The Canadian Investor - 5 Advantages Retail Investors Have Over Fund Managers

Episode Date: September 26, 2022

In this episode we break down the advantages that retail investors have over fund managers. We also talk about the dilemma of converting CAD to USD while CAD is in a downward trend. We finish the episode by talking about the recent US Federal Reserve interest rate hike and Simon’s latest moves. Tickers of stocks discussed: ETSY 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. Convert CAD to USD with Norbert’s GambitSee 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. Today is September 21st, 2022. My name is Brayden Dennis. As always, joined by the wonderful, the great Simon Belanger. So we have lots to talk about today. I'm going to talk about five reasons why it is

a good time to be an investor. You're going to talk about Canadian USD conversions and then some moves you've made recently as well. And then we're going to react live on some breaking news coming out of the US Fed. How are you doing you doing, buddy? Still looking good in the dungeon down there. Yeah, I'm actually safe because we have a tornado warning in Ottawa. So, yes. Spooky. Keep recording even if there's a tornado hitting. Yeah, that's right. You're going to be in the best possible position. So, that's just good planning, isn't it? All right, let's get right into it. Please

jump in here because it's not a super long segment, but it's a semi-long segment. So jump in here and there. But I wanted to highlight something I've been thinking about. And it was really coming around a conversation I was having with Chris Meyer, who I've had the pleasure of meeting now virtually, who wrote the 100 Beggars book. of meeting now virtually who wrote the 100 Beggars book. And it was really around the people very likely to hang on to some of these mega winners, some of these outrageously good performing stocks. The classic, someone threw RBC stock in their RRSP 45 years ago, and it's dripped and compounded into a couple million dollars and pays them like several hundred thousand dollars a year in div because they have like 28% yield on cost. Those types of stories are way more likely to happen to a

retail DIY investor than someone having their money managed for them for five particular reasons that I'm going to go on here. But do you kind of agree with that sentiment? Like the person very likely to have some of those like outsized returns are not arbitrarily constrained. Yeah, I agree with that. I mean, I think the only exceptions that I would think about is someone like Warren Buffett, where he has a strategy of just buy and hold really good companies. I mean, his yield on costs for like Amex, for example, American Express. I don't know what it is. Coca-Cola.

Exactly. Those companies, like he probably, you know, I don't know, he must be at like 40, 50 percent, if not higher. So I think, you know, the exceptions are probably someone like Warren Buffett. But for the most part, you're right, fund managers, usually, you know, they do have investors to respond to. And it's much easier for them to try and at least be in line with the market than having a strategy that may put them behind the market for a year or two, but long term be really beneficial when you have a lot of investors that they are not long-term focused like we are. So I think you're completely

right for that. Right. And Buffett does these five things not like a fund manager, right? I would say that the reason you point that out, which is true, is because all five of these things, I would say Buffett doesn't really comply to, except for the fact that he's constrained by the amount of money he's moving, which he has said is a flaw to being able for him to be able to get better returns. Yeah. Because he can't just buy a small cap. No.

Like you buy the whole company, right? Yeah. And there's a whole set of disclosures too and regulatory. I don't know them all by heart, but once you hit that 10% threshold of ownership, when you're such a large investor like Berkshire, I mean, you have to be careful about that. So that's another constraint. Not that an individual investor is likely to get to 10%, but that's one other constraint that he has. That's right. All right, let's kick it off. Number one, that's one other constraint that he has. That's right. All right, let's kick it off. Number one, I think is probably the most obvious and probably the biggest one, which is you're not being graded or judged every month or quarter. You don't have to produce a statement that says, I'm producing results regularly. Whereas if you're managing money professionally or for clients,

you are pressured to produce results both in the short term and in the long term. And those are very conflicting incentives for a variety of reasons. And so this is a huge one. It is very difficult to produce regular results on the short term. When you're making decisions for multiple years out, not just a month or a quarter years out, that is a structurally gigantic advantage. Yeah. Yeah. And I think a good example, I know she's very polarizing and rightfully so, But Cathie Wood is a perfect example. Whether you agree with her strategy or not, she tends to stick by it, but she gets a lot of criticism for it. I'm not trying to debate whether it's the right strategy or not, but I'm sure she gets a lot of pressure from large

