The Canadian Investor - 8 lessons from Buffett and Blackberry

Episode Date: May 17, 2021

We start this episode by discussing volatility in the markets, why you should embrace it as a long term investor and why you shouldn’t be using stop losses. We then do a review of Blackberry and say if we think it is a worthwhile investment or not. Blackberry was the winner of a twitter poll (@cdn_investing) we recently did to know which company our listeners wanted us to review. We finish the episode with some takeaways from the recent Berkshire Hathaway Annual General Meeting. Want to send us a question? Check out our Anchor.fm link in the description below and leave us a voice message! Getstockmarket.com Candian Investor Pod Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital --- Send in a voice message: https://anchor.fm/the-canadian-investor/messageSee omnystudio.com/listener for privacy information.

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

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Simon, I'm excited for this episode. We got a lot of fun topics. This is the result of the Twitter poll that you put together. And do you want to just intro that really quick? Yeah, yeah. So we a couple was it three, four weeks ago, we did. Yeah, about that. Yeah. So we tweeted and we asked people what companies they would like for us to review. And we picked the four top choices create a poll and then the top choice from that poll we would review and lo and behold BlackBerry the old research in motion the smartphone makers so they're the ones that won the

poll with around 40% if I remember correctly so we'll be talking about that but first before we get started to BlackBerry I think we'll be talking about that. But first, before we get started to BlackBerry, I think we'll get started with talking a little bit about volatility and how it's been impacting the market in the last couple of weeks. Absolutely. Yeah, so we're doing BlackBerry. That was the result. We'll go into the business later, but let's talk about volatility. I'll talk about volatility now. I'll talk about volatility next week and the week after. It is the only normal thing. And I am here. It is my job

to be that voice of reason and that voice of optimism eternally, because I think it's the most profitable way and the most sane way to live your life as an investor. And that volatility is completely normal. So I'm going to have a quick segment on that. There are always headlines on why you should be pessimistic as an investor, why you should panic when stocks have poor performance. Now what's happening is that price declines start driving the narrative. The news outlets will find new ways to instill fear so that you keep watching and keep clicking. This is what all news outlets do and they are incentivized to do so. That's the important piece here. This doesn't just go with investing. This is with all news outlets,

and we're getting a lot of that over the last year and a half, as you can imagine. They are incentivized to keep you watching and clicking, and the best way to do that is to instill fear. So financial media is no different. And there's two real realities to think about. And before I get into those two things that I think you should think about is financial companies, like news outlets, because they're incentivized for clicks and for keep you watching, there has to be some new narrative on daily price action or weekly, you know, the market routes, the Dow's down so many points. Those numbers, what do they mean? You know, many points. Those numbers, what do they mean? You know, the Dow's down X number of points. Yeah. How has it performed in the last trailing 12 months? Because last time I checked, the market has been on fire and been a great place for money. So I'm digressing. There's two

things to really think about here is that number one, there will always be a narrative on the bear case and on the macro side. Always. Anytime in the history of the stock market, we've endured wars, recessions, political unrest, inflation. Like, think about it. The stock market has been through wars, like long wars. It's seen it all. So the reason that the market hasn't endured this is not by chance. It is because the market is made up of businesses.

And the businesses that are inside of the market have been resilient. They've been inventive. They've been innovative. They've provided value for customers. And that leads to reality number two. And maybe the most important thing to think about as an investor, maybe all, maybe ever, is that business fundamentals change very slowly compared to the market, which is keeping score every single day, or every single business day, every trading day, whatever you want to call it.

Business fundamentals change very slowly compared to the market, this machine that is keeping score every single day. The real results of public companies are posted every three months when they come out with their quarterly results. And the regular volatility in stocks can feel random in the short term, especially if there's like an overall market correction that's maybe happening now or this week. But zoom out. I mean, it's not even a blip on the radar. So regular volatility can feel very random in the short term. But in the long term, stocks move relative to business performance. So if you are a long-term investor, embrace volatility. Embrace it. Study the companies that you own so that when general market volatility happens like this, you're able to use that as your greatest edge.

While most volatility is selling some narrative about the business, almost like it's really trying to get you to think irrationally. Invert your thinking, invert it. Price is driving narrative in the short term, but business performance drives narrative in the longterm. Own good companies, dollar cost average them,

and volatility will become your greatest tool if you're dollar cost averaging. And that's how I think about this stuff. And over the last week or so, everything out there, every outside force is trying to tell you some sort of narrative. There's this inflation narrative. There's always something. Use it as your edge.

