The Canadian Investor - 10 Reasons to Keep Investing & Reserve Currencies

Episode Date: June 12, 2023

In this episode, we look at some recent statistics showing that Canadians have high levels of debt. Braden goes over 10 reasons why the world is not a worst place. We then talk about reserve currencies and why they are so important. We finish the episode by talking about vertical applications of AI. Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  TCI meetup registration Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Welcome into the show. We're so happy you are here. My name is Brayden Dennis, as always joined by the very handsome Simon Belanger. My friend, we have a good show today. We are talking about debt that Canadians have in household debt. There's lots of lots of discussion there. I'm going to talk about 10 stats to prove the world is a better place now than it once was.

Every single media headline you hear, we're that voice of optimism for you. And then we're going to talk about S&P returns and reserve currencies. And then one last bonus topic at the end, we will give you if you keep listening. All right, Simon, Canadian household debt. What do we got? Yes, I wanted to touch on that because there has been a lot of news in the recent weeks also statements from the CMHC Bank of Canada who released reports highlighting that Canadian household debt was a risk for Canada although it may be manageable for most household currently if there is a downturn Canadian households could be in trouble now currently the household debt as a percentage of GDP

is 107%. It's down from the peak, but it's still incredibly high. And for comparison, the U.S. is at 78%. Now, household debt to disposable income was 180% in Q4 of 2022, down slightly from the highs of Q3 2022, which was 184%. And Equifax does these surveys it's called the Equifax market pulse report and was released in March of 2020 so a couple months ago and the total consumer credit card balances were up 15 percent at the end of Q4 2022 versus a year before that so that's clearly pretty high and I I saw some data, I didn't have

the chance to update my notes here. But I think there was some recently released data showing that the trend is actually continuing, unfortunately, where credit card balances are going up, and people are putting more and more on their credit cards, which I guess is good if you're a, you know, on their credit cards, which I guess is good if you're a shareholder Visa or MasterCard. Obviously, the banks actually issue the credit tied to that, but it's still their network. And according to the Bank of Canada, a third of Canadian mortgages holders have seen their payments increase since 2022. And of course, that's going to keep rising as more and more fixed rate mortgage holders have to renew their mortgage because their term is up. So I decided just to do a few kind of things to keep in mind. So what should you do if you've

seen payment increase and are struggling to make those payments and things to think about if you do have a fixed mortgage that's coming due in the next couple of years. So the first one, if you've seen your mortgage payment increase, and I would say, you know, as a whole, if you've seen your costs increase, even if you don't have a mortgage mortgage this could be a good thing to think about if you have other kinds of debt as well now the first thing i think we've talked about that before is just make more money so it's that simple so i know it might not be easy but you could think here asking for a salary increase um you know getting a sidekick side gig whatever it is but making more money will clearly help you making those payments any comments there i don't really have a i can't

argue with that you make more money you save more money that seems like a good good play uh it it's always like i find people have like kind of a weird visceral reaction to like financial planning where it's like, okay, yeah, of course you can save more money. But what about going on offense, you know, and trying to make more money? And I find people have kind of a reaction to that, like, oh, if only it was that easy. And I guess my thought to that is no, it's, it's not easy, but don't be afraid to dream bigger. And, and also for ask for things that you think that you deserve. It's amazing what happens when you ask for things that you, that you think and know that you're worth. It changes, it can change your income very, very rapidly just with a meeting with your boss,

for instance. And so I actually think that it's a good take. It sounds obvious and simple, but people think that it's, you know, if only it was that easy. And sometimes it might be the easiest thing that you can possibly do. And people don't want to talk about. Yeah, exactly. And obviously, you know, for some people might be more difficult because you have kids or things like that. And it's just not easy to find time to, you know, have extra income coming in. But I think, you know, probably a lot of people would be able to make that work. And I would say as just a personal experience, just step outside your comfort zone, you know, take a risk. You know, it doesn't have to be a crazy risk, but, you know, we did it for the podcast. I know you did it for Stratosphere where you left your job,

but, you know, the podcast, it was just, you know, buying a job but you know the podcast it was just you know buying a mic uh you know putting it out there we didn't even have intent on monetizing it at the beginning it was more a hobby a passion um you know think about something you're passionate about and just try to maybe just try it out put yourself out. Or if you're not interested in that, just show your employer where you can bring additional value and that can justify a salary increase. And if not, you know, look for other jobs. Like if it's much easier to negotiate a salary if you're getting a new job with an employer. What is that? What is that quote?

