The Canadian Investor - 2023 Bold Predictions

Episode Date: January 2, 2023

In our first episode of 2023, we look back at our 2022 bold predictions and make some new investing bold predictions for the year ahead! Tickers of stocks discussed: QQQ, SPY, COIN, LSPD.TO, NFLX, DIS, VIAC, WBD, XEG.TO, ARKG 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

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Simon Belanger. How are you doing, buddy? How are you feeling? What's your general feel on your predictions for next year? I think they're pretty good. I try to always go pretty bold. So, I don't know. I feel it's stuff that I personally think is unlikely to happen, but we'll see. I mean, I think they'll be fun to review, especially this year. I kind of forgot a few that I made. So, we had to go back and re-listen to them like, oh yeah, I did say that. So, it's going to be interesting. Out of 10, how spicy are your hot takes on your boldness here yeah i mean i think i would be uh probably seven eight out of 10 i mean i think there there's a chance that they will happen will they for sure definitely below

like 25 if i had to guess yeah yeah i have Well, I mean, one of them is very unlikely. One of them seems fairly likely. So we'll see. Let's start off with going one by one on our six bold predictions for this year and see if we have any winners. My first one was all brokerages in Canada will go to $0 commissions. I'm going to chalk this up as wrong, but probably just early for that one. My second one is ARK Genomic ETF. ARKG ETF will blow up in 2022. It didn't blow up, but it's down 75% from the peak. And I honestly have no idea how on earth they run that fund. And then third, I had Amazon will be the best performing FANG Megatech of 2022. That was just flat out wrong. It would have been the worst one if it wasn't for our friend,

Mark Zuckerberg, running one of the most historically bad years for a huge company that was meta. So, that one was just flat out wrong. But, you know, there's reasons to think that maybe I'm just early on this one as well. Yeah, no, no. It's very true. And I just wanted to go back to the ARK one. So, they only have the genomic... That's the one, right?

ARKG? ARKG, yeah. That's right. So they only have $2.2 billion worth of net asset value right now. So it's not a whole lot. I don't know exactly what they had. The price is $29.70 and it peaked around $100, I guess, three and a half times that. So they must have had close to what, eight, nine billion of assets under the fund? Yeah, I don't know what the actual fund flows were. I know that the ARK Innovation ETF actually had positive fund flows this year, which blows my mind and kind of proves to you they keep pumping the marketing engine. Yeah, we'll see.

I mean, this one, if you look at the holdings, we're talking about like micro caps at this point that are in the fund. I'm not sure how they're even doing it. There's some wizardry happening. No, no, that's true. And look, I mean, I think it might also be, obviously, she gets quite a few appearances on CNBC and I think it might also be people seeing the big drawdowns and trying to buy the dip right because it's worked pretty well since April of 2020 pretty much March April of 2020 when we had the big correction because of

the pandemic started so I think a lot of probably newer investors had seen the prices go significantly down and just assume, look, I'll buy the dip now and it'll probably just go up. Yeah. Like this worked last time. What could go wrong? Well, they probably learned it can always go lower. It can definitely go lower. All right. What were your three last year? Yeah. So my three last year, first one was a whiff. So CPP will invest 2.5 billion in Bitcoin as institutional investment in Bitcoin accelerates in 2022. So obviously they did not invest that. Although teachers did invest in FTX. I don't know if that was this year or last year. I can't remember when they actually did that funding round. So there's actually that. I think it was last year. Was it?

Or sorry, 2022. Was it this year? Yeah, I'm not sure. I don't know. It was probably it was 2021 or 2022. I'll look that up while you're talking. Yeah. So but at the same time, there's still, I think, definitely some investment that's happening this year. We saw some large asset managers that are actually pouring quite a bit of resources and offering some crypto options to their institutional investors. So I don't think the take up will probably be good this year. Probably not next year as well, but we're seeing them lay the groundwork. Probably not next year as well, but we're seeing them lay the groundwork.

