The Canadian Investor - 4 Lessons From Warren Buffett’s 2022 Letter

Episode Date: March 6, 2023

In this episode, Braden goes over takeaways from Warren Buffet’s 2022 Shareholder letter. We then discuss another legend in the investing space. We also touch on what impacts government bond yields and how to store your Bitcoin and cryptocurrency. Symbols of stocks discussed: BRK-B 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 in to the show. My name is Brayden Dennis, as always joined by the highly ruminative Sir Simon Belanger. How are you doing, my friend? I just booked a flight to Omaha for the Warren Buffett Berkshire Hathaway extravaganza. I can't wait to see Charlie Munger's face.

And I want you, you got to come with me next year, if it's good. Yeah, yeah. I mean, obviously it's good and I'm just crossing my fingers they'll be with us for another year. Because at this point, mean yeah um you know they're not young whippersnappers anymore but they're not getting any younger i feel like it's going to be so interesting for you to see the dynamic between munger and buffett because buffett is usually way more politically correct where charlie has no filter whatsoever, and he's more than happy to, you know, tell you exactly how he thinks, whether, you know, he hurts or feeling or not. He doesn't care.

He doesn't care. And he's always been like that. But when you're 99, you're just going to be more of that. Like the amount of F's you have throughout your lifetime, they're all used up. You just got none left. So next year, dude, that would be incredible because he would literally be 100 years old. Yeah.

Which is nuts. To book it this year for next year. Yeah. Hopefully. Anyways. So I'm officially headed to Omaha for Berkshire AGM this year. It's going to be, I'm going to have so much content for the podcast. Um, maybe we should do like a live episode, like maybe the morning before I go or something. I don't know. Just, just spit blonde

ideas. Um, I've been kind of in a meaning to go, but never committed to going to do it. I mean, this is like, you have all the sweaty financial nerds in one place for a weekend and I couldn't be more pumped. So, yep, all booked up. Now, on that same note, my first segment of the podcast today is I'm kicking us off with lessons from Warren's 2022 letter to shareholders because it came out last Saturday and it might be my favorite letter in a while. Like it's been my, it is my, I, for some reason it just stood out. And I talked to a couple of other shareholders, um, who are like, you know, big Buffett fans. And they all said something similar like this one. It just seemed like he zoomed out so much and not was in, not in the weeds of the business and just zoomed out so much, very philosophical. Um, and as always, lots of tidbits on how to,

how to be a great investor. And so I have four lessons here. Uh, we can go through them one by one lesson number one from his letter. And again, these are just my takeaways and interpretations of the words, the buff dog words. And you can leverage them in any way you can for your own framework. Lesson number one, Simone. You get the outcomes you attract on a long enough time horizon. Again, you get the outcome you attract on a long enough horizon. He starts with a paragraph as per usual in the beginning of his letters on him and Charlie's why, like why they do this, why they care, why they still do this,

why they get up every morning and are so excited to do this job for their shareholders. And this whole segment for me felt a lot like you deserve the shareholders that you attract. And managers who act with lacking integrity typically get the shareholders who do too. The shareholders who are just looking for a quick buck are attracted to managers who typically act with short-term thinking and lacking integrity versus long-term investors looking for good stewards of permanent capital who can operate with integrity. Come on over to Berkshire. That's basically what he's saying. And he ended this section with the quote, who wouldn't enjoy working for shareholders like

ours? End quote. That's how he ended this first page. And so yeah, you get the outcomes you attract on a long enough time horizon. What are your thoughts? No, I think I'm a big believer in that just generally in life, right? If you work hard, you treat people well, usually things, you know, you get rewarded. You might not feel like it in the short term, but long term, you'll get rewarded. If you're, you know, a not good person to not swear,