It's like you need three hobbies. Yeah, here it is. One to make you money, one to keep you in shape, and one to be creative. You need, I really, really like this quote. You need three hobbies, one to make you money, one to keep you in shape, like exercise, and one to be creative. in shape, like exercise, and one to be creative. And sometimes, you know, a hobby can do two of them at once, probably not all three, but maybe, maybe two or three all at once. And I think that this is a good thing to live by, because even if you, your hobby or your passion isn't how you make money, I think that that's fine. I mean, people, you know, you got to, you got to do what you got to do. But to have one that you can think about that keeps you in shape, makes you money and keeps you creative. That's always really stuck with me. And that's kind of how I design a lot of my life to, to be fit, make money and be creative. So I like that quote. Maybe others will like it too.

Pursuit of happiness. That's what it is. Is that what it is? I don't know. I'm just saying it's ultimately the pursuit of happiness when you think about it. Oh, right. Okay. I thought it was from that or something. I was like, oh. It's size, you know. Let's just say it is. Let's just say it is. And, you know, the second, so if making more money is not really an option for you or not something you want to get into, that's okay. But I would say be proactive and talk to your financial institution. So whether it's a mortgage, they might be able to extend your amortization,

for example, which would make your payments more manageable. But if it's other kind of debt, talk to them. If you're having trouble making the payments. If you're proactive, you know, it's not in the best interest of your financial institution for you to default on the loan. They'd rather have some kind of agreement, whether, you know, they extend the amortization, make the payments, you know, smaller, whatever it is, but be proactive. you know, smaller, whatever it is, but be proactive. And the third one here, if you're a homeowner, you know, consider selling your home and rent instead, especially if you're really being stretched out financially. You've looked at all these other options, you know, you may have been able to rearrange your mortgage payments or your debt payments. But in this case, let's talk about mortgages. I know it's not easy.

And I know there's sometimes it feels like there's a six. You know, for some people, there's almost a stigma that they have to be a homeowner. But at the end of the day, you don't have to be a homeowner. And financially, a lot of the times and I think right now is one of those times hasn't changed. Renting just makes more sense financially. one of those times hasn't changed. Renting just makes more sense financially. I've been saying that for a long, long time. It's an important decision and usually one that is more emotional than financial, which is totally fine. But if you have to make a hard decision, you might find that owning a home is not the most financially optimal. But Canadians don't like that narrative, if you've noticed.

No, it's really unfortunate because I think it's just something that's been ingrained with us. And we have all these government programs. You have the homebuyers program where you can use RSPs to purchase a home. And it's, I don't know, we've been kind of programmed to think that it's one of the milestones in life is to own a home. And I know tons of people, I mean, if you rent, it's much easier to travel, live abroad, if you have a job that allows you to do that. There's so many advantages to renting that people tend to forget and just think about owning a home. So I'm just trying to be devil's advocate here. I own a home, but at the end of the day, there's plus and minuses for both. But financially, oftentimes, like you said, it just makes a whole lot more sense to rent.

Like you said, it just makes a whole lot more sense to rent. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly.

Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb

or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. That is Airbnb.ca forward slash host. Now, if you have a mortgage, and this is specific to mortgage, that is a fixed rate, but it's coming due in a couple years from now, then, you know, you still have time ahead of you. But I think you definitely need to make sure you're aware of what your potential costs could be when you end up renewing. And I'm in this situation.

