The Canadian Investor - 2022 Year in Review

Episode Date: December 22, 2022

From high inflation to growth stocks coming back down to earth, we discuss our main takeaways from 2022 from a Canadian investing standpoint. Tickers of stocks discussed: XAGG.TO, XCBU.TO, VGV.TO, VCB.TO 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  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. Register for ShakepaySee 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. My name is Brayden Dennis, as always joined by the very thoughtful Simon Belanger. Today we have one of my favorite shows of the whole year. I'll call it my second favorite episode of the year. My first favorite is the one we will record next week, which is our bold predictions

for next year. Simone, by the way, I was a year late. Did you see Fresh Eat got acquired like yesterday? Yeah, yeah, I saw that. No, that was a bit unexpected. But yeah, we were chatting about it a little bit. And it's kind of funny. People would that was a bit unexpected. But yeah, we were chatting about it a little bit. And it's kind of funny. People who would have bought around the IPO, they still lost about 80% even that with that pop up. I think it doubled yesterday or something. Yeah, yeah, it did double. I think more than doubled yesterday on the buyout price. That's how unloved this thing has been. And it's still you've lost tons of money if you bought it at ipo so i had a bold prediction that it would be acquired in the year of 2020 when i set up my bold predictions

we're going to do our 2023 bold predictions wow that sounds strange to say 2023 bold predictions next week it was one of my 2020 bold predictions so i was just a little late. Two years late. That's okay. We'll chalk it up in the win column. Spoiler alert, I got one absolutely nailed out of the three I did. I whiffed on the other two, but one I nailed. I know one you certainly whiffed. Yeah.

Oh, yeah. I forget what you – I forget what else you made. Anyways, we'll see that next week. Let's do our 2022. I got all my years mixed up here. Year in review. We're going to go back and forth on things we noticed, what summarized it, and also things that we learned because I learned a ton this year. And you know, that's just kind of, that's just how we operate is we got to keep learning one so that we can make the show better time and time again, but also to become a better investor, a better operator. And I think that that's important in this lifelong

journey. So let's kick it off with your first takeaway from the year that was. Yeah. So the first one, I mean, the one that came to mind as soon as I thought about 2022 and probably the one that comes to mind for most people as well. Turns out inflation is not transitory, Mr. Powell. What? You're kidding. You're kidding me. I was told it was. Yeah, I know. I think a lot of people were told that it was. And obviously, inflation was the topic that everyone talked about this year. And for good reason, because Canadian CPI started at 5.1% in January. It continued upwards up until pretty much like mid of the year. I think it reached 8.1% in June and has trended down since with September and

October both coming at 6.9%. The three core CPI metrics that's the metrics that the Bank of Canada tracks closely remain elevated recently at 5% plus so that's something to keep an eye and for those who still aren't familiar with the lingo, CPI is just the Consumer Price Index. It's the official measure of inflation by the government. And although the trend is encouraging, it's too early to say if inflation will keep trending down towards the target rate of 2% for the Bank of Canada and the Fed. And by the way, TIFF today said again that this was their goal

to get it to 2%. Essential categories like food and shelter are still experiencing very high inflation levels. Now, central banks around the world led by the Fed and its chairman, Jerome Powell, have been increasing interest rates rapidly to combat inflation. And they took a page out of the Paul Volcker playbook, who was the chairman of the Fed between 1979 and 1987, and increased interest rate to as high as 20% to combat inflation. So we're not quite there yet, not the 20%. Now, I think we have to keep in mind that the Bank of Canada ended up raising rates a total of 400 basis points. So, you know, a 4% increase from the base it was this year, bringing the rate to 4.25%. So it was 0.25 to 4.25. And it raised rates by the 100 basis point

in July alone. And the 4.25% that we're currently at is the highest rate since 2008. As high as it may seem, few people realize that the average interest rate in Canada since 1990 is actually 5.8%. Which means that the 4.25% that we're currently at right now is not historically high. Well, high historically speaking so even if the rates are still relatively low compared to historical level it's still the quickness of those rate hikes and how individuals and businesses piled on a lot of debt while rates were lower than ever before and the debt levels are really high especially in Canada less so in the US and it took a lot of people by surprise and I think

Tiff McClellan has to take a lot of the blame for that of course people should have been more conservative in their approach for that but just two years ago and I quote what he said in 2020 if you've got a mortgage or if you're considering to make a major purchase or if you're a business considering making an investment, you can be confident that interest rates will stay low for a long time. So, I don't know. Damn. The fact that that's in writing. I know. Well, it was a press conference.