I could use other terms for, I'll try to keep it friendly. But if you're, you know, you're a hold to anyone or like pretty much everyone, I mean, it's going to come back and bite you and make you may profit from it on your daily lives in the short term. But longer term, things kind of have a way to come around. in the short term but longer term things kind of have a way to to come around yeah people do life with and do business with people they trust and like number two great advice typically doesn't change with the seasons um you know it's like the content creators and You know, it's like the content creators and just advice generally about not, not like investment advice, just like life advice. It sounds less smart if you just keep saying it. So people feel like they always need to come up with new, new tidbits, new motivations

to feed their audience. And the reality is, is that great advice is usually evergreen. Like it doesn't change with the seasons. It doesn't changes with what's hot. And this section of Buffett's letter, the second section was what we do and why owning both private and both private and pieces of publicly traded companies at the end of the day. He says the same things 50 years ago, as he says in 2023, which is act like a business owner, not a trader. And he has been consistent about saying this exact same thing and same pieces of wisdom, same tidbits for decades. It's nothing new. Like he doesn't come up with anything that's like

radically different than he's been preaching for 50 years. And it sounds like a negative, but it's actually such a positive that the same sound wisdom doesn't change with what's hot and what's not. Quote, Charlie and I are not stock pickers. We are business pickers. Said that a million times. Another quote, one advantage of our publicly traded segment is that episodically, it becomes easy to buy pieces of wonderful businesses at wonderful prices. It's crucial to understand that stocks often trade at foolish prices, both high and low. Efficient markets only exist in textbooks. In truth, marketable stocks and bonds are baffling. Their behavior usually understandable only in retrospect. So basically saying the fact that the idea that stocks trade at efficient prices is just a

concept in a textbook. It is not real. And that is one of your advantages. Yeah. And the retrospect is really interesting because if we go back just a year and a half ago, two years ago, 2020 and 2021, I mean, now in retrospect, I mean, low interest rate, tons of money in the economy, government stimulus left, right, and center, no matter what country you were looking at, people not being able to spend on a bunch of different things. So kind of focusing their spending on certain type of goods or investing that money. The result, asset prices become extremely inflated, especially those riskier assets. And now it's much easier in retrospect to be like, okay, that was pretty obvious, right? Money was cheap. There was tons of liquidity. Now interest rates

are going up. Liquidity is tightening up in the market. Makes a bit more sense why we're not seeing those multiples. I mean, I think it's just a great quote. I know I've learned lessons. Clearly, we are good at, you know, making sure we don't put too much of an allocation on things that are riskier. And I think that's a big one. Big part that we did not get wrecked. Right. For the most part, you know, you know we took you know didn't have

a great year last year like most people but at the end of the day um you know you allocate and you kind of judge or you mitigate your risk that way but i definitely learned one thing is that i have to be more careful of making sure even businesses that are growing quickly that i actually pay a reasonable price for them yeah not overpaying is such a such a skill but um just needs to be emphasized and this leads so well into lesson number three which is literally mistakes are going to happen. That's lesson number three. Look, they're going to happen. I've made some, you've made some, we've all made some. And if you haven't yet, keep doing this because it will happen. And that's okay because you're going to do it for a long time. And as a result, crush it, get wonderful long-term wealth generation with compounding returns,

but sprinkled in that with a couple of not ideal outcomes, and that is okay. Quote, along the way, other businesses in which I have invested have died, their products unwanted by the public. Capitalism has two sides. The system creates an ever-growing pile of losers while concurrently delivering a gusher of improved goods and services. Schumpeter, who is that, called this phenomenon, quote, creative destruction. And so he called out literally examples, companies that have been huge flops and companies that have been gigantic winners like Coca-Cola and American Express and owning massive positions in those businesses. They just had to do a couple things right. And they did many wrong, but they just had to do a couple things right and they did many wrong but they just had to do a couple things right