Our mortgage is manageable. The amount that we have on our mortgage is much lower than we could have afforded. I wanted something like that because, you know, it just made sense. I wanted to be able to save extra money to keep investing and not being outspore as a lot of people would say. Now, one thing you can do is right now, interest rates are high. So you can look at a GIC or high interest savings account, ideally tax free, which would mean that you're getting higher returns on that money versus what you're currently paying on your mortgage in terms of interest rate. That's important because if you

are getting a better return, there's no sense in, well, logically you should be putting that money aside in a higher interest account because it makes more sense than paying your mortgage down as a lump sum because your mortgage actually has a lower interest rate. So you can just use that money when the mortgage comes due and you have to get a new mortgage term then you can decide whether you want to put a lump sum payment or maybe keep that money aside so you can top up the extra payments as you need on the monthly basis the other option would be you know if the rates are lower than expected then you can decide you can decide what you'll do with those extra funds. So when you end up renewing your mortgage, if you were planning for the mortgage rate to be 5% or 6%, and it's, let's say, 4%, and you don't necessarily need that extra money, well, at that time, you can at least, maybe you decide to make half of it as a lump sum on your mortgage and decide

to invest the rest. So you do have different options that will open to you if you start doing that. That is something that I've been doing myself because I'm just planning in advance since I know that, you know, there's a very high likelihood that our renewal rate will be much higher than the rate we're paying right now. And then the second option here is just voluntary increases your payments right now. It may not be the most optimal in terms of making the most out of your money. Like I just mentioned, if you can get higher rates on safe investments. However, it will pay down your principal faster. You'll get used to the higher payments when you refinance.

So maybe you make the payments payments when you refinance. So maybe you make the payments as if you were paying 5%. So you're paying down your principal faster. And like I said, it might not be optimal, but for some people, the psychological perspective or aspect that it achieves will actually be a really big benefit. It may make them less stress, for example. So that's something to consider as well. I think this is a good summary, right? Have you ever seen the graph that shows US household income and household debt versus the US? It's very common when shown... Oh no, sorry. It's the price of a home versus disposable income.

Oh yeah. Yeah. I've seen that before. For the US, that graphic gets shared a lot. Yeah. I know the most recent one, I think there's starting to be a pretty big discrepancy between the two. And it was, what, 2008, 2009, it started kind of shifting away slowly. Yeah. Yeah. That's, it's an alarming graph that gets shared quite a bit, which basically for those who are listening on the pod here is the gap between disposable income and home prices in the U S are very related. Uh,, one goes higher than another, as far as the data goes back well past 1980. But you know, they're very similar today, disposable income is actually a little higher. And the Canadian version of the graph, you have this like exponential growth of housing prices and disposable income has increased, you know,

similarly to the U S on a very linear. So you have a huge, huge gap, um, in Canada. And it's, it's frankly an alarming graph to look at. And it tells you a lot about everything you need to know about home prices here what i will say is it doesn't include like health care so like that would have to go into the disposable income graph if we're gonna if we're gonna make these apples to apples so it's it's not a perfect comparison but it does spell out kind of you know a structural difference between the countries yeah definitely i mean health care is a big part like if you retire in the the US, you have to plan for healthcare big time or in Canada, obviously. You have to some extent, but not to that same extent. Yeah, so it's not a perfect comp, but none of these things ever are, but it does help

spell out kind of a structural difference. Well, thanks for sharing this. You know, there's things you can do, right? I think a lot of people will feel trapped with not a lot of options, and it's good to spell some of those out. All right. So I am going to share 10 stats here from a Twitter thread. And I actually saw it on LinkedIn, but I saw it posted on Twitter too, from Clint Murphy. Not sure who this guy is, but he says, if you watch the news, you may think we're headed for civil war and the world's in bad shape. That's bullshit. And here are 10 charts to prove it. Number one, child survival is way up. So in the 1800s, 44% of children passed away before their fifth birthday, which is like just heartbreaking, man. That's like such a terrible statistic. That number stayed persistent all the way through the 1800s and really didn't start dropping actually until the early 1900s. So it's not that far away that, you know, about almost half of

children didn't make it to their fifth birthday. People would have like 20 kids and they'd have 12 later. It's very sad, but that's how different the world is today. And now it's down to very, very low single digits. And so that's a huge win. Literacy. Share of adults who are 15 and over with basic skills to read and write in 1800 was 10%. Today, it is 86% and increasing. That latest figure is in 2016. So I'm sure it is much higher today.