Yeah, well put, well put, Brayden. I would add to that one last thing is just remind yourself too that there's been studies showing that for an investor, the loss psychologically, you feel the loss of losing a business or losing money on an investment a lot more than you feel a similar gain for an investment so keep that in mind you you'll feel it a lot more and it's just being able to power through that especially when you know the business like Braden said and

there's a price pullback if you know that the business is good then it can really create some opportunities for you and one to segue to the our next subject the subject of stop losses we've talked about this before stop losses in short you put a price where if the stock price go down to that level you actually the system will automatically sell your stock. So for example, you buy a stock at $100, you put a stop loss at $80. So what it means, they will sell your stock if it drops at $80. The issue with that, especially if you own quality companies, quality businesses, especially those that can be quite volatile, you can really hurt yourself by putting some stop losses because you'll have companies like Amazon for example if you

zoom in on their chart over the past 20 years it's had some really significant pullbacks and if people had stop losses they actually would have lost on some significant gains versus just holding for the long term. So personally, I don't do stop losses, I may understand in certain situation where people want to put a stop loss, the only one that would come in mind is maybe a business where you're kind of the premise has changed, you're kind of on the fence of selling it or not, or you're still really seriously thinking of selling it. Maybe you want to kind of edge a little bit by doing that. But that's a stretch in my view.

I typically will not use those top losses. Do you want to add anything to that, Brayden? Yeah, I think you put it well. It's basically a mechanism for your broker to put a percent gain or a specific loss percentage, like 20%. Say, hey, Braden, we're going to sell this position. It falls 20% for you. Or a certain set price number. set price number. And the reason I think that stop losses, I don't know how to say this more, more nice than this. So stupid is because you would have liquidated your whole portfolio last March. You would have liquidated your entire portfolio last March. If you had a 20% stop loss on, you would have missed out on

everything since. And you would have been sitting there while the entire market has this massive drawdown. He would have sold your whole portfolio. And that's just incredibly goofy. And my second thought on that is maybe it's a useful trading tool, but that's not what we do here. We're looking to buy good businesses and own them. I'm looking to buy a company with the intention of holding it, not buy the company with the intention to sell it. And that's a really good type definition of what the difference between investing and trading is. Investors buy companies to hold them. Traders buy companies to sell them. 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. And those intentions matter. So maybe if you're running a trading strategy, stop losses could be useful. But if you are thinking like a true business owner, you wouldn't be selling your shares on a 20% drawdown, especially when the whole market's falling. Like there's nothing specific with the actual, the specific business, but just maybe the whole market. Like Simon, imagine if you liquidate your whole portfolio in March on a stop loss.

You'd be crying right now. Yeah, you'd be poor. Yeah, maybe if you're running a trading strategy or very risk, whatever, you'd be poor. Yeah. I'd maybe, maybe if you're running a training strategy or very risk, whatever. I don't think that what we're trying to do here, it bodes well. All right. Let's switch gears. Drum roll, please. Blackberry. Yeah. Let's do this. Yeah. Let's do Blackberry. All right. I'll let you lead this conversation

um tell me a little bit about the good old water lube based blackberry old research in motion yeah you got it so it used to be the giant of the smartphone world obviously uh anyone who was old enough probably over 20 um most likely remembers those little BlackBerry phones with the keyboards. And I know there's still some people that actually enjoy those. I haven't had a BlackBerry in about four years, I think, was the last time I had one with my work. But, I mean. That's pretty recent. Yeah, exactly.

It wasn't. Yeah, four years ago, you're probably one of the few people left with blackberries yeah so we switched over with my work to iphones about four years ago when i joined them gotcha um so yeah i i had one um i mean i didn't love it because the one i had was in the actual keyboard uh but all that to say that they've transitioned quite well actually from being a hardware business to really almost a hundred percent software business the actual numbers are now that 90% of their revenues is now software and services related just as comparison this was 28% of revenue the hardware section was 28% of revenue in

the fiscal year that ended in February of 2017. And that's how I'll be talking about them because they do have, just a side note, like some funky fiscal years. So right now they're starting their 2022 fiscal year. So just so people kind of wrap their heads around it a little more. So the backstory on them is the current CEO, John Chen, joined in 2013. And one of his big missions was to essentially transition BlackBerry from a hardware business to a software and services business, which he's done. There has