um and this happens so often yeah and if you haven't made a mistake either you haven't been investing for a very long time or you're lying to yourself um that's on that's my honest opinion i mean i've made mistakes um and i think whether it's in life, you know, or investing and the way I try to approach is just learning from them. I just talked about it. Some companies, I clearly overpaid for them. And, you know, I'm probably going to overpay for some businesses in the future. But I'll try to learn what I did learn on the last couple of years and, you know, minimize the overpayment, I think, because, you know, you just have to learn from it. They're just learning opportunities. That's how I see it. Yeah. And I know you and I, for the first like year or two of this pod, I didn't have, I felt like a fraud. I was like, I don't really have that many like bad mistakes to report to. And that's because I indexed for so long. It's the beauty of indexing. It's pretty hard to go wrong if you just DCA. And maybe that's another learning in itself right there that

a lot of people should probably just be in the index. Lesson four, winners win. Tangentially related to lesson three. And they all flow together as they should, like any good letter from Warren Buffett. Now, return decomposition for many portfolios, it tends to be where a significant amount of outperformance comes from just a few select great ideas, like Buffett's example of Coke and American Express, where the investor had the right thesis at the right time and the right conviction. I think I double click on that. The right conviction to hold it for a really long time. Because every great winner is going to have drawdowns. I mean, like how many times did Amazon lose half its value since it went public?

I don't know, but a lot. Yeah, quite a few times. A bunch. So you've had to have the right conviction on the thesis as well. I think that that's really important. And the reality is that this is very common that you have like these outsized returns from just a few winners. Return dump decomposition is usually placed that way.

And Buffett points it out here as well. Quote, is usually placed that way. Buffett points it out here as well, quote, the lesson for investors, the weeds wither away in any significance as the flowers bloom. Over time, it just takes a few winters to work wonders. Yes, it helps to start early and live into your 90s as well. I think this is my favorite quote of the entire letter. The weeds wither away in significance as the flowers bloom. And then, yeah, it helps to start early and live into your 90s. It doesn't hurt. It's just so wonderful.

It's so him. And the man still has such a way with words. Yeah. No, that's always a great letter to read. I haven't had the chance just yet. So this is a little preview for me, but I'm excited to- It's really short. Yeah. I'm excited to read it. It's five pages. Oh, nice. Okay. It's short. Yeah. It's really short. Probably we'll read that either today or tomorrow. either today or tomorrow. 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 we'll move on to a different kind of thing. We haven't really

talked about that. It's a bit more macro, but it can apply like impact your daily lives as well. So I figured I'd touch on that a bit more. So what the bond market can tell you about interest rates and what, you know, the bond market actually thinks where they'll be going, you know, forgetting what actually central bankers are telling you about interest rates. It's always a good thing to look at. So first of all, just a quick primer in terms of government bonds. So whether it's Canadian government bonds or U.S. treasuries, clearly the U.S. treasury market is the most important.

Governments issue bonds to cover their expenses. When the bonds come to maturity, they won't repay those back because they just can't repay the entirety of them back. They'll typically just roll them over. And that's because, for example, in Canada, the current federal government debt is around $1.5 trillion, much higher if you include the provinces. So I don't have the figure here but for 20 for the 2021-2022 fiscal year the government reported revenues of a bit more than 400 billion so clearly you know these are just the revenues you have a debt of 1.5 trillion so clearly they have to roll these bonds over so as they roll them over with higher interest interest costs actually rise now I won't go into too much detail here because I could

probably do a whole episode on that. And that's not the point. Rising rates could eventually impact the ability of government to spend as a larger part of its expenses are allocated to pay interest debt. That's something, like I said, I can dive into another time because it would be way too long. Now, when you look at government bonds, you really have to look at it from a duration standpoint because it'll tell you different things. So typically, shorter the duration, the lower the yield will be. That's because when you invest in longer duration bonds, you want to get compensated for the fact that there is more uncertainty and potential for interest rates to go up, therefore having a bigger effect on bonds that have a longer duration. That's also because the time frame for longer bonds, there's longer for maturity. So that means there will be more interest payments remaining on dot

