The Canadian Investor - 3 Ways to Add Gold to Your Portfolio

Episode Date: May 29, 2023

In this episode, Simon goes over 3 different ways that investors can get exposure to gold in their investment portfolio and the pros and cons for each. Braden then talks about the difference between vertical and horizontal markets. We finish explaining the Relative Strength Index and if it is a useful tool for investors. Symbols of stocks discussed: GLD, PHYS, NMT, ABX.TO, FNV.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! TCI meetup registration 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.See omnystudio.com/listener for privacy information.

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

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If you are not subscribed to the podcast on your podcast player, we don't ask very often, but we're asking this week. And if you could do it, that would be lovely. It'll come right into your podcast player when you're in a pinch, when you're needing something to listen to for that drive or that walk or that subway train ride, we will be here for you. Simone, today you're going to talk first on gold, and then I'm going to talk about vertical horizontal markets, the relative strength index, and then we'll talk about the 13F notables, kind of a continuation I had from a few weeks ago. So when you can't see in the background, but my main floor is to the ceiling of boxes. Cause I just had a cozy.ca deliver a couch.

Oh, you excited that I would say it probably will take you an hour or two to set it up. That's, I think I have my evening cut out for me. Yeah. Based on the number of boxes yeah you're gonna do it solo or ask for the girlfriend to help she will probably help but uh yeah she'd

definitely help but she has to go film uh a video at a dyson you know like the oh yeah the vacuums the vacuums and the uh dryers. Okay. Okay. That's it. Ash, is it for the hair dryers? Yes. Yes. For the hair dryers. Okay. Okay. So, you know, model stuff, right? Yeah. I mean, I've not used a hair dryer before because I don't have hair to dry, but I've used, I do have one of the vacuums it's pretty uh you know the little portable one it's really convenient dude this is so off topic but james dyson i've been meaning to read his his autobiography because apparently it's killer and just his story and the number of he's just a pure inventor and the number of just failures he had along the way to finally making his big break with the vacuum.

He got ousted from his own company, from a wonderful invention. I don't know how well you know the story, but this guy is a killer. And he's in his 70s now and he owns 100 owns 100 of dyson i think he's doing all right he's doing all right yeah he owns 100 of dyson and i'm pretty sure it does like three to five billion in in profit a year or something absurd so i mean they're not cheap they're good products but they are not cheap no the margins on a 600 blow dryer that's got to be pretty good i mean i know it's high quality but i'm sure a 600 plus tax usd blow dryer has some pretty healthy margins on it yeah for sure now we'll move on from blow dryers to ways to get gold exposure so i figured i think we were

going to do the segment last week but uh you know you were having what uh a headache or too much stuff going on in your mind i saw the segment and uh i just didn't have i just didn't have it in me because you know as a positive outlook person and someone who's like almost an irrational optimist, which by the way, I'm like pumping myself up here, but I think is a very good quality of an investor. And I'm very bearish on this topic. And that requires mental energy more for me to be bearish than positive. So here we go kick it off i i gotta i'm gonna be i'm gonna be firm but fair that's my promise to you yeah and i ended up doing a bit more so i i actually ended up doing more research on it and adding some historical context as well which i think you'll appreciate so before you know i go over some of the different ways that people can get exposure, I wanted to look at what we've seen in terms of historical returns of gold, comparing it to the stock market, but specifically the S&P 500. So over the last 100 years, the S&P 500 and even the Dow Jones Industrial have both massively outperformed gold.

The S&P 500 is up more than 47,000% while gold is up only 9,500%. This excludes dividends so the total returns would be even higher for the S&P 500 if you reinvested the dividends during that time. The reason I did not include it for the 100 year period is because the data is just not as accurate prior to 1977. If you look back at the last 50 years, the S&P 500 is up 3,700% while gold is up 1,800%. For this one, I was able to use total returns. 30 years, the S&P 500 is up 820% while gold is up about half, 450%. Again, still use total returns. 20 years, it's quite close for this one.