been some bumps involved, and I'll dig in a bit further down a bit later on in the actual numbers. So right now their main revenues come from really three lines of business. So you have cyber security more specifically Blackberry Spark, Blackberry AtHawk, Blackberry SecuSuite. I may be mispronouncing those a little bit. They also have the Internet of Things, more specifically their QNX suite, which is an intelligent vehicle data platform. And the last revenue stream would be the patent licensing. So BlackBerry has had over the years a lot of patents, so they're getting some revenue out of that. To go a bit more into detail, so BlackBerry Spark, this was launched in May of last year. So that offers a broad set of security capabilities, management tools, visibility, converting people, devices, networks,

apps, and automation. So again, it's more focused on the security side. BlackBerry AdHawk, which launched in June of 2020, it's basically a secure way of transferring information and communication for enterprises, specifically for emergency situations. So you're talking here about, you know, fires, businesses being hacked, all types of different kind of emergency situations. And they say that it is used by the U.S. federal government. and they say that it is used by the US federal government. It's 98% of people actually renewed their contracts with BlackBerry, and it's 99.5% reliable. Secure Suite is an easy way to put it.

It's basically a secure way for people when they use the Secure Suite to message or calls for enterprises. So basically it's a method of encrypting. when they use the SICU Suite to message or calls for enterprises. So basically it's a method of encrypting. And then the BlackBerry QNX, like I mentioned, there's 175 million cars that have that installed. They did mention in their latest earnings release that there was a slowdown of revenue from QNX royalties due to the pandemic. So that decreased by 75 million. They think it's going to pick back up this year. Some notes as well that I've noticed on the conference call, so I

listened to the most recent one. There was lower patent revenue as well, licensing than expected. Going forward, software services will be recorded separately so that will be something to keep an eye on on their financial statements and one kind of red flag is John Chen did mention a lot of total addressable market numbers for some of their specific software and not that it's a bad thing per se but when I hear a company mentioning that over and over in a conference call there's a bit of red flags because you know total addressable markets are all nice and dandy one of the issue with that it's an estimation management tends to be overly optimistic of those but it's also you know very competitive market. So even if their projections are true for the TAM, it doesn't mean that they'll get

a huge share of it. So I always take those with a big grain of salt. Any comments? It's become a bit of a cliche. The classic software company being very aggressive, probably exaggerating their total addressable market or that number, that TAM number we talk about and their total addressable market. He's not the first software executive to be very exaggerative with total addressable market. And that's, it's become a bit of a cliche yeah and i mean it's not just

software companies remember all the marijuana companies before legalization in canada and i mean i'm not faulting them because it was very hard for them to know exactly what the time would be because you don't have anything to base it on so that's why they're just doing projections um so it's not only for blackberryerry. It's not only for software services. Just when they talk about TAM and they throw out these big numbers, just take it with a grain of salt. So now to look at the balance sheet. So they have actually a decent balance sheet. There's a few red flags, though, on that balance sheet.

So the first thing I was looking at was the cash and short-term investments. I kind of put that in cash and cash equivalents in my head because it can be easily converted. So they had $739 million of cash as of February 28, 2021, $909 million as February 2019 and 2.2 3 billion in February of 2018 so the reason I kind of put all those years is I just wanted to show where the trend is going the trend is definitely showing that the cash and cash equivalents are definitely going down slowly so that is a bit of a concern I mean not a huge red flags because they still have a pretty nice balance sheet. In addition of that, they actually issued some convertible debt with Fairfax Financial, which is led by Prem Watsa. I'll talk a bit more about that later on. that convertible debt can be converted at any time to 60.8 million shares at $6 per share.

So the total value of the loan is $365 million, which partially replaced their previous loan of $605 million. And the interest is now 1.75% versus 3.75% that it used to be. The balance was paid with in part in cash. So that's definitely a good thing to see that interest rate go down. But obviously, there's also a lot of equity associated with that. And I'll talk a bit more about some of the big shareholders for the business. And obviously, Fairfax Financial and PremWatts own a significant portion of the shares when you include this convertible debt. When we look at revenue, revenue has been a little stagnant in the past few years. So in 2016, February 2016, you had for the previous fiscal year, you 2.16 billion February 2017 1.3 billion in revenue February 2018 932 million February 2019 904 million February 2020

