long time, friends with Michael Bloomberg, like... Yeah, he's a lifelong banker who went to Harvard, you know? And yet somehow he's managed to like galvanize the country in a way that like no other developed world established leader has been able to do over the last year. Yeah, I mean, I think that, you know, the story politically of the last year or two has been the

the ouster of incumbency, right? The current world order needs to be overturned. Is it possible that Trump has changed that narrative where, you know, he's been so disruptive and

that people have different feelings now. Yeah, and I think where we can actually really look to see that is Ontario's premier, right? Doug Ford, who just won another mandate. Fighting like this does not make sense, but I will respond appropriately on the electricity. Stay tuned. You know, this is a leader who I think you previously could have suggested would have been much more aligned with Trump, but he has come out so...

swinging against the U.S. really firm in his statements. And I think that's been a lot of his renewed popularity. Yeah, I think whether you attribute that to being savvy or having real principles, he certainly is channeling something and it's been popular. Yeah, I find it really interesting to see the difference between kind of the stance he's taken and Alberta Premier Daniel Smith, who has remained very close with the U.S.,

And you've really just seen a divergence in these two politicians with similar policy agendas usually in terms of their relationship with the U.S. and it has changed their fortunes in terms of their popularity. Can I distill it as USA versus Canada? Canada versus USA, but yeah. I gave you my friendship and my trust and now they tell me that my best friend is the goddamn enemy.

All right, Matt, you're up. Who is making or losing money that's interesting to you right now? Well, we've all been losing a lot of money because the markets are down, like we talked about last week. But I actually saw another story this week about how much money hedge funds have been losing. And, you know, the further into it I got, the more I realized that those two stories are actually pretty related, much more than they may seem on the face of it.

Okay, so I hope this is a story about how hedge funds are secretly controlling the world, because that's what we all believe anyway. Giant blood-sucking vampire squids? Yeah, exactly. But it's also really interesting that, like, the behavior of these huge funds that control enormous amounts of money change markets in a way that probably are invisible to us. But first of all, how do we even know that hedge funds are losing money? And in this case, do we know how much they're losing?

It's hard to know for sure. They haven't responded to my dinner invites, you know, all that recently. But there are signs. So like, for one, Goldman, which is one of the biggest brokers to hedge funds in the world, has seen more selling from hedge funds than any time in the last 15 years outside of the financial crisis. You know, this has been one of the big themes of my friends' group chat over the last couple of weeks. You know, a lot of them work at funds and, you know, have seen some of their colleagues losing a lot of money. And

and see the firm overall responding to that. Okay. Of course, I'm always fascinated by your group chat. What are people saying? And like, what happens to you if you're like a trader at a hedge fund and you lose a bunch of money? Well, you don't even need to lose that much money before you get kicked to the curb. Like the basic... Oh, of course.

It's, you know, like a quasi Darwinian style of business here. The deal is that they have like a very thorough vetting process. They find these like super talented people. They tell them to focus on like a very niche area. They give them an enormous amount of money to trade. If they win, those people get treated like kings. You could make, you know, tens, twenties, you know, up to a hundred, hundred plus million dollars in a year if you're crushing it.

If you lose money, though, it's not like a three strikes you're out thing. You know, if you lose more than a couple percent or if you're down on the year, it's no questions out. You get shown the door. And that actually is really important because when that happens, often the traders are forced to liquidate the rest of their positions, which can then exacerbate the same market move that got them fired in the first place. First of all, I don't like this model. I'd like to be given several reasons

warnings. What's it called when you are doing badly and your company wants to fire you? A performance improvement plan? Yeah. I would not be too great at a hedge fund. But okay, so how does this

move the markets in general. So as these like 21st century masters of the universe have built up their armies of hedge fund traders, they've also put in place management teams that watch these traders closely to make sure they're not betting all on the same obvious stuff. And they check for a lot of stuff, but obviously they can't check for everything. So when like a true unknown unknown comes up, like Trump turns out to not care about the stock market falling and instead

actually mostly just cares about his international beefs, that can catch traders off sides. And you can get more traders being off sides than with like, call it normal risk, like inflation or something like that, because this is not something that was on the risk manager's mind. It can lead to like very big, violent downturns in asset prices on like relatively little news, and then can also have the effect of very big upswings right afterwards.