This one says share of Earth's land surfaces that's protected by national parks and other reserves is up from zero to 14.7 i think this one's a little bit of a stretch to be honest i don't know if we can take this win here but yeah there's also less to protect i guess there's less to protect yeah yeah maybe we had to build these protection laws because, you know, we deforested half the Amazon before we decided, oh, wait, we probably shouldn't do that. All right. So number three, I don't think we can chalk that one up. All right. Number four, less people are dying and smoking or dying from smoking. So in 1970, it's in about one third to 2010. And I'm sure it's even lower. You know, we talked a lot

about this statistic with number of cigarettes being sold worldwide and tobacco being sold worldwide. When I did a deep dive on British American tobacco, Philip Morris and Altria, that is clear in the data. So less people are dying from smoking. More people have clean water from 1980, 58% of people on earth had clean water. And now we're up to 88% in 2015. And this number continues to climb. Number six, globally, more women can vote in the 1900s. Very few, I guess. very few, I guess, countries with equal rights for women and men to vote in 1893 was one. And now it is 193 in 2017. This is obviously one that there's still a lot of room to go. It looks like it's kind of plateaued, which I can see that, right? It's like most, you know, modern countries have gone on board and there's just like a lot of them that are not for

primarily like religious state reasons. Hopefully that changes as well. But overall, we've had a gigantic increase in women's rights and equal rights between men and women to vote in particular. equal rights between men and women to vote in particular. Number seven, there's less war. Battle deaths per 100,000 people has gone from 201 to one per 100,000 people, like likelihood to die die in war so that is uh quite significant of course this data including many world wars in in this here as well and so generally uh you know there's obviously a war with ukraine and russia right now but generally there is a lot less deaths in war than historically. I know it seems hard to think about, but it's true. Eight, there are way less oil spills. In 1979, there was oil spills left, right, and center. There was very little regulation on tanker ships. There was 636 tons of oil spilled. A thousand ton.

What does this mean? Basically the number has gone from 636 to six, a thousand tons oil spill. That doesn't make any sense. All right. So we've gotten a massive decrease in the number of oil spills year over year. Less people are dying from natural disasters

and less people are starving. 28% of people worldwide were undernourished in 1970 and now it is 11% as of 2015. And then he goes here, these are facts from Factfulness by Hans Rosling, a book called 10 Reasons We wrong about the world and why things are better than you think. I might have to pick up that book because I think a lot of people could use this kind of thought process. Yeah. I mean,

my alternatives as I watch Ted Lasso, have you ever watched that? I didn't watch Ted Lasso, but I've heard it's really good. Like I've heard many people tell me it's really good. Yeah, it's really good. Just I feel good show. That's why I kind of included it. But I guess the third point, the deforestation, one thing I would probably add if people are looking to be optimistic is, you know, it's probably not for the next decade, but probably beyond that.

But space exploration will probably allow us in the future to get materials that we would normally deforest or, you know, use our land that could be used for other things that are not as destructive. that are not as destructive. So it could help us get those materials or minerals and natural resources outside of Earth and not damaging the Earth. So that's something to, you know, look forward to and kind of stay positive about. Okay, so, you know, thanks for that. So the world is not completely going to shit, as you said. But, you know, it's definitely a good refresher. That's for sure. So now I'll talk about the, you know, essentially what a reserve currency is and why it's so important, because there's been a lot of talk about the dollarization, which refers to the importance of the US dollar as a reserve currency in the world. I won't touch on that really, if people do like the subject. I mean, I can do a segment later on other podcasts, but I wanted to lay the groundwork here and just talk about