investors in her funds, in our ARK Innovation Innovation Fund to potentially change her strategy because she's lagging the markets like pretty intensely right now when obviously when she was doing really well compared to the market last year, people weren't complaining. But that's I think is a really good example of, you know, just think about the amount of flack she's been getting. Again, I'm not trying to debate whether it's this right strategy or not, just as an example. Yeah, like how are you supposed to make good decisions with that kind of external pressure? That is obviously going to affect human decision making. All right, number two is the ability to tune out noise, whether it be macro, interest rates, economic concerns, you know, whatever the new flavor of the day is, geopolitical tension, war, whatever it is, right? These are the types of things that face all investors,

professional and retail investors all the time. And depending on how much you pay attention to it is going to affect the way you act. That's going to affect your decision-making. to affect the way you act. That's going to affect your decision-making. And if you do this full-time, say you work in an office that has CNBC, it has Jim Cramer barking in your ear all day, you are what you eat in terms of information consumption. And you are able to focus on just a select few metrics for the businesses that you own. A few KPIs. Maybe you own Spotify and you just want to see premium subscribers trend up every quarter. And if the market doesn't like it, but it's still in line with your goals, you just keep buying. And you just keep tracking that your long-term thesis is going. You own Costco and you just confirm year after year that they

continue to open new warehouses, continue to have high subscriber counts and grow the business regardless of the roller coaster of the stock price. This is a gigantic advantage because you don't have client A, B, C, and D knocking on your door saying, hey, let's sell Spotify or hey, let's go sell Costco because it's down 10% and the expert on TV said that it's going lower or that there's this big market crash coming. Largely investors in great businesses or just people buying the index on a regular contribution with a time horizon that is longer than the short-sightedness of the market

really need to focus on these short-term economic indicators very little. And you won't get that. You won't be told that just regularly around the street, that the thing that everyone is so glued to, whether it's recession fears, inflation, or whatever, I'm not saying tune it out. I'm saying it matters less than the weight given to it for long-term investors. And if you can kind of recognize that and think longer than the short-sightedness of the market, it will produce wonderful returns. You just kind of got to go against the grain in most things. I'm going to go one way further here and say you can actually use that to your advantage, whether it's the noise and macro interest rates, everything or economic concerns,

where you can really pounce and get some value when the markets are really scared. And like, I think it's, who is it again? There's blood on the street. Who said that? That's a Buffett, right? I'm not sure. Yeah. Anyways, whoever's quote it is. But when there's really bad data and people are very scared when you're an individual investor, do it yourself, investor, you know, I think it's a personally I find it's a good thing to understand what's happening, but also being able to kind of leave the emotions out and, you know, get some really great companies at really reasonable valuation or cheap valuations.

Now, it says here it was a Rothschild that said the quote here is the time to buy is when there's blood on the streets. Didn't realize you were looking it up. I'm looking it up right now. But how classic is this? Okay. You already searched something up on Google. All the images are a photo of Buffett and then the quote, even though if you look it up, apparently it wasn't Buffett that said it. Like how many quotes is Buffett credited with that he didn't say? It's wonderful. Apparently, it's Nathan Rothschild that he said, or Baron Rothschild, buy when there's blood on the streets, even if the blood is your own. That's pretty intense. Hey, props to him for that quote. 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. All right. Number three is limit groupthink. So groupthink or the concept of fear of missing out or following the herd are collections of reasons that so many people, including professional investors, underperform. This happens to everyone. I mean, it's a very common human psychology. And groups of people, when they work together, group their biases, and this leads to a paradox called groupthink. This is the same reason why jumping on what is hot on some online forums like Reddit stocks or Wall Street bets is a quick way to underperform

and get caught holding the bank. You have crowded trades, extreme group think, fear of missing out and going into overvalued assets. This happens across the board. And if you are just managing your own money, it's not that you shouldn't bounce ideas off of other people and think about these things together. It's really around the fact that if you work in an office and you're managing money in some hedge fund, there's 20 analysts, sticking your neck out on an idea that is extremely unloved screams job insecurity. It screams job insecurity. It's like all of the tech bubble bus names, you couldn't get fired for suggesting to your PM for when managing a fund, even though it made no sense to buy them,

they were completely overvalued because that's what everyone else was doing. And if you're doing what everyone else is doing and you're wrong, then you didn't do anything wrong. right? Like you still have job security. So people are afraid to stick their neck out on an unloved stock or an unloved idea when it goes against groupthink because it can lead to real career risk for these people working in the industry. Yeah. Yeah, exactly.

