The Canadian Investor - 2022 Mid Year Returns and New Housing Rules - Earnings Roundup

Episode Date: July 7, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Update on market performance in 2022 compared to long term returns FTX reaches an agreement to buy BlockFi Alimentation Couche Tard earnings Pinterest names a new CEO Returns on Canadian housing vs. S&P TSX composite index New HELOC rules to come into effect in 2023   Tickers of stocks discussed:  Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Check out our portfolio by going to Jointci.com 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

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My name is Brayden Dennis, always joined by the great Simon Belanger. Simon, we have a good earnings roundup and news. Well, I wouldn't call it much of an earnings roundup, more of a news roundup because not much earnings to talk about. But how are you doing, buddy? I'm on hour 21 of a 24-hour fast. I have no reason for doing it, but I'm trying it out and I'm feeling okay. I'll say I'm feeling okay. Yeah, no, I'm doing good. It's actually, it's our second recording today.

So we record an extra episode so we have content for you guys while we're taking a little break from actually recording the podcast and enjoying summer. So if we're slurring our words a little bit, it's because Braden's fasting is rubbing off on me. Yeah, it's my fastingen's fasting is rubbing off on me. Yeah, it's my fasting. I'm pretty close to 24 hours. I'm doing all right. I want to say around lunchtime today, I was dying. Bro, I was so close to just eating everything in my kitchen. But you know what? I feel okay now. I pushed through the hard part. Let's start off today with an update on market

performance for 2022 and zoom out to kind of give some perspective. I don't know if people can hear it too as well. I finally don't have a voice that sounds like I smoked 40 darts before the podcast, which is nice. Just in time to lose it for my next weekend fun, but hopefully I sound good today. So let's talk about market performance for 2022 because of course, Simon, it's not been a fun year for investors, but it's been a humbling and sobering time for new investors who have just come in and realized, oh, wait, markets are volatile and we have these things called bear markets periodically, which do suck. But I'm here to tell you there is good news at the end of this segment. Okay. So let's talk about some market performance. The S&P 500, the TSX composite and the NASDAQ composite are the three indices I'm going to look at. I'm going to give you a year to date perspective, a trailing 12 months, so one year of performance and the last 10 years of performance.

Just to give you some perspective. So for the S&P 500, by the way, this is total return inclusive of dividends. And this data is surprisingly hard to find, but I got the plug for you guys on the podcast here. So this is total return inclusive of dividends. Year to date on the S&P 500, the most well-known index is down 19.11%. Over the past 12 months, it is down over 10% at 10.15%. However, 10.15%. However, inclusive of this drawdown, you have made an annualized return of 13.08%. Call it 13% over the past 10 years. Not bad, eh, CMO? That's pretty good. That is very good, yeah. It's incredible. On the TSX composite, so this is the aggregate of the Toronto Stock Exchange. Composite. This is the aggregate of the Toronto Stock Exchange. This is the Canadian Stock Index total returns, which makes a big difference for this index, total return does, because

there are a lot of high market cap, big dividend payers like the banks, like the energy names, like the Enbridges of the world, the telecoms. They make a big difference on the dividend payments. So year to date, the TSX composite is down 9%, which is much better than the American constituents. Trailing 12 months down about 3.27%. Now over the last 10 years, you've made an annualized average return of 7.98%. Let's call it 8% on the TSX composite over the past 10 years. Zooming out gives you some perspective, that 8% number. I mean, it's good, but it's not nearly that 13% the S&P 500 US stocks have done. The NASDAQ. Now, the NASDAQ has been absolute destruction, Simone. You can see these numbers here. The reason for that is it is very heavily weighted on big tech and big

technology companies are way down this year. They had unbelievable runs over the past few years, and they're giving you a shot to buy them cheaper here today. Year to date, the NASDAQ is down 28.6%. On a trailing 12 months, it is down 22.84%. Now, if you look at a five-year basis, for some reason, they can't find the 10-year, but five-year, 13.67%. It's even more if you do 10 years annualized average return. The NASDAQ 100 Index, which is the 100 largest companies in the NASDAQ, again, very focused on tech. Today, you are up more than 700% if you've owned the NASDAQ 100 for the past 10 years. So this is a reminder, Simone, to zoom out and not have such a short memory. We're such goldfish. I already forgot what happened in the past 10 years. All I know

is my stocks are down today. Don't be like that. When times are good for stock performance, people are all high on their investments. But when they're down, people lose faith very quickly and forget to take this wider view that I'm presenting right now. Yes, seeing your gains get wiped out sucks. I get it. But it is very normal and these times create opportunity. What do you think about this? Because this is the way I think about it. Real money is made in bear markets. Actual real move the needle type of wealth is created in bear markets because you continue to add to your portfolio. You just don't know it yet until you see the results five, 10 years down the road. Yeah. The first thing is I'll say we feel losses way more than we feel the equivalent gains. I

remember reading a book and I can't remember the multiple, but you feel it way more. So keep that in mind when you hear what Brayden is saying, because yes, in the moment, it may be extremely difficult to take whether your portfolio is down 20, 30, in the moment, it may be extremely difficult to take, whether your portfolio is down 20, 30%, whatever it is, if you're heavy tech, it's probably closer to 30% could be even more because that 30% drawdown that you talked about are close to it. Some names are down way more than that, right? So I think big tech is probably saving the NASDAQ there a little bit, because you have names that are down more than 50% and quite a few. I think it's important to keep that in mind.

