The Canadian Investor - A Simple Retirement Income Strategy and Canada’s Urgent Need for Private Sector Growth

Episode Date: December 16, 2024

In this episode of The Canadian Investor Podcast, we dive into alternative strategies for retirement income, including a simple and dynamic approach to replace the traditional 4% rule. Simon explores the pros, cons, and practical ways to implement this strategy while focusing on capital preservation and variable income management in retirement. We also highlight the G7 productivity gap, with Canada lagging behind its peers, and why it’s time for bold policy changes to support private-sector growth. Inspired by Shopify’s leadership, Braden and Simon share their thoughts on the long-term impact of inefficient policies and the urgent need for a shakeup in Canada’s economic direction. We finish the episode by looking at two Canadian stocks on our radar. Tickers of stock discussed: DOO.TO, KSI.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca 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  Web player - The Canadian Real Estate Investor Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.  See omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Welcome into the show. My name is Brayden Dennis. As always, joined by the dependable Simon Belanger. Good, sir. I was at the TSX opening, the bell opening this morning. It was good uh good bucket list activity yeah yeah

that was fun huh it was yeah like it's so funny you um so i went there with bmo who's sponsored the podcast coming into 2025 so uh shut up bmo uh their etf product and it's funny so you're there kind of like half an hour before market open in the room, coffee, pastries, you know, like the classic conference breakfast. Yeah. You know, you're chatting, you're meeting some executives, some folks from TSX there. And, you know, it's funny because for you, it's a big deal. But people look at TSX, it's just another Tuesday. Yeah, it's funny because for you, it's a big deal, but people look at TSX, it's just another Tuesday. Yeah, it's another day.

But, you know, respect for them because they, you know, they show up knowing that it's a big deal for the people who are there. Anyway, so right when the market opens, they pump you up and tell you like, here's what the photo op is going to be. Here's what it's going to be. And like, keep clapping and cheering and fist pumping but because they have to get the shot live for like the bnn bloombergs of the world you're sitting there clapping for the market open for what feels like several minutes it's probably probably like a minute but just clapping in the hoopla like like you're like, they're like, keep going, keep going louder. So man, it was good.

I'm glad I went. You know, it's one of those things where you got to check off the box. Yeah, no, definitely. Maybe I'll get to do it one day, but it's okay. It'll remain on my bucket list. Yeah, we'll ship you into Toronto for a Tuesday morning. Dude, we have a great show, jam-packed, lots of content, lots of Canadian content as well.

And we can jump right into it. You're going to talk a little bit about, I think, with the withdrawal rules, if I'm reading this correctly. Yeah, yeah, yeah. And then Brayden the Bear, Brayden the Big Bad Bear. Or, yeah, the Macro, Macro Bear. Brayden the Big Bad Brayden the big bad bear. Or yeah, the macro, macro bear. Brayden the big bad macro bear is coming on. And then you and I are going to talk about a stock each for stocks on our watch list.

A, you know, crowd favorite segment. All right, let's get into it with the first one. Take it away. Yeah. So I actually listened to a podcast a couple of months ago. I wish I would remember the name of the person that talked about this like alternative to the 4% rule. And for those who don't exactly know what the 4% rule is, when you retire, essentially you use whatever amount that you have and then you withdraw 4%. Essentially, you would calculate what 4% is,

and that's your annual withdrawal rate, and then you index that for inflation. And then you should have enough for I think usually it's like 30 years, what they say in terms of the 4% rule. But I mean, there are a lot of drawbacks with the 4% rule, some of it meaning that, you know, you could run out of money. So the success rate from what I've seen, and since it was first kind of brought out this 4% rule, which was I think in the 1980s, if I remember correctly, early 1990s, the success rate, depending, you know, on what studies you look at, it could range between 70 and 95%. So meaning that if you're not within that bracket of success rate, and you end up living, you know, those 30 years or even more, then you could run

out of money, which is definitely, you know, 70 to 95%, especially if you're at 70%. It's not, you know, still 30% chance that you won't be able to sufficiently fund your retirement. still 30% chance that you won't be able to sufficiently fund your retirement. 35%. So yeah, success rate from what I've seen different studies, it's between 70 and 95, depending on what assumptions they take, what kind of benchmarking they look at, what years they've done that benchmarking. So it'll look different if it was done more recently versus 10, 15 years ago. But for the most part, studies I've seen, it's a success rate using the 4% rule between 70 and 95%. So even if you're looking at 90%, it's still a 10% chance that it doesn't fully fund your retirement and you run out of money before you pass away. I'm sure you'll get to this, but rule of thumbs are always tricky in every industry. With personal finance, they're especially tricky because personal is in the word personal finance. So it's kind of an oxymoron to have a rule of thumb in there.