I actually got it down. We'll call the transcript in writing. Yeah, exactly. So, I got it down word for word, but it doesn't look good. And I think the banks and the Bank of Canada was not the only one. I think the Bank of Australia said something similar around that time as well. But I think central banks now will be very wary of trying to make predictions like that and statements that could be interpreted or lead to certain behaviors.

interpreted or lead to certain behaviors. And now they seem very much focused on doing rates, rate hikes, or letting it stay at the current rate, whatever they decide to do based on the data that they get. So who knows where it'll be in 2023. But I think I'm going to go on a limb and say that inflation and interest rates are still going to be a hot topic in 2023. Yeah, I think that that's a fair statement. I do want to just highlight like two things here. One is that, yes, historically, rates are not like super high if you zoom way out. But given, you know, that being said, we went from like zero to, you zero to the upper band of historically since 1990 very quickly and was given the ultimate rug pull from the Fed. It's like, everything's fine. Don't worry.

Rates are staying low too. Just kidding. Rug pull. That's where it doesn't sit right with people. to just kidding rug pull. That's where it doesn't sit right with people. And that's where you had these huge, huge tent loads being taken on by Canadians and around the world. And then you have a big regime shift very quickly. So the problem is not that rates are higher. It's the problem that it went from so low for so long to so much higher in such a short period of time and led one way and the result was the other way. That's where the real problem is.

Yeah, and for people who are not aware, typically interest rate hikes were done just by 25 basis points increase. So that was the norm before this year when they increased rates. It was very rare to actually see a 50 basis points increase. So that was the norm before this year when they increased rates. It was very rare to actually see a 50 basis points increase. So the 100 basis point we got in July, that was quite a shock. So I think you put it really well. And I think, you know, I mean, you can't talk about 2022 and investing and not talk about interest rates because it has impacts on pretty much everything we do as investors, whether people realize it or not. Yeah, I wholeheartedly agree. And I'm going to dive actually more into that after one of my third takeaways, which is a preview of it, which is

absolutely these things matter, but they're so out of your control and impossible to predict. So just double and triple down on the things that you can control. control and impossible to predict. So just double and triple down on the things that you can control. 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. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like

learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. I want to talk about what I'll say. The market smartened up. Now, this is different from the market went from a historic bull run to a bear market. That's not what I mean. I mean is that markets actually smartened up on three things

in particular that I noticed, which I'm going to get through in a second. So I want to start with the definition of irrational exuberance. Irrational exuberance refers to investor enthusiasm that drives asset prices higher than those assets fundamentals justify. So it's saying we went into la-la land and the fundamentals don't justify it. So Irrational Exuberance is also a book written by Robert Shiller. It's pretty good. I read it a few years back. I kind of forget it, so I should probably reread it.

But this is the same Robert Shiller who coined the Shiller PE as well. So pretty famous investor and economist. Okay, so let's look at 2022. Prior to this year, you had a very strange dynamic, okay? You had a very long bull run, basically post-GFC, post-great financial crisis in 08 to March 2020, I would say is probably largely agreed upon. Now, the economy was good, largely peaceful geopolitically between superpowers that doesn't necessarily mean everywhere in the world, but generally, I would say pretty peaceful. The rise of big tech to where those companies are today, just dominating every facet of business. Very solid stock market returns for quite a long while during this period. It sends the market down sharply. And in comes the Fed with what you mentioned,

helicopter money, rates to zero, and print, baby, print. And so that led to the regime that we're in. And then conversely, now the regime we're in now. So there's no free lunches, right? Every action has an opposite reaction. Now, market rallied like I've never seen. We were back at all-time highs by July, and we have had a monster stretch from that point all the way to the fall of 2021. A monster stretch. Large caps like Apple seeing their share price increase 200% from the lows of 2020 to the end of 2021. So if you were in large caps, you made money.