But like Brayden said, if the prices are down, it means that there could potentially be a lot more upside. And if you're talking about more upside, then over the long run, during those bear markets and drawdowns, that's where you can accumulate a lot of wealth. During those bear markets and drawdowns, that's where you can accumulate a lot of wealth. And that's why we talk about dollar cost averaging so much. Because it's a really powerful strategy. Consistency is the key there. So you don't have to worry about these market bottoms. You just have to tell yourself, I keep buying that set amount, set intervals, regardless of what's happening. The upside is that I'm buying more now for the

same dollar amount. You just have to keep reminding yourself of that. That's right. And continuing to buy good companies is the key because hard times present a lot of challenges for subpar businesses. So you might think you're getting a great deal, but the business fundamentals may have changed. If you can verify to yourself that the business fundamentals have not changed or perhaps even improved and the price has gone down, then we have opportunity. Yeah, exactly. And the easy way too is I know a lot of people do that is they have a hybrid approach, right? They'll DCA and index ETF regularly. And then every now and then, they'll dollar cost average in businesses

as well. So that index kind of is that consistent DCA. And then if they have a bit more capital, either they'll put in the index or they may select specific companies that they like and they find attractive at their current valuation. Yeah, I was thinking about that too. I've been meaning to bring this up on the podcast and I'm glad you just said this because this is a good reminder. I often think to myself, if you're just an index investor or part of your portfolio is just buying the broad-based index ETFs, this is such an easy way to just get really aggressive when things are down because you're buying in such a diversified basket and don't have to make these gut-wrenching decisions on individual securities that are bouncing around like nuts.

You can actually just get really aggressive and keep buying the index and increase your DCA contributions because at the end of the day, you're just buying the broad market. If you can buy the broad market, you can't time it correctly. But if you can buy it at much better prices, your implied return expectations are just so much higher. 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 Money Cents, 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.

Now moving on to some more news in the crypto space. So there seems to be a lot of news. I guess it's saving us when there's not a lot of earnings going on. The destruction in crypto gives us something to talk about. Exactly. So news came out last week that FTX and BlockFi reached an agreement. FTX and BlockFi reached an agreement subject to a shareholder's approval that would see FTX provide a $400 million revolving credit facility to BlockFi. The agreement also includes an option for FTX to acquire BlockFi at a variable price of up to $240 million based on performance triggers. Zach Prince, who is the CEO of BlockFi, mentioned that they had experienced some headwinds because of some of the recent

events in the crypto space. BlockFi had exposure to 3arrows capitals, short 3AC, which is now being liquidated and resulted in a loss of $80 million for BlockFi. They have no further exposure to 3AC and will be part of their ongoing bankruptcy cases. I think it remains to be seen here if they will be able to recoup any funds from 3AC bankruptcy proceeding. But it's nice to see that BlockFi, which is definitely one of the more reputable names in the crypto lending space, that they no longer have exposure to that. The negative news about Celsius, another crypto lending platform, affected the consumer confidence in BlockFi. That's what Prince mentioned on a Twitter thread. And he did mention that BlockFi had no exposure to Celsius. So that's really important here. And he also

mentioned that high volatility seen in the crypto markets in the past few months definitely affected some withdrawals as well, increased that for their consumers. He mentioned during a Twitter thread as well that they'd see an uptick in withdrawals like I just referenced. And the deal with FTX is valued at approximately $680 million, according to Zach Prince. To put things into context, BlockFi had raised $350 million at a $3 billion valuation in March of 2021. So that means their valuation has gone down significantly. They were even talking about going into actually doing an IPO at some point. I think last year they were talking about that. Obviously, that's not happening anymore. And then on top of

this, news came out today that Nexo.io, another crypto lending company, is working on an agreement to buy Vauld, which is another company in the crypto lending space that is not doing well at all. There's still a lot of information coming on that front, so I don't have much more to say here. But I think it's just showing here that the stronger companies are definitely coming at the top. There's a lot of consolidations coming. And I think we will be seeing in the next couple of years, a lot more regulations focused on consumer protection here, because clearly I'm sure there's a lot of people that will have lost some money. If you're with BlockFi or potentially Vol,

depending on what kind of agreement, I think it sounds like you should be okay because you have those other companies that are stepping in to buy them essentially. So this Zach Prince guy who's the CEO of BlockFi, he's the one that did this Twitter thread? Yeah. Yeah. Straight from the source. Oh, cool. Because there was a lot of speculation. Remember- There was a lot of incorrect information flying around.