And usually it's, I find's when you people are starting to talk to you about, you know, investments. And I think, you know, another quote, again, I don't know who are saying these quotes, but when is taxi just put Buffett's face on it? Exactly. When his taxi driver is talking about a specific stock or company or asset, that's usually time to sell, because obviously it's really hit main street and there's a lot of people like FOMO obviously wouldn't use the word FOMO but it's a good way sounds like a Peter Lynch yeah I think it's Peter Lynch type thing yeah yeah number four ability to hold assets through drawdowns this might be the biggest one for me is you gotta

you gotta hold through drawdowns. It's the normal, it's what you sign up for when you own equities, especially if you own individual equities. Drawdowns, they come with the territory. Apple stock has fallen more than 30% four times since 2012. Shares are up 10X during that time. Since 2012, Apple's historic meteoric rise to the largest company on the planet has been very obvious. You've been holding it in your hand. You've had it in your pocket. You've probably been hooked on one of their products, unless you're outside of their ecosystem, which not many people in Canada really are. So I'd be a few outliers to that. You saw a lot of volatility to the stock price and the business.

All it did was gain earnings per share at a ridiculous compounded rate. The shares were unloved many times just since 2012. Amazon stock, it's fallen more than 30% four times since 2011. Amazon stock, it's fallen more than 30% four times since 2011. Shares are up 13 times during that timeframe. Visa stock lost more than 15% of its value six times since 2014. During that time, you've made two and a half times your money and you've saw your dividend triple. These were businesses you could have quite easily tracked their fundamentals, saw your dividend triple. These were businesses you could have quite easily tracked their fundamentals, ignored the noise and saw businesses executing extremely well. I'm selecting three really great businesses. Of course, there's some selection bias here, but these were not hard to track businesses. The thesis tracking was not extremely difficult.

And if you can control your emotion and focus on the numbers, do it. I added these KPIs and business metrics like iPhone sales for Apple, Visa's total transactions for Visa, Amazon Web Services traffic for Amazon. These company-specific metrics, I added them on stratosphere.io. It's a ton of work for us, but go take advantage of it. This data is so hard to find, and it's really valuable and just gives you that quick glance every quarter. Like Adobe is a classic example. What did Adobe fall? 15% when they released earnings? And the Creative Cloud? 20%. Yeah, of course, it's on an acquisition announcement. But if you look at the metrics that matter on

the Adobe subscription and the Adobe Creative Cloud subscription, they had one of their best quarters ever. And so, it's really just easy to get lost in the noise, especially when price starts to drive narrative. Yeah. And I would say, I think this one is probably one of the hardest for people, especially those who are new to investing. If it's something you're finding that's really, really hard, maybe you want to own a bit more like good companies that do pay a dividend because having that dividend coming in for a lot of people, it's just that little extra thing.

It doesn't have to be a huge dividend, but that little extra thing that, hey, it's okay to wait. Yeah, exactly. It's okay to wait. At least I'm getting paid while I'm waiting. For me, it doesn't really matter. I know for you, it doesn't matter as well. But I know for a fact that some people love dividend stocks for that exact reason, because they get reassured by that dividend that's coming in. Yeah. No, I agree with that. And I just listed two names there, Visa and Apple, that are both fantastic businesses that pay a dividend. Just don't sacrifice business quality for the dividend and you'll be off to the races, right?

Yeah. Yeah, that's it. And you'll be off to the races, right? Yeah. Number five, last one here on my list is regular people listening to this show, DIY retail investors. I know we have tons of CFAs and pro fund managers and RIAs that listen to this show. We appreciate you. We love you. And you're listening to this list and you're going, you're so right.