If you were in mid caps, you made money. If you were in small caps, you made money. It doesn't matter what you win. And here's the kicker. The worse the business, the better. And so, boom, you have a gigantic influx of IPOs, people trying to cash in. And I was mentioning the business quality doesn't matter. Here comes the shit co, Simone. Carvana, the used car retailer. They have the big vending machines

of cars, right? What are they going to do with all that stuff when this place goes bankrupt? This thing went up over 1000% during this stretch. The stock's now down 98% from the peak. Like an absolute disaster. During the holidays, I'm going to do a segment because we're pre-recording on zombie companies. And the example I took was Carvana. So, I'm actually going to look a couple years back to just show people what were some of the signs that this was actually – they were in trouble even when things were supposedly booming for the used car industry. Right. What a weird thing. It's like come in with this new model. We're turning used car sales into giant vending machines. Innovative stuff, right? Innovative stuff.

Well, let's come back down to life. I saw a funny thing where it's like, what are they going to do with all those giant towers of used car vending machines? And it's like someone just threw like a spirit Halloween logo on it. It's like spirit Halloween is going to swoop in there and use this space. Let's look at another example, Wayfair. Now, I don't think this is a terrible business. I think it's actually a decent business in carved out space of e-commerce and furniture. But it was definitely a sign of the times. The stock surged 1100% during that time. It's down now 90% from there. Roku, a story I've been always pretty bearish on, even when it was a very loved name,

was up 500% during that period, also down 90% from then. The list goes on and on and on. And what do these companies have in common? So as I always hinting at, here is the Bredo checklist of shit co-qualities that the market smartened up about. This is the three-step checklist for your public stock portfolio to be now 90%. Number one, the VC-infused hyperscalers gone public. All right. So what do I mean by that? Pre-IPO, anything goes. You get Silicon-backed, well-known VC-backed money. You raise on ridiculous terms. You basically hardly have product market fit, if anything, and you have lots of money to go grow higher and scale. But pre-IPO, anything goes. That's the little league. You're in the big league now, and you can't be a perennial cash burning clown car forever. Operating leverage on some of these

companies was either a scam, a dream, or they just got way too bloated and we can trim the fat and some of them can eventually become real sustainable businesses. So that is number one, can eventually become real sustainable businesses. So that is number one, the VC-infused hyperscaler unicorns gone public. Number two, regardless of business results, short-term, you're probably in a world of pain when the tide goes out as it did. And you'll see who's wearing pants when stocks trade at nosebleed 50X plus sales multiples. We'll see who's wearing pants. Number three, stock-based compensation. Attracting and maintaining talent is important, but at what cost? High SBC companies basically got taken to the woodshed this year. So that is my three-step checklist for your stock portfolio to be down 90%. Yeah, no, I mean, it's been risk off, right?

And if people are wondering, kind of goes back to my first takeaway for this year is as interest rates are low, people are just looking for ways to make that money grow. And it's risk on like you have to take risk if you want to have returns, because what are you going to get from a GIC? Barely anything, bonds, barely anything, savings account, barely anything, even with, you know, low inflation and air quote at the time, you still weren't keeping up with your buying power. So people turned to higher risk. But now as interest rates go up, there's other alternatives. So if you don't want to take all that risk, you know, you can park your money in a 5% GIC, which I'll be talking about a bit further down for virtually, you know, no risk. Obviously, there's risk with

everything, but it's guaranteed by the government 5 5% interest. That was not there a year ago. Totally. I mean, so far out the risk spectrum when rates are at zero. That's just basic 101, right? Yeah. I wholeheartedly agree. I have learned a lot during this transition. I've learned a ton. I think lots of people have learned a ton. And it's a worthwhile exercise as investors to just kind of jot this stuff down, whether it's like physically writing it down, if you use an investment journal, or just mentally, just like things you do not want to forget as an investor that when this thing happens again, because it will. History doesn't repeat itself, but it does rhyme. So when something comes even remotely close, you'll be handled and well-equipped. You'll

have some scars to kind of navigate things over time. So just mark it down, whether it's literally physically or just mentally. Yeah, no. And same for me, right? I've learned, I've made some bets that didn't turn out all that well when valuations were probably too high. But what saved me and I think for you as well is allocation, right? So we didn't allocate big portions of our portfolio. And I think that's why we did not get hurt like some people for riskier bets on things like high growth companies. And speaking of riskier bets, let's transition to the crypto meltdown that happened in 2022. So it's been quite the year and not a good way for crypto. Not a good way. Not a good way.