It sounds like what you're saying is that a lot of the market movement is happening because of these giant trades that hedge funds are making.

Is that what people think is going on? If you read the news, if you watch TV or what have you, like, is that the narrative out there? I mean, you know, in my world, I definitely found a number of those headlines. Like, I didn't come up with this theory on my own, you know, sitting underneath my bed. But no, I mean, you know, the common narrative is the market response is sort of a rendition on the Trump campaign.

trade, geopolitical strife. This common thinking is that like, you know, markets down is because, you know, people expect profits to be down, which means, you know, people expect a recession.

I just feel like people talk about markets like they're like the board. You know what I mean? It's not about like these individual tools. It's like, here's this like unknowable hive mind that like moves as it will. Right. And only has one impulse and thinks in a unified way. It sort of comes back to what I think is like a interesting baseline viewpoint, which is that like,

If somebody is selling something to you at a certain price, they probably think it's a good deal for them. And if somebody is buying something from you at a certain price, they probably think it's a good deal for them. I think what's interesting, though, is that might be more true than not over time, but it definitely isn't necessarily true in any given moment in time. There are lots of reasons people can buy and sell stocks that is not related to some independent view on what's going to happen in the world. And I think that this is just...

as good an example as any of that. Is there a vibe shift among hedge fund traders that you can see about, you know, consensus thinking about the future? Well, if you look back over the last couple of years, there have been narratives that have like suddenly developed and, you know, one day they're not there and then the next day, like everyone's talking about it. There's been a big shift from like everyone in the world is bullish on the U.S. and like the deregulatory liberalization

low tax miracle that like Trump was going to unleash to wow, like the U.S. is basically uninvestable. The tech stocks are completely overvalued. AI is going to become a commodity and like nobody's going to be able to make any money off of it. And the best thing to do is like park your money in foreign countries like Canada, Europe, and like hope that, you know, you don't get like hit with, you know, massive tariffs. Like that's basically the way that the mood shifted.

But I wouldn't trend follow. Right. I don't think that anyone should listen to this and decide

where to put their money. I think that if we've learned anything from the conversations about market swings, it's that it's probably a bad way to decide how to invest because markets swing for lots of different reasons, some of them durable and some of them flashes in the pan. But it is fun to find out

what people's theories are, because I think it helps us think about the world. Well, and I think these investing trends like weigh on so much of our lives. So I think it can tell you just a lot about the world to see like where money is being placed and moved around. Yeah. And I think that the same like hype cycles that you get for like, I don't know, fitness trends, job advice, like I think you're seeing the same

trends hitting markets. And I don't know, I personally feel like trends come and go much more ferociously today. And that seems to be true in markets as well. I think the most important thing to get to here for us is if you had a hedge fund, what would it be called? Sarah? I'll try to say Sarah, like I would ever have a hedge fund. We're talking about Reader's like Ranch or whatever. How about Reader's Inn and Hedge Fund? Hmm.

That sounds like a why is that illegal thing. Yeah, deeply stretchy. Mine would be called, I don't know, dad jokes? That's good. I would invest in those. I feel like they're always predictable. That's what they want, right? Always a bull market for dad jokes.

Okay, Sarah, please remind us what we learned. We learned that California is out and Cananastis is in. We learned that Canada has undergone a pretty big political vibe shift. And we learned that some hedge funds are getting a failing performance review right now. Citadel, you're on a pip. That is it for this week. Thank you for listening.

The show is sponsored by Wealthsimple. It is made by me, Devin Friedman, Matt Karras, Sarah Rieger, with Matilda Erfolino, Leah Fetter, Sam Lee, and Jared Sullivan. Help from Juanita Leon, Allison Hopkins, and Eva Cruz. Fact-checking by Brennan Doherty. Theme music by Andy Huckvale. And engineering by Emma Lunker.

The TLDR podcast is offered by Wealthsimple Media Incorporated and is for informational purposes only. The content in the TLDR podcast is not investment advice, a recommendation to buy or sell assets or securities, and does not represent the views of Wealthsimple Financial Corporation or any of its other subsidiaries or affiliates. Wealthsimple Media Incorporated does not endorse any third-party views referencing this content. More information at wealthsimple.com slash TLDR.