The top 7 startups from Y Combinator S’17 Demo Day 2

 Day two of YC S’17 brought us autonomous store checkout, cannabis genomics and at home fertility testing. We whittled down the strong day of pitches to just seven hot companies. These are the startups our writers and the investors we spoke with were most excited about. If you want to check out the full list of startups from day 2 you can read about them here.  Additional reporting by… Read More

Canada’s big banks stand to lose on credit card debt in the next downturn: Moody’s

The next economic downturn will result in higher credit card losses at Canadian banks than the last recession due to the “unprecedented” levels of consumer debt fuelled by the housing boom, says Moody’s Investors Service.

With many Canadians already pushed to the limit by high housing costs, job losses or other “cash flow shocks” will put higher credit card balances at risk of default, the ratings agency concludes.

“When the economy turns, many consumers will struggle to meet their credit card payments because they’ll be too concerned about making their mortgage payment,” said Jason Mercer, lead author of the report published Wednesday.

Credit card portfolios tend to take the hit in times of stress because homeowners prioritize repayment of mortgages, explained Mercer, and the banks hold no collateral against credit card loans.


“Consumers are more likely to default on credit cards before their mortgage because they won’t lose an asset such as their house or their car,” he told the Financial Post. “The banks have limited recourse to a defaulted credit card borrower other than giving them a black mark on their credit history.”

During the next downturn, the ratings agency expects the losses from credit card portfolios to climb between 50 and 100 basis points above the past peak charge-offs of 5.8 per cent in 2009.

“In the event of job loss, consumers will not only prioritize mortgage and other loan payments, but may also increase their credit card borrowing to pay the bills until they find another job, resulting in higher balances at default,” the report warns. “Credit cards are also sensitive to increases in interest rates, albeit indirectly.”

If rising interest rates result in higher servicing costs when a mortgage is refinanced, this can drive credit card repayments further down the list of a homeowner’s priorities, the report explains.

The big five

Canada’s five largest banks are dominant players in the domestic credit card business, with a combined estimated market share of between 70 and 85 per cent, Mercer said. But despite their exposure to the overall segment, the Moody’s analysts note that credit cards account for only five per cent of the lenders’ total consumer loan portfolios. Mortgages, roughly half of which are secured, make up the bulk of those portfolios.

The small relative exposure to credit card debt should dull the impact of the expected fallout from a downturn, the report notes, as should the higher fixed interest rates Canadian banks tend to charge their credit card customers compared to peers in the United States and United Kingdom.

“The research suggests Canadians repay their credit cards at a higher rate than in the U.S. and the U.K. because it’s more expensive to carry a balance,” Mercer said. “The flip side is that these rates lead to higher profitability for the (Canadian) banks.”

In the last recessions in the U.S. and U.K, credit card loss rates rose to 11.5 per cent and 12 per cent respectively, according to Moody’s. That’s well above the ratings agency’s prediction of 6.3 per cent to 6.8 per cent for Canada in the next downturn.

Debt load

The expectation of additional losses is not surprising when considering Canadians’ growing debt burden. As Moody’s points out, as of March 31 of this year, just a penny shy of $1.70 was owed for each dollar earned.

That’s “nearly twice the level of 30 years ago,” the ratings agency points out, adding that the trend has been driven by a combination of low interest rates, minimal economic stress, and increasing housing prices.

Canada’s record high household debt has attracted attention and warnings from international organizations such as the Bank for International Settlements. A key ratio of credit to gross domestic product tracked by the BIS suggests Canada is among a group of developed countries most vulnerable to a financial crisis.

This week’s Moody’s report suggests high household leverage will play out differently in regions across the country. Consumers in Toronto and Vancouver, for example, are flagged as particularly vulnerable to “cash-flow” shocks such as job losses or rapidly increasing interest rates, due to more dramatic house price increases in those pockets. In the oil-producing provinces of Alberta and Saskatchewan, meanwhile, there have already been indications of an uptick in delinquencies in consumer debt portfolios in the aftermath of a slump in crude prices, the report says.

Initial unemployment insurance claims in those oil-dependent provinces nearly doubled in the latter half of 2016 from the start of that year.

“Although we expect losses to be moderate and manageable for large, geographically diversified banks, card loan performance in these Prairie provinces in coming quarters will be an illustrative first test of the ongoing strength of Canadian credit card portfolios,” the ratings agency report said.