That's an understatement right there. The two largest cryptocurrencies, Bitcoin and Ethereum, are down 64% and 69% respectively year to date. It's even more than that if you go back to the all-time highs of November 2021. And if you've been listening to the podcast for a bit, you know, I have strong conviction in Bitcoin and I still do. Hasn't changed this year because despite the implosion of several prominent crypto institutions that were centralized, might I add, the protocol has just been chugging along for Bitcoin. And, you know, I'm not going to shy away to say, you know, I'll be pretty harsh on some of the things that happen here in the crypto world. And I've always said for people who want to get into crypto, or I strongly recommend personally, if you want to get in

there to get into Bitcoin, but to do it with something you're comfortable with and go with the mindset that you put an allocation that if it goes to zero, you're fine with it. And I've said that a whole lot. That way, when you have these big drawdowns like we've seen, you don't panic because you allocated what you were comfortable with. Anything you want to add before I continue? My only thing I want to add here is I am, people probably know, especially if you follow me on Twitter and if you follow the podcast, I am both a fan of Bitcoin and the problems that it seeks to fix, especially when as someone who sends money internationally to pay contractors,

like, holy crap, there has to be a better way. And after sending money over lightning for like no cost instant settlement, it does fix some things. It's not perfect, but I think Bitcoin proposes a solution as a currency in many good ways. And I am such a bear against crypto. The word crypto, all these other coins, they're all largely Ponzi's. You and I have disagreed about like Ethereum, for instance. I think Ethereum is pretty much a Ponzi. I'm super anti-crypto, but respect Bitcoin. So I don't think of them as the same thing.

And so that's my only comment. No, no, that's fair. And like, obviously it fair. And I like, obviously, it's a year in review, so we won't get into a debate here. But to go back here, the downward price action for the overall crypto ecosystem is really what exposed some poor centralized businesses in the crypto world and the need for regulations when it comes to those kind of businesses. Because at the end of the day, they were acting like traditional finance would be acting if there was no regulations for traditional finance.

And I think I want to make that clear, too, is people just kind of look at crypto and say, oh, look what happened. What do you think would happen if banks weren't regulated? We saw what happened in the 1930s when the financial system has poor regulation. So it's just, you know, it's the same thing. Now, during the spring... Or 08. Or 08, exactly. So I think it's important to remember that. During the spring, obviously, we saw the depegging and fall of Terra Luna and its stable coin Terra USD or short UST. UST was supposed to be a one for one for US dollar based on an algorithm but imploded in May.

The ripple effects in the crypto world were quick with Celsius another centralized lending platform and Three Arrows Capital a hedge fund boat going under. The contagion was widespread with other names going under, but we really hadn't seen anything until November when, you guessed it, FTX declared bankruptcy and its narcissist, sociopathic, and pathological liar, CEO, founder, Sam Bankman-Fried. We're laying it on him, man. Yeah, allegedly, I'll say allegedly, obviously. Allegedly was using customer funds to make risky bets with his hedge fund, Alameda Research. And hedge fund is actually pretty generous because they weren't hedging against anything.

And that wasn't very sophisticated operation. No, it was not. And that's just a small part of it since all indications show that he was using customer funds to buy real estate make political donations put ftx names on arenas and then some thankfully he was charged by the department of justice and it sounds like he will be extradited to the u.s most likely in the coming weeks he seems to not be contesting it anymore and as a fallout of the whole fpx thing blockfi another centralized lending platform also declared bankruptcy and there is some other potential contagion with one prominent name dcg known as the digital currency group it's the group behind the gbtc fund it's also the group that owns coin desk and a couple other things so they've been pretty silent on what's going on so it's not great because usually

silence at crypto is followed by some pretty bad news but like i said i'm still bullish especially on bitcoin here i don't know what's going to happen short term, but I do think it does provide some really good solutions to some of the big problems we have in our global monetary system. Yeah. Look, I mean, there's no getting around the fact that to build a great business, you have to solve real problems that people are willing to pay for. real problems that people are willing to pay for. And the problem that it was solving before, again, this is just my opinion and my bias towards crypto being a lot of it's scammy, is it was solving a problem of people going to the casino online. That's how so much of this industry was treated. It was looked at as a giant casino for gambling on coins.