1.04 billion and February of this year 893 million for the previous fiscal year so it's I mean they did do a big transition. And if you went back even further, you'll see that the drop of revenue was even greater because they were really losing some hardware revenue. So that does make sense from that perspective, but is something to keep an eye on because you want to be investing in growing businesses. And I know they've had some challenges with the pandemic last year but again you want to see that business growing so if buyberry is something you're looking to invest in definitely keep an eye on that revenue line because I know you know it's a bit it's not

been progressing as well as investors at hope and it's also not trading at cheaply right now because it's trading at 5.3 times price to sells it may look cheap compared to some high flyers that are trading 10 15 20 times to sell but those are growing exactly and that's a big those other you know those multiples trading at you know double the sales number are actually growing. For those listening at home, those revenue numbers you just listed is a very ugly chart. That's not a nice looking bar chart. No, exactly. Not what you want to see. But again, maybe there's upside because if you factor in the valuation, the price to

sales, for example, obviously the price to cash flow is not cheap either 57 times price to free cash flow is over a hundred those are high numbers but again there could be some upside if really the the software and services segment really picks up but one of the issue like I said is you know it's not really gone it's kind of gone sideways for the past few years um so based on that i do find the valuation a bit steep for what you're getting from blackberry um if you're interested keep an eye on that and the last note i wanted to say before i i as brayden for um you know is is take on blackberry as well is the there's some notable shareholders. So the two that stuck to me is, like I mentioned earlier, Fairfax Financial, which PremWatsa has 43% of the voting shares, owns 15.23% of BlackBerry if they exercise that convertible debt. Without it, it's about 8%, just going on memory.

But they're still significant shareholders. And it can also be good for BlackBerry, on the other hand, because they're being backed by Fairfax Financial, essentially. And then John Chan, the CEO, owns approximately 4.3% of the shares, which is a decent amount for a CEO as well to own of the company. So it definitely has some skin in the game. So my take on it, and Brayden will give a bit more numbers after me, but my take on it is if you're interested in Bagberry, just keep an eye on it. Make sure that in the upcoming quarter, especially this year, you're seeing some improvement in those sale figures because that's been a point, like I mentioned, that's not been growing very fast. And make sure that you dollar cost average if you do want to start a position in them.

And you'll probably want to wait a little bit until the valuation is a bit more palatable for the growth that you're getting. Yeah, well put. I think that's a good overview. I mean, really, at the end of the day, when you're thinking about BlackBerry, it's been this, you know, I'll give it to them. It's been this impressive transition from a company that was losing market share like crazy

of their dominant smartphone business. If you, like when I had a BlackBerry, I had many BlackBerrys. I had several BlackBerrys over my career in smartphones. And BlackBerrys were awesome. And they had awesome network effects. There was that BlackBerrys were awesome. And they had awesome network effects. There was that BlackBerry messenger platform. And you wouldn't dare not have a BlackBerry. Like, in my opinion,

in the circles I hang around with, because you wanted that BlackBerry messenger. They were building these awesome network effects. And it's crazy to see how they were disrupted in just a short amount of time. And the CEO kept saying, oh, the iPhone's not a competitor. No one will do business on an iPhone because there's no keyboard. They can't write their emails without the keyboard. Obviously, that aged poorly. That aged like milk. And they lost their entire smartphone market. So now like 97%, 98% of revenues are this software business. So I will give them credit for being able to do that and not just going

you know away with the wind i mean a lot of companies just don't make it they get innovated and they're nothing anymore they were able to use some of that awesome talent that they have out of waterloo ontario and and pivot the business i had such a buzzword pivot. But that's, you know, you got to give it to them. That's very impressive. Yeah. Yeah. Oh, yeah. That being said, I'm here to make money as an investor. I'm here to give capital to great companies, not some awesome, hey, great job. You guys pivoted the story. You guys are great Canadian story. That's a good way to go poor, acting like that. My personal opinion, and Simon laid out the business. That's what they do.

It says cybersecurity and cars now and all the other products that they listed. This is a business that has had very inconsistent results financially. Their top line is not growing. It has been on a decline and is now kind of flat over the last three years and still trades at the valuation metric that I look at probably more than any is enterprise value to EBITDA trades it over 50 times. And you know, it's over five and a half times sale, but yeah, 5.4 times sales. Now, is that crazy expensive for a software company? No, it's not. But it's crazy expensive for this software company. And the reason I say that is they have sub 50% gross margins based on the numbers I'm looking at and a shrinking or flat stagnant top line business. So if I'm thinking of all the places I want to deploy capital,