bonds. So in turn, it will depress the market value of the existing bond. So when interest rates rise, existing bonds tend to go down. The longer the duration, the more impacted they will be. Now, in terms, I pulled three charts. I know you can see them. They're showing interest rates for Government of Canada bonds for bonds for one year, two year, five years. And what you see in those charts is actually pretty simple and also quite interesting. I'll explain it pretty easily to people. So the one year, there are some shorter duration, but the one year is a smoothish, smoothish,

slow climb to the right, almost in lockstep with the Bank of Canada increases with not many bumps and currently sits at 4.66%. The two year has a bit more bumps and is currently sitting at 4.66%. The two-year has a bit more bumps and is currently sitting at 4.2%. And the five-year is a lot more volatile and is sitting at 3.5%. And the U.S. five-year bond is yielding 4.17 for additional context here.

Anything you want to say on that before I finish up here? No, I'm in complete learning mode right now. This is good. Yeah. So now let's focus on the five-year bond yield because it will impact some things in your daily lives that people may actually not realize that it's impacting. First thing that we're seeing here is that the yield is lower for the longer duration than the shorter duration, which is not typical. That's what they'll refer to the yield curve inversion. And we're still seeing that right now. Second, we're seeing the five-year bond yield bottom around.

We saw the Canadian yield bottom around end of January below 3%. I think it was around 2.8%. And now sits at 3.5%. And that's despite the Bank of Canada saying they would pause rates this year. Now, the market is essentially saying that they think rates will need to stay higher longer. So, that's what the bond market is telling you here. Now, there's other… That one-year chart looks like a really nice stock to own.

Yeah, exactly. And the six months is actually even smoother, but the one year. And you can pull that really easily if people just Google it. It's very easy to look at it. Now, there's other reasons why longer term bond rates can go higher, but I won't go over that for this segment because, you know, that would probably take a whole episode in itself as well. Now, the last thing here, the fact that the U.S. Treasury for the same duration is yielding

more than 60 basis points than the Canadian one is likely to keep putting pressure on the Canadian dollars because it makes the five-year U.S. Treasury more attractive to investors. Even if the rates were the same, there would be more demand for U.S. Treasuries because the U.S. dollar is the reserve currency. So that's where the Bank of Canada is kind of in a difficult spot right now. Now, why should you care about this? Well, government bonds are typically seen as, air quotes, risk-free alternative to investments. And the reason I said air quotes is because there's nothing that's really risk-free. And yes, it's backed by the governments, but governments can default on their debt, however unlikely that

may appear to be right now. And let's say you're one of the big Canadian banks. The five-year bond will actually be one of the big determining factors influencing the rate that you're willing to loan for a five-year fixed mortgage. That's because the bank can always put that money into that government bond that they consider risk-free. And it may decide to underwrite you a mortgage, but it's going to look at the five-year bond first and then add a risk premium to that and offer you that five-year mortgage. And a lot of people don't realize that that's actually how it's calculated. Obviously, you know, it may be a bit higher for you compared to your neighbor, depending on a bunch of different factors, but that's also why we don't have 30 years mortgage in Canada and the US has

them. So it's in relation to those government bonds. And as a stock investor, it also impacts you in a few important ways. The higher the longer terms rates are, the more money will go towards them and away from stocks. It can make some type of stocks more attractively priced or depressed. It can be a great opportunity to buy wonderful businesses like we just talked about with, you know, referencing Warren Buffett and Berkshire