Yeah, exactly. Because you're the one who actually i think it was on canada day right you texted me and saying like oh like ftx buying block five for 25 million and i'm like what like that doesn't there must be a zero i was like this must be 250 is what i said there's just no way yeah and i think as the rumors starting coming out i think he wanted to once the deal got I think he wanted to, once the deal got finalized, he wanted to put things out straight. So he went on Twitter and did a full thread about basically what I just outlined was straight from his thread. I thought they were like the one that would be swallowing up all these other companies. Like, I always thought of them as like probably the most solid balance sheet, most reputable.

And here this FTX guy and what's his name? Sam Bankman Freed. Dude, just swallowing up everything. Yeah. I mean, it's hard when you don't have public companies, right? You can't really see what's going on under the hood. I think BlockFi from the sounds of it was still in decent shape, but it really sounds like they can use the liquidity. I don't think they were anywhere near close to a Celsius, for example. But if things kept getting worse from a market perspective, maybe eventually they could have gotten in trouble. But I think it just makes a lot of sense for them to be bought by FTX probably. Just goes to show when the hype comes down and there's withdrawals in this type of lending, I was going to say Ponzi, when there is withdrawals in this system,

it just falls apart so fast. And it just goes to show you can't expect to get these ridiculous 20% returns by lending out your digital assets and think it's sustainable. I mean, the writing was on the freaking wall for this stuff. No one was wearing any pants in this whole industry. I guess some guys were, but not many. Some were. Yeah. Yeah, some were. No, and I think I would add that that's what happens when there's an unregulated sector. Yes.

I think that's probably the biggest thing. It's the wild west. Yeah, that's why I mentioned I think there's going to be a lot of regulations. Hopefully, it won't stifle innovation. It'll be more focused on consumer protection. I think that's the most important thing there. Agreed. Because it's just how are you going to move forward with just no confidence in your ability to protect my money?

If you're trying to disrupt financial services and consumers just have no confidence when they want to withdraw their money that's still going to be there, that's bad. That's just brutal, man. That's terrible. Yeah. But the last thing I'll add is, yeah, BlockFi definitely offered interest rates that were more reasonable. They did. That's why I thought they were the only ones wearing pants, but I guess not.

Yeah. Celsius, though, that was ridiculous. Yeah. So you're telling me 25% guaranteed returns was not sustainable? Let's talk about more performance indicators. I guess everything I'm talking about today is performance driven because it's top of mind across the board. It's fun to hear about, fun to listen to for the podcast, but also just like nothing, no earnings yet. I'm going to talk about sector performance. Now, I use the S&P 500 and not the Canadian market

because TSX is pretty limited in terms of coverage. Like tech, for example, like half the market cap of tech is like Shopify and Constellation software. There's just not enough there to get a good picture of S&P 500, like as you would get for the S&P 500 with the US stocks. Like you're just going to get way more coverage and better data. So year to date, these are the different sectors as defined by Fidelity and what they have performed. Now, it is no surprise, Simon, you didn't have to see what's here on the document to know that energy is pretty much the only sector that investors are really happy with owning year to date.

Energy is up 31% and it is one of two only sectors in the green year to date. Utilities is at 0.43%. So call it dead flat. And so it's holding true. Utilities are durable in all kinds of markets. That thesis is true. If you include dividend, utilities are probably up, right? Does that have divvies?

I think this is total return, I think. Total returns, okay. So maybe on a share price, they've decreased a little. Yeah. But you've stayed float. I'm like 90% sure this is total return. But even if it's not, I mean, you can see here pretty much everything is red except for energy. Next up, we have consumer staples down mid single digits,

healthcare as well. And now we're down into double digits in the negative. Industrials at minus 16%, materials, financials, real estate down 20%. Information technology, so tech down 27%. Communication services and consumer discretionary names getting wrecked at more than 30%. That's that inflation fears. Everyone just sells consumer discretionary and goes towards staples. So you get these factor rotations out of sectors. And many times it has nothing to do with the fundamentals of the business. And so this is your opportunity. On a five-year, if we look out five-year, this thing flips on its head almost identically, which is nuts. So this is again, my reminder to zoom out. On a five-year basis,

So this is, again, my reminder to zoom out. On a five-year basis, the tech sector has returned 137% leading the way, then healthcare, then consumer discretionary, utilities, materials, consumer staples, real estate, financials, industrials, communication services, and in last, energy at just 15% on a five-year basis. And that includes all of the new performance. Like this is up to date, including all of the destruction that's happened in 2022. So again, you zoom out and the worst performing sectors this year are still have been the best things to own on a past five-year basis. Now tech, you get Google trading at less than 20 times free cashflow these days. It's just really time to do the opposite, like zig when they zag. This is how I'm thinking about this because you look at what has worked and what has worked recently, and they do not align. The sectors that have performed well recently, I just don't want to own for the most part. They're just underweight pricing power is the way I think about it.

Yeah, it puts things into perspective. It'll be interesting where commodities go, especially if we see a high inflation remain as is for a period of time i think commodities will probably end up doing quite well there's not really a sector for that unfortunately i guess materials would be commodities right yep yep totally yeah and i guess energy is commodities as well it's just different type of commodities i think that's the only thing with inflation. Typically, commodities will tend to outperform during inflationary times. The only thing is, even as they may do well during that cycle, you may get some short-term volatility with commodities. So that's, I think today we saw oil being down like 10% in one day.