So gold is up 390% while the S&P 500 is up 430%. And then 10 years, the S&P 500 is still leading 182% compared to 40% for gold. So I'm sure a lot of people and maybe even you, Brayden, are thinking right now, why would I ever buy gold based on what you just told me? Well, the first thing I'll mention is, you know, the hundred years, I always take those long periods with a grain of salt just because, you know, it gives a historical context. But let's be honest, I think, you know, very few people would be able to hold assets for that long a period of time, even if they're long-term investors. I guess-

Mr. Munger turns 100 on January 1st, so- Yeah, he didn't start investing at birth. At birth, they gave him an ounce of gold as a present. Yeah. Yeah. No, it's just to put things a bit in context. And clearly you can make a case, you know, you can start investing, you can give that gold or that asset when you pass away. So clearly, you know, there's cases to be made about the hundred years, but I think you have to take it over such a long period of time with a grain of salt. Now, gold has outperformed inflation.

Gold has outperformed the S&P 500 during some 10 and 20 year period. So the data I provided is interesting, but it's just, you know, looking away from today backwards, 10, 20, I did 30, 50 and 100 years. So there is still some, it's still arbitrary to some extent, because you're just looking back, you know, backwards for that time period. If you look backwards, you know, in a year or two from now for those same time periods, the numbers will be different, whether it's favoring gold or the stock market, who knows. But I think that's always important to take into context. And I was also listening recently to a podcast that Bob Elliott was on as a guest. Bob used to be an investment executive at Bridgewater and was working with Ray Dalio.

And one of the points that he mentioned is that investors have to be careful with recency bias. And because he was arguing what has worked in terms of investing in the last decade or two or even, you know, three decades may not work going forward because of different macroeconomic forces that we're facing and that we have not seen in recent decades. I'm not saying that, you know, it's just to add a little bit more of context here, because, you know, I think we're guilty of that. I certainly am is sometimes we look at just, you know, the last decade or two, and it's easy to try and project that in the future. But the reality is, you know, it really depends what the future looks like and what different forces are at play. Anything you want

to comment or add there? Definitely around recency bias. If you manage money professionally, the whole industry and clients are asking, what have you done for me lately? That's right. I think that that's fair to call out the outperformance during some periods, the long-term general underperformance from the S&P. All of those things are kind of important context. And I was wondering if you're going to bring up Ray Dalio because didn't they kind of coin that all-weather portfolio, which is like 25% gold or something? I forget exactly what it is.

Whatever it was, it seemed like far too much from my view but uh i know that bridgewater and and he has been uh very in favor of owning gold yeah yeah and i think you know i think as a part of their portfolio and i'm not against it myself it's something that you know i don't think i'd have a huge allocation to it but you know I've been pointing my portfolio. I did that. What was it like maybe a month or so ago, kind of my new like modified investment philosophy, I would say, or investment strategy, whatever you want to call it. And I'm just trying to just hedge a little bit, depending on, you know, being well positioned, having some allocation in my portfolio that will perform well in a variety of different macroeconomic outcomes. And I think that's the way I view gold personally, is I'd be wary of having too high of a percentage in gold.

But I don't think there is any issue with having, you know, a single digit allocation, you know, 5% or something like that. you know, a single digit allocation, you know, 5% or something like that. But, you know, I think to each their own. Gold, again, if we have low interest rates and, you know, easy monetary policy, there's a good chance that stocks in general will be ripping. Gold might do well as well, but may not outperform stocks. So something to keep in mind here. In terms of why people want to invest in gold, there is history of holding its value. It provides a hedge to fiat currency like the US dollars or the Canadian dollar or the euro, whichever currency you want to think about. It is fiat currencies. There's an inflation hedge. Clearly, it has outperformed inflation over long periods of time geopolitical uncertainty and increasing central bank demand so a lot of central banks have

actually purchased have been increasing their gold purchases and so far this year they've seen record level of gold being purchased by central bank according to the world gold council and the last one that i mentioned at the beginning here is just a way of diversifying your portfolio a little bit um so i think these are probably the main reasons that people would own gold anything else that comes to mind that i i didn't mention there no i think that that covers a lot of it it's kind of like chump insurance right right? In a lot of ways to the financial system. And whatever your stance is on Bitcoin, it really doesn't matter. all of the reasons that people would like to own gold, Bitcoin does better. And I'm no huge Bitcoin bull like you are. But for all of the reasons that people want to own this as like chump insurance, I actually genuinely think Bitcoin does infinitely better, especially as