Hathaway. Assuming that you have a long enough time horizon because if those rates keep trending higher, there's really a good probability that short-term pain will continue into the medium term. And it means that if you're not finding any attractive opportunities for the time being, you can actually park your money and get a decent yield in return. Will you actually be a net positive compared to inflation? That's debatable, but it does impact investing as well. And I wanted to – something we don't really talk about a lot, but the bond market is actually a good indicator as where the market thinks rates will be going and all the ripple effects it can have as well. Yeah, it's such a derivative of forward rate predictions. And it has never once been understandable. It's so I just, people do this all day. I don't like what are they? How do they have any sort of conviction? It's so wild to me. Yeah, no, I mean mean it's and the bond market usually will be better than

the stock market i kind of predicting the outcome but again you can see those variants i just talked about within a month the five-year change like pretty significantly in canada so that's the bond market saying in part they're thinking look okay, the economy is still pretty strong. The job numbers are pretty strong. We actually think inflation might be more present than the Bank of Canada is actually projecting. So they think that they may be kind of stuck in this pattern to have to stick to higher rates longer if they really want to get a hold in inflation in nutshell that's what the bond market is currently telling us right now people who work in credit are so smart like on a professional scale oh yeah it is unbelievable

how like how smart some of the people who work in credit are. And they are way smarter than I'll ever be. And you've just done a breakdown that is super helpful for people and super helpful for me. And I just scratched the surface too, right? I think. Yeah, this is just the surface, but the surface is helpful. Yeah, exactly. No, it's good to just understand, even if you don't care about most of what I said, but you're looking to buy a house, you may be wondering why the five-year fixed rate is hovering up and down despite the Bank of Canada not changing rates. And most people, it's just some floating number that really never has any sort of rationale. But there is some complex stuff happening in credit that derives at that number. have gone forward, the reality is this rate has moved from basically zero to something significant in a short period of time. Yeah, exactly.

And not to get political, but the way the government actually manages their finances has an impact on that too. We saw what happened with the guilt with the British bond when Liz Truss, I think, was saying she would be cutting taxes, increasing spending and all these things. And the market said, OK, they called BS. Basically, they said, OK, well, we don't think the UK is going to do a good job at repaying their bonds back. So the yield shot up. The price of UK bonds completely crashed.

And then the Bank of England had to intervene intervene and they have a new prime minister now. So, you know, it's something, you know, we don't get into politics, but that's just to give you an idea of, yes, the decisions governments take actually can have a pretty significant impact on the bond market. 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. Let's take a look at the late great John Bogle. I guess I decided to do two investing legends here from my two segments on the pod here. John Bogle, or most often referred to as Jack Bogle. I'll interchange them. My buddy Jack Bogle,

I'm saying it like me and him are like buddies or something. This man lived a fascinating life. He did a lot for the individual DIY investor. A lot might be the understatement of the year. That's why he deserves a segment on the podcast here. Jack Bogle passed away in 2019 at the age of 89. And his life was prolific in many ways. And there's still tons of interviews on YouTube. If you ever want to hear him talk, if you've never heard him talk, he does lots well into his late 80s, still sharp as a tack right up until then. And not many, maybe new to the investment world, you might not be familiar with Mr. Bogle, but you will probably be very familiar with at least Vanguard.

And Vanguard is the company he founded and ran and got kicked off at one point, like any good entrepreneurial story that grows into a billion-dollar company, ousted from the board or whatever it was. And Vanguard has been a gigantic disruptor in the financial industry, turning the mutual fund business upside down, and this was all from Jack Bogle in his career, he brought in passive index investing to the mainstream. And he invented it, really, with the main effort of bringing costs down and performance up for the individual investor. Very mission-driven on this individual investor. I can't make you get great returns, but I can make you have low fees. If I can really focus on that, then we'll be getting somewhere here. That's what he's been relentlessly pursuing during his whole career. And Jack Bogle became known as the father of index investing. Today, Vanguard has over 7 trillion assets under management, and the growth in fund flows has been

stupid consistent during all types of markets. Today, Vanguard and BlackRock both own around 7% to 8% of almost most public companies, which is kind of nuts. Jack had a real disdain for mutual fund fees, aggressive. There are some stories, Simone, and this just kills me. He would get invited to these financial conferences and he was a big shot. He's a billionaire, managing hundreds of billions at the time, which ended up becoming trillions assets under management. He's a big shot, right? He's a billionaire, like managing hundreds of billions at the time, which ended up becoming trillions assets under management. So he's a big shot. He can go on any stage he wants in the financial world. He would get invited to like active management fund, like conferences and go up there on stage and shit on their business.