This is the problem that we deal with. going, you're so right. This is the problems that we deal with. But for the most part, if we look at our analytics, a lot of good chunk of the people listening do not have arbitrary position or company size constraints in the names that they're tracking. Many pros running a fund, managing client money will have a mandate. I'll just make one up here. We only own companies over 20 billion in market cap. Or we only invest in Canadian companies that are over 10 billion in market cap or something for this fund. Which means basically we only own gigantic companies. Investors that don't have those arbitrary constraints, don't care if a company is a mid cap that is a small cap that turns into a mid cap and a mid cap that turns into a large cap.

It's just arbitrary, right? It's just by definition of categorizing companies. And you have the ability to look for opportunities where you can find them instead of being funneled into ideas. And so really, I've just listed five behavioral psychology, psychology of investing advantages that you can really take advantage of as an investor managing your own money. That's what makes this so exciting for people who are managing their own money is you actually have a lot of structural advantages, not disadvantages. 10, 20 years ago, I think that that was the opposite. And now I think that's swayed from a fee perspective, from a control perspective, and from a behavioral bias perspective, DIY investors actually have an edge over pros. And I actually believe that. I know they have institutional grade level investing tools. That's changing a lot. What I'm building, that's democratizing financial institutional data. And so,

I think that that's really swung hard the way of the advantage going to Main Street. Yeah, no, well put. I don't really have anything to add to that one. I think you have way more flexibility when you're an individual investor. That's 100% true. Now, moving on to the next segment here, I've been getting this question quite a bit from people. I had a few people DMing me. I know some people reach out to us too through the Canadian Investor Pod, our website. And they've been asking, should I be converting Canadian dollars to US dollars when the Canadian dollar is so low? Well, before I answer the question, I wanted to give a little bit of context here. So CAD, obviously, I'll refer to CAD for the Canadian dollar and USD for

the US dollar. So CAD is actually at its lowest point in more than two years compared to USD. We haven't seen this since September 2020. I have a chart here, but you can, you know, any website that tracks the currency exchange, you can find it pretty easily. Now, it's not doing well against the USD right now, but it's actually doing pretty well compared to other currencies. If you pull up the euro, for example, the Australian dollar, you know, kind of name it, the Canadian dollar is actually doing quite well against those. So the reason why USD is gaining so much strength can be summed up in a few things. Now, I think we can all agree there's a lot of uncertainty and fear right now. So markets tend to go to safety when that happens. And safety equals the

U.S. dollars because a lot of financial instruments like U.S. treasury bills are denominated, of course, in U.S. dollars and the demand for those actually increases in periods of uncertainty. And although the Bank of Canada has indicated they want to raise rates to curb inflation, the Fed has also increased its rate. And of course, I think it's coming out right now. We'll probably do a quick segment on that. We'll know whether they raised it 75 basis points or 100. on that. We'll know whether they raised it 75 basis points or 100, but the odds were basically 85% online that they would increase it 75 basis points. So that means the higher the rates are for the US treasuries, the more demand there is for the US dollar. And as rates go up, yield increases for things like that. And of course, there's more demand going to that type of currency. And you add the fact that the US dollars is typically seen as safer. And of course, with all things being equal,

that demand will be stronger for the US dollars. And the last reason here that the Canadian dollar has not been doing super well is in recent months, commodities has just been going down and the Canadian dollar is very dependent on that. If you look at the Western Canadian Select, which is the price of Canadian oil, it's actually been trending down. It's always a bit lower than the West Texas Intermediate, which is for US oil. But the drop in price typically means that there's going to be less foreign money coming to the Canadian dollar. So just to give some context as to why the Canadian dollar is at its lowest point in two years. Now, for me, yeah, go ahead, Braden.