And a lot of those investments were actually made after the fall of Celsius and all those more centralized exchanges before the whole FTX thing. On October 2021, Ontario Teachers Pension Fund invested $75 million in FTX International and its U.S. entity FTX US. In January of 2022, we made a follow-on investment of U.S. $20 million in FTX US. So a combined $95 million in Jan 2022, so this year and in the fall of 2021. And this is right from the Ontario teacher's pension plan website they probably got wooed by Kevin O'Leary and his 15 million endorsement deal who still says that it's not a fraud because he probably doesn't want to repay the 15 million that guy is out to lunch with this whole thing he's he's oh man he's just destroying his reputation like just take the hit i'm gonna buy him a ladder to get him out of the hole he keeps shoveling in himself into just admit you made a mistake and that the guy you know that's not his style man oh yeah i just i think he's actually destroying his reputation right now because admit you make a mistake like a bunch

of other institutional investors and move on instead of trying to say that it was just mismanagement. It was actually because of Binance that it went defunct. It was not fraud. That's because he doesn't want to return the money. There is a good precedence on that where fraud was done and money was given to other parties where the parties actually have to give it back. So I think he's kind of hedging because of that. That's right. Now, my second one here, TOS will acquire Lightspeed Commerce. That one was, I mean, the more specific you get with these kind of things, the harder it is for them to actually happen, right? So yeah, you're saying that this company is going to get bought and buy this specific company. Like a lot of things have to go right for your prediction yeah exactly and i mean both companies have still i've been quite down so since last year since we did that light speed is down by quite a bit i'm just looking it up here roughly

so it's down do you have the numbers to it yeah year to date 66 oh my god and it's down. Do you have the numbers? I'm going to beat you to it. Yeah. Year to date, 66%. Oh my God. And it was down like around, probably around the same percentage when I made the bold prediction. And it's 90% from the peak of September 21. And it's now, it's quite a small business if you look at it from even just a market cap perspective. So it's definitely, I mean, I think it could be an attractive purchase for a larger company at this point, because it's only has a market cap of 2.8 billion Canadian. So even if you double, you actually like make an offer that's double the value of this,

it's still a relatively small acquisition for a potential larger player who just wants to integrate that as part of their offerings yeah like the fact that dax stepped down from the role i bet you someone could gobble it up for like three billion usd because maybe the management team's just like all right i'm done yeah yeah i don't know no just just a random observation yeah i think he still holds quite a bit of the company. But again, at some point, I know he's not a majority shareholder. I think last year was around 10%. If the offer is so good, I mean, you're going to get pressure from shareholders, right, to actually accept it. Yeah. Okay. And the last one, the one that actually came true, and I did this over the weekend, but I don't think the markets have changed all that much. I'm pretty sure it's still accurate here. So the S&P TSX

will outperform the S&P 500 by more than 10% with oil and gas leading the way. And I actually said that if you go back to the episode, I actually said that the S&P 500 would underperform because big tech would be underperforming as well. So I think I nailed that one pretty well because if you're looking so far this year, the TSX is down around 9% and the S&P 500 is down around like 19-20%. like 19 20 percent so TSX obviously it's not great when you are still down but considering if you compare that to our neighbors down south the S&P TSX did very well and it is pretty much what I said too because if you look at the S&P 500 index I like like the sector SPDR. The best performing sector for the S&P 500, energy up more than 50% and tech and I'll say comms, communication services, because they tend to have some companies that you could probably make a case that would be tech that end up in there as well. Those are two of the worst performing sectors this year. And if you

look specifically at the XEG ETF, so that's the iShares S&P TSX Cap Energy ETF Index, it is a 40% year to date. So clearly energy has done very well this year. Big reason why the TSX has performed that well. Well, ding, ding, ding, we got a winner. We needed one. We needed to chalk up just one into the win column and we can always lean on you to get that done. I was just looking at that iShares capped energy index ETF. It's so funny, right? The victory laps done by commodity investors this year are hilarious. Do you know the meme where there's the guy celebrating? It shows the first slide of him celebrating with champagne, and then it zooms out and he's in last place.