Like no, no problem. I don't know why he kept getting invited to these events uh he had no time for the mutual fund business not only because he was building a disruptor but he was baffled and what originally sent him on this mission is after doing some work seeing that after fees, they had historically poor performance compared to the benchmark. And in 1976, Bogle introduced the Vanguard 500. It tracks the returns of the S&P 500 and marked the first index fund marketed to retail investors. And this was very significant. Now they own, like I said, single digit percentage of most public companies, similar to BlackRock's ETF businesses. These two are the heavyweight titans in index ETFs, even though the original index fund was actually structured like a super, super low cost

index mutual fund, but not an active mutual fund. Not be confused it's an index fund but it was not structured like an exchange traded fund i don't want to confuse people so i'll stop i mean you can get mutual funds that are really low fees they're essentially you can't they're index mutual funds like it it does exist like it's not uh just people are not that's what the original yeah index fund was they're just not traded on the stock market like an ETF. That's it. Because they're traded like a mutual. Yeah.

Right. Exactly. His disdain was against the structure of high fee active management mutual funds. And I can go on and on about the genesis of Vanguard and his story and the dramas. But I wanted to highlight two critical things here. And he was a true outsider and a true mission-driven founder, entrepreneur, and just human being. He did not take no for an answer. And he was an absolute thorn in the side of incumbents in the industry and grinded his way to carving out an entire new category.

Now, the reason why it's important is I don't think there is one person that deserves as much credit as someone making investing on Main Street for the individual investor better from a cost perspective and easier than Jack Bogle. I think he is the single most influential person in this. And what he has done is started the massive movement of making what we do possible. Now, you and I are both fans of index investing and active stock picking with the right level of research involved and the willingness to remain invested and logical. There's no right way to do it, but the key here is that Jack Bogle believed keeping your cost structure low was important to maximize compounding. So do you remember when you first maybe did some back of the envelope fees on mutual fund fee like math on mutual fund fees like for me it was a light bulb moment oh yeah for first year engineering

student braden 10 years ago i was like now you what like you what like you know like what was that like for you oh i mean it's the same kind of thing you don't need um you know you you know like what was that like for you oh i mean a same kind of thing you don't need um you know you you kind of have it in your mind you see the number i think it's just instinctual you see one two percent or let's just say two percent uh that comes to mind but you see it's you know since you're a kid you know that you know one is low two is a little bit higher but you know there's still relatively small numbers i a little bit higher, but, you know, they're still relatively small numbers. I think it just comes down to that, right? And then you try doing the calculation. I remember I use a compound interest calculator to do it. And then I started plugging numbers

and the different, you know, difference of 1%, 2% and extrapolate over 20, 30 years and not necessarily huge, huge sums of money either. And then I just saw the massive difference that it did. And that's when it really clicked for me. There are two main lessons here from Jack Bogle. Number one, counter positioning is an extremely powerful thing and can change the world. Counter-positioning against the incumbents. And number two, going against the grain, which is what Jack Bogle did from day one in his career, can be very intimidating. But someone who's on a mission and just crazy enough to think that they can change this trillion dollar industry can like they're just he's just nuts enough and has just enough of a drive to make it happen and i say world changing type stuff here because without a doubt i do believe

he is one like one of the single most influential people in terms of changing the lives of millions of people today and hundreds of millions in the future for Main Street investors and giving them access to the things to really build wealth, have low fees, and compete with what was in just an elite exclusive ability to invest your capital uh so that's that's my uh summary on jack bogle he was an absolute legend yeah yeah no i know i mean i've read quite a bit about him and i can't remember what it is i'd have to look back but i thought so i think the the way vanguard was structured is they incentivize low fees, right? Where the typical funds, people are just incentivized to make sure that they maximize those fees because that makes money. But I have to look back to understand exactly that was done.