Yeah. Yeah. That's the news today, right? Yeah. That's the news today. But we could be talking about oil two months from now, and it'll be 25% higher if we continue in this inflationary period. So it's something to keep in mind. That's one thing I'm looking at more and more. I'm interested in seeing how commodities are performing because I don't think it's really happened since the 1970s in terms of what we're seeing in terms of inflation. So yeah, just interested in that. 2022 is a bizarre year where the first time in several decades, I forget the exact year, but I believe early 80s, 2022 is the first time since that year, whatever year it was,

first time since that year, whatever year it was, that almost every asset class is down. Yeah. Which is so rare, right? Usually, you have these uncorrelated asset classes, and almost everything is in that situation. So it's a bit of a strange event, right? And deflating for market participants and just the general feel of the economy, consumer confidence. So I get why people feel the way they do in terms of the outlook for the economy. They turn on the TV and they tell you there's a recession coming or we're already in a recession. And as an investor, there are so many reasons, the list of reasons to be pessimistic in the short term, they will throw at your face left, right, and center.

You can't get away from it. But there are more, more reasons to be thinking long term and investing and continue to compound your wealth. If you can think like that, you'll make lots of money. Yeah. Now, moving on to some actual earnings. So there were a few businesses that reported. So this one is probably well known by our listeners at this point.

So it's Alimentation Cousteau, which released their fiscal year. I love when you say the name of that company because I just butcher it. Yeah, the D is silent. I think that's all. to butcher it. Yeah, the D is silent. I think that's all. So fiscal year 2022 and Q4 results all mostly touch on their fiscal year 2022 full year results here. So revenues increased 37% to $62.8 billion. This is good, but I think we have to put things into context where the price of gas has gone way up in the past year. So it is misleading fuel revenues alone increased more than 50% year over year to 45.4 billion. Total merchandise and

services revenue was up 4.4% to 16.6 billion. Still good, but obviously not the 37%. So I think it's important to differentiate both sources of revenues here because the gas is definitely lower margin for them. Net earnings were down 1% to $2.68 billion. Earnings per share was up 3.3% to $2.52. And just by mentioning these two last items, you can tell that they reduced their share count because the earnings per share increased more than their earnings. And actually, the net earnings decreased. They repurchased $1.9 billion in share during the year.

They increased their total annual dividend payment by 25.6% to, let's just say, $0.42 per share. And free cash flow was down 21% to 2.3 billion. They had to write off 90 million during Q4. 56 million was because of its Russian subsidiaries and 34 million surprise, surprise was tied to their investment in fire and flower holdings, which is a cannabis retail company. Are you surprised by that one? That's the one they like tuck in in their locations to sell the cannabis, right?

The Fire and Flower. Yeah, I think they also have like, yeah, they have, I think we have a few in Ottawa too. It's just, you know, I think we've talked about cannabis quite a bit recently. It's just the economics behind it. Even the retail place, it just doesn't make much sense for someone to go to one place or another. There's nothing for the most part different in terms of their offerings. Yeah, no. What's the differentiator? And if you're in Toronto and you walk down Queen Street, there are just way too many cannabis retailers. Something has to give and something is giving

you're seeing it consolidate and shake out a bit because it's just ridiculous like the market can't support that many retail locations i'm talking about like every other store legit no no joke and it's such a weird system because you have these retail plays that have to buy their marijuana straight from the provincial system. And then you can go online and buy your own cannabis straight from the province as an individual. Right, right. So it just, I don't know, the business model is all out of whack. I'll just say that. i just don't know how profitable it can be when you can get from the comfort of your own by just online straight from the province and then you bypass all these retailers yeah someone's got a gift that's all i have to say about this but back

to kushtar yeah back to kushtar uh so during their i said it wrong again wait kushtar kushtar kushtar yeah i'll never say it as eloquently as you, but I can at least get closer. So during their conference call, I was intrigued. So I listened to parts of it and they spoke again about supply chain issues. They said that it had improved compared to previous quarters in Q4 of 2022, but they were still experiencing some issues with supply chains. Funny thing is that apparently they were having a lot of issue with getting chicken sourced. They talked about that specifically, not in their most recent quarter.

They said that actually improved, but that was one of the issues they had in the year previously. They have rolled out the first circle K-branded EV charging stations in the US and are looking to add 250 charging stations in the next two years. And the last thing I found interesting during the conference call was that they are trying to increase customer loyalty with their loyalty programs. One of them that the CEO spoke about in the conference call was the Sip and Save, which now has 450 000 members with their circle k brand that's a good amount 450k yeah i have no context that sounds like a lot yeah me neither

you get cheaper overall drinks or coffees or whatever it is i don't know if there's just a certain amount like it's tied to certain types of beverages. But anyways, it's just, I thought it was interesting to see how they're trying to create a customer loyalty there. Are they still Max Milk in Quebec? Do they keep those ones or do they rebrand them too? So it used to be, yeah, they're,