This startup is bringing Alipay-style QR code payments to Indonesia

 The growth of digital payments and banking in China, where it has become mainstream and spawned numerous on-demand industries, is inspiring companies to pursue similar opportunities across. Indonesia, the world’s fourth largest population and Southeast Asia’s largest economy is a primary focus for many. Beyond bigger players such as Alibaba, which has a joint fintech venture… Read More

One week into negotiations, Trump says he’ll ‘probably’ cancel NAFTA

WASHINGTON — Donald Trump has threatened to blow up NAFTA less than one week into the renegotiation of the trade agreement, providing an early indication that the upcoming talks might occur under a cloud of menace.

The president’s threat itself is no surprise. A common topic of hallway chatter at last week’s first round of talks last week was just when he might deploy that withdrawal threat, which many view as his principal source of negotiating leverage.

The only surprise is how quickly it came.

“Personally, I don’t think we can make a deal,” Trump told a campaign-style rally in Arizona late Tuesday night. “Because we have been so badly taken advantage of. They have made such great deals — both of the countries, but in particular Mexico — that I don’t think we can make a deal.

“So I think we’ll end up probably terminating NAFTA at some point.”

He repeated it: “I told you from the first day, we will renegotiate NAFTA or we will terminate NAFTA. I personally don’t think you can make a deal without termination but we’ll see what happens. You’re in good hands, I can tell you.”

He’s made the threat numerous times, but this is the first time he’s done it since Canada, the U.S. and Mexico began talks last week.

Mexico’s foreign minister shrugged it off as a leverage play: “No surprise: we’re in a negotiation,” Luis Videgaray tweeted in response. “Mexico will remain at the table with calmness, firmness, and in the national interest.”

Insiders say they expect him to keep making these threats. It’s his main source of power to force the other countries to reach an agreement. One well-connected Washington lobbyist at last week’s talks said he was convinced the threat was coming: “Almost 100 per cent.”

The former deputy trade czar under Barack Obama said it’s an obvious move and he thinks the president made it too early. In an interview several weeks ago, Robert Holleyman said it was a serious tactical error when Trump made the threat in April.

He said Canada and Mexico gained valuable insight that will render Trump’s threats less powerful at the negotiating table: in April, the U.S. Congress pushed back against him, the business community fumed, and his own cabinet members pleaded against it.

U.S. President Donald Trump and Canadian Prime Minister Justin Trudeau meet in the Oval Office.

“It was, at a minimum, terrible timing,” said Holleyman, Obama’s deputy United States Trade Representative.

“You do that at the 11th hour in the negotiation — not at the throat-clearing stage … I suspect President Trump will be unable to play that card again. And if he does play it, it won’t be as strong as it would’ve been… The Canadians and Mexicans will say, ‘You… will face a huge backlash in your own Congress.”‘

That episode in April underscored the complexity of ending NAFTA.

Without the support of Congress, a president might withdraw the U.S. from the international agreement, but he could not singlehandedly wave away the law on the U.S. books that implemented NAFTA.

An international economic law professor and former State Department lawyer said he believes it would ultimately end up in court. And he said U.S. courts would ultimately conclude that the president can’t rip up NAFTA without congressional support.

That’s because the president can’t just erase the 1994 NAFTA Implementation Act passed by Congress. Only Congress can pass laws. In addition, the U.S. Constitution makes clear that Congress has power over international commerce.

“If the president were to rip up NAFTA, and then sort of jack tariffs way up, I think somebody would be able to come in and say… ‘You’re actually violating U.S. domestic law,”‘ said Tim Meyer, a Vanderbilt professor, former government lawyer, and onetime clerk for Neil Gorsuch, whom Trump appointed to the Supreme Court.

“I think courts are going to be sympathetic to the idea that the president can’t ignore the legislation that implements these trade agreements. Congress has not repealed that legislation, and they’ve given no indication they intend to.”

That being said, several observers suggest a presidential attempt to withdraw could set up a legal and political tug of war with Congress over the setting of new tariff schedules — and that would foster economic uncertainty.

The Canadian Press

Ontario tweaks labour reform bill, but no changes to minimum wage phase-in

By Allison Jones

A major Ontario labour reform bill is being tweaked but so far is seeing no significant changes to key parts, including a controversial phase-in of a $15 minimum wage, leaving concerned businesses looking to a relief package promised by the premier.

The Liberal government’s legislation includes equal pay for part-time workers, increased vacation entitlements and expanded personal emergency leave, but the centrepiece is an increase in the minimum wage. It is set to rise from $11.60 in October to $14 in January, and $15 in 2019.

Businesses have said a 32 per cent increase in less than 18 months will be tough to absorb, and have called for a slower rise.