what a reserve currency is. So a reserve currency is a currency that's widely held by most countries and financial institutions and that is used for international commercial transaction, international investments, and even international debt payments. So why is it so important? It's because it creates common ground for trade. So you might wonder, okay, well, what does that mean? Well, let's look at an example. So for example, let's say a Turkish company wants to buy maple syrup from a Canadian company. I had to use a very Canadian example here. Well, the Canadian company might want the transaction to be conducted in Canadian dollars,

but the Turkish company on its end might say, well, I don't have any use for Canadian dollars. Why don't we do it in the lira, which is our local currency? So it's unlikely that the companies would agree to do it in one of those currency. So instead, they choose to do it in a widely accepted currency across the world, the US dollar, which is the reserve currency. When the transaction is done, the Canadian company can decide to keep those US dollars or convert it to Canadian dollars. With the US as the reserve currency, you'll be able to convert most fiat currencies easily to the US dollars and vice versa. Whereas it might not be extremely easy to take the Canadian dollar, for example,

and convert it to the currency of a smaller country, or even, you know, it might not be as easy to convert it to the lira, for example. Now, to be clear, there have been different reserve currencies in history. Typically, it's a currency of the most dominant world power. The most recent ones were Britain and France, with the current one obviously being the U.S. dollar. So the U.S. dollar has been the reserve currency for some time. In practice, I think most would agree that it's been essentially a century. It started after the First World War, but it was made official in 1944 with the Britain Woods Agreement, which made it the world reserve currency. At the time, the reasoning was that US dollar was linked with gold, so it was

gold-backed, and therefore having it as a reserve currency would make it a gold-backed system. Now, the gold-backed system is no longer what we have. That's why we call it fiat currency. It changed in 1971 under the Nixon administration, and now the US dollar is the reserve currency in our fiat monetary system. And for those not aware, fiat is just a fancy word. You may want to make sure you're familiar with it because you'll probably hear about it quite a bit in, you know, if you read on investing macro and things like that. But it just means that it's not backed by a physical commodity like gold or silver. So that's why a reserve currency is so important is because it's pretty much a neutral currency. I think that's the best way to explain it for people.

It's just a currency that you can use. And the neutral aspect is definitely debatable right now because obviously we've seen what the U.S. has done to, let's say what it is, to weaponize the U.S. dollar against countries that they don't agree with, whether you agree with that or not. That's beside the point here. It's just the fact that the more they do that and they weaponize the U.S. dollar to put sanctions on countries they don't agree with, the more it will place doubt on other countries that may be, you know, okay with the U.S. right now, but may want to start hedging what they have in their central bank because they might tell themselves, what if in five, 10 years, we're not aligned with the US on some major issues and they start putting financial sanctions on that. So that's part of the debate of the de-dollarization. Just a quick overview, but I can go into more detail in another segment because I could probably do a 15, 20-minute segment just on that alone and just scratch the surface. No, I think that it's good to bring up because macro is obviously complicated, but this

specific topic helps people understand the US, the power that they have on the global scale. A lot of it comes from being the global reserve currency. It really does. It's one of the main reasons that America has been such a dominant force on the global scale. If you think about like a business and they're trying to build like really competitive moats, like the 1944 Bretton Woods agreement was like probably the smartest like business strategic decision like ever, like put it in the hall of fame. Really, I think it's at that level because you can see how much it has changed their history from that point forward and their kind of rise to dominance and being the economic global superpower that they are today. A lot of it comes back to this. Yeah, and the other alternative for those that are not aware, so that's what we have after the Bretton Woods Agreement. But other countries were proposing something

more as a basket of currencies instead of having it just one US dollar. But obviously the Americans and in 1944, you're at the end of the Second World War, not officially done. But, you know, the winners were clearly, it was clear which countries were going to win the Second World War, and clearly the U.S. was probably the biggest winner of all, and they