in terms of being a value that you can exchange because exchanging physical gold is not the most ideal scenario if it was to come to needing to use it. And so I feel like I'm on a Shark Tank episode. And for those reasons, I'm out. No, no. And that's a really good point. I'm out. No, no. And that's a really good point. Obviously, you know, it's much easier to carry Bitcoin or if you have a cold storage device or you can have your 24 words password, whatever it is, it's much easier to be able to move Bitcoin. And it's also, you know, you send me one Bitcoin, I'll send you one. It's not necessarily the exact Bitcoin bitcoin but it has the exact same value right it's one for one where with gold there's always the question of purity purity yeah purity is always you know something a bit tricky i'll i'll mention gold plated so yeah some gold plated aluminum uh

or like a stainless steel yeah exactly so you have to be careful with that and i'll mention some ways where people can definitely minimize the risk if they want to purchase physical gold. I mean, the probably the biggest thing it has going for it, it's something you can't hold physically, right? So that's really the main thing. Yes, you can hold Canadian dollars or US dollars, but at the, you know, when you have gold, the supply of gold, I think the figures, it's like it increases by 1% or 2% each year, which is much lower than the supply of fiat currency in the world. So I think some of it gets destroyed, used in certain things, in jewelry, whatever it is. But the supply remains much more constant compared to fiat currencies. So I guess that's

probably the physical element of it that people may like. And just the fact that it has stood the test of time too. And I think that's probably the two biggest things. And it looks pretty. Come on. It does look pretty. It does look pretty. We got to factor that in. Yeah, 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just

going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. Now the ways to, I'll go over three, the three main ways. There might be some other ways, but I think these are the most, the ones that makes the most sense, I think for most

people. The first one would be to just buying physical gold directly from Canadian, the Canadian Mint or Canadian Bank. So if you buy it from a bank, you can get the gold stored for you in a vault at the Canadian Mint. The Canadian Mint won't do that directly with individuals, but they'll do that with institutional investors like a bank, obviously. You'll pay a premium versus the spot price.

So I have looked into this before because I was curious. It's always going to be more expensive than the price of gold as it's quoted on the markets be careful buying it somewhere else because of purity like I mentioned if you buy it from a Canadian bank or directly from the Canadian mint you can be pretty sure that it'll be I think 99.9% unlike etfs are mining stocks that i'll talk about a bit more it's not going to be very liquid so it's very illiquid it's not as easy to to sell and change and get cash if you do need cash but the biggest advantage here is that you can physically have the gold in your possession if you want to so that's the the first option. Any comments on that one?

No, I think that that's good. Just watch for the fees here. Like, oh, yeah, very, you're very acutely aware of the fees associated with doing this. Yeah, yeah, exactly. But it is definitely, you know, it's probably easier than a lot of people think. But, you know, there is a cost tied to that. The second one is buying a physically backed gold ETF like DSPDR Gold Shares, ticker GLD, or Sprott Physical Gold Trust, ticker PHYS. One of the biggest benefits here is that it's very liquid. It's backed by actual gold. So make sure, you know, if you are interested in the ETF route, be careful with leverage gold ETFs because, you know, leverage can go both ways.

And those are usually used more by traders. It follows very closely the price of gold minus the fees. And the fees are the management expense ratio is about, for these two are right around 40 basis points. So 0.4 percent. So that's also a good option for people that want something physically backed by gold. But, you know, want it an easier way to purchase gold, I would say, compared to buying it physically. purchase gold, I would say, compared to buying it physically? There are, it seems to me that gold is a very polarizing discussion or topic for investors, because it seems to me people are gold bugs and are very in, and they want a large position.