Yeah. And the problem with the 4% rule, it tends to be used like a golden rule almost, right? With a lot of people in personal finance that haven't done the research. And the reality is it was like originally put into place when, you know, bond kind of half, half or 60, 40 portfolios had much stronger returns and we were in a constant, you know, ongoing lower rate environment. And we've talked about this before, if you look from like the 1990s up until pretty much the late 2010s or, you know, 2020, 2021, I guess, interest rates had been on a steady decline. So yes, bonds did very well because they appreciated in value. Existing bonds, you had some capital gains on those bonds. So clearly it did well.

And then the stock market actually did quite well during that period of time. So I think it's- 2022 highlighted this really well. Yeah. Yeah. Where you had both asset classes do poorly. It was like the worst year for the 60-40 portfolio in a long, long time because neither the 60 or the 40 were particularly nice to own. No, exactly. And so this alternative, actually, I really like it. There are some drawbacks to it. So nothing's perfect.

Whenever you have kind of a rule, it's, you know, it's not going to be perfect. But here's how it works. So you first estimate conservatively how many years you think you'll live. So when you retire and be conservative, so give yourself, you know, more credit than not for living longer, take the number and divide it by the value of your investments. So if you think you're, let's say you're, you know, I'll give an example actually. So this will give you how much money you can withdraw in the current year. And at the beginning of each year, you repeat that process. So let's say you have a million dollar investment portfolio, and that's there to fund your retirement. You're also getting other sources of income, but your investments, it's 1 million.

You're 65 and you think that you'll make it to 90, but to be safe, you use 100 just to make sure you don't run out of money. So you have 35 years to fund at that point. So you divide the 1 million by 35, which gives you roughly 28,600. So that's the amount that you can withdraw that year. Now next year, say your portfolio went down to $900,000, combination of negative returns and also withdrawing that $28,600.

So now you have $900,000, you divide it by 34 years because you're one year older, and the amount you can withdraw is $26,500. Now, let's say instead that year, your portfolio actually went up. And despite the withdrawal that you did of $28,600 that first year, your portfolio actually went up to $1.1 million, even after that money was withdrawn. So you now divide $34,000 by $1.1 by 34, I mean, and you get approximately $32,400. So it actually adjusts over time. So clearly this is not perfect because, you know, there are some, there's going to be some fluctuations. So that is the one thing you have to keep in mind. You know, it will be variable. Your income will be variable, but it will ensure that

you don't run out of money. So there's some ways that you can actually balance that invest in a mix of asset that will provide you with a relatively high floor, while still providing you some upside. In other words, don't put everything into equities in Bitcoin, for example, where it can be volatile. Sure, you'll limit your upside, but that doesn't really matter when you're actually in decumulation phase and you want retirement income. You're more in capital preservation mode. So I think that's really important to remember. You have to create a balance between the two. You want to preserve your capital as much as you can and still give yourself some upside. But I think it's important to remember that you're not gonna have the same goals

as if you're like 30, 35 and building your wealth. Make sure that you rebalance your portfolio regularly to stay pretty close to that target asset mix that you're putting in place. Again, different from when you're a capital accumulation mode, this is more capital preservation. And then the last thing I would say in order to really make sure this rule works well, at least that's what I would do, you kind of set a baseline of how much income you need

every year. So for example, what I just went over, let's say you decide that $25,000 is, you know, I'm good at a little bit every year for inflation. thousand is you know i'm good at a little bit every year for inflation but if i get 25 000 with my other source of income i'm good then anytime you have some excess to that you could put it in a gic or treasury bills and kind of build a buffer where when you do have a drawdown in your portfolio and you use that rule and let's say it gives you $23,000, then you don't need to sell additional assets to be able to fund that. You just already have it in something that's as safe as cash, for example. So those are some ways that you can actually kind of balance that risk. Or

alternatively, any excess to that $25,000, if that's the amount you need every year, you can just keep reinvesting it. And then it gives you a bit more, hopefully returns in the future, which can kind of pad your retirement as well. It's kind of depressing that 4% of a million is only that much money. Yeah. But at the end of the day, it's, you know, people will probably have CPP, old age security. So there's other source of an income but yeah i mean it is i mean if you want to not run out of money yeah because that's 25k ain't what it used to be yeah that is true that's true yeah so what do you like about this approach i like it because it's