wanted it to be the U.S. dollar. So yeah, it's just good to know, especially if you own a business, right, and you transact a lot, you export your goods and services. I'm sure we have some small business owners that may have clients outside of the US and Canada. Well, that's why most of your transactions are probably done in US dollars and not in Canadian dollars, unfortunately, just because reality is there's just not that much demand for the Canadian dollar compared to that. demand for the Canadian dollar compared to that. Yeah, good point. I mean, 95% of the transactions I do in my business are in US dollars, both on revenue and on expenses. So, you know,

that's a Canadian corporation and kind of managed in Canadian dollars in a way. But, you know, as soon as you're going over the border everything's in usd and no one expects anything different so uh that's just the way it is now um this is tangentially related but did you see coinbase got uh the lawsuit this morning yeah yeah uh from from the yeah i debated adding it what's the what's the spark notes what's the spark notes on this? Because I think that this is related in the fact that I've always thought these large companies that are in quote unquote crypto or Bitcoin, a threat on what is the de facto reserve currency in the US dollar, to think that they would get treated nicely by regulators, I think you have to be off of your rocker.

And we're seeing that play out this morning and yesterday with Binance and Coinbase, the two of the largest exchanges on the planet getting sued by the US government. And I don't know the first thing about it. I really don't know what's going on. Do you have a spark notes on this? I mean, I've been staying kind of on top of what's going on in the US. So Coinbase is not the first company that's being essentially sued by the SEC over dealings with crypto. Generally, I think what's happening with Coinbase is they're saying that

they are operating or they have securities on their exchange and they're not registered as they should be. But crypto companies, including Coinbase, have been saying that there's no rules, there's no clear guidelines in place from the SEC to register. And unfortunately, the laws that are in place for traditional financial institutions, it's hard to apply them for crypto. So the SEC is pretty much, under Gary Gensler, has decided that they would essentially just enforce the law how they see it. essentially just enforce the law how they see it, because Congress has been slow to adopt legislation regarding cryptocurrencies as a whole. And for the most of the companies, they've just been settling with the SEC because the reality is if you get sued by the SEC, it's going to cost a whole lot of money to go to litigation and they're getting essentially their way that way.

Coinbase, however, has stated for quite some times now that they will go to court. And if Congress can't come up with legislation, then they'd rather have the courts interpret what they think is an incorrect action of the SEC. So there's just been a whole lot of. There's been a lot of debate on that. And if you look at Gary Gensler. I mean it's cringeworthy. Whether you're for crypto or not. He's clearly pushing for political office.

He's doing these little videos. And the one thing he does say. And has been kind of steadfast on. Is that he considers Bitcoin a commodity. And for the most part, everything else is a security. So if you have any of the other coins listed on your exchange, you're going against securities laws. That's essentially what they're accusing Coinbase of doing. Damn.

Okay. All right. That's wild. Okay. All right. That's wild. and with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com

for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. I'm just looking here. Coinbase stock is down

13% today. It started down 15% at the close. This stock has been a tough one to own since IPO, 85 percent since ipo of april 2021 which is probably about the height of yeah yeah i would say yeah i would say and it was also when crypto was all like like every other asset was kind of ripping higher right and you know one of the things that Brian Armstrong is saying was the CEO of Coinbase is, you know, if there was an issue with their business, why didn't the SEC, you know, say it when they IPO'd? Because their business model has not really changed. I mean, there's been some little changes here and there. But if there was really an issue with their business model and what they were doing. Why would the SEC have given them like the green light to IPO? And I mean, to go public. Their S1 is with the SEC. It's not a bad point. It'll be interesting. I've said it before. I think it's just important to