Oh, no, I'm loving this. I was just going to say there are other little small things that come to mind, you know, having spent some time in auto manufacturing, for instance. Yeah. things that come to mind, having spent some time in auto manufacturing, for instance, those businesses love a crappy Canadian dollar when they export. And so it's funny, it's not always black and white on the CAD to USD on being good or bad. It's just one little thing that I'd like to mention. Yeah, exactly. On the flip side, though, as the Canadian dollar weakens, it does increase the risks of inflation, right? Because we're buying things in the US, for example. And then obviously, if the Canadian dollar is weaker, makes it more expensive, therefore companies have to

charge more in Canada. So it's kind of a double edged sword, but totally agree for exports. It can be a really good thing. I remember, I think, back in the Jean-Claude Tignes days, when the dollar was way lower than this, he would just say, well, it's a good thing. It just makes it creates more jobs, makes it easier to export elsewhere. So I remember that. Or you start some Canadian-based tech company, some sexy SaaS startup, and you sell your product in US dollars, have all your costs in Canadian, all your people working in Canadian, and then it all comes out with a nice little premium at the end when you convert it. It's a good gig, man. Or the other way around. The last thing I'll mention here is Canadian pro teams,

like NHL teams, that's always been a big strain to them because most of their revenues are in Canadian dollars, but their salaries, which are one of the biggest expenses are in US dollars. So as the Canadian dollar goes down, it is pretty tough for them. But usually I know they kind of hedge. So they'll have a kind of fixed cost for a period of time that they can lock in to have that kind of cost certainty. Now, what I'm doing here, and as a reminder, this is not investment advice, so you should definitely do your own research and analysis on this. But for me, I'm currently converting about 75% of all the money I'm investing in US dollars because I am looking to add to my savings account in USD and buy some stocks and ETFs that I have to purchase in US dollars.

I don't control exchange rates, so I don't really pay too much attention to that. The Canadian dollar could go down, could go up. I know a lot of experts are saying it's probably going to be trending now a bit more. They could have said the opposite. I really don't care. My current strategy is I want to do this because I want to reduce my home country bias, which is mainly in CAD, because I've said it before and I'll say it again. My income is in Canadian dollars. The equity in my house is in Canadian dollars. About 50% of my portfolio is in Canadian dollars. Granted, those companies are doing business elsewhere.

So, I mean, it's not as heavily kind of Canada dependent as you might think. And my goal, my ultimate goal is to have at least 60% of my investments in USD and 40% in Canadian dollars. It's not that I'm bearish on the Canadian economy here more than the US. Canadian dollars. It's not that I'm bearish on the Canadian economy here more than the US. It's just that I want to diversify my exposure a bit more because I do realize I'm very dependent on the Canadian dollar and I do want to diversify that. So what I'll do is I will control what I can control, which are fees. So when I convert Canadian to USD, I usually do at least $2,000 at a time because I do get charged $5 for selling an ETF by using the NordBurse Gambit method that you've talked about quite a few times. And we can actually add it in the show notes again if people are interested. I know with that, you know, I'll make more.

I'll be safe in terms of the spread that Questrade charges me versus the fee that I'm paying to sell the ETF. Sure, the Canadian dollar could go up or down during that three day period that it takes to convert it. But I don't worry about that because sometimes they may be to my advantage, sometimes not. I can't control that, but I can control the fees. Dude, Norbert's Gambit is the truth. That's like all my like, I would say I'm pretty aligned with you. 75% of my personal savings rate goes to USD through the process of the Norbert's Gambit because it mostly goes to US stocks. Yeah. About 75%. Yeah. Yeah.

And you're like me, right? A lot of what you do is kind of dependent on the Canadian dollar too. So that's just my approach. And I guess you have a similar- Dude, we host a podcast called The Canadian Investor. Exactly. That's it. So, I mean, obviously this is just what we do, but for those wondering, you know, I really

don't blink an eye whether the Canadian dollar is going up or down. 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. That is questtrade.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 at airbnb.ca forward slash host. That is airbnb.ca forward slash host. All right, let's get into breaking news. The US Fed, what do we got? What's the number? 75 basis points. So that means that the rate will now be between, so it's always a range for the Fed. So it'll be between three and 3.25% for for the Fed. So it'll be between 3% and 3.25% for their Fed rate. So it was in line with expectations. I was talking earlier, most experts were predicting 75 basis point. I think it was like 85% chance of that and 15% chance, 100 basis point. I think there was 0% pretty much for 50. And they also said, so I kind of was reading this quick.