I demand quality and I demand growth if I'm paying multiples like this. And I just can't find that here. So maybe they have some great turnaround story. Would I bet money on it? No no clearly not uh they wouldn't be getting my capital i don't really have anything more to add than that simon um i think you've touched on it well i mean if you're if you're investing your money i demand greatness and this income statement is uh not so nice to look at in my opinion yeah the only thing i'll uh add and i'm looking at the um their revenue and their income statement this year it sounds like they have a gross margin around 73 so i'm not sure if you're i'm looking at the 10-year median that's why so it must have so much of the hardware business that's right okay just so yeah that's i didn't want to number to use i didn't want to sell them short so just to just as i was reading that i'm like oh this

might be a 10-year median that's got to have the hardware business back in there well that's just saying don't don't listen to what i said 70 73 is still pretty good but one of the reasons why people put a high premium on software companies is a lot of them are still not profitable but they're going growing so quickly and their gross margins are so high that when they do become profitable they'll be creating a lot of cash flow so that's why a lot of yeah they're going to generate that operating leverage exactly oozing cash left, right and center. Yeah, that's it. And I mean, with what I've seen, and obviously I could have, we could have done an even deeper dive if we had probably 25, 30 hours to look at BlackBerry. But from what I've seen with the information I looked at and research, I don't know if they will be growing.

And that's the biggest issue I have with the business. And maybe they will surprise both of us and they will start growing and their software and services will really continue to pick up with adoption. And they'll become market leaders in each of those segments. But for now, I think at least for me, it's it's a wait and see for sure before I would consider putting money in them. I'd also be lying if I said I wasn't turned off that it was like a fairly big Wall Street bets stock for a while. Yeah, it was. You got to figure there's some frothiness built into that.

Yeah, that's for sure. So I think that's it for BlackBerry. So we're going to transition to some of the things that we noticed from the Berkshire Hathaway General Assembly meeting that was two weeks ago, I think, Bernard, by now. Two Saturdays ago. That's it. So I'll let you lead that and I'll give my thoughts afterwards regarding that. 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. Sure. So yeah, I've put together a list of four lessons personally that I took away from Berkshire's latest AGM. And before I get onto that is just what a treat it is to be able to see Warren Buffett and Charlie Munger sit up on the stage

doing what they're doing at their age with their wisdom dropping these little nuggets and these little like they're just so fun to watch and um they tell it how it is especially charlie especially charlie i i was thinking that in the back of my hand charlie munger is the best he has like no filter on just love him he's the best dude yeah he's incredible so um yeah these are four takeaways it was a couple saturdays ago and it was just so fun to listen to these guys answer questions and just talk about the market and talking about things they love to do and how long they've been able to do this. And I just sat there, had my cup of coffee and just watch these guys for like four hours. It's just amazing. And you can rewatch it all if you can think of it like

a podcast to it as like four hours, but Okay, so four takeaways from their latest meeting. And there's tons of takeaways. There's endless takeaways, but these are four that stuck out to me personally. Buffett grabbed a slide to talk about the 20 largest companies by market cap in 1989. So he grabbed a list of all the largest companies by market cap at that time in 89. Not a single one is on the top 20 today.

Not one company from the largest by market cap in 1989 is in the top 20 by market cap today. Not one company from the largest by market cap in 1989 is in the top 20 by market cap today. Not a single one. I read, I'm saying a quote here. So I was writing a bunch of notes and these are all quotes directly from Munger. Sorry, from Buffett. He goes, it is a reminder that extraordinary things can happen. I would invite you to think about a few things. 1989 was not the dark ages. People thought they knew a lot about the stock market. The top company had 104 billion in market cap. Now the top company has over 2 trillion. He's talking about Apple. It tells you something about equality, a little about inflation, and it tells you that capitalism has worked incredibly well, especially for the capitalists. Like this guy is a wizard with words and the English language.

And he's so clever and so bright. And it's these little things he says that mean a lot with few words. And I just thought that was so funny. Capitalism has worked incredibly well, dot, dot, dot, especially for the capitalists. And it's just, he's amazing. Number two, he was asked right out of the gate, one of the first questions about big tech companies, of course, you know, we're talking about the big fang stocks. And he was asked in the question, quote, unquote, about their crazy valuations, end quote. And Buffett

responded with, well, we don't think they're crazy. And I just remember looking on Twitter after that and just kind of talking to people and everyone's just buzzing about, you know, the things they're saying, right? And just amen, man, like, they're not crazy. Facebook trades at like 17 times next year's earnings and growing at 40, 50% on the top line. And these are not crazy. And then here's another little trinket he said about these valuations on these great businesses. trinket he said about these valuations on these these great businesses here's a quote from buffett interest rates are to businesses what gravity is to matter i mean simon how good is that like it's just incredible yeah yeah no it's uh he's always has some great, great ways of putting things. And I remember that slide that you were talking about as well.