Yeah, yeah. Do you know what I mean? I know. It's perfect for this ETF because you have just gotten smoked for like more than a decade you've made absolutely not a penny even including total return with dividends you've lost lots of money but you know 2022 is your year to shine so it's like you know take your victory lap while you can yeah like that's a good point and i'm just gonna say too you know people who didn't listen to us and had the strong Canadian bias for their investments probably ended up doing relatively well compared to the overall markets this year. Because obviously, you know.

Yeah, on the time frame. Yeah. The arbitrary time frame. Yeah, exactly. Because like I guess the human brain likes to look at things from, you know, a year kind of thing. You can always pick and choose whatever time frame you want to to kind of suit your argument but it was a good year to fulfill my bias i'm gonna take whatever time frame i need sports is actually notorious right when you watch

sports and then they'll like throw at you this random stat in the last 16 games, this player has 15 points. Like, okay, what about the last 25 games? How does that look? He still has 15 points, but... That's called the ESPN stat. It's like the most hand-selected stat possible. 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. All right, let's get into the 2023 bold predictions. We'll do three each,

as always. Some of them spicier than others. Some of them, you know, I could see happening. I'll start us off here. Number one is my prediction is an AI bubble forms on the TSX venture specifically. I think an AI bubble forming is not even that hot of a take. I think that's consensus going to happen, mostly in private venture capital markets. But on the TSX venture specifically, being the breeding ground for tons of frauds, pump and dumps, And our friends at FaceDrive will probably make an appearance and reemerge as a AI-infused company. So every year, there's one hot sector that gets pumped meaninglessly, completely detached from fundamentals. At one point, it was the weed companies. So many of those have gone to zero. The previous two years, we had the EVs,

so many of those have gone to zero. Last year was the Web3, so much of that has gone to zero, washing up, along with the fraudsters that were involved. I predict that there will be an AI hype train in 2023 that forms a bubble pretty much everywhere you look. In private startup valuation funding rounds, in small cap stocks, and the TSX venture being where all the bad actors like to hang out, there's already a wasteland of AI companies on the TSX venture that are highly speculative, use lots of fancy buzzwords, and have largely proven not much in terms of fundamentals behind them so look out for this i actually have quite high conviction that this bull prediction may pan out whether it happens like i i'm saying on the tsx venture i think that's the spicy part

we'll see yeah and i mean what's the deal with the TSX Ventures? Seriously, like what is the deal? That's a great question. I know it's for smaller cap companies, like that's obvious. But how are there some of the companies allowed to stay listed on that exchange? I don't get it. Because TMX is publicly traded and they have incentives to make money. Yeah, I guess so. publicly traded and they have incentives to make money.

Yeah, I guess so. But I mean, yeah, I know like, you know, we've talked a lot recently about more regulation in the crypto space, but this like this has been going on for years. It's kind of crazy how it just keeps happening. You talked about phase drive, but the amount of, you know, venture companies that reach out to us to like basically get us to pump their stocks, like it's like clockwork. They're always listed on the TSX venture. I don't know. It just really pisses me off because a lot of beginning investors will probably gravitate around the venture because

they have low per share price so they can get like, you know, 2000 shares because it's trading for pennies. I don't know. I feel like that needs to be cleaned up quite a bit. If there is a junior mining exploration company listed on the TSX Venture and you are reading a puff piece about it on the internet, I can guarantee you that that post or that content you're seeing on the internet is paid promotion from the company. Like with 99.99% certainty that that is paid promotion. So be careful out there. We get hit up to do this shit all the time and we would never rug pull you guys like that. So just be careful out there. The TSX Venture is a breeding ground for this stuff.

like that. So just be careful out there. The TSX Venture is a breeding ground for this stuff. Yeah, no, exactly. And I guess the silver lining there, if you're more astute investor and you're looking at the venture, you can find some really good deals of really good companies that are smaller, but you really have to do a lot of due diligence there because for each good company, there's probably like 10 that are borderline frauds or have no viability whatsoever. Yeah. Well, I own Topicus, which is a TSX venture. Yeah. I think they just want to save money. That's what I'm saying. They want to save money and they don't want people to know about the stock. Exactly. So my first of all prediction here, I'll probably, you know, homeowners just mute this for the next couple of minutes. Yeah. Homeowners, press the skip button on your phone.