But I know that's how they did it. It's funny. It's funny. He then went on to really not like how Vanguard was going when he was no longer part of the organization because he thought ETFs were a loaded – he didn't like it. He didn't like the structure. And he thought that the original index fund was a much better structure than ETF. And they eventually were just like, get this old guy out of the building here. We're trying to make trillions in assets under management here. And it's just funny because that's in his DNA to just, even in his own company, he didn't like the conformity to typical capitalism when he thought that something could be done better. It's just in his DNA and even in his family's DNA for his uncle did something similar in the insurance business, going against the grain and just not taking no for an answer. So some people are just cut from a different cloth and for better or for worse, I think he was a legend.

No, no, totally agree. Now we'll finish here with a segment on Bitcoin and how to store your Bitcoin presented by our sponsor ShakePay. It's been a while since I was able to do a Bitcoin segment, mostly because earnings has been kind of crazy for what it's been like over a month now, we're in season and stuff. we're earning season and stuff. So I thought, I mean, I've had the question. We have some people reach out to me, reach out on our email as well. It's probably the most common question I've been getting lately about Bitcoin from our listeners. And it's definitely increased since what happened with FTX, BlockFi, Celsius and others in the past year. And people just want to know, you know, what my thoughts are in terms of storing your bitcoin and keeping that safe it can also apply if you're into other cryptocurrencies but for me it's mainly bitcoin i do have some ethereum as well now you can store it on an exchange you can store it in cold storage or you can do it through a multi-signature and I'll go quickly over each in terms of the pros and cons. First exchanges

and also include hot wallets here. Exchanges and a hot wallet just mean that it's connected to the internet that's what it means so this is probably exchanges what most people are familiar with so whether it's our sponsor Shakepay some other big names like Kraken, Coinbase, Binance there are pros and cons of storing your crypto on exchanges. A hot wallet, like I said, it's not necessarily an exchange. It's just that it's connected to the internet. Now, the pros here for exchanges, you can easily access your money. It's easy to use. You can easily trade if that's what you want to do. It's a good option if you have small amounts of Bitcoin. And there are know your customer requirements, which may be a pro or a con for people.

I have the same thing in the cons here for know your customer. That's what if you ever hear KYC, that's what it is. So know your customer. Funds can be the cons here. Funds can be frozen by the exchange or governmental entities. It can be hard to know if the exchange has one for one your assets back, especially if it's an offshore unregulated exchange. Like, for example, what happened with FTX, they were commingling users fund using it for their hedge fund Alameda. So that's especially, you know, dangerous when you're dealing with offshore exchanges. Binance is one that's not regulated in Canada or the US.

And it's much easier for a hacker or unauthorized person to steal your funds if the funds are on the exchange. The next one is cold storage. So cold storage is just the opposite of hot storage. It means your Bitcoin is not connected to the internet while it is being stored the most used devices for this type of storage is ledger or trezor there are some other ones just make sure you do your research for the other ones i've used ledger but i don't have any experience with trezor another way to keep it in cold storage is you can actually write down manually your seed phrase so that's another option that people could do that's cost effective now the pros here it's a

good option if you have a larger amounts of bitcoin you cannot be accessed without your device or seed phrase like i just mentioned kyc requirements so know your customer can be avoided that could be a good or bad thing depending I'm not doesn't have to necessarily be that you're trying to do anything illicit here is just in certain countries that are not Canada not the US where there's potential dictatorships and things like that this could be a massive advantage it's not connected to the internet it's harder to freeze funds you own the keys to your vault there's no third party involved and the cons here pretty simple if you lose your device or seed phrase your bitcoin is gone forever and there is a learning curve to understand how to use these devices so if you use it incorrectly