industry was treated, it was looked at as a giant casino for gambling on coins. You have to solve a real problem as an entrepreneur. And when I think of a Web3 and crypto and the bubble that was formed, you had all of these entrepreneurs working on problems that don't exist. It's like, hey, we're going to build this thing, but Web3 version. And it's like, okay, but what's wrong with the current version? It seems to be better and cheaper than what you're proposing. And so you can't really get around the laws of like what works in the marketplace. And that's why it was a bubble. That's why so much of it has collapsed. So much of it has gone to zero. I think people have largely smartened up on this. I don't really have any more hot takes other than Bitcoin was made as the original cryptocurrency. So many of them have been made past it. When the real solution that was someone

was building a solution to a problem that exists, which is largely moving money around and avoiding some of the problems of central bank policies, is already exists. So I go back to the same question of just like, of course, none of this worked out. And of course, we saw a major contagion from the businesses that were operating inside of the ecosystem, like the ones you have mentioned. So I'm not surprised, like is my main takeaway. Yeah. No, I think that's fair. I think there are probably some other projects that will do well, but my take is probably, you know, for every project that may end up being something, there might be a hundred that are scams, like you just said. So, I kind of view it from the way it's

just a lot of work to try and decipher all of it. So I just stay with what I understand the best. And that's Bitcoin. I mean, I own some Ethereum, but I haven't added recently to it. So that's more of an older position. And for the time being, probably a good portion of the future, I'll kind of stick to Bitcoin. That's for sure. Just looking back, the height of this was a scammer's paradise. Oh, yeah. They'll look back at this and go, shit, I should have scammed way more because it was never easier. There was no regulation and absolutely no consequences for rug pulling millions of dollars. Like starting some NFT project, as soon as it launches, dumping the whole thing and shutting

down the entire thing. Celebrities did this. Influencers did this. Scammy crooks did this with no consequences. It was literally like the golden era of scammers. They're going to wish they scammed more money. That's ridiculous. No, no, exactly.

Now let's move on to your next one. Let's talk about DIY investing because of course this show, most of the listeners are DIY investors, lots of professional managers and advisors as well listen to the show, but mostly DIY investors. And my takeaway is one that I actually was quite surprised, which is the fact that DIY investing is hyper resilient, which is contrary to what I may have expected would happen before I looked at the numbers. active brokers, active accounts more than doubled through 2020 to the end of 2021. And it's still today growing quarter over quarter. It's a public company, so you can look at these statements. This was a long-term trend and certainly pulled forward a lot of the trend like so many digital consumer activities did. But the long-term trend is there. Let's look at Charles Schwab. I pulled this data. You type in Schwab on stratosphere.io. You can look at active brokerage accounts and trading revenue. Those are two separate line items we can see.

Active brokerage accounts have been really steady and really solid. They ticked up all through 2021, which is no surprise, even through the first and second quarters of 2022. And then in the third quarter, you had a slight first time quarter over quarter decrease in active accounts, but not much. We're talking about just like a few thousand accounts on their millions that are active. And so that was surprising to me that it has been so resilient. If you look at trading revenue or trading volume on the DIY platform, really quite resilient. If you look at through December 20th to the 20th, September 2022, the third quarter, it's actually higher than the fourth quarter of 2020.

So not only resilient, but quite impressive results. And of course, this is just one data point. Maybe it's off the backs of Robinhood losing lots of customers moving that needle as well. So they're getting some positive boost from that. But overall, when I look by brokerage by brokerage of the public ones that post their active accounts, it was very surprising on how resilient the self-directed investing market is. 23 because I think there's still people that probably work, you know, creating accounts to buy the dip, but it's been a pretty long dip. So we'll see. We'll see the dip of the dip. Yeah, exactly. So we'll see how many people actually stay the course. And I would say even, you know, stay the course versus, you know, actual traders and investors. If you're an investor and you know like we are and you actually look towards longer term, this is a great time to be investing because you're getting some much more

reasonable valuations right now. But if you're a trader and you're not a sophisticated trader, you're probably getting crushed and have been getting crushed for some time. Oh man, I would like, someone's like, here's a million dollars. You have to trade this to positive sum. I would absolutely lose. It's such here's a million dollars. You have to trade this to positive sum. Like I would absolutely lose. It's such a hard game to play. And people have learned that the hard way, unfortunately, with some of their hard earned money.