But I am a homeowner, so the average home sale price in Canada will fall another 20%. So, I'll give out a little bit of context here. So, of course, it turned out that real estate does not always go up like maybe your favorite realtor has told you. Volume of sales is down 38% since peaking in early 2022. Of course, that's seasonally adjusted because there's months like December where traditionally sales are much lower compared to a month like March, April. After peaking to over $816,000 in February the average home sale in November is down 29% so that's the price this is not seasonally adjusted it's just the average so keep in mind that whenever you have an average it can skew either on the downside or upside depending if there were more luxury homes for example that were sold in one of the samples versus the other. That's just something to keep in mind.

I think it's still pretty telling the amount of the correction that we've seen in the housing market. Even if you think 29% is too high, I think we can probably agree that prices are probably down around 20% overall in Canada. Of course, there's some isolated market where it might be a bit more flat. But I think personally, it's gonna get worse in 2023. Because I know it's anecdotal. But if you see more and more people having trouble making ends meet with variable mortgages, you can just look on Reddit. You can see a whole lot of stories there. The common thread is I'm making it work for now, but if rates keep increasing, I don't know how long we can make it work because on top of having higher mortgages payment, you have to keep in mind

the overall cost of living is also higher. So it's kind of a double whammy for people where their mortgage cost is increasing and everything else as well. So I's kind of a double whammy for people where, you know, their mortgage cost is increasing and everything else as well. So I've also noticed that there tends to be two common outcomes right now, at least in Ottawa, because we are just looking slowly because in the next year or two, we're probably going to be looking for something a bit bigger. And I just want to stay on top of prices and just have a good sense of where they're trending. And what I've noticed in Ottawa, which was a very hot market up until the beginning of 2022,

the homes will stay on the market for a while and then it either gets delisted or the prices reduce and oftentimes more than once. These tend to be most of the outcomes because some you'll see selling but for the vast majority they sit on there for several weeks oftentimes months. So that leads me to believe that some are hoping to ride it right now are having trouble making their mortgage payment but are figuring that they can hold off until the spring, which is typically where a lot

of the volume happens. But if rates stay this high, I think they'll be in for a very rough surprise because the reality is with higher rates, people can just not be approved for as high in terms of mortgages. I like that you pulled up the Reddit forum on Personal Finance Canada. It is a scary place over there. You got to feel for these people. I mean, you and I were talking like people taking on debt got rug pulled. So it's a sad, I wouldn't be surprised if this comes true. I mean, I think that it's going to be a real, we've seen kind of already how this affects our economy on the move we've seen with asset prices and rates in real estate and just general borrowing rates. Another 20% would be

quite the hit. And I don't think it's outside of the realm of outcomes. quite the hit. And I don't think it's outside of the realm of outcomes. Yeah, I think this is probably the most probable ones of my bold predictions. And again, I apologize for homeowners. I'm one as well. But I think all the stars are lining up with what's happening right now to see another sharp decline in 2023. All right, let's move on to a blockbuster acquisition, no pun intended, in the video streaming game for my second bold prediction. So earlier we had Warner Media and Discovery merge together, joined forces at the hip. This put HBO Max and Discovery Plus into one and HBO continues to be a very valuable brand and bring great content to

the table time and time again. So they're also set to bring in a combined platform. And so this could be a real powerhouse. I think that's supposed to roll out early next year. Now, so what I did is we got this dope feature on stratosphere.io now where you can pull up a bunch of KPIs from these large caps. And we have all this data. We pulled in just streaming subscribers. So we pulled in Netflix's paid subscribers, Disney Plus's or Disney's Disney Plus subscribers, Paramount's global streaming subs, and Warner Discovery's global HBO Max and Discovery Plus subscribers together. So it gives you a context of scale.

So you can see this graph, Netflix, obviously in the lead, and then Disney kind of coming up and making a splash, overtaking some of that. But still a lot of scale with Viacom, Paramount, and Warner Bros. But I think something still has got to give. We've already seen consolidation with that big blockbuster merger happening. There's still, in my mind, too much competition because if you include all the other services not included in here, Apple's in the game, services not included in here. Apple's in the game.