have, you know, legislation in this space. I think you can't really expect, you know, decentralized protocols to, you know, follow legislation that was done for centralized financial system. I think there should be legislation to encourage innovation in this space, but also, you know, to make sure that there's no excesses. And some of the things that we've seen with like with FTX and some of the other defunct crypto exchanges and even Binance, I know is a bit in hot water as well with different regulators around the world. But I think it just shows we just need, you know, politicians to come up with sensible legislation i think most in the crypto industries would agree with that i think i know just the guy for the job sam bankman freed he could he'd be able to help us out right yeah he was trying to push legislation that would have

put ftx almost in a monopoly type of situation that's what he was pushing yeah oh god i miss talking about that guy he uh it was like watching a teen teenage drama uh with with adults it was it was out of control all right let's talk about uh my prediction for the verticalization of every AI app. So what does that mean? That's a lot, some buzzword. That's like, you just grabbed like every buzzword and you made dinner with them. Like that's just way too many. there is, in my view, going to become the chat GPT of every single vertical. And what I mean by this is like generic chatbots like chat GPT and Google Bard are directionally quite good at most tasks.

And I think that they'll be very good for search engine use because they're good at surfacing information and being trained on massive amounts of vectors and have huge training on large, like these large angles models have huge training databases. So those all make sense. But they're not really great at specific use cases today that people can use for very specific tasks at work.

What I mean by this is like, there is currently stage one, the generalist AI assistant with ChatGPT. You say, hey, I need a list of 10 ideas to make for dinner tonight. And it'll be quite good at that. It'll come up with 10 ideas. Or you could say, hey, I have this email that I've written. Can you make it more persuasive? this email that I've written, can you make it more persuasive? And I'll say, sure, I'll rewrite it as persuasive. Or you'll say, I want to reach out to this guy, Simone. He runs this podcast called The Canadian Investor. He likes mountain biking. Can you craft an email that's very personalized to him that mentions X, Y, and Z and why he should buy my software. It's very good at all of those things when, when provided the information, but providing software that actually performs unique niche tasks, it's not there yet. And so stage one is the generic assistance and stage two is now the verticalization of these AI

assistants. It's like what FinChat is for stock investing. There's going to be these category vertical winners for healthcare, for finance, for HR, for running payroll, for real estate. running payroll, for real estate. And I think that stage one has reached mass adoption very quickly, faster than probably anyone thought they would. We're at the very early innings of stage two of these vertical AI assistants. And then there's going to be what I think is even more interesting, which is not just the verticalization of these GPT assistants, but hyper, hyper niche. So now it's getting hyper specific and very useful. So instead of just the chat GPT for HR, that's, you know, very good at benefits and, you know, payroll and whatever, it might be like pretty decent at a lot of those things from HR

better than chat GPT did. So we've gone from stage one, which is not that useful stage two, to being able to do a lot of HR tasks. Well to stage three, where it is amazing at employee benefits, just employee benefits only. That's its only application for this AI assistant is being able to answer questions very specific on employee benefits and be able to actually help the user. So instead of having like this one generic chatbot that everyone is tuned into, having like this one generic chat bot that everyone is tuned into, there's going to be, here's the one for payroll. Here's the one for employee benefits. Here's the one for probing on company training. And they can be all aggregated and connected and integrated well together. But there's going to be very specific technology that's built that is good at executing

the tasks related to that. So that's what I'm calling stage three. The opportunity here is that stage three, none of them have huge total addressable markets, but in aggregate, they're very useful, very sticky, and in aggregate have a huge total addressable market. This is why I think there's an opportunity for the constellation software of hyper niche vertical AI assistance. My prediction is that in the next 15 years, there's going to be a huge roll-up that takes these very, very small 10 to 20 million in revenue, hyper niche AI assistants that are B2B and rolled up into a conglomerate. Maybe it'll be the constellation today that does those deals. But I think that that is going to be a gigantic opportunity in this hyper niche. And I think that it's a giant opportunity for entrepreneurs who want to build in this space, if you're listening today, to go super, super niche.