I don't think they can use the circle K name because of the language laws in Quebec. So it used to be like Alimentation Couchetard with the same branding as Max. But now I actually noticed over the weekend, I was driving to head over to the casino last weekend. And I saw they didn't have the Circle K name, but they had the Circle K branding colors. Did you go play some poker? Yes, I i did and they have a staff shortages there too oh yeah big time some macro takes at the casino so uh yeah i made uh did you win any money 400 bucks yeah dude i cannot play you will take all my money do you think i would have a single chance of beating you in heads up poker

and i'm like okay anyone can be anyone just because there's a luck aspect, right? Well, of course. I think I would probably put myself in situations where the probabilities are in my advantage. Yes. So over long periods of times, I would probably crush you. But short term. That's what I want to do. That's what I was looking for.

Short term, you could win. That's the beauty about poker right and that's why players that are not as good come back because on any given night they can still win right okay cool so more takeaways from kustar because i was looking into this results and of course like i was like oh yeah they reported earnings and I was like, oh yeah, they reported earnings. And I was like, oh wait, you already beat me to it. You got your notes here. But I was like, okay, there's some more interesting macro takes from this earnings release that are just kind of interesting because you have this Canadian company that may have one of the best pulses on the global economy. Think about that. Think about

their network across Europe, across the US, across some of the emerging markets. They are the largest convenience store operator on the planet. Actually, I wonder if they have more or less locations in 7-Eleven because 7-Eleven is private. 7-Eleven is one of the largest private companies in the world, by the way. But regardless, we have this Canadian public company that only trades on the TSX that has one of the best pulses on the global economy. And they are not shy to talk about the macro experience because it affects their business. So they pointed out some interesting bullet points that I have here when it comes to the global economy. So I've made some notes here. Heavily

rising costs across the board was mentioned more than once, mentioned many times. And so shocker, right? Shocker, heavily rising costs across the board. All right. Now here's a quote from Chief Financial Officer Claude Tessier now here's a quote from chief financial officer cloud tessier that's a very french canadian name right right yeah yeah so yeah that's tessie is it claude tessie yeah claude tessie yeah sorry i was trying to figure out which one is bigger 7-eleven or kushtag and it looks like 7-eleven has more stores but kushtog is not according 2019 article kushtog is a close second a close second okay interesting all right so here from the chief financial officer cloud in canada we felt pressure on our cigarette sales there seems to be a transfer to the black market, end quote. Whoa, wild. And it was them talking

about how this stuff happens when consumer confidence is really low. People look to get their stuff at cheaper prices. They mentioned that people are going to the discount brands when they're getting stuff in the convenience stores and even affecting people going to get cheap cigs. And so they saw some pressure on their cigarette sales. Interesting. He told analysts on the call that inflation has also shown interesting behaviors for consumers where they just fill up a low percentage of their tank. They have seen actual volumes for each fill decrease significantly. People throw in just 5, 10 liters, which now is double the price because their tank used to cost $50. Now it costs $120 to fill up. They're just filling up like they're $50, even if it only gives them half the liters.

And so they're seeing stuff like that happen. Here's the quote. This is a sign that the pressure is mounting on consumers. We are lucky to see unemployment at a historic low, which means that the consumer is still in better shape than 08, 09 during the financial crisis. So like you got the CEO of some company that has like a really good pulse on the macro situation. And he's like comparing it to 08, 09. But don't worry, we're in better shape than that. Another quote here. We see consumers switching from premium beer to low cost beer.

Okay. And then another quote here. Light at consumers switching from premium beer to low cost beer. Okay. And then another quote here, light at the end of the tunnel in terms of workforce shortages. Really interesting, like all across the board of things that we talk about and stuff that we hear for macro discussions, kind of interesting discussions about all of that from the management team from CouchTire on the latest call. And I thought that pointing those kinds of things out provide a lot of insight. And yeah, it's just cool because you have this Canadian company only listed on the TSX that may have some of the best insights on consumer confidence in the world. And I think we should keep talking

about what they have to say on their calls. Yeah, no, it's really interesting. I mean, as you were talking about cheap beer, I'm kind of intrigued to see if we go back to like past recessions. Maybe I can do that for an episode to see how alcohol makers have done during recessionary periods. Because to me, if it's a recession, a lot of people are hurting on a financial standpoint. And, you know, sometimes people want to escape. And I feel like they probably do pretty well. That would be my... They keep drinking, but they, you know... Yeah, they may switch.

They go from Budweiser to Natural Light. you know yeah they may switch they go from budweiser to uh natural light yeah or canada goose to uh you know smirnoff or i don't know if we even import that anymore now with the rush situation going on but that would be an interesting thing to look at to see how they've performed and how their sales have done during those periods because there is a couple wait wait did you call it canada goose the vodka did i, did I? Yeah, yeah. I think I did. Grey Goose. Yeah, Grey Goose.

Yeah, I did. I'm going to start calling it Canada Goose and see if anyone notices. Canada Goose Vodka, yeah. But yeah, there's a couple names there to look at. Diageo is a big one. There's Constellation Brands. That is a big one too. I think there's some of the ones in Europe that are, I think, and Weiser Bush is publicly traded too. Yep, it is.