more dynamic as an approach it kind of adjusts itself versus the four percent rule where if you just kind of go on cruise control and you never adjust those payments, you still just stick to the initial 4% indexed inflation, there's definitely a risk of running out of money. Yeah. I mean, I'm all for just a generally more adaptive and flexible approach, which this is doing on an annual basis, rather than a set percentage. But at the end of the day, man, I know it's not fun, but you got to spreadsheet this out. If you're not hiring someone to spreadsheet it out for you, all rule of thumbs, this theory, this is is all great these are good ways to start your

spreadsheet but you gotta spreadsheet it out and and look through the numbers and if that's not comfortable then i think you gotta get like a fee-based cfp yeah yeah i mean obviously a certified financial planner will have like we'll look at the. Like they'll do a lot more than just this part. But if you're doing it yourself, I think this is a very simple rule. Obviously, you can spreadsheet it out as well. You can even like ask Chad GPT to give you a bunch of potential outcomes using this rule. It'll spit out some numbers for you and potential returns, what would be your income. And then you can assign probabilities to each of those potential scenarios. I mean, it is quite good to do those stuff. So you can ask a model for that. I mean,

I like the simplicity just because, yes, it's very simple. You just divide by the number of years and then you have your amount. You just redo it every year. But again, I think you need to be able to. And that's where I think you need to be able to, and that's where I think the spreadsheets come in, is just establish what baseline of income that you need to meet your needs. I think that will be the biggest thing. So you do your expenses, you try to project that out, and also try to project out inflation.

Good luck doing that, but still. Yeah. The CPI number will tell you the truth, no? It's got everything baked in there. Yeah. I think that's where the personal rate of inflation, I think keeping track of how the things you buy increase, I think that's where it becomes very powerful. Because then you can assign something based on what you've seen for your expenses, how much it's grown over the last like two, three, four, five years. And then you can try to make some assumptions based on that because your basket's not the same as mine. You know, the listeners' baskets are not the same as mine.

CPI is all nice and dandy, but it's still just a basket, right? Yeah. I like this. I'm 65. Eh, 90 would be cool, but how but how about 100 okay 35 years it is yeah well it's the conservative and that's what you know when i listen to the guy that's what he said he's like be conservative the goal with this is to not run out of money that's it right you show up for a haircut and he's like how much do you want off and you're like show up for a haircut and he's like, how much do you want off? And you're like, start with less first because you can always take off more. But once it's gone, it's gone.

Yeah. Especially for me, it's not growing back. So, you know, be as conservative with your retirement as you are with your barber. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want and they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer

myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked.

And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the App store and join the community today. I'm on there. I encourage you, go on there and follow me. Search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the app store, and I'll see you there. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a

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

Okay, kind of on that same macro dooming landscape here, 25K ain't what it used to be. Have you been hanging out with Dan Foch? I am going to Dan Foch's and Nick's Christmas party tonight, but I haven't been hanging out with them. This is all on my own, unfortunately. Yeah, I feel like I talk to Dan more than you. Yeah, we have our little group chat and he's got every graph.

I message him and i'm like before the segment i was like describing the graph he's like oh yeah one sec boom spits it out he's like i got i got the macro graph for you so i'm gonna talk a little bit about canada and where we're going with stats and figures and then and then navigate the situation. G7 productivity growth, Canada is getting smoked. So this is from the Financial Times and all the data is from each national statistic. Labor productivity growth in the US is smoking basically everyone G7 ex-US.

And this is highlighted, especially post COVID. It started earlier, but really post COVID, you saw a complete flat line of this and the other countries stumbled and the US stumbled very, very briefly and then continued to get back to productivity and being good at what the U.S. is good at. So this is it's not a perfect metric, but it's output per hour work, which basically means GDP per hour of labor in the country. And no, it's not a perfect metric, but on a grand macro scale, the US is crushing along. And so the bottom line here, I edited into the graph here, but G7 ex-US minimum. So the minimum line of all G7 countries. I am sorry to report, Simone, that line is the great white north. That is our country. And post-2015, which, you know, let's not kid ourselves, is the year Justin Trudeau took office.