So it's the same as Canada, 75 bps, right? Yeah, but I think they're slightly behind. They're behind. Yeah, just because Canada had that 100. So the Fed never went to 101 rate hike. And what they did say is that they're looking, I don't know what that means, but either to reach a terminal rate, whatever that means, or an endpoint of 4.6% in 2023. So it sounds like it could go up basically to 4.6% in 2023, or potentially slightly lower depending on what the data in terms of inflation,

or depending on what the data in terms of inflation, more specifically the core CPI, which is what the Fed looks at a lot. And it doesn't seem like they're guiding for any type of interest rate cut until basically 2024 or later. But apparently, it's, I think, going to be stable until that time if they reach that maximum that they're looking for. Yeah. So maybe a bit of a pause potentially. Yeah. I think there's still, yeah, at that point. So I mean, again, it's with a Fed, it's always a bit like that. You have to read between the lines a bit. So I think you'll have a bunch of different people and even reading up to it, I kind of get fascinated by this. You can listen to five different experts

and, you know, two will kind of think alike and three others will think differently in terms of what the outcome is. And I think the markets don't really know where it's going because since ever it's been out, which was about what, 45 minutes ago at this point, maybe a bit longer, you know, the markets have been zigzagging all the way. So it's kind of, I think they're still making up their mind. Are you telling me no one has any clue what they're doing? Okay. Pretty much. Yeah. That's it. Yeah. This is why I step back, start the episode again. Listen, listen through points one through five, why you just keep buying the, you don't need to be changing your strategy around short-term macro moves if your time horizon is not based on a short time horizon, right?

Like this is the beauty of it. Use it to your advantage. That's my best advice to anyone. Use it to your advantage. Yeah. Dude, I was looking today at MSCI Europe Index, like all Europe. Just European equity performance has not been good. And it's obviously been worse lately. The feeling around European equities globally is not a good feeling from the investing community globally. I mean, you have some pretty

grim situation happening energy-wise. And you look at the real GDP from a lot of these companies per capita, and it's like, oh my God, how is it so bad? So Europe has a bad rep for equities, I would say. It's gotten worse lately. So I'm like, how bad has it been? So I looked at the MSCI Europe Index. And from the MSCI website here, it says, the MSCI Europe Index captures large and mid-cap representation across 15 developed countries in Europe. So a good portion of the developed countries there, 429 constituents in

terms of companies. The index approximately represents 85% of the float adjusted market cap of the European developed markets equity universe. So that is a lot of jargon for European stocks, about 430 of them being the index here. Can you believe today the MSCI Europe index trades at the same level it did in March of 2000? And I don't mean March of 2020. I mean, 22 years ago. Can you believe that? Yeah. Yeah. I mean, I'm looking at it. I'm also looking at one of BlackRock's, I think it's ticker IEV, which is iShares Europe ETF. Expense ratio is pretty high on that one, 58 basis points. But even that one, just kind of looking quickly, it's actually, yeah, slightly higher than March of 2020. Not by much, but I don't know. I would not.

Because the one I usually look at for BlackRock that kind of gives me like the European thing is XEF. XEF, okay. Which is international stocks. It's like Europe, Japan, Australia. Yeah, IEBs really focus Europe. And obviously, it's way, way down compared to the peaks of kind of last year. But again, it's still, you know, like you said, almost all at that same level. So and there's a lot of uncertainty in Europe, even some businesses that have to shut down parts of their operations.

I'm thinking in Germany, for example, and other parts of Europe, just because they have to potentially be rationing gas for the winter months. So yeah, it's something to keep an eye on. I don't know at what point it becomes attractive in value or it's still a value trap. But yeah, it seems like it's still a bit rich considering you're comparing at 2020, like you said. I couldn't believe that. I quadruple checked my data source and yeah, that's how grim it has been. Now, of course, everything was elevated up to that year of 2000, but still, that's pretty brutal. Yeah, exactly. I personally would wait. I mean, I think there's nothing wrong with investing,

I think, XCF that you mentioned, one that's a bit more global with some pretty good European exposure. At least you have that diversification, but something Europe only. I mean, you're definitely going into value territory, that's for sure. But I don't know, a lot of uncertainty with the whole Russia-Ukraine war going on. So yeah, I personally will stay on the sidelines a little bit unless it becomes like almost too cheap to ignore. It almost looks too cheap to ignore, but again, you gotta, it requires a leap. It requires a leap that, I don't know, for those reasons I am out. All right, let's talk about what you're doing. Yeah. Made some more moves. Every couple of weeks you're like doing stuff, man. Yeah. People must be wondering. I got to spice it up.