But that being said, I am still surprised about how resilient it is. We'll see how resilient it really is to say if we have like a lost three or four years in the market, just kind of hums along, not up, but just flat and grinds along. Because there are many times in history where it just grinds along and nothing happens. We'll see how many people are truly long-term here in the data. Yeah, no, exactly. 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. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are

using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons

that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Now we'll move on to the next takeaway. It turns out that bonds are not especially safe. 2022 was definitely a reality check for a lot of investors who thought that their bond allocation was a hedge against stocks. It may be in most years, but it was certainly not the case in 2022.

And I've been banging the drum on this, that bonds were riskier than people think because interest rates were low. And as interest rates rise, the value of the bond, so the capital tied to that bond actually goes down in value because it has to match a higher interest rate. So what does that result in? Well, I'll give a few examples here. So ticker XAGG.TO, the iShares US Aggregate Bond Index is down 7% year to date. The iShares US Corporate Bond Index is down 10%. That's ticker XCBU, again listed on the TSX. government bond ETF is down 11%. That's ticker VGV again on the TSX. And Vanguard Canadian corporate bond ETF is down 9%. That's ticker VCB. And that's really, I think, reflection and a reality check, like I said, for a lot of people that didn't fully understand bonds. And people may think, oh, well, going forward, bonds may actually be a good investment. And I would just say, be

careful on that presumption, because on the one hand, we don't know if central banks have, you know, I've kind of reached our terminal rate, which is the highest, they'll increase interest rates. There's a good argument to be made that probably not. And even if they have, rates are pretty elevated for the amount of debt that a lot of businesses have, for example. So even if interest rates do end up going down, you have to factor in that there may be an elevated number of bankruptcies that we see in the next couple of years because businesses have just taken on too much debt and they cannot sustain their operation with these high levels of debt. I mean, you have been banging the drum on this topic for how long now? Since we started the podcast. Since we started the podcast. And I mean, I got to give it to you. You have been super spot on,

right? This doesn't just go with investing, but there's so many rules of thumb that just exist out there. Like bonds are inherently safe. You can't lose money with bonds. And it's just ETFs. There's so many things that don't make sense in my head operationally for these bond ETFs. And you can go down the deep rabbit hole and just kind of look into why that is. When it comes to weighting, that doesn't really make a whole lot of sense to my brain. When it comes to actually how they run it and just conceptually, bond ETFs make no sense to my brain, whereas they make perfect sense for equities. They're

the best instruments for equities. It can make so much sense. But you have banged the drum on this and I wholeheartedly agree. Yeah. And I would just add the last thing is people may say, oh, then, you know, government bonds are really safe because the government, you know, can't really default. Well, depending on the country, some countries have defaulted in the past. They're usually not G7 nations. So clearly people are not as used to it. But you have to be careful. The British, we saw that a couple months ago ago they got into a situation where i think it was liz who became their prime minister for a couple for a month do you remember that yeah it was like yeah how long was in office like yeah for like she was in office yeah i think about roughly a month or not even but essentially what happened is she basically said she was going to cut taxes and increase spending.

And the markets freaked out with the British bond, which has a weird term. I can't really recall what it's called. But essentially the bond was actually got degraded. Like the market prized a bond super cheaply because of that. Basically, I think based on incompet, because they saw the British government as spending beyond their means, and they just didn't think the Brits would be good on their debt. So the British Central Bank actually had to intervene to stabilize the bond market.

So you just have to be careful that there can be some funky stuff happening for sovereign bonds as well. Do you mean what they call the tenured guilt? The guilt, that's it. Yeah, that's it. Yeah, you got it. I couldn't recall the term, but I just wanted to kind of, it's really, it can get really complex, but I just wanted to put that little thing there that personally, I'm very cautious when it comes to bonds. And don't hear what we're not saying. Like, Of course, if you're to chart out the risk spectrum, they're safer than equities. I think that you and I can both agree on that for the most part.