Almost exactly is when we start to fall behind in almost every single category compared to G7 countries. No matter how you slice it, this is just the facts, okay? Now, deterioration in major markets in the job economy, you and I were talking about this. I think you sent me this yesterday. I had to include this. This is mind-blowing. I had to include this.

This is mind blowing. Toronto, for instance, has the highest jobless rate since the GFC, since the great financial crisis in 2008 when unemployment spiked from high single digits to 10%. We are now crossing that threshold here in 2024 which is which is not great of course the the the graph goes nuts during the covid pandemic when everyone was sent home and then rapidly down again and then we have ticked up and up and up toronto montreal vancouver they're not doing as bad but toronto's jobless rate is frankly staggering.

I think it was you that sent me this graph, right? No, no. I think it was Dan. This is a Dan graph. Okay, good. Yeah, Dan graph. I can take credit, but no, no. It's not me.

Yeah. That's a Dan graph. Okay. Oh, I know what it was. It was Adrian sent me it saying Dan posted it. Okay. The Fraser Institute. posted it okay the fraser institute job growth in government exceeded the private sector in canada in eight out of ten provinces from 2019 to 2023 this is no surprise basically post 2015 again to

draw that line in the sand the only real growth as I have on air quotes for the people listening on the pod, was in public sector government jobs. Private sector, down the toilet, self-employed, especially down the toilet. That's really sad to see, right? that is a fake economy in terms of growth now i've largely said screw it politics is too divisive on this podcast simone it's thanksgiving dinner here but i've been inspired by the the shopify executive team i mean all of them it's not just toby and harley it's a good number of shopify employees who are trying to rally canadians and it's It's a good number of Shopify employees who are trying to rally Canadians. And it's not in a, hey, Justin Trudeau sucks, liberals suck, let's own the libs. But in a, hey, look at the data, look at the second order effects of bad policy and something has to change.

Or this continued path is a dark place. These policies like capital gains tax, for example, inclusion increases really hurt Canadians, not in the way that it's framed to you. It's framed to you as, hey, this is going to affect almost no one. If this is going to affect you, you're probably already rich. And so, although that might be true, let's think of the second order effects. It really hurts the Canadians who are going to have really large one-time capital gains events like selling their business. So the people who want to build a business, grow actual private sector jobs for Canadians, they might employ, which we definitely need, by the way, there's not enough friction for someone like me to just go bring my business to the US. I'll bring the talent that I employ and their tax money to the US or someone else

because me, myself, and I, I don't want to pay some huge, massive, one-time, lifetime corporate capital gains event on my business. And so, look, I'm just not going to hide my opinions here on the podcast anymore. I mean, we're going into election year next year. This country needs a major shakeup. This bad trend that we're on that has happened since 2015 in this administration, the cracks are really starting to show in what I'll call hashtag post COVID loser that I post on Twitter all the time of all these graphs of just how, how bad it's getting. And the problem is this trend is not getting better. It's getting worse. Annual public sector job growth by prime minister on an average of 1.33% per year is up

4.53% on average under Justin Trudeau. And look, I'm a proud Canadian and patriotic, but the movement in the US right now post-election from both sides of the aisle is like, hey, we need to be more efficient, less bureaucratic and avoid this government debt death spiral and get real private sector job growth. So since 2014, public sector job growth cumulatively in Canada, this is from the Globe and Mail and Stats Can, has grown over 25%. Private sector has been at a standstill post 2020 and self-employed is actually net negative during that 10 year period. So this is where we're at right now. It's not great. We need to do something better. This country is situated in a really good place for a really good decade of prosperity. If we, you you know get our head out of our you know what and and so that's that's

just me kind of saying like hey this is this is not great we need to do something i'm not here to try to own the libs quote unquote but something's got to change yeah i mean for me like a lot of the stuff i agree with you you know my opinions on this stuff for me the there's two big elephants in the room the first one is the more you you kind of hide taxes on businesses the more you make it restrictive to capital capital will go where regulations are the friendliest yep so that's just the way it is if you're an investor outside of canada sure if you're canadian you may still invest in Canada because you have, you know, probably a bias towards that because you know the country

and all different things. You know how it works here. But if you're coming from another country, I mean, you'll probably think twice when you're looking at much, much lower taxes, corporate taxes in the US. The other thing I'll mention, and it's not just a federal government, I think we've seen it with a bunch of provincial governments, is what I find worrying is these, for lack of a better word, gimmick bribes to try and get re-elected. That's why I'm saying it's not just the liberals. You're seeing Doug Ford doing it. I think they did it in BC too.