Like what the, do I do anything like my portfolio? Not really. Yeah, people might be wondering. I thought you were a long-term investor. Why are you constantly selling? It's the Canadian Day Trader podcast. Yeah, exactly. I mean, so this one I've been holding for quite a bit.

So I decided to sell Etsy. Now, before I go on, I've done some sales recently, but they were not some of my major holdings. So Marlari Just Holdings, I haven't touched in several years. Etsy, I actually bought right before the pandemic. I think my average cost was around, I think, just going on memory, it was $43 per share. And then I just sold it recently, $43 per share. And then I just sold it recently. I think $111 is the price I sold it on. So I made, you know, very nice profit. Obviously, I could have made a lot more if I sold it at the peak. It was trading at over $300. Almost $300. Yeah. But it was a very small position. So as people know, I've been thinking about this for a while, and Etsy was a huge beneficiary of the pandemic

with their GMS going way, way up. For those who are not familiar with GMS, it means it's a gross merchandise sales, which is just the total dollar amount of merchandise sold on its platform. It's not necessarily equal. Well, it's not equal to sales. So these are two different things. There are sales. It's like GM. It's evolving. Every e-commerce platform will call it something different. Like Shopify calls it GMV, for instance. Yeah, exactly. But it's essentially just representation of the total volume on a platform.

Now, their sales also saw a huge increase during the pandemic. Sales have continued increasing, but GMS has essentially stalled in recent quarters. continued increasing but gms has essentially stalled in recent quarters slowing gms was to be expected but a stall gms is definitely worrisome for etsy and we talked about that in the earnings release now the other part i really don't like is that their sales have continued increasing during that time period now you may be asking aren, aren't revenues increasing or sales increasing a good thing? They are, but for a company like Etsy, you'd want revenue increasing because there are more goods being sold on the platform, also known as GMS, which has not been the case in recent quarter. Now, this is pretty, when you think about it for a second, you kind of come to the conclusion

that, of course, this means that their take rate, which means essentially the percentage you're taking on each sell, has risen, which has frustrated a lot of their sellers. For context, and I pulled this from Stratosphere because I think you guys have that metric there. We track sellers and everything, yeah. Yeah, and you track their take rate too. there. Their take rate- We track sellers and everything, yeah. Yeah. And you track their take rate too. So it's gone from 14% in 2018 to 19% this year. So that's almost a 50% increase right there, which is a lot in just a span of a few years. Now, my reasoning here is increasing the take rate is not a bad thing in itself, but doing it that much, it seems like it's causing issues. And Etsy has argued that their take rate allows them

to provide more value to sellers, but it seems like a lot of sellers don't necessarily agree with that. My view is that Etsy is playing with fire here. We've talked about it. It seems like they're threading a line. It may end up working out for them, but it's a very fine needle that they have to thread here. And because if you start losing sellers, the platform suddenly becomes less attractive for buyers. Now, they're still trading at a pretty expensive multiple of six times sales and 30 times free cash flow. multiple of six times sales and 30 times free cash flow. I'm not saying here don't, you know, think that I think Etsy is a bad company. I don't think it is. I still think it's a pretty good company, but I've lost some conviction because of that. And I think it's opening them to competition

from other players. And I think, you know, one that just comes to mind is eBay. eBay could very well try to take advantage of that. And if you also consider some of the headwinds that the retail space has seen recently and that products on Etsy are not necessarily the cheapest. And with the economy, pretty much like everyone's saying it's slowing down. We may be in the recession globally right now as well without even knowing it because it's usually lagging. I think it's just trading at a pretty high valuation considering the growth. And, you know, I'm not saying it's not a name I'm not looking at buying, you know, in the future if I see all the things that I mentioned improving, including the valuation. But at this point,

I think there's just some better investments for me and better ways to put that money to work for my investments. I'm speaking very anecdotally here, but I use it a couple of times and I got to say, they didn't retain me at all. And it's not even that I had a bad experience. I think the things that I bought off, they were gifts and they were great. They're like handmade from people here in Canada. You can select like, I want this to be from local, like, you know, I want this to be a local thing that I get sent when you're selecting it. And that's just like, I kind of just forgot about it. I don't know why it's very anecdotal, but like, what are they doing to really keep that, that sticky? I just posted on the document here. Can you see at the bottom there? I pasted it from stratosphere.