Just, you know, it's kind of surprising, especially the way that he does it. I think wasn't it like a paper slide almost or something like that? Or like basic. He's always pretty low tech. We'll give him a break in his 90s. But still, I get the message he was trying to say. So it was well put by him yeah um then they were asked about trading uh they were they were asked about you know the

robin hoods of the world and this very high trading volume that we've seen since the pandemic started and this kind of trend of gambling away some money and trading stocks. Buffett replied with, we're not trying to make money trading stocks, quote. We don't think we know how to do it, and we really don't trust anybody to do it for us. This is him on trading. And then Munger went on to go mention his disdain for the rise of trading and how it's a complete waste of time. He thinks that this trading volume is a gambling machine and that he thinks that these brokers like Robinhood, and he did call out Robinhood, are gamifying the business and are basically highly immoral. And this is what we've been talking about, Simon, on this show just over and over again, is that trading is a waste of time. If Buffett and Munger can't do it, the smartest guys that, you know, to ever do this can't do it. And they don't trust anybody to ever do it for them. Trading is just a waste of time. They want to own businesses and own them for a long time. And that's what's made them

billionaires, not by in and out of companies all the time. So they act like business owners, not traders. And they have no insight to it. After all this time, they have no insight on how to trade. And they don't want anyone to do it for them. And lastly, number four, just the takeaway of how incredibly sharp Buffett and Munger are for their age. Munger is unfathomably sharp. For a 97-year-old man, he's just coming out there saying it like it is with all these awesome trinkets and ways to these mental models that he has are just amazing. And the takeaway here for number four that that I

really had watching these guys do what they do is not to sound too cliche and sentimental, but if you do what you love, it won't be work. And if you can do it for a really, really long time sustainably, it will keep you really sharp and have a fulfilling life. I mean, the proof is just here with Munger and Buffett sitting up there in their 90s, Munger's 97, has to fly to Omaha for this meeting. And it just goes to show that they really love what they do. And it has kept them, kept their brains sharp. And they just really love what they do. And I think that's an impressively powerful thing, what they've been able to accomplish.

And there's a lot of takeaways there. Yeah. Yeah. The only thing I would probably correct you on is I don't think Munger flew to Omaha. I'm pretty sure he stayed in California because it was too challenging for him to fly. But everything else, I agree, is very sharp for that age. Wait, how did he get there? I think they accommodate him, and I'm pretty sure they did in California.

Maybe I'm wrong, but I'm pretty sure that's what happened. I remember seeing that TV. Oh, was it not in Omaha? No, I don't think so. Anyways. Anyways, it doesn't matter. It's a side note. Yeah, I should probably know that, but I don't.

Okay, so I'll touch on a few takeaways. So people are probably wondering, oh, is, so I'll touch on a few takeaways. So people are probably wondering, oh, is Simon going to touch on Charlie Munger and let's just say his strong opinions on Bitcoin? Very strong. Yeah, very strong. Very strong. And oh my God, Bitcoin Twitter was definitely lit up after those comments. So definitely true to himself on uh hating bitcoins not the first time that he says that he finds the development of bitcoin uh and i quote him disgusting he hates the

and i quote him again the bitcoin success and he also uh did say that it was contrary to the interests of civilization um so this i mean I do love a lot of the things that Charlie and Warren say, and my investing approach from them is really what Braden said, is to buy and hold, not try to trade. So that's probably the biggest takeaways ever that I've had from Warren and Charlie. But I have to disagree on Charlie, and he's a bit, I'll just put it out there, I find that hyper, a bit, let's say, a bit of a hypocrite to say that because saying that's in contrary to the interests of civilization, when Berkshire has stuck by Wells Fargo through so many scandals that they were you know taking advantage of ordinary people and Berkshire stuck by them and they have a very strong position in banks and we've seen banks you know committing fraud over the years laundering money and so on so that's where I had a bit of an issue with Charlie on Bitcoin is just yeah okay I get that it may be a big change for what they believe in.