But the government made no changes to that timeline in the first round of amendments at a Liberal-dominated committee this week, and also voted down all of the changes proposed by the NDP, such as giving all workers five paid sick days and eliminating minimum wage exemptions for servers.

Second reading

There will be another chance to make changes to the bill, after the second reading expected next month, and business groups say they’ll continue to press for amendments.

They’re also eager, however, for the government to unveil a package of offsets to help businesses cope with increased costs the labour bill will bring. Premier Kathleen Wynne has promised it will come in the fall.

“We know that there are small businesses, particularly some mom and pop businesses in our communities, that are going to have a challenge going through that transition,” she said earlier this month.

Economic Development Minister Brad Duguid has said a break for small businesses will come “likely on the tax side.”

That’s in addition to already planned burden reductions such as cutting administrative costs, streamlining compliance for small businesses, and increasing small businesses’ share of government procurement, Duguid said.

Small business

Jeff Leal, the minister responsible for small business, has said Ontario is eyeing the example of Manitoba, which has a zero tax rate for small businesses on the first $450,000 of active income.

Wynne has also mentioned that restaurant owners in particular have cited fees they pay to the Liquor Control Board of Ontario as an issue, and that businesses have said “training dollars are a challenge to find.”

While much of the government’s talk about the offset package has focused on small businesses, large ones have said the minimum wage increase will hurt them as well.

Metro Inc. estimates the wage increase will cost about $45 million to $50 million next year and is accelerating its study of automation. Loblaw Companies Ltd. has estimated a $190-million hit next year from higher minimum wages in Ontario and Alberta. Magna International has warned that higher costs could affect its business investments in the province.

Offsets should be across the board, said Karl Baldauf of the Ontario Chamber of Commerce.

“Small businesses have tighter margins than large businesses, but that being said, large businesses will accommodate this type of hit in a way that will be detrimental to jobs, in a way that will be detrimental to economic growth in this province, and I can’t understand how any provincial government would want to enable that to take place,” he said.


Offsets also need to come sooner rather than later, as businesses are planning now for 2018 and if a package comes in November, that is too late, Baldauf said.

“Businesses will have started to increase costs, they will have started to let people go, they will have stopped hiring people that they might have hired because they’re planning now under the presumption there is no offset.”

The Keep Ontario Working Coalition, which includes the chamber, last week released an economic analysis that it commissioned showing the labour reforms would put 185,000 jobs at risk. Baldauf said the government needs to address the problem through a combination of offsets, delays and amendments to the labour bill.

The minimum wage hike does, however, have support as well. During the first round of committee hearings, many labour and other left-leaning groups cheered the increase, saying it addresses income disparity and stimulates the economy. A group of economists also wrote a letter last month in support of a $15 minimum wage.

The changes the government did make to the bill this week include providing an unpaid sexual assault/domestic violence leave of up to 17 weeks, where in the original bill it was lumped in with 10 days of personal emergency leave.

A few amendments were made to scheduling provisions, as well. If a shift is cancelled within 48 hours of its start, employers must pay three hours’ wages, but a new amendment was added to exempt weather-dependent work.

If an employee gets less than 96 hours’ notice of a shift, they can refuse it, but an exemption was created for work that is needed to deal with an emergency or to remedy or mitigate a risk to public safety.

Alberta challenges ruling that says its outside of province beer tax violates trade rules

EDMONTON — Alberta’s beer war is opening on a new front.

The government says it will appeal a trade panel ruling that found the province’s incentive for Alberta brewers violates interprovincial free-trade obligations.

“We stand firmly with Alberta small brewers. We will not abandon them now,” Finance Minister Joe Ceci said Tuesday at the legislature.

“There have been 18 small breweries opened up in the year since the program started. It’s doing what it’s intended to do. Jobs are happening.”

Three weeks ago, a three-member dispute resolution panel of the Agreement on Internal Trade determined that the incentive violates trade rules agreed upon by all provinces and the federal government.

The challenge was filed by Artisan Ales, a Calgary-based importer of beer from places such as Quebec and Europe.

Artisan Ales co-owner Mike Tessier said he was not surprised Ceci has chosen to appeal. He said the province can’t give ground when it is also facing court challenges from two out-of province brewers over the program.

“They more or less have to do this,” Tessier said in an interview.

The price changes have damaged his business and hurt other distributors, he said.

“They’ve had the rug ripped out from them overnight.”

Ceci should have pursued options to help small brewers in a trade-compliant way without inflicting collateral damage on others in the industry, Tessier suggested.