We track active sellers, active buyers, and this is quarterly. So active sellers decreased in Q2 sequentially for the first time in this entire, like on all of this data. Yeah. It's not, I mean, not by a lot, but it's not something. Not by a lot. Yeah. It's not something. And it's still way elevated off like even 2021 levels. Yeah. And granted there was a lot of pull forward growth for Etsy because of the pandemic. So obviously a slowdown, but I think there's a big difference between growth slowing and growth

stalling. And unfortunately, you know, it's still not a lot of quarters. So it could be increasing once again. But it really, you know, another quarter like this and you can start making a case that growth is definitely stalling for them. And with that valuation at six times sales, you know, it kind of makes me think. Obviously, I think it's a way better business, but it's like a BlackBerry, right? Has no growth and it's still trading at like seven times sales or what it is right now. The margins are better than I thought. Yeah. The margins are pretty good. Yeah. The margins are pretty good, but I think it kind

of comes back to that take rate increasing. Right. So I think, yeah, I mean, it's just that take rate. I have a hard time with it. I just think they pushed it too high. That's my biggest fear about this business. Well, you know, the people who listen to this show are very appreciative that you're willing to share these things because it's not easy to put yourself out there, especially with, you know, things that you're doing. Lucky for you, you're just made a casual two and a half times your money. Oh, yeah. That sucks, doesn't it? And I mean, I may be wrong, right?

Maybe they'll, you know, in the next two years, they'll increase the growth. I'll kind of pick right back up. And obviously, if you own Etsy, it doesn't mean you need to sell. This is just what I did because I'm comfortable with this. I've been thinking about it for a while, probably over six months now when the number is starting slowing down. So by all means, if you own them, do your own due diligence. You don't need to sell because I sold. But this is, I'm very comfortable with my decision, whichever way Etsy goes. And for the owners of Etsy, I do hope they start growing again. I wish you the best if you keep on holding. The takeaway here is, you know, remember, no group think is when

it comes to your portfolio, you got to make decisions, you know, based on your own conviction, because if you borrow someone else's conviction, that is an absolute recipe for disaster. So, Simone, you got your own conviction. You make your own moves because you're a man. Simone's a man. He has to sell – he has to cut slack on some things that he accidentally almost tripled his money on. Whoops. It's a good problem to have, yeah. It's a pretty good problem to have. I was never quite sold on the Etsy story. I should have been because when I was first looking at it, it was a lot less than it is now. But dude, it looks like the chart, like the share price chart looks like so many pandemic winners. Oh, yeah.

It's a mountain. It's like straight up, straight down. Yeah. It's a mountain. It's like straight up, straight down. Yeah. And I mean, obviously, I was fortunate that my timing, I bought it like pretty much right before the pandemic. It went down a little bit, but then just went right up.

And even at the current levels, ended up working just fine for me. Yeah. Yeah. Thanks for listening to the pod. We appreciate you. Make sure you give it a five stars and make sure you're subscribed on the podcast player. Simone and I are going to start introducing some fun little stuff. We're going to order some equipment after we finish recording this. not only do we have a face for radio, but also voices for radio, as you already know, but there's moneymakers right there. They'll be out on the, we'll be dude, our tick tock videos that we put out or something like we're trying to promote the podcast.

I am so nervous for the masses to see like of like tick like TikTok finance to just be like, oh, this is so boring, dude. Just tell me what meme stock to buy. I can't wait for that. Or buy a real estate because interest rates are going down. That's been Dan's thing. Oh, man. It's apparently it's what another universe.

Yeah, exactly. TikTok Twitter, as you may say, TikTok finance, TikTok investing. It's going to be a wild place. But you know what? We got to grow the show some more because we got to back up that Brinks truck. And you can't do it by staying stagnant. Thanks for listening to the show. Please share it with a friend if you enjoyed today.

And shows come out Mondays and Thursdays. We'll see you in a few days. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.