But to say those comments, anyways, it kind of rattled me a little bit. I have to say I was a little bit disappointed, but not surprised. The next thing. The guy is 97. Yeah, I think it's true. Can't teach old dogs do tricks i mean if there's anything if there's anyone that would be willing to learn and adopt it's probably him but i don't think he's changing this one no i don't think so either but uh the next one which kind of ties into

a bitcoin for me at least a little bit was uh when warren actually had a question about inflation and he's basically i'm just just summarizing what he said. But he's saying that Berkshire, they're seeing in their subsidiaries an increase in prices. So prices are being raised and they're being accepted and they're doing that as well. So what this means, it will also go down to the consumer. So I was a bit surprised that Warren actually went there. But, you know, they're seeing it. We're starting to see a lot of data, too, that's showing some signs of early inflation.

The Fed is mentioning that early on they were mentioning that it would not cause inflation. Now they're mentioning that it will be inflation more on a temporary basis. But some of the latest figures, and that came after, after obviously the Berkshire meeting that came this week is that the CPI index in the U.S. rose 4.2 percent from last year. Obviously last year people were spending less so prices were the pandemic was hitting so you have to take that into account but it was higher than expected. And there was a survey that people were expecting around 3.6%. And the month to month sequential increase was 0.8% versus 0.2%. So that's the one that you definitely have to keep an eye on. And that really reinforces the fact that

inflation is probably the biggest threat to your investments and to your cash. It is the biggest threat. So you want to make sure that you have businesses that have a, you know, they have pricing power, like Braden has mentioned a lot before, that they're able to increase those prices. And the whole idea behind investing is you want to make sure that your money actually keeps up with the cost of living because we're seeing right now signs that in inflation will be happening this year to one extent. I don't know yet, but we're definitely seeing signs of that. And obviously, I believe strongly in Bitcoin. And for me, the you know, Bitcoin is actually a bit of an inflation edge as well. But whichever way you want to look at it, whether you're looking at real estate,

stocks, or something like Bitcoin, you know, they're all ways that may potentially help you kind of edge that that inflation. Any Braden, any comments on this one? Yeah, like with inflation, I mean, thepi is is becoming a bit of a joke yeah oh yeah for sure i mean like i mean the cpi consumer price index which you know the fed has their fancy way of coming up with with the inflation number i would say i am like the worst at macro like i am Like I'm terrible at macro. I have no edge there. And that's why I just own good businesses and hold them that have pricing power so that, you know, inflation is not here right now in asset prices, real, like in real assets and

all the commodities across the supply chain. Ask anyone who works in supply chain. Um, it is significant. The PR and, and Warren was talking about this. He's like, we're seeing prices go crazy on all of our inputs in our businesses. And I mean, it's really here. And the reason that it's been this delayed inflationary dynamic is because we're in a pandemic. Right? It's that it delayed inflationary dynamic because of the pandemic there's like no discretionary spending um and i i'm gonna stop there because i'm terrible at macro and basically don't know i'm talking about so uh yeah there there was some interesting takeaways

from what he was talking about with inflation and And I mean, you got to be blind or stubborn to not think it's here right now. Yeah. Yeah. And I think it just reinforces the power of being invested. I think that's the biggest takeaway. Whether you believe in Bitcoin or not doesn't matter. Just make sure you are invested because if you're keeping cash, chances are you're losing money. You're not keeping up with inflation by getting 1% interest.

So keep that in mind. So one of the other things that I've noticed, I'm sure you had as well, was one of the big headlines is they do have a lot of cash on the balance sheet. I think they were around $145 billion on the balance sheet. So that is a lot of money. Buffett is always questioned about why do they have so much cash on the balance sheet so that is a lot of money buffet is always question about how why are they do they have so much cash on the balance sheet and you know from what i got from them is really you know it's a in part you know valuations are pretty high right now they're always open to making deals but they want to be they definitely want to be strategic when they make those deals and it has to make sense for

for berkshire um the next one that was another takeaway from me was um i don't know if you remember that one when he was questioned about selling the the airlines remember that one yeah so it was interesting what he responded because people said oh you sold the airlines when the pandemic hit and now they've kind of picked back up. Do you regret selling? And Warren's take was really, really interesting. He said, look, no, we don't regret selling. Yes, the government came in and rescued those airlines with some bailout packages. But his argument was that if Berkshire stayed as a big shareholder for those airlines, most likely it would have been very difficult for those airlines to get those packages because the feds would probably have said you know what you have a very healthy shareholder in Berkshire Hathaway that has cash on the

balance sheet yeah so there's a couple billion hanging around yeah exactly so it was a very interesting take who knows if that would have been the case or not but it was an interesting answer, I thought. And I never thought about it that way. So of course, Buffett with his wisdom as usual. And my overall take is, you know, I don't necessarily agree with everything personally that Warren or Charlie says. But, you know, there's a lot of good things that they did say in that shareholder meetings, whether it's this year, last year, any of the previous year, their shareholder letters as well. So there's a lot of good takeaways.