Amazon's in the game. There's like other services like Hulu that's bundled into one of these. I forget which one. Is it Paramount? I forget. No, it's Disney. It's Disney? Okay.

Oh, it's part of Hulu. Sorry, it's part of Disney+. True. Okay. Something still feels like it's got to give, in my opinion. Like these guys are all just fighting each other out. There's just a lot of price pressure, a lot of pressure to spend a lot of money on content. And I'm just not sure where it all fits into the picture sustainably.

The reason for that is if you look at the model before, a lot of these could survive, even if they weren't amazing businesses as on the cable package. But like, how many people are really going to have six subscriptions to content? Like, it's just completely unrealistic to assume that. And especially in tougher times, there's going to be more and more churn. I mean, and look at the numbers, look at the graph just completely fall off in terms of growth rates. And so my bold prediction is that Disney, Netflix, or one of the big players in big tech buys Paramount or the newly merged global HBObo discovery plus now this would be an absolute field day in antitrust from regulators so that's why i'm saying that the likelihood of this happening given that there was just some consolidation big blockbuster consolidation

the likelihood of this happening i put it like 01%. But we ain't bringing in some spicy takes at like a one Scoville. We need an 11 out of 10 here on spicy takes. That's my whole prediction for 22 is that we see a gigantic move in consolidation in the streaming game. Yeah, no, that's a pretty interesting one. I think 2023, that aside, it'll be really interesting just to see how it ends up working for netflix and their ad supported version because i think the early early verdict is it's not yielding the results expected for advertisers that i read something about that i mean it's still early on but that's what i i saw about their new because i think it launched in the US a month or two ago.

Yeah, it's brand new. I haven't heard a single whisper of it. I almost forgot about it until you brought it up. So, I mean, it's gonna be very interesting, especially if you see potentially Disney following suit with that kind of model as well or, you know, it's just, I don't know. i feel like it's very interesting because netflix has said for a long time re-dasting that they would never do ads i think or as early as this year they were saying they would never do ad supporting models and then they i don't know what happened maybe had a dream and just figured that was the way to get more profitable but it'll be interesting.

I think they reported their second quarter and they saw the market reaction and they're like, we got to do something. Yeah, that's it. So no, that's a really good one. Very bold. 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 winningwinning 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. My next one, I think, is quite bold as well. So large financial services company buys Coinbase. So I typically do one crypto related. So this is the one here, but it's kind of it's crypto, but it's still related to the publicly traded company. So I think it's pretty interesting here.

So it could be it could be one of the exchanges. It could also be something like a Schwab. But I think Coinbase could be a very attractive takeover in exchanges. There could be CME, I think Intercontinentals, another one in terms of the larger exchanges, whether it's NASDAQ, a bit smaller. But if they really want to lay that groundwork, I mean, Coinbase has a market cap of around $10 billion right now. So of course, Coinbase has just been pulled down in what's been happening in the crypto world. Obviously, we've talked about all the centralized platforms in our year in review, so I won't go again on this. You can just go back to that episode.

But if you're a financial services company and you think crypto is here to stay, and Goldman Sachs has been pretty vocal about that. They're actually looking at quite a few deals right now because they're finding the valuations very attractive to get in the crypto space. I don't know if they'd be allowed to operate an exchange. I'm not 100% sure how that would work. is this bearish and you're these companies I'm pretty sure some of them are looking at making some acquisition potentially a coin base very closely right now and keep in mind that despite my bold prediction not coming true like I said earlier there's been plenty of investment in the space by large asset managers like a BlackRock Fidelity I know Bank of New York