and they want a large position, and they're kind of attuned to the risks of fiat currency, and they're all in, kind of like Bitcoin maximalists, but they're gold bugs. Or you're in the camp that I'm in, which isn't like hate on it, but I don't want to own any exposure because I don't believe in its utility when push comes to shove. Now, again, that's the way I look at it. And so it seems like a very polarizing topic of being all in or all out, kind of like Bitcoin. And I understand why, right? There's for many of the reasons that you've mentioned here. For me, my rough thesis here is it doesn't have any actual intrinsic utility when push comes to shove. If I needed to use it, I think that it wouldn't actually work the way that gold bugs think

it would, uh, for. For one, that's my rough thesis on it. And two, it just doesn't provide any sort of intrinsic value or cashflow generation. And most commodities don't, but those other commodities have intrinsic utility. So if they don't generate cashflow, giving an intrinsic value, then we need to measure it in some other way. Like we value commodities, but gold doesn't have a lot of those same properties like wheat and oil does, you know? So it puts it in an entirely different category that to me officially sits in, you know, a Venn diagram of useful and cool and doesn't do either. It's out of both rings. It doesn't, it doesn't sit in any useful category in terms of generating intrinsic value or having intrinsic

utility. So that's for me why I'm not an owner of gold and have really no intention of owning any. Yeah. And a couple of points here. I would say, you know, the first thing about the gold performance, you can make a case it could be higher than it is, especially in the past decade and change, because you can make a case that Bitcoin has taken a lot of market share from gold. So a lot of people, like you mentioned, that would have been interested in gold may have put some money in Bitcoin instead or diverge that completely to Bitcoin because that is an option that's digital and which is much more liquid than gold and all the different advantages that Bitcoin has. And in terms of utility, obviously, I totally agree. It's hard to argue there. That's why I

think some people prefer silver because it also has that kind of dual slash precious metal, but also it's much more widely used in industrial uses than gold would be. So that's, yeah, that's just a couple of points there. And then the last one in terms of generating cash flow, if people are interested in companies that do generate cash flows, well, you can invest in either in a mining or screening company, some names to consider. It's one, I think it's the biggest player in the world. It's Newmont, ticker NMT, Barrick Gold. I know ticker gold in the US, but in Toronto, it's ABX. Or Franco Nevada is one that I like as well. They can provide, one of the advantage to miners is they can provide exposure to not only gold, but other metals. For miners, one of the downside, it's very capital extensive, which means earnings will vary quite a bit depending on the price of gold and obviously what their costs are.

Like DTF route, it's very liquid. So that is an advantage here. And, you know, for most of the mature gold miner or streamers like a Franco Nevada, TSX and those companies, you know, usually those junior miners, typically they have, yes, they found, for example, gold in a mine. But now they need to figure out how to extract it, getting the funding to extract it. And a lot of these junior miners end up just going bankrupt. So I think you have to be careful. Personally, if you're, you know, if I were to invest in a mining company, I wouldn't even look at the junior miners. I'd look at the more mature companies that, you know, are stable they have good you know good operations and gives me exposure to gold and probably some other uh precious metals at the same time yeah look no further than the than the tsx for you know barrack newmont franco nevada probably uh some of the best is agnico? They merged, right?

Agnico, Eagle. I think so. Yeah, a while back. Or a while back. Maybe last year or something. Yeah. Maybe you can look that up. There was a big merger a year or two ago. Maybe you can look that up while I'm doing my next segment here.

And such next segment is called vertical versus horizontal markets. How do I take this? All right. So this segment is the genesis of coming up with this is I was on a podcast last week talking about vertical market products. And this stemmed from talking about none other than Constellation Software, which is a roll-up of vertical market software companies, aka VMS. And I've realized that on the podcast and this other podcast, I'm throwing around this buzzword, which is VMS, vertical market software, or just

vertical markets in general. And what does this really mean and why should you care? So vertical markets versus horizontal markets, it's really quite simple. And I'm going to break it down with some basic examples to explain it. So let's look at Microsoft Excel. Microsoft Excel is arguably the most successful product of all time. You could put it up against almost anything in terms of relevance today, functionality, maturity of its feature set, maturity of its feature set, longevity, and it passes the snap test today. Whereas if every spreadsheet was to just get deleted, if you deleted every spreadsheet on the planet and it didn't exist, even maybe Google Sheet on every Google Cloud that existed today, google cloud that existed today commerce as we know it would take a pause so let's just let's just think about that for a sec like we're in a doomsday situation that would be if we lost