You don't need to take everything, you know, do everything as they do it. You have to create an investment strategy for your own. But one of my biggest personal takeaways, like I've said before, is not trading and just buying and holding. Because if you find good businesses, good investments, that buy and hold strategy will pay dividends in the long term, especially if you're dealing with taxable accounts. Because then if you sell, you trade trade a lot you're getting into a lot of taxes with each sell and gain being a taxable event so that's always something that can get really tricky super complicated to do your taxes as well but even if you're only having this in a registered account like a tfsa rsp i really think and I know Brayden, obviously you agree with that, that it's the way to do it is just buying and holding good businesses for the long term. You

don't have to worry about that price volatility. You kind of, you know, you buy it, you keep track of that business, you make some regular check-ins, but then you kind of buy it and forget it. Obviously, forget it is more in the term of not selling it, basically. Yeah, some good takeaways there, especially on trading and just buying and holding good businesses. With Buffett, I mean, he wrote the book on that. Yeah, my final thought on what all we're talking about here, and I could talk about these guys all day, but the final thought is think for yourself. And Buffett has repeatedly said this. He's like, don't follow me into businesses.

Think for yourself. And that's really important because obviously Charlie had a lot of stir in the financial community about his comments on Bitcoin. His disdain for Bitcoin, he calls it disgusting, end quote. Is to think for yourself because just because one person's opinion is out there, it doesn't mean that they're right about everything. And maybe he is, maybe he's not,

I'm not here to comment on that. It's here. I'm here to comment on think for yourself. And as much of a genius as these guys are, you can have differing opinions from them, which is very hard for a lot of, uh, Buffett and Munger fanboys to to comprehend and even myself because i'm i'm one of them um so you got to think for yourself because i mean shit i mean simon you you've nailed the bitcoin trade you've nailed it you've been so early on it you've crushed it uh you're like my local crypto cowboy um like you've crushed it you know what i mean like there are many ways to think about this stuff yeah and there's you've killed it and there's probably some i think for you and i for the most part agree we'll agree on most things but we don't agree on everything

and there's businesses that i might like a bit more than you do and vice versa and obviously the bitcoin investment and that's totally fine like that's perfectly fine if you want to invest in oil and tobacco or whatever it is some of the sin stocks and you're fine with that that's fine that's your prerogative uh like i've said it before personally i don't but that's my personal philosophy and i know bray, you have some as well when you invest. And that's okay. That's okay. Just make sure, you know, you can take bits and pieces.

You know, you can take bits and pieces from me, from Brayden, from Berkshire, from other people in the financial space. But make sure you come up with your own investing strategy that makes sense for your situation, for you, for your beliefs. And I think that's probably the biggest takeaway from this. A hundred percent. All right, let's wrap this up, guys. It's been fun chat. Lots to unpack here on this episode. Share the show. I have two, I have two requests. I'll have three requests for you today, guys. I have three requests. One, rate the show five stars. Of course, we don't ask very often, maybe like every 10 episodes, we ask you to rate the show. It really helps us. It really

boosts the algorithm. It helps us. Number two, share it with a friend because we are on a goal to hit 1 million downloads this year for this podcast, which would be remarkable. And I think we can do it, but we need your help. Uh, if you share this podcast with a friend, tell them to,

uh, check it out. That would be awesome. Honestly, like we really appreciate it. Oh yeah. And what's that? I said,

Oh yeah, that'd be amazing. If we had that share the show, we got to, we got to hit 1 million downloads this year. And it's possible, but we need your help. And number three is go to getstockmarket.com because this is my business, Stratosphere,

and I'm running it full-time now. I have a team dedicated. We just put out new reports on Spotify and Square, deep dives, you can go in that. We rank every business in our database, all the companies I talk about on here. And you can go there by going to stratosphereinvesting.com or getstockmarket.com is a URL that will redirect you there.

And I'm going full time on this now. This is officially my business. So really appreciate the support there, guys. Braden, Simon, we're out. Take care. Bye-bye. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence

before making investment decisions.