Ric McIver, finance critic for the United Conservative Party, said Ceci needs to accept the trade ruling and fix the incentive program.

McIver said the party wants businesses, including small brewers, to thrive but “we do not, however, agree that violating trade agreements with protectionist measures does anything to help these businesses thrive.”

The dispute began almost two years ago when Ceci announced changes to government markups on beer sales. Until then, beer producers had been charged a markup on a sliding scale. Large producers paid the maximum of $1.25 a litre.

In October 2015, Alberta kept the sliding scale for provinces in the New West Partnership at that time — Saskatchewan, Alberta and British Columbia — but made all other brewers pay the maximum $1.25 regardless of how much or how little they sold.

Opponents argued this was a violation of free trade and Alberta ultimately acquiesced. A year ago, it changed the beer rules again.

This time, it made all beer producers in Alberta and elsewhere pay the same $1.25 a litre. But it also introduced grants to help Alberta producers expand their businesses.

Artisan Ales filed a complaint with the internal trade panel. The brewer argued the incentive program and the one-price markup were effectively retaining the previous approach through the back door.

Alberta argued that the $1.25 across-the-board markup and the grants are two different things and are both allowed under interprovincial free-trade rules.

In a 2-1 decision, the panel agreed with Artisan.

Ceci declined to elaborate on the legal arguments the government will use to try to overturn the decision when the appeal goes before another panel.

Alberta has the most open liquor market in Canada — vendors simply have to fill out a form to sell. Access to shelves in other provinces is controlled by liquor boards.

Ceci said he is watching ongoing talks among provinces on revising liquor trade rules under the new Canadian Free Trade Agreement.

“I’m certainly hopeful that will bring some better co-operation amongst all provinces.”

GoodTime nabs $2M to match job applicants with interviewers to save time and build rapport

 Despite countless attempts and millions in venture capital, the calendar, one of the most ubiquitous work tools, has remained largely unchanged for as long as I can remember. Rather than overwrite the calendar in an effort to make it obsolete, Ahryun Moon and Jasper Sone, co-founders of GoodTime, are putting the calendar front and center — embracing it as a means of understanding… Read More

U.S. houses using more Russian lumber, thanks to Canada spat

By Jen Skerritt

Russia has emerged as one of the winners from the trade dispute between Canada and the U.S over lumber.

The U.S. is importing more softwood lumber from overseas after it slapped tariffs on Canadian supplies, making them more expensive. Russian shipments are 42 per cent higher so far in 2017, according to U.S. government data.

To be sure, Russia accounts for a relatively small proportion of the total, while European countries such as Germany and Sweden are among the biggest suppliers to the U.S. But the shift in volumes illustrate how a political spat has quickly altered the flow of international trade.

“It seems to be that there’s something illogical that we’re not buying the lumber from our neighbors to the north, that we’re buying it from the Russians,” Jerry Howard, chief executive officer of the National Association of Home Builders, said in a telephone interview from Washington. “That’s sort of the looking glass that we’ve gone through and that’s what the market is forcing us to do now.”

The dispute has increased material costs for house builders in the U.S. by 20 per cent, according to Howard. Lumber futures traded in Chicago have gained 11 per cent this year, among the best performance of all the commodities tracked by Bloomberg. Prices fell 0.6 per cent to US$364 per 1,000 board feet Monday morning on the Chicago Mercantile Exchange.

The trade in softwood lumber between the U.S. and Canada has been an intermittent source of friction for years, but tensions escalated in April when the Trump administration set countervailing duties of up to 24 per cent on Canadian imports. Additional duties of as much as 7.7 per cent followed in June.

There’s been speculation since then that both sides could resolve their differences before talks this month aimed at renegotiating the North American Free Trade Agreement. But so far, it’s remained as speculation.

House Building

Monthly softwood lumber shipments from Russia totaled 4,214 cubic meters in May, the most since January 2008, data from the U.S. Department of Agriculture show.

For the first half of the year, offshore softwood-lumber imports into the U.S. rose 38 per cent, while shipments from Canada declined 1 per cent, said Bloomberg Intelligence analyst Joshua Zaret.

The additional cost of Canadian lumber is not only saddling U.S. consumers with extra costs but threatens to price some of them out of the market, according to Howard. For every US$1,000 price increase of a home, 150,000 people are priced out of the market, he said.

“Fewer houses are being built at the moderate price points, and they’re not being built because the cost of lumber puts them out of too much of the consumers’ buying range,” he said.