And now the liberals with the GST thing, which you talk to businesses that are impacted by that, like most of them are pissed off because it just creates so many additional costs. You know, the best example too is, you know, alcohol, right? If you get a restaurant, I think it's like anything that's seven percent or less can you imagine how kind of time consuming it would be to program your system when you sell all different kinds of alcohol and liquor and some stuff is just the extent some stuff it isn't so i've been and you're using something like you know you're at a restaurant using something like toast which is a u.s point of sale payments and you're like hey uh some changes here in our local economy can you and they're like uh you guys small market for two months don't care figure it out yeah it's just yeah the cause that

will cause a federal government to do that and i don't think it will bring much of the benefits to businesses you know my view is why not just make all food at the grocery store permanently exempt from gst you know if you really want to help lower income people i think that would be something that's very sustainable yes it would cost money but the one that really pissed me off was a 250 250 dollars which is kind of stalled right now. But I see it from a father having a daughter. Use your money back. Well, yeah, and you're paying interest. So you're taking a loan to give us money,

but a loan with interest that will cost more to future generations. That's essentially what they're doing. And I find that very sad for future generations who will have to bear the burden of that elevated debt. And I would be in the upper bracket of being eligible for this. And, you know, I do not want the $250. Like, it's completely stupid that I should be even eligible for this stuff. But anyways, that's kind of my rant. My biggest issue is the public debt. I think we are going on a very dangerous road. People can say what they want.

At the end of the day, history is full of examples of bad things happening when public debts get out of control. So you can do the research, you can look it up. And unfortunately, we're going on that path. And we do not have the reserve currency. The U.S. has a much larger runway than we do yeah like the u.s has the ability to like export inflation on the rest of the world as being the global default currency we don't have that luxury man the the debt spiral is is concerning

with all major countries and i think the u. woke up to that, or at least is. And there's been a lot of hype built around this kind of like, hey, we can do better, but we need to make public sector private sector-y again. You get guys like Elon and Vivek with the Department of Government Efficiency in the States. And people, them posting like, hey, if you want to come work for the Gov, it's going to be excruciatingly long hours if you want to come work with us. And then people are super fired up to do that. People want to work on hard things, especially the Silicon Valley Elon Praiser type person. And so I think that there's an opportunity over the next decade to get out of this slump. And I really want to see the Shopify, Toby, Harley,

Finkelstein types take a bigger role. Like you're seeing some private sector people take a bigger role in u.s government now post the the election i think that that would be really really good for this country and and fresh eyes on the situation yeah yeah and i like i guess for me i guess the last thing i'll just mention is just like we need to spend within our means i think that's that's the biggest thing for me you know i'm not saying cut everything i'm just saying you know there's a lot of fat that can be trimmed in our government uh i mean i live in ottawa i've heard countless stories of literally public sector employees like working on you know their personal business yeah and doing maybe an hour or two of actual work

during the day or, you know, working. I've like, I know a lot of people that work in the public sector and there's a ton of good employees, don't get me wrong, but they actually, you know, make up for some of the bad employees. And if you would be able to cut the fat, I think that would go a long way. And the last thing here is you also have to like, you know, I think it's fine to have a welfare state and help people that, you know, are not as fortunate. But you also have to make decisions at the end of the day. Like you have to pick, you know, you have balanced the budget, and then pick what is the most important if you're the government in place. I don't care if you're liberal, conservative, NDP,

block if they come into power agreement. I don't care what it is. You have priorities. That's fine. Just spend within your means. That's all I care about. Yeah. We have a spending problem, not a revenue problem. Yeah, exactly. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been

impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY, do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage

account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the App Store and I'll see you there. 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.

forward slash host. That is airbnb.ca forward slash host. Okay. So we've got a couple more here. I have this survey on Canadian investors and then stocks on our watch list. Should I just hit this survey quick? Yeah. Yeah. I guess we'll have, I don't know if we'll have time to do both, but we can see. We'll see how it goes. Yeah, exactly. We can see. We'll see how it goes. Yeah, exactly. So I met a fellow, I was in Vegas at a, I was in the Venetian at Vegas at this kind of like happy hour thing. I'm talking to this guy.