every spreadsheet that was saved on every computer in the world today like what would happen there'd be no logistics no no nothing like yeah yeah well i mean maybe maybe Chad GPT or something will be able to help us out. I think it would have to, right? Like, GOMRs, as we know it, would take a medium-length pause for a while. And this is because Microsoft Excel is used in essentially every industry in the world by every single knowledge worker using some sort of spreadsheeting. And it's not just used for one specific industry or sector, aka vertical. And that's why spreadsheeting as a tool is very horizontal. It serves many different sectors and use cases.

It's industry agnostic. Visually, if you were to put every kind of sector in boxes on a flow chart, Excel would kind of cover all of them. And then there would be these niche tools that fit into each specific sector. Let me introduce to you vertical products, vertical markets. These are products that serve just specific verticals, not like Excel. Let's use a guy I met in Austin, Texas. His name is Dan, and he has a perfect example of a very niche product that serves a niche vertical. And it is called Commit Swimming. So Dan is the founder of Commit Swimming. Commit Swimming is software for swim teams, okay?

This is software for swim clubs and coaches. This is like hyper, hyper specific. Simone, you'll never see Dan's product, make it big in any sort of vertical outside of the sport of swimming, but he has a great business because it's specifically built for them it's built for the customers it's built for the swim team owner operator coaches and that's why it's hyper useful given the context so shout out dan from commit swimming good guy on the off chance yeah i did not yeah i did not know there was such a thing i mean it's not, obviously, the market is limited for that, but it's so niche that I'm not sure if there would be many competitors to go into space, right?

Exactly. So you are now describing the benefits of vertical markets and building products and companies that serve vertical markets. And if you want to drill down to this next level, like extremely niche applications within these vertical markets. So if, by the way, if your kids are competitive swimmers, if you're a competitive swimmer on the off chance, go check out Commit Swimming. Dan's a good guy. All right. So you've kind of described the nice part about building in specific verticals and investing in these types of companies as well. Let's use one

more example here that I'm just thinking of out loud. The products that Autodesk makes are in the niche verticals, depending on the product, of mostly architecture, engineering, construction, and now they're tackling and making a lot of advancements in the new vertical of manufacturing. So now they have new products to help serve and do 3D visualization in manufacturing. But this is an example of vertical market software. Those are huge verticals. So these can be gigantic businesses. There's still a giant adjustable market, but you're not using Autoad to you know do your uh manage your swim club you know like maybe you could yeah even something like we're using right now riverside right it's very targeted i mean there might be more uses than just podcasts but what riverside does well is that it gives you essentially audio video

together. You can separate the audio, you can separate the video, you can separate each track. So a lot of things that Zoom just doesn't do because their enterprise customers are not interested in that. They just want a good video conferencing software. They just want to tighten up my blemishes for my morning Zoom call. wear you know they just want to tighten up my blemishes for my morning zoom call yeah exactly but it's true right it's kind of very focused definitely more on podcasts or live shows and things like that yeah so there's lots of easy examples in tech but it's not just this isn't just exclusive to technology of course this is you know kind of product agnostic here, we're talking about it. And having said that, I'll probably use more tech examples. But the nice part about

these specific verticals today, not only for investors who are looking at investing in these products, or investing in a company like Constellation that rolls up vertical markets, or investing in a company like Constellation that rolls up vertical markets is two main things that you alluded to. First off is you can get really close to your exact customer and let them know that this is for them. And that really makes it easier when you don't have, when you're not Microsoft Excel. People know who you are when you're Microsoft Excel. If I'm Joe Schmo coming up with software for home contractors that's specifically for them, I don't have any kind of brand reputation that people can kind of stick their neck out on and try your product. But I'm letting them know, hey, dude, you are a trades worker. You're a plumber. I have a plumbing