Yeah. Let us know on Twitter if you'd like us to look at that. I think it'd be pretty interesting. 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. Now moving on to Pinterest, who named a new CEO. So Pinterest announced that it had appointed a new CEO, Bill Reddy. Is Bill Reddy? Yeah, I think he's Reddy. He actually previously led Google's commerce business. He has a lot of experience in e-commerce and payments, clearly. Co-founder

Ben Silberman, who was the CEO, is now in the role of executive chairman. As a shareholder, I mean, I have a very small position here. This seems to be like a good move on the surface. It sounds like Pinterest is really trying to monetize the platform while not negatively affecting the user experience. Very delicate balance to do. And one thing that I read is that when someone sees inspiration on their platform and has intent to buy, they want to make it as easy and seamless as possible for the user, which is a good thing.

But I think, again, you have to achieve a good balance here where you don't want to necessarily also be shoving things into people's face, especially given how the Pinterest platform is and how people use it a lot for inspiration. So there's a really fine line. And for me, increasing revenues per user is great, but they have to make sure that they keep those users and they stay on the platform. And that's been the biggest bear case against Pinterest. And I've been keeping a close eye on and I said it earlier this year. For me, yes, they've been executing well on monetization. That's all great. But I want them to see their users, their active monthly users.

I want them to stay stable at the very least by year end. If I don't see that, I will most likely be selling my shares. I think it's wise to have this one on a short leash. There's a lot of questions. And I think I've been pretty vocal about when you talk about the company. I mean, your thesis has been mostly right, but there's a lot of things to think about with this name. And I think that you're on to the right questions. I'm interested to see what you do with this one. There is so much potential though. Like it's almost like kind of frustrating. Yeah. And that's kind of the feeling I get for them. But again, I think keep in mind Pinterest

and it goes back to what we were saying. I'm not sure if it was this episode or the other one, And that's kind of the feeling I get for them. But again, I think, keep in mind Pinterest, and it goes back to what we were saying, I'm not sure if it was this episode or the other one, everything's kind of blurry. But we do own growth stocks, you know, especially if they're unprofitable, or you know, they're just on the verge, we tend to just take smaller position, take small shots at it, our bigger, larger positions are usually much more stable companies that are compounders over long term. So when you have a thesis that doesn't play out for a growth company, this one so far for me for Pinterest, even if I end up selling at a 50% loss, it's just peanuts for my portfolio. Okay. So before we go to this next section, please scroll up because I don't want you to see the graph because I want to ask you something first.

I kind of saw it, but that's okay. Oh, you already saw it? Yeah, but I wasn't really paying attention to it. So I think... Okay, it's more so like, did you see the legend for the two graphs? I kind of did. So I know. You know the result. Sorry sorry okay pretend you didn't

when i prepared today when we logged in i was looking at what you added and i looked okay yeah yeah dang it that's okay all right so i pulled some interesting data here what i was gonna ask you is what do you think has outperformed since they started tracking this stuff? The Canadian house index, so like home prices or the S&P TSX composite. So the Toronto Stock Exchange composite. And I would have thought like it'd be pretty similar because how often do you just hear about people who are just rich from their like, they're like bajillionaires because they just have owned their home forever, right? They've owned multiple homes and they've just made so much money. And well, the reason for that is mostly that there's leverage involved, right?

Leverage and I think it's also, it depends where in the country you are too, right? That's right. I think there is some place in the country where you've seen a lot. It's probably driving this number you're going to talk about way more than the rural area. The GTA, Vancouver. Yeah. Those markets have really drove Canadian home price indexes. Now, I looked side by side from data back to 1984 on the Canadian home price index compared to the TSX. So Canadian publicly traded businesses.

And the data is actually quite interesting. It was like neck and neck until the mid 90s, but the stocks have just way, way outperformed estate, as they should. But I wanted to talk about this because for some reason, there's been this debate about how homes and stuff have like higher returns in Canada than the stock market. And the data just says a completely different story and it should be expected, right? You have way more volatility on stocks. You don't have leverage. Well, you can, but like not typically compared to like what you would run leverage with real estate.

But there's been this weird notion in Canada that real estate just outperforms everything. in Canada, that real estate just outperforms everything. And so I was like, okay, well, how do I compare it to just publicly traded Canadian companies? Since 1984, the Canadian home price index is up 767%. So you've made many times over your money. But stocks with publicly traded Canadian companies on the TSX, you have made more than 2000% since 84, if you just held those. So again, you've been holding the banks for all that time, right? You've been holding some of those Canadian staples to the economy, and they have produced phenomenal compounding returns. So there's no real insight to here other than just this weird notion that Canadians have been so attached to real estate outperforms everything is just not true. And statistically, when you look across the world, real estate does not appreciate like