It's a nice hotel. I've been a few times. It's massive. It's like a small city, right? Mike Rodenberg, the guy, he's Vancouver guy. And I'm talking to him, getting to know him. And I'm telling him about the podcast, what do you do? And that kind of stuff. And then he runs these surveys for Canadians. He's like, hey, I'll make

a survey on Canadian investors and then you can talk about it on the pod. So I was like, oh, sweet. So he put this together. And so thanks, Mike, shout out to them. And Square Knot Analytics is the name of their company. So Canadians over the age of 18 in November answered this survey. And it's pretty awesome all the data he collected on like what they're holding, beginners, intermediates, and advanced investors. And a lot of people these days statistically are holding GICs, HISA's, mutual funds, individual stocks, and ETFs. Those are the big four. Not surprising. And GICs and high interest savings account was the highest across the whole board. I mean, that makes sense, right? Like if

you're an investor and you own those things, you probably still own the HISA, that kind of stuff. So I'm not sure if we could split out GICs after that. But 78% of people said that they were investing for the long-term and 63% said that they were, it was not one or the other, but 63% said they were investing for short-term goals as well. Most people on the advanced side are using discount brokerage. This one I thought was interesting. They're using discount brokerage. I'd love to understand how they define like beginner, intermediate, advanced, long-term and all that, or it's just like what people think they are.

Maybe just what they think they are or time, number of years maybe of experience. But it is staggering. Those who are in the more advanced, more tenured categories are using discount brokerage at a significant more than on the early side. Those early side, those people are probably using more mutual funds, more active management, advisor services. So that makes sense. Goals. This is my favorite part of the survey. Short-term people said that their top three things were saving for a major purchase, like a home or car, lifestyle, like travel, and building an emergency fund were short-term goals.

Top three for long-term, retirement, of course, and then fire like financial independence and then three lifestyle upgrades. Interesting. So those are the top three across the board. People buy stocks because of desire for long-term stability, confidence in the data, and then they sell to lock in profits or seeing better opportunities elsewhere as the top two across the board. So not totally surprising there, but it was good to see that a good variety of investors are oriented long-term. That 78%, it's our job, Simone, to tick that up year by year on the podcast to, you know, maybe 99 plus percent of people who are investing for, you know, let's call it three plus years. Even if you're in retirement, you have a longer time horizon than just one year. I think

you're going to have better results. Yeah. Yeah. I mean, at the end of the day, like it's, it's not easy to trade. There is a reason. And obviously, like if you start trading, you probably want to do it outside of a registered account because then you could get into especially a TFSA. You can get into trouble with the CRA and then you have the, you know, the taxes you have to factor in. Clearly, if you're a long term investor, you might have to deal with taxes, too, if you end up maxing out all the registered accounts. But it is something that we're pretty lucky. I mean, in Canada, despite what we were talking

about the prior segment, one of the things that we have in Canada that they don't have in the US, it is that TFSA, right? So they, yes, I know they have Roth IRAs, but Roth IRAs have the more designed for retirement and they have restrictions. Whereas a TFSA, I know they have Roth IRAs, but Roth IRAs have the more designed for retirement and they have restrictions. Whereas a TFSA, I mean, maybe it's good or bad that there's not like kind of withdrawing restrictions. But again, I think if you're disciplined, it's just a fantastic vehicle that we have. And then obviously the FHSA, if you're saving for a home, which is a bit more of a short-term goal, that's a fantastic vehicle too. All right, let's move on to stocks on our watch list presented by our friends at EQ Bank. Fantastic product for Canadians on that GIC and

HISA segment, which is clearly the largest in terms of what people hold. So it's a great place where you and I both hold those types of assets. All right, Simone, we both have two Canadian picks. Yours is dual listed, mine's not. And I was surprised to see this one on here. I'm excited to hear what you think. Yeah, I mean, this is definitely a bit of a contrarian pick with, I think I've probably said in most of the episodes that we've done in the last couple of months that, you know, my feelings about the market being pretty richly valued right now. But, you know, there can still

be some good opportunities, especially if you're looking right now, right at cyclical stocks, because I think it's safe to say that we're definitely you know starting to see some cracks into companies that are very cyclical and there's no company i think that is more cyclical than brp let's be honest how consumer discretionary it is yeah exactly so brb for those are not familiar with, we've talked about it before. So, it stands for Bombardier Recreational Products. There you go. You had BRB, but it's BRP. BRP, exactly.