But there's these rules of thumb that exist that rules are sometimes just broken. And there's nuance to rules. And you have pointed that out time and time again. All right, let's talk about economic and broad stock market forecasts and how I believe they are a complete waste of time. What is the Peter Lynch quote? It's like, you know, you spend 15 minutes a year on economic indicators and that's a waste of 14 minutes or whatever the quote is. He tends to agree that economic and broad stock market forecasts are a complete

waste of time. I typed in stock market 2022 into Google, and these are the top search terms on Google. Some of them are pretty sad, actually, to be honest. Here they are. Stock market 2022 chart, Sad, actually, to be honest. Here they are. Stock market 2022 chart. Stock market forecast 2022. Stock market prediction for the next five years. Stock market forecast for next six months. This one's sad. Lost everything in stock market 2022. Oh, no. That's getting way too much search volume. Expected stock market returns for next 10 years 2022. Stock market crash prediction 2022. Those are the top search terms on stock market 2022. Just a generic search. And it turns out people really find comfort, clearly, in someone else telling them with some degree of certainty what is going to happen in the future, whether it is economically or with the actual

stock market, like what the S&P is going to do in three months, in six months? When is the next crash? These kinds of just broad predictions. And they get a lot of clicks. So people are very incentivized to make commentary on them. Clearly, these are like huge search volume terms on Google. And they're all a load of junk because no one knows. Let's give an example. Personally, I didn't think rates would move the way they did if you asked me 12 months ago. Turns out, guess what? I have no idea and no one else does either. And that's okay. That's totally okay. So you focus on what you can control, double, triple down on that. Whether it's buying great companies, understanding them well, or consistently DCAing into a broad based index over time and

sticking to that plan, rain or shine. Those are things that you can control. What it's like predicting the stock market, tell me the SPY price in five years. If someone is telling you with any degree of certainty or trying to establish themselves or their company or their publication online as a reputable and source of authority in the space, because they're willing to make those kinds of predictions, run. Because if they knew what they're talking about, they would tell you that they don't know. That's the only right answer. And so, I believe wholeheartedly, and this confirmed my opinion this year, that these types of forecasts are a complete waste of time. Yeah. No, I think for the most part, I agree with that where I get really interested in the macro stuff. And the really, the ones that are really good at it, they don't make set predictions, they work in probabilities.

In the past, you know, there's a 60% probabilities of X, Y, Z outcome because of this, this, and this. But they never say for sure because they realize that, you know, placing a probability and things, you know, can have a higher probability to happen and whatnot. But the ones that really know this stuff well, they work in probabilities. They don't say, oh, this is going to be the outcome. They work, you know, with a certain percentage or range here. And I think that's really important because a lot of the clickbaity stuff is you'll have people outright making predictions. And that's a whole lot of bullcrap, if you ask me. Well, it is.

And so, yes, what you have said, I think that that makes sense to work in probabilities and the smart ones, honorable ones, and intelligent economic predictions are using that model. But those are not the models that get sensationalized or get press coverage because people want certainty. Look at these Google searches. I didn't make these up. Look at these Google searches. I didn't make these up. These are statistically what people want to know, like generally population, is they want certainty. And so you have an incentive structure to draw those out.

The ones you're talking about, they might be the most legit, well-thoughtful, put-together predictions, but they're not the ones catching headlines right yeah and you can't read those or listen to the the good ones and get a quick answer like it's usually it takes hours just to read their whole analysis like it's not like a five minute thing like you would do on a search you want a instant gratification right it kind of comes back to that or if you listen to them on a podcast usually it'll be like multiple podcasts or couple hours long where they go into detail and a lot of people would just have no interest because they're like okay that means nothing to me tell me what to do tell me the answer tell me what to do right now yes exactly

yeah and so it's not the fault of the people. It's like that's a better product because people want that. That's a better product. It doesn't make it right or smart or intelligent. And that's just the reality we live in. Yeah. So, my last one here is, again, a little bit on the macro, but with a little twist. So, of course, we all know interest rates are higher. If you didn't know, you learned on this episode in case you were living under a rock this year. But with higher rates, there are better fixed income options. So the first one that comes to mind, obviously, you know, we have a great sponsor in EQ Bank that typically offers some of the highest rates with, you know, they're always up there. They might not always have the exact highest. They're either at the top or very close to it. And I wasn't personally paying close attention to GIC rates at the beginning of the year, but it And of course, that's still below the rate of inflation.