equities do. And Canada is the same. So this weird notion, let's lay it to rest that the S&P TSX composite on a long run has massively outpaced the Canadian home price index. That's not to say that Canadian homes have not massively increased in value over time. They have, but they are still massively trailing the performance of stocks. Now, there is a quick caveat to this data set which you mentioned. This does not take into account the different geographies. How does this graph look side by side with Toronto home prices? It looks different than rural Saskatchewan home prices or somewhere out east in Vancouver, prices have gone crazy too. So of course, there is more

underneath the hood to this. But as a general Canada home price index, it's just not even close. Yeah, I would like, I don't know if anyone can create these charts, but let's say what an average down payment was in 2000 for a home. And then you take that money and you invest in the stock market. Which one would have performed the best when factoring in average maintenance costs and other costs associated with owning a home or owning properties? Because I think the thing that annoys me the most about real estate is, you know, you talk to people and they have this amazing way of completely forgetting that there's additional cost to owning real estate. Right. Like you never hear

people like, oh, don't forget about the maintenance cost of property. It's not as sexy to talk about that stuff. No. And you'll talk to a lot of realtors. Unfortunately, they never talk about that. They only talk about like, oh, well, look how it's performed over the last 15, 20 years, but they don't talk about the bigger picture. And I think that's the one thing that frustrates me the most. I'm not saying it's not a good idea to buy a home. I think it really depends. But I think, yeah, you have some cheerleaders out there that I find sometimes they'll kind of just talk about the good and leave out the other stuff. Yeah. There are so many benefits to each asset class, not just real estate aside. Every asset class has their pros and cons. And you can definitely debate me on this and you'll probably

be right on many points, which is like, yeah, you get to introduce leverage. You don't get daily mark to mark asset prices. You can take all your money out, refinance, and then go put it somewhere else. There are amazing benefits to investing in real estate. Don't get me wrong. It's just really knocking this myth that it's outperforming stocks over a long view in Canada. It's just not true. So that's the facts. stocks over a long view in Canada. It's just not true. So that's the facts. Yeah. Now, speaking of refinancing, there sounds like there's going to be some new rules for HELOCs in Canada. So a HELOC is a home equity line of credit for those who are not familiar with it. If you're a homeowner, you probably have heard of this before because your bank or mortgage broker or someone may have talked to you about that. So OSFI, which is the Office of the Superintendent of Financial Institution,

is implementing new guidelines. This will have an effect on share equity mortgages, reverse mortgages, and home equities lines of credits, HELOCs. Now, the biggest change will be for the very popular HELOC. Before I get into that, I saw a survey done by BNN Bloomberg and rates.ca that they surveyed 1,500 homeowners and found that 27% of them had an HELOC. I get it, 1,500 is not a super big sample, but it's still a pretty decent sample here. So it affects close to, well, let's just say a quarter of the homeowners according to the survey. Now, a HELOC is a line of credit secured against the homeowner's home. The way it works is you get a line of credit against the equity in your home. The interest

rate on HELOCs are variable and not fixed. So when you have a HELOC, you currently only have to pay the interest on it. Under the current rules, as soon as a borrower makes the mortgage principal payment, they can immediately re-borrow the same amount from their HELOCs. And that HELOCs can increase to as much as 65% of the value of the home. The entire loan cannot exceed a loan-to-value of 80%. Now, the new change that will come into effect in late 2023 will force a homeowner with a home equity line of credit to repay principal, not just interest, if the total loan-to-value is above 65%. And from what I understand, that 80% cap of loan to value is still there. The only

difference now is that you would have to pay principal on it if it exceeds 65%. Now, the survey that I referenced also had some interesting data here, actually some pretty scary data, I'll just be honest. The survey found that 24% of homeowners who had a home equity line of credit often or always pay interest only on their HELOC loans. So that's pretty scary why they're a quarter only pay the interest essentially. 20% of the holders said they either didn't know their payment structure or chose not to answer the question and then 55 said that they make regular payments against the principle to decrease their HELOC debt so it's a bit alarming here that you can make a case that potentially up to like 35 40

of homeowners just make the interest payments when interest rates are going up. And these are variable rates. You cannot have a fixed rate home equity line of credit. And I did use the full name and HELOC interchangeably there just because it felt like I was saying it like a buzzword too often. That's good. Yeah. So HELOC's always variable. In the past few years, I hear this and I'm like, oh, I mean, what's the problem? Look at rates, right? I'm not surprised. So, I guess my biggest question is how much that skew changes on how many people are paying just the interest or how many people are making a priority to pay down that debt? Because you're right. I mean, how this affects regular people who have HELOCs when they're on a variable rate, as you have to be, definitely affects their cash flow situation. So I'm

interested to see how this affects that 24% number in terms of if they're actually willing to pay down this debt or if it becomes a priority? Yeah. I mean, for me, I'm more scared that even if they would be willing, they can't. Can they? Exactly. I think it's can they is the biggest question. I think, unfortunately, low interest rates have seen people take on a lot of debt and variable debt is some of the most dangerous one, even credit cards, right? Like that'll be impacted by higher interest rates too. So makes me a little nervous, I'll be honest. And that's probably the barest case right there for some of the Canadian banks is typically higher