product just for you. I made it for you. Here it is. And so you can get really close to your customer and iterate with them. So that's very helpful. Number two, which you spoke to, the Google, the Microsoft, the Facebooks of the world, very rarely, not never, but very rarely, are they building and acquiring vertical products? It's too small an opportunity to justify so they focus on these big horizontal tell us tell us what company focuses on acquiring those kind of businesses let me tell you about constellation software no but like google microsoft for instance okay when they come out with with teams right it It's a perfect product for them to build out their existing distribution. It's industry agnostic. It's collaboration tools. Doesn't

matter if you're managing a swim club, you're a plumber or you're an electrician. It really doesn't matter. And so in these vertical niches, both investors and entrepreneurs can thrive there and investors can thrive there because they're not too worried about Microsoft coming up with Teams and eating the lunch of, like they ate the lunch of Zoom. Like they ate the lunch of Zoom. You know, they didn't kill Zoom. Zoom's going to be fine. But that's a concern that people have when they build horizontal products is that the big guys with big distribution will come eat your lunch. Yeah. Yeah, exactly. Not much to add there.

Your examples are good. Okay, good. To be fair, about 90% of those were on the fly. So I had Excel written down here and commit swimming written down here. So everything those were on the fly. So I had Excel written down here and commit swimming written down here. So everything else was on the fly. Same for me. Yeah. As we were talking, but no, it's true. There is tons of products. I'm sure people can think about different tools that they might use for their work or if they have a business that are definitely specific to very niche application i mean um think about the platform we use to host a podcast on it's solely for podcasters that's it like i'm not talking about riverside the other platform we use where omni exactly where it hosts it's only

for podcasts that's it there's no other uses for it can, you know, I'm not saying they will never get bought out, but I mean, for a lot of companies, probably doesn't make much sense to make a product just for that fit. That's right. Yeah. Yeah. So as an, you know, there's an investing show, not a startup building show,

but investors can think about that a lot. Like when they're, when they are investing in an Autodesk, for instance, compared to a Zoom is because of how niche it is and how entrenched it is into the vertical that they're serving, it limits the total addressable market, but it builds a more profound competitive advantage and less of a competitive pond with the sharks swimming in that are well-capitalized and have extreme distribution to just basically one line of code and you don't exist anymore. So that's the way I think about it when investing in some of these names. Yeah, totally. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is

Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks

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

That is airbnb.ca forward slash host. That is Airbnb.ca forward slash host. Now we'll move on to the next segment here. So the relative strength index, it was on our list of things, of concepts to go over. So one more checked off the list. Now in short, the relative strength index, which is the RSI, is a momentum indicator used in technical analysis. It measures the speed and magnitude of a recent price change of securities. Securities obviously will include stocks to determine whether it's overvalued or undervalued. The RSI was developed in 1978 by J. Welles Wilder. The index will range between 0 and 100. RSI was developed in 1978 by J. Welles Wilder.

The index will range between zero and 100. So I won't go into too much detail how it's calculated because it's not great, you know, podcast material, but you can look it up if you're interested. The formula is not overly complicated. You can just find it on the Google machine or you can ask one of your large language model favorite AIs. I'm sure they'll be able to come up with that. Now, the two big things to know here is an RSI over 70 has been traditionally considered overbought, which could mean that a stock is poised for a downward trend. On the other end, an RSI under 30 is typically considered oversold, which could mean that the stock is poised for a rebound. Now there's different

variations of RSI as well. So if that's something that you're interested, obviously read up on it. It's not something I'm overly familiar with, but I definitely have seen it around. I think it could be a useful tool for traders. And then I'm definitely saying traders here. But for someone that would be new to investing and just using this tool, I would be, you know, I would say be very careful if you don't really know what you're doing, because if you're using this strictly to base your decision on whether to buy a stock or not, it can really lead you in a wrong way, especially if you're looking to hold businesses for a long period of time. Because, for example, the RSI will look at a defined period of time. I can't recall whether

it's six months or whatever the period it is. And then if there's a big deviation from that, it's going to be either overbought or oversold according to the RSI. And what it doesn't do, it doesn't tell you anything about the underlying company. So a company may see, you know, let's just think about the regional banks, right? Recently. So you had some of the banks that went bankrupt or into receivership that were down massively and if you you know were living under a rock and did not look at all at what was going on in the news you may see oh the rsi is actually quite low so the stock is definitely oversold so i'm going to go ahead and start a position just to a few days later to essentially lose your whole investment. So I think that's kind of my nuanced take on it.