And essentially, it's because Bombardier actually spun off or sold Bombardier Recreational Products in 2003 as a standalone company. They sell recreational vehicles like Ski-Doos, Sea-Doos, Motorcycles, ATVs, etc. It's dual listed, like you mentioned, on the TSX and on the New York Stock Exchange. It has a market cap of $5.5 billion Canadian dollars and an EV of $8.4 billion. Now, for those new to the podcast, an enterprise value is simply the market cap. And then you just add in the debt, subtract the cash. So that just gives you like a kind of an idea of what the company plus the debt is. It currently pays a dividend, which yields a bit more than 1%.

It's very sustainable. I mean, right now, despite their cash flow, actually, their free cash flow being on the decline, it's still just a payout ratio of 11%. Now, the issue with BRP is that it's the ultimate non-essential cyclical stock. So when things are going great and there's tons of money in the economy, BRP will be doing great. I mean, we saw that in 2020, 2021. It was probably on steroids because we had lockdowns.

And one thing you could do is spend time outside so and so clearly um a lot of fun toys i remember then having like backlogs and um i think people could like buy them and then resell them at a higher price on the aftermarket on like these uh whether it's like facebook marketplace or auto trader and stuff like that used ones with like 70 80 hours on it which is like for context that's like selling a car with like 80 90 000 kilometers on it type of thing we're going for more than msrp so there you go so just goes to tell you and obviously that was a bit on steroids because of the whole lockdowns. I don't think we would have seen this kind of cycle if it weren't for that. And then you had the stimulus in the US. Now things are not going great for BRP. I mean,

it's not going bankrupt or anything like that, but sales are declining. They've adjusted their full year revenue guidance multiple times in the past 18 months. Literally in the same year, with a quarter or two left, they've been downgrading their guidance. It's not anything on them per se. I think they probably would do well to just pull the guidance for a little bit just because it's so unpredictable right now. But they're clearly having trouble understanding where sales will be going in the short term and you know with the macroeconomic headwinds we're getting I mean it's understandable so in the most recent quarter revenue fell 17.5 percent net income was still positive but decreased 70 percent free cash flow is still positive on the

full year basis but has also taken a pretty massive hit and then if you look on the yearly basis so which will give us the trailing 12 months you can really see what the graphic here Has also taken a pretty massive hit. And then if you look on the yearly basis. So which will give us the trailing 12 months. You can really see with the graphic here. Where things like really peaked in revenue last year. I think they probably had a bit of a backlog. In terms of being able to get those sales out. But now it's been declining.

I anticipate when they release their most recent year, it's going to be much lower than that. I'm trying to remember their guidance, but I think it's in the low $8 billion. It peaked at over $10 billion about a year ago, but it had been declining towards the end of the year as well. So it's not obviously, you know, it's not great. And I'll explain why I think it's on my radar right now. Interest expense has tripled over the last few years, but it's still manageable. Debt has not increased for a few years now, which is a good sign. I would want them to start reducing their debt a little bit when things start turning around. I don't think now is necessarily the best time to do that. But when things start

turning around, it probably would be a good thing. They have been working with their dealership network to reduce inventory and have made significant progress. And that's been one of the issues, right? When you think about cyclical industries and, you know, I'm very familiar with mountain bikes because, you know, Brayden and I mountain bike quite a bit and follow that. And that is also an industry that's been having similar issues is, you know, you get really an uptick in demand. Then you have manufacturers that see this demand start increasing production rapidly. But then there's always a lag, right? So then on the other side, when that demand starts falling, manufacturers, you know, will start cutting production, but it will be a lag. So now they end up having at the beginning of it all, they did not have enough inventory to fulfill everything.

At the back end is the opposite where they have too much inventory for the demand that collapse. So now what they're doing is they're trying to right size that and trying to get the inventory levels lower. Now it currently has a P of 2025 on a trailing 12 month basis and 17 on a forward looking basis, which I find a bit of a head scratcher that the forward looking is actually better in terms of P, which implies like better profits going forward. So I'm a bit confused as to what the analyst has been smoking when it comes to that, but that's beside the point. The reality is that PE when I'm trailing 12 months is actually, you know, on the highest, on the high end. I mean, it's the highest it's been in like close to four years since 2021. So people might wonder why. You know what I'm going to say, right?

Yeah. Yeah. Go for it. Yeah. You buy cyclicals at high PEs. And why is that, Simon? Yeah, exactly. Well, the P ratios can be really misleading when you have cyclical companies, banks included in that group. Obviously, banks are not as cyclical as this, but because most of the time when things are going well, profits get so high that the P actually is shrinking because the price of the company is actually not keeping up with the rising profits. But then on the other side, when the P is high, it's oftentimes when it's very attractive to buy the company like this because profits are falling faster than the share price, which is inflating the P.