interest rates will be good for banks because that interest spread between what they give out on people who are essentially depositing money and then what they collect on loans. That spread increases, but it can be a problem when rates are going up too quickly and then you have more defaults happening. So that's really the risk here for banks. Here it's tied to hard assets, which is their homes. tied to a hard asset which is their home so it is not an unsecured loan but still if you have people starting to default here and the home values actually has gone down significantly it could spell trouble for some of the banks in canada oh wow that's uh let's not think about that sorry that stresses me just to think about this all right like yeah i don't have a he lock but yeah i mean i know a lot of people like who are in really tough situations

they'll like sort out their debt situation so they'll like he locked to pay their credit card which is pretty smart move right like you don't want to be uh paying the higher interest rate if you can avoid it yeah and at the least, there's also the mortgages that have CHMC insurance, so people that have less than 20% down. So the bank can recoup their money if someone doesn't pay back their loan. But then you have the ripple effects of that, that now it's putting pressure on the Crown Corporation owned by the government, right? So I'm hoping none of this happens, but there could be, hopefully, people are able to make those payments as a whole and this nightmare scenario doesn't happen, but there's definitely some warning signs going on. Simon knows his way around the housing market. I do not. I am a poor, starving, dirt and ramen eating technology entrepreneur.

And there is a good news, Simon. Let's lay it on them. Yeah, let's do it. Let's lay it on them. Yeah, it's a good segue after all this doom and gloom. Let's lay it on them because I am not the real estate expert. You don't come to this show to hear me talk about real estate. Simon, you know your way around real estate. I know a decent amount. I'm not an expert by any stretch of the imagination. But you wouldn't say you're an expert. No. Perfect. Great. Because we have a solution to your problem of if you want real estate content,

we are launching in one week exactly. You'll find it on your podcast player. If you listen on this feed too, we're going to do a little intro for it. The Canadian Real Estate Investor Podcast. We have two new guys coming on as part of the network, Dan and Nick. I think you're really going to like them. Episodes are going to be rolling out in exactly one week's time. All these types of discussions, you're going to have actual experts talk about it. Nick's an expert in mortgages and that situation. He's a mortgage broker. They actually have a corporation together where they do real estate investing together. And then Dan is a realtor and done all kinds of deals from residential to commercial and all that

fun stuff. So this is just a good segue to talk about the show that is coming up very soon. I'm pumped to hear it. I'm going to be a listener myself. I've heard their first episode. It's really good. Yeah. Yeah, I know. I think they'll do a great job. They work well together and it's been fun working with them, just getting that prepared for launch. Our plans basically are to make a network of niche canadian shows in this vertical of finance finance because that's an american thing right they call finance finance i think it's a british thing finance is it british i always hear americans on the internet oh i thought yeah i thought it was a british thing but anyways yeah it doesn't matter. And the Canadian niche of financial

news hot takes that we got. And I think that's going to be really good. So this is our segue into that real estate was an obvious choice to make that move. And so the Canadian Real Estate Investor Podcast. Hey, come on. Get excited, people. We're going to have that out very soon. I think you guys are going to really like it. And we will give you tons of reminders and links of where to find that show so you don't have to listen to me completely give silly hot takes on real estate. I can talk stocks all day, but I don't know what I'm talking about with real estate. And we'll have a preview on our show here. I think it's next week, right?

Yeah. And then you'll be able to get a full taste of what the show will be like. And then you can go listen to yourself. And I think it's going to be good. If you're new to this show, if you're by chance stumbled into this beautiful investing show, we're the Canadian Investor Podcast. And we release shows on Mondays and Thursdays. And I think you should subscribe because I think you're going to like it. We keep up to date with relevant stuff like we heard today. But we also think long-term on some episodes that are just kind of timeless. You could listen to it now.

You could listen to it in five years. The idea is that it does not need to be listened to in the moment because we're just thinking about our investing frameworks, the way to think about long-term investing. And so you can listen to those episodes as well. Yeah. Yeah. When my daughter wants to listen to investing podcasts, she'll be able to go back. Yeah. She'll be able to go back a couple hundred episodes. We'll be in like episode 5 million by the time she's listening to investing podcasts. Coming up. It's coming up, eh? Oh yeah. It it's coming up five and a half weeks i i think if she arrives on time papa belanger five and a half weeks yeah i'm excited for you man it's gonna be good yeah me too your whole everything's gonna change you're gonna be making dad jokes on the pod that's gonna be wild yeah the dad jokes are gonna be off the charts man yeah i'm starting to

practice so i should be warmed up for it. Yeah. Okay, good. I don't have one right now, but I'll try to think about one. But when you are, dad, they'll just come to you right away. Yeah, I think so. Okay, good.

Thanks so much for listening. If you want the best financial data platform on the internet, go to stratosphere.io. Please go subscribe and get 15% off with code TCI and go join a paid plan so that I can stop eating dirt and ramen and be like one of these cool real estate people. That is code TCI and that gives you a lot more than just the base plan. But even if you haven't checked it out,

the base plan is really good. It's completely free. That is stratosphere.io. Thank you so much. We'll see you in a few days. 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.