Mellon as well as made some large investment when it came to custodial services so i think we could see some big splash in that space in 2023 maybe it'd be a good tack on for like ice yeah as an idea this is spicy yeah that's intercontinental right ice yeah yeah yeah yeah ice intercontinental they're much larger than operator to the nyse yeah and for those who are not aware you can look at the the large exchanges up nasdaq i think is the smaller one ice is the largest cme is kind of in between and 10 billion is not that much for them it's they're much larger than that yeah no it would be huge but yeah it's not out of the question no exactly how much like ice is it has a market cap of 57 billion for people to wrap their heads around it yeah all

right let's talk about my this is my third one yeah my third one and it is that qqq which is the NASDAQ ETF, outperforms SPY, which is the S&P 500 ETF, by more than 5%. And the reason that 5% feels high enough for this segment here is the holdings at the top are so similar and they're ridiculous in terms of concentration. Plus, I need one to potentially be right to pad the stats you know i'm surprised you didn't choose the vegan etf instead yeah damn i should have picked a vegan etf to win because it's basically qqq isn't it yeah a lot of a lot of similarities let's just say that yeah yeah you know what switch it out if you look at the holdings at qqq, I'll just start calling it the NASDAQ,

has Apple and Microsoft 24% of the holdings. If you combine it with Amazon, it's like 30% Apple, Microsoft, Amazon. Now, the reason that I think that there is opportunity here is high-quality tech has gone mostly too cheap. Like, mostly. It got too frothy, but overcorrected too hard in the quality. And the types of wide moat, high margin technology companies that print cash, that we interact with on a daily basis, and have built the infrastructure of our digital lives. And I'm not

talking about like highly speculative, high SBC, non-gap profit tech companies. I'm talking about the ones that make more money than you could ever possibly imagine. There are tons of holdings at 1% weighting. I like quite a lot in the NASDAQ from this point forward that would only make up a fraction of a percent in the S&P 500. So I think that that's enough of a difference to move the needle. You just look at what's worked this year, and it's basically everything that hasn't worked in the past 10 years, and leading the way is comms and tech and information tech. So there is a lot of opportunity in that space where high growth, still profitable, wonderful wide moat tech businesses are trading at really, really reasonable forward multiples,

very reasonable multiples compared to similar type multiples for more commodity, no pricing power, worst margin industrial names that are in the S&P 500 that have like no growth. And I look at as much more expensive in the way I invest and operate. So I think that the Q's can outperform by at least 5% in 2023. Yeah, I like it it not as bold as your first one but definitely i like it nonetheless dude i gotta pad the stats i need i need one i went oh for three i think i'm like oh for nine since we started this podcast i've had what i'm batting maybe 25 percent like it's not like i'm batting that high either it's pretty good though it's pretty good actually you know what chalk me up in the wind column for Freshie getting acquired. That's right. That was two

bold predictions ago, and Freshie just got acquired like, what, three days ago? Yeah, yeah, that's right. And I mean, just to answer people who don't fully know how much big tech, and I'll just take Microsoft as an example here, how much free cash flow they generate. So in 2021, they generated $56 billion. 2022, $65 billion. If you're looking at trailing 12 months, they've generated $63 billion. That's free cash flow. So even if the business experiences a bit of a slowdown short term, they're still going to be generating gobs of cash, probably returning a decent amount of that to shareholders through dividends and share buybacks and, you know, reinvesting in

the business as well. So I think Microsoft's a great example right here. Dude, TTM free cash flow on Apple. 110, something like that. 111 and a half billion billion that's pretty close i didn't even have it up yeah you were right on the money i thought it was like 100 ish but it's yeah it's more so i mean you know cash is still you know it's still pretty good king baby yeah exactly for those companies so my next one i think is probably i would say my boldest here. So XO, the marijuana company that's actually headquartered in Gatineau on the Quebec side of Ottawa, and DraftKings will no longer be publicly listed in 2023 or by the end of 2023. So as interest rates continue to rise, credit tightens, there's a bunch of companies that will just not be sustainable and will file for bankruptcy.