it could result in a permanent loss of your Bitcoin or cryptocurrency. Now, the last one, this is the not a bad option. It's called multi signature. It's basically the next step of cold storage, if you'd like, and probably the best option if you have significant amounts of Bitcoin. That's typically the storage that institutional level investors will have for their cryptocurrencies. And the way it works is multi-signature, you could say you have three keys instead of just one. So instead of having just one, you have your three keys. And in order to access your Bitcoin, you would need two out of three

keys. So it removes the risk of potentially losing your own key. So you would have one key in your phone, for example, one key in your ledger or Trezor device, and one key with a multi-signature provider like a Casa or Unchained Capital. There's also some open source options that can be quite more complex, but are free. Coinbase also has a multi-signature and you can also go towards like I said the open source options. Even if you lose your keys or one gets stolen you can still have access to your Bitcoin as long as you access the other two keys as long as you have access to them but if you lose two out of three you're screwed like the previous option. Now the pros pretty easy here good option if you

have large amounts of bitcoin cannot be accessed without the required number of keys so instead of two or three it could be five of seven for example so there's different ways to structure that kyc requirements could be avoided increased protection against loss of key te TEF of key, harder to freeze funds, you still own slash control your keys. And the cons, like I said, if you lose the two out of three, you can no longer access it. There are fees associated with like some providers like a CASA, for example, and there can be a learning curve, especially if you use the open source option. So those are all the typical options that you can have. I know we do have people that have varying amounts of Bitcoin or cryptocurrencies. And if you only have it on an exchange, and that's what I like about ShakePay,

is they actually encourage people to store it into cold storage or even multi-signature. You know, you can basically use the exchange a bit like a public washroom you do your business uh and then you go out oh my god i heard that before it was kind of funny made me laugh uh that's brilliant um and not what i was expecting um uh next time we bring up the segment we're calling it the public washroom public washroom segment yeah presented by our friends at shake bay uh we'll lose our uh they're gonna message us and be like um what are you guys calling the sponsored segment i'm like guys it's just the easiest way to understand the value proposition here. No, this is helpful.

I mean, there's a reason people do it. There's a reason the smart people in this space are doing it. There's a reason you're doing it. Yeah. There's a reason ShakePay is recommending you do it. And I also like that they're honest about that. Yeah, exactly. Because, you know, it could be of no fault of your own or ShakePay.

What if someone, you know, access your account, they figure out what your password is and the classic SMS hack where they are able to kind of get your phone number redirected to their phone. I hate SMS two-factor authentication. So that's something to keep. It sucks security-wise and it sucks logistics-wise too. Yeah. So something to keep in mind, the exchange may try their best to keep it safe. And I've never had any issues with ShakePay myself. And it's super easy to buy Bitcoin.

But things can still happen that you don't you can try to do things as well as you can but if you have your money on there um there's always that risk that's there i love the user interface and i'm not just saying that oh no it's yeah it's really sponsored it's just stupid simple like you and it's stupid simple it's like good how every good user interface should look these days is especially on ios and uh fintech apps that's the new trend is just like there's like nothing to be confused about and uh i like and they even like prompt you if there's common mistakes right if you're sending bitcoin common mistakes, right? If you're sending Bitcoin, they're like, oh, make sure you're sending it to Bitcoin address. Because if not, if you're sending to Ethereum address, you will lose it forever and things like that.

So I think it's really helpful having those reminders too. Yeah, especially for an idiot like me. Like, dude, the last thing I want. See, mom, hopefully this is your address and you can send me this back because I just lost all my money. Thanks so much for listening to the pod, guys. Really appreciate everyone tuning in. If you have not checked out stratosphere.io, go ahead and do that.

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So go ahead and check that out. If you do want more data, more features, then you can get the Essentials plan. You can get 15% off with code TCI. So guys, stratosphere.io, sign up to the essentials plan, use code TCI for the podcast listeners, get 15% off. Thanks so much for listening. We'll see you in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making

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