It is something you'll see thrown out there, but it's not something personally I pay overly attention to. This is a number you will see all over the place usually complemented with a chart with a bunch of squiggly lines and a line and uh the support line and uh cup and handle patterns just a whole lot of stuff i don't give two shits about but it is thrown out there quite a bit for oftentimes for a reason to buy a company i think the better articles at least use it as a one element they still look at the business just say oh well the business still doing well and look at the rsr it's actually in

oversold territory. So it's a good time to start a position. So maybe you can make a case that it has value there. But I think the best value for this tool is if people are traders and, you know, technical analysis and stuff like that. Just be careful if you see an article and says like, oh, the RSI and it just kind of glances over the business. That's pretty dangerous in my opinion, especially if you're not looking to trade and invest long term. So what I will give it credit for and technical analysis, I'll give it some of its credit, is investors who need to buy tons and tons of stock over long periods of time. They can't just buy 20 shares on the brokerage and move on. They're managing billions of AUM. They need to be quite optimal in terms of using momentum factors and optimizing their buy price.

And some of these tools like RSI can actually, in the short term, make a fairly big difference in their performance in the short term, using trend following and momentum and this kind of stuff. So I get that. But for 99.9% of people, those are not constraints that you're under. And for that main reason, it should never be the reason you buy or sell a security from my view. So, not much more to add than that. Did you learn that philosophy as a principal at Allianz? Is that it? Yeah, I did. I did.

I was moving hundreds of billions at Allianz. It is a German company, right? I don't know. Yeah. If people are wondering why we're saying this, just go back to the previous episode, the news and earnings that came out last Thursday when Braden kind of AI'd himself with the large language model to see what it would give him. I think it was ChatGPT, right, they use they use yeah i asked chad gpt to tell tell me uh well i didn't actually do this my co-founder

sent me a screenshot of it because okay i didn't uh i didn't just say hey who am i it was kevin um okay and it says brayden dennis is a canadian investor is the co-founder stratosphere and a principal at allianz i don't know if I'm pronouncing that rightly. Probably not. Principal investor at Allianz, according to his LinkedIn profile. Maybe someone hacked your LinkedIn profile and changed it. Yeah, it must have been, right? It provides the link.

It provides the source. This is the browser extension plugin. And you click on the link and it brings it to my linkedin it's actually the right source and uh it just made up that that piece of information but uh who knows all right simone um let's uh let's call the episode there let's uh all right that good. Let's call it there. Thanks for listening to the show, folks. We really appreciate it. This is coming out in the following Monday.

So if there are. Yeah, like the 29th. Yeah. That sounds, I'm just going to have to go with that. Yeah, 29th. If there are tickets remaining for our meetup the link is in the description of show notes as of recording this right now we're we're more well more than half sold and uh it's gonna be a fun evening if you can make it uh to to toronto if you're in the gta or whatever or i'm a bit nervous that we're gonna meet people

like oh I flew in from Vancouver for this like oh no man like never meet your heroes you know I mean I think guys a lot of people go to Toronto to vacation a little bit so you know I'm doing it as part of a family vacation anyways so that's how we ended up with the july 7th date because i was already planning to be in toronto and figured that i extended a little bit and you know because dan braden and nick are all in the gta it was it made sense for for me to move out maybe at some point we'll do one in ottawa yeah yeah for sure the the real estate guys will be there we're hoping to get a bunch of questions we're going to get a bunch of questions compiled on joint tci.com for the patreon subscribers to propose some questions and

we'll just pick some to to answer we'll need our uh our our becky uh for we need our becky cnbc uh style question panel becky quick that's her last name right oh one of us can do it yeah one of us can do it and then just answer the question ourselves or yeah let's hire let's hire becky quick to make the trip out. I'm sure we're big enough, no doubt, to have that happen. So yeah, we'll pick some questions, do a little Q&A, drinks, food supplied by us, and you'll have a great time. 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.