And I talked about that. I don't know exactly the sequence, probably in the past episode for zombie companies. So I talked a bit about that. And that's why in 2023, it will be so important to invest in companies that have sustainable business models and actually make money. In our year in review, I think you mentioned that where people or investors now are actually looking at companies from a making money standpoint, not just sales going up and losing a bunch of cash. Now, my bold prediction here will be pretty specific. So I'll say both

have to happen. So I won't go partial here. So XO will file for bankruptcy and will be pretty specific so i'll say both have to happen so i won't go partial here so exo will file for bankruptcy and will be delisted while draft kings will be bought by larger players or taken private so exo just a little bit of primer here it's just a disaster let's just be honest here of all i mean it's just i don't even know the band-aid off oh my god i don't even know why they're still like operating and they just keep losing cash sales declined 30 in their latest quarter they recently did another reverse stock split this time 14 to 1 oh my gosh how many didn't they just do a 20 to 1? Yeah, something like that at the beginning, I think, of 2022. Essentially, for those who are wondering why they're doing this, it's because in terms of

staying listed on the NASDAQ, I don't recall the exact requirements, but I think their share has to be above a dollar. I think that's the requirement. It's an actual share price requirement. I think it's a dollar. Yeah, I think so. And they had gone down to like pennies basically so that's why they're doing that they're probably just trying to buy themselves a little bit more time but at this point i think they're just i don't think it's going to make any difference and they're just going to go bankrupt in 2023 and the company was once worth more than a billion dollar in market cap and now it's only only worth, well, 77 million when I did these notes. It's probably gone down since in a couple of days. I know it's been, yeah, 67 million.

So it's gone down 10 million in the span of a couple of days since I did these notes. of a couple of days since I did these notes. And they only had $78 million in cash as of October 31st and burned $28 million during that quarter in free cash flows. So honestly, I just don't think they'll be able to get financing. So why would you actually pay to buy this company? You may as well just grab the assets in bankruptcy if you're interested in the business. And their share price is so low,

like there's no one who would actually subscribe to buy shares if they did a secondary offering. Maybe some drug dealers will get together, buy all the distressed assets and sell the weed. That could be the arbitrage opportunity of our lifetime. Yeah, maybe, maybe. And DraftKings. So DraftKings is, we've talked about them before. I was pretty harsh on them and I will still be here. So as of September 30th, cash and cash equivalents were down 35% since the beginning of 2021 to $1.38 billion. Actually, I miswrote that. It was beginning of 2022. So it's gone down quite a bit in less than a year revenues more than doubled but losses remain extremely high they had a loss of 455 million in their latest quarter compared to 546 last year so little improvement here for the first nine months of the year their

losses increased seven percent to 1.28 billion for the first nine months of the year. They burnt just shy of $500 million in free cash flow. Now, I don't think they will file for bankruptcy because they still have, I think, enough cash to survive another year or two. But what's clear, and they've talked about that before, at some point, they're going gonna have to reduce those marketing expenses and incentive that they give to players to come on their platform because those are really money losing proposition they essentially end up giving like really good odds where you can almost not lose when you do that obviously if you're essentially it's an online casino let's be honest when you do that i mean you're clearly not coming out ahead. And there's just a

lot of competition in this space. There's some much larger player that owns some really good properties and multiple properties. And I've talked about them before as well. If Flutter Entertainment, for example, that owns, I believe, if I remember correctly, FanDuel's, I think they own them. Do they own FanDuel duel i'm pretty sure they do should have checked but i'm checking right now i think flutter yeah yeah it is flutter so flutter also owns poker stars for those are not aware so it's a very large company so i think that's what's going to happen this space is there was a lot of hype it's being starting to be legal in the states and canada where it was typically done more offshore before now it's actually done on a

legal basis in those countries so I think there was a big rush thinking that there would be a lot of money to be made and I think there is money to be made but there's just not anything proprietary almost for any of them I think players will kind of go where there's the best deal being offered, unless a platform is really comprehensive, like a Flutter, and you have access to a whole slew of different other things. So that's why I think DraftKings will either be bought out by a company or just taken private altogether. It looks like Fox also owns almost 20% in FanDuel. Okay. Yeah. Interesting. yeah interesting i mean look it was a spack right like everything spack got destroyed and draft kings was no different here yeah but

the numbers just don't make sense right like i mean their revenues have increased nicely but once you stop those incentive like what happens to revenues that's that's a big point right so yeah you reduce your cost but by reducing your cost you also smash your revenues the sports gambling market is such a land grab burn cash strategy right it's heavy marketing expenses. And what you talked about is like the, to really drive engagement and get people to spend their first couple of dollars and literally to try to get them hooked on it is give them some ridiculous odds. As you mentioned, like FanDuel or DraftKings, what they'll be like is like Patrick Mahomes to get more than 0.5 passing yards this game. It's like he's going to get that in the first 30 seconds of their first offensive drive of the game. Like obviously that's