But, you know, you have to keep in mind that depending on where you think inflation is going to go, you know, a five year GIC that's giving you 5% interest per year, if you think inflation is going to be down back to 2% within a couple years, you know, you're kind of laughing if you have those five years GICs. So they definitely provide some interesting income options for people looking for capital preservation. And for me, I've been adding for those I've talked about it before, people on joint TCI, I'm looking to build a bit of a cushion for potentially either buying a new house or when we refinance our mortgage when

it comes due. So I'm using GICs for that because I want the capital preservation and having a 5% interest on it. It's pretty appealing. It is. I mean, I would have thought you're crazy if you could get what you can get now. You told me just a little bit ago, right? I mean, of course, right? I was surprised at how rates moved. So I think there's a correlation here. Yeah, exactly. And there's other fixed or very liquid options too because the issue with GICs is that, right? You do have some redeemable GICs,

but typically they'll offer low interest rates. So savings accounts have become more attractive. I mean, it's pretty common now to find savings account that offer 2% plus interest. And honestly, if your bank doesn't give you that, you should probably switch banks. It shows that to me with the current interest rates, that's a bare minimum. And there are also some really interesting options if you want to keep some cash in your brokerage account. I've talked about that before, ticker psa.to in Canadian dollars or psu-u.to. These are essentially money market funds, but they're very liquid. You can trade them like stocks. You just buy the ticker. If you have a broker that doesn't charge for ETFs, you won't have any charge when you buy these. So that's

really interesting from that standpoint. And they're both yielding over 4.5% interest. And like I said, extremely liquid. So they're a great option. The downside with those compared to, let's say, a GIC is that you're not locking in the rates, right? So if rates do come down, they will come down with these as well. And so typically will savings account. So you have to keep that in mind.

But for people looking to get some interest on their cash or if you're looking to build, you know, a down payment for buying a home, for example, there's some really attractive options right now, especially as home prices are going down overall. especially as home prices are going down overall. I mean, if you can get 5% on your money, 4.5%, whatever it is, it's starting to be really attractive as the market is going down. You're building up that down payment with very little risk. What a world. What a world and what a shift. I think that is a great place to wrap up today's show, which is things changed fast. Things changed really fast.

And so you got to roll with the punches, man. You got to. What other option do we have? You roll with the punches and I'll speak for both of us. I've never been more optimistic than before. Now we still have a really high Shiller PE historically. So it's not like stocks are bargain basement cheap across the board. But because of the way the math is done there and on the PE on the S&P 500, there is a lot of beat up stuff that's not just hidden in like mega cap Apple 7% waiting, right? Like the numbers are skewed on like a Shiller PE or like S&P 500 PE. And so I think that there's tons, tons of great valuations and opportunities that exist around there, especially in some really high quality beat up stuff. I think the market PE is a bit of a farce of being so high just because of the

weightings that exist on these mega names. Yeah, no, no, exactly. And I guess there's one last takeaway for the year. I think you'll like this one that I forgot to add, but Canada saw its newest and best real estate investing podcast launch in 2022. That's true. Just in case. I think we forgot about that one. Hosted by Dan Foch and Nick Hill. Good way to point that out because it was a big year also for us turning this thing into an actual business that we can keep doing for a while. And part of that growth strategy is rolling up other really interesting podcasts that are in the Canadian space. And so investing in real estate as like a real estate portfolio made so much sense and there's so much appetite for it. And so we did launch with Nick and Dan,

much appetite for it. And so we did launch with Nick and Dan, the Canadian real estate investor in 2022. So that's big for us personally. So if you have not checked out the show, the lads over there, they're doing a good job and it's a good time. It's like this. It's mostly just us shooting the shit, but sometimes they have on guests like we do, and they're following a very similar model. And these guys are real estate as a personality. They know everything there is to know. Canadian real estate as a personality is who they are. And we appreciate them very much. And we appreciate you very much.

Thank you for listening to the show here in 2022. We do have a couple of really fun episodes. My favorite episode of the entire year is coming out next year where tomorrow I get to chalk up some bold predictions. And you know, what is it and whose lines is it anyway, where Drew Carey is like, the points are made up and the points don't matter and the points are made up. It's basically how our bold predictions work because, you know, right or wrong, we got nothing to gain or lose.

We'll see you in a few days. We appreciate if you leave a nice little review for the show. We really appreciate it. It takes two seconds. Call it 30 seconds and it helps us grow quite immensely. Take care. We'll see you in a few days. 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.