Because you're not going to compete with ChatGPT on being good at everything. Repeat with them on being really, really good at being the AI assistant for people who want to find restaurants to eat at or something like that. It's probably a bad example. But you see where I'm going with this, Simon? I think this is a big opportunity. I think you can sum it up too with the more niche you go, the more the data quality is higher too. So I think that's the biggest issue right now with Chad GPT is you ask it questions and it has so much data that oftentimes it'll, you know, get confused on what data to go and pull. I mean, you could just take my name, right? Simone Bénage is a pretty

common name. If you ask them like, you know, to summarize me, I mean, it may pull a bunch of different others, Simon Berangier, and having trouble differentiating which one is the correct one. So you may end up having, you know, part of it that's accurate and then the rest not. And that's what I've been seeing a lot of people saying is, you know, if you use just chat GPT, it tends to, you know, some will be accurate, some might not be. And just the data accuracy comes into question. Whereas something like FinChat.io or other kind of very niche application is the creators can really make sure that the data is solid. And if the data is solid, then the AI will be able to give you an accurate answer. And that's, I think, the biggest problem or, you know, solution, however you want to put it right now with chat GPT is just the

accuracy. I mean, especially even if it's plug on the internet, you know, if yeah, if you're asking it for a dinner, it's fine. But if you're asking it for an actual, you know, an actual question that needs to be accurate, and there's a correct and wrong answer, that's where you may get it, you might not get it, and you need to validate the info. And the whole point is having something where you can ask it a prompt and be 99.9% sure that the answer you get is actually accurate. That's right. Because think about like, say I run, let's use the employee benefits example. Okay. So say I have a idea that I want to build this AI assistant for companies to adopt in their HR system. But I'm going to specifically say in my messaging, this is for employee benefits. I'm going to work with the company

to index like very, like in a, you know, consulting relationship, index everything that they have today written in PDFs on employee benefits so that when their employees ask specifically, they get information that's exactly written from the company, summarized of everything they've written about their specific employee benefits program and related information about the company. It's not reaching into its back pocket of its large language model and having to make it up or make guesses on how that company does their employee benefits program. And so this is what I mean by like, go super niche, like not just HR, but like what are the 10 categories of an HR department and just focus

on one of them? Will they, will, will that specific business be massive? Probably not. It can probably get to 10, 20 million in revenue, but it's going to be really, really sticky because you've already gone ahead and indexed and trained that specific application on the business's information. And so I think that there's a pretty big opportunity here if you're listening and want to get in the game. Yeah, no, I think that's a good point. Thanks so much for listening to the pod. We really appreciate you tuning in. And we are here Mondays and Thursdays.

If you have not checked out stratosphere.io or finchat.io, those are the investing tools you and I use. And Simone's an investor in the company. I am the co-founder and CEO of the company. So you can go ahead and check those out. stratosphere.io and finchat.io. As well as our Patreon is at joinTCI.com. It's $9 a month. You get this podcast on video

as well as our monthly portfolio updates that came out just a few days ago. And the podcast videos, sometimes you'll get it even a day or two early. So that's an extra perk. Yeah, just because, you know, it makes more sense to, you know, upload it as we, not too far after we started recording. So that's an extra perk. We'll definitely have them on the day of the release,

but depending on the weeks, you might actually get them a day or two day or two so you know our content will be even more up to date and you can see our beautiful faces at the same time that's right i'm having a bad hair day so i'm wearing a hat but bad hair day just means like gonna go to the gym after this so i don't want to shower do you i don't like showering twice in one day what are your what are your thoughts on that i used to before i had a baby now it's not possible now i shower once every two years once every business pretty much yeah no i mean i i wouldn't mind i used to do it a bit more when i was younger i'd shower in the morning and then that you know in the evening too but uh no i don't have that luxury anymore. I just find like, you know what it is? I will sometimes

convince myself not to work out if I've already showered. Oh, okay. And I don't want to do that. So, you know, I'm fighting my own human psychology here. So I got to shower after. So here we go. I'm going to do my workout class after this. Thanks so much for listening. We'll see you in a few days. Take care. Bye-bye.

The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.