going to happen unless he literally got sick and doesn't play the game like five minutes before. And so people just hop on those because I mean why not it's literally free money yeah and and you have players like that's the thing with flutter right it has a long track record in that space it has the the know-how it probably knows what works what doesn't way better than a draft kings or some of the other players in the space so that's why why I just think you're going to see probably one or two players just emerge and a whole lot of consolidation in this space because it's just not going to be profitable. I'm not much of a gambler. I just don't. I'm not too into it. But me and my buddies used to play on DraftKings just against each other, not against everyone,

but we'd use the platform and then just e-transfer each other after. On the Thursday night football games, we used to always put in, we're such peasants, we put in like five bucks, like 10 bucks, and the winner would get the pot based on who had the best fantasy team in that NFL a registered sports book, DraftKings doesn't in Ontario, we just couldn't play our Thursday night games anymore. Like we have no option. So that just kind of ended. It used to be so fun. You know, you throw in five bucks every like three weeks, you'd probably win. And yeah, that was disappointing. So like another example where they're just at the will of regulators as well. Well, yeah. And that was disappointing so like another example where they're just at the will of regulators as well well yeah and i'll just give you another example too same vein so i talked before that i like to play poker i haven't played online in over a year now because one of the things that happened with legalization is now when you're from ontario and you play you

play only against a pool of players from Ontario. So, you went from having thousands of people playing these huge tournaments. The Million Maker tournaments, those are gone. Yeah, exactly. Because now you're just playing against a super small pool of players before it was basically the whole world except the US. So, you can imagine that it was a quite large pool. So that's one of the things that kind of annoyed me with the legalization. But you know, because each company then had to have a registered sportsbook locally, right?

Yeah, exactly. That's an investment they might not want to make. Yeah, because before that, I think PokerStars must have been I think they were registered. It changed a few times for a while they were in Gibraltar I think and then it came back to Canada I think on some native reserves because the regulations was kind of murky there so it kind of just been all over the place but I think it was a pretty reputable brand so anyways that's a little rant that. But I think so for that one to come true for me, I'll just finish on that. XO has to go bankrupt and DraftKings has to be delisted,

whether they're acquired by another public company or just taken private. I like it. That is the show. That is the bold predictions for next year. I'm feeling pretty good about some of them. Some of them I just know probably won't happen, but that's okay. That's the whole point of the show. I hope everyone had a great couple days to just enjoy with the fam,

take it easy, or, you know, like I said on the last show, maybe you're grinding it out. I see you. I see you. I see you. I appreciate you. And we'll see you much more in the rest of 2023. If you're new here, this show comes out on Mondays and Thursdays like clockwork. We also have a real estate show called the Canadian Real Estate Investor hosted by our friends, Dan and Nick. They do a wonderful job. They started it in July and they're coming out twice a week as well.

That's on Tuesdays and Fridays. So you got four episodes from the lads if you really want them. That is the Canadian Investor and the Canadian Real Estate Investor. We will see- Oh, I have something. When you said like clock clockwork unless braden is in charge of uploading the episode then it may come up early clockwork may not be the correct term to describe if i'm in charge of uploading the episode it might just come out you know saturday morning who knows it's really just up it's really just a flip a coin at this point. No, that's why I got fired from that job hard. Well, I never had the job. No, no. It's more when I'm unable to do it, then you step up and do it. Yeah.

I step up and do it wrong. That's the nicest thing you said is that I step up and do it because I step up and do it wrong. Thank you so much for listening. As I said before, Mondays and Thursdays, if you could leave the show or a view, we really appreciate it. And if you want to check out the best place for financial data, I was hinting at how I was pulling all the stats for those streaming companies. That's on what's called the KPI dashboard of stratosphere.io. We'll see you in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast.

Always make sure to do your own research and due diligence before making investment or financial decisions.