That's the reason why you'll see. share price, which is inflating the P. That's the reason why you'll see. And it can be a bit, especially if you're starting to invest, you may get confused because you're like, wow, it's trading so high. But these are the kind of companies that you want to buy when things are not looking great. You know, you don't want to buy this company in 2021, 2022 when, you know, has a low P because, you know, everyone and their brother and sister wants to buy an ETV or SEDU or whatever it is. So that's why it's a company I have on my radar. I think you can apply the reasoning that I talked about to a lot of cyclical companies right now that have seen this kind of thing. The one thing I will caveat is you have to make sure these are

solid companies when you look into cyclical names, because there are some bad cyclical companies that will do very well at the peak, but they're not in good enough shape to weather the storm. And there's countless examples of companies doing that, performing very well when things were going well, and then going into bankruptcy when there's a downturn. So you have to make sure it is a solid company because they will be able to weather the storm. And then obviously it's just kind of figuring out the right entry point. Yeah. It's one of those things where you got to kind of break your frame on valuation multiples with something like a consumer discretionary cyclical, which is hard to do. But I mean, it's really simple in how you explained it, but profits can drop dramatically

as the cycle turns, aka that's affecting the price to earnings multiple. And the price might not fall off a cliff as rapidly because the market still realizes this is not going to zero. Profits aren't going to zero. It's just the cycle. This is the cycle. This is what we signed up for. And so, yeah, earnings multiples can be actually at its highest when it's the most attractive valuation wise, which again, hard to, it breaks the frame of every value investor, especially when you're new to this. And I've talked about this a lot. I mean, with BRP, it's a stock I own, right?

It's probably the only really, really consumer cyclical name that I own. And the story here continues to be intact, which is two things. Market share continues to be very strong across all major categories, especially the categories I care about the most, the product lines of skidoo in the winter and seadoo in the summer. Those two product categories are industry leading. They've become synonymous with the sports. And of course, they do have competitors in those spaces, but they've continued to tick up in market share year over year in the recreational vehicle market. Thesis tracking. Okay, good. Two, have you seen how much shares they buy back?

They're serious share cannibals. That's why earnings per share has elevated so much over the last 15 years. They buy back a lot of stock. Well, I can pull it up here on Finch app, but that's another thing. I mean, it's an undervalued name that they continue to buy back a lot of stock. North American power sports market share has ticked up almost every year for 13 years straight and yeah you're sharing on your screen on the other side there the share count's gone from what is that 111 million to 73 million yeah which makes me a little bit concerned about management i forgot to look at that because why were they buying so much stock in 21 22 23 i 23? I know hindsight is 2020, but

you know, they're not stupid. They know that it's a cyclical business. That's when I'd probably be kind of saving my capital, paying down the debt versus buying stock because now is probably a better time to be buying the stock if they had excess resources. So that is the one thing where I might be a little bit critical on them is probably should have slowed down a little bit time to be buying the stock if they had excess resources so that is the one thing where i might be a little bit critical on them is uh probably should have slowed down a little bit the buyback yeah yeah the buyback's been pretty steady though i guess that's the only counter argument like that graph's pretty down to the right their dca uh the buyback yeah yeah the buyback program is a dca no it's a it's a good one to bring up. It's one

I've been getting questions out about a lot because I've owned it for a while and people are like, how are you still holding this? It's been markets ripping and it's down. I want to see another season, which a season on the winter and the summer, because I think the thing that I got wrong, which I'll admit to the mistake is I thought demand was going to stay really hot for these things. Post-COVID, I was not correct about that, which, you know, you're not going to get everything right. But people still want these things and people who can afford them are still going to buy them. If you back out the pulled forward growth in 2021, it's a pretty good trajectory. Yeah.

Yeah. And like I said, the market will adjust, right? Companies tend to, it's a classic example that, you know, companies react late for change in demand. I mean, it's normal and they react late when there's a change in demand, like both sides, right? Reduce demand or increase demand. It takes time to be

able to react to that. So that is normal. Things will kind of adjust and then they'll start producing a bit more in line with where the demand is actually is at. So I think now they're probably in that leveling out phase. Probably in the next year or two, you'll see things turn around a bit more and hopefully demand pick back up. But it's the last thing I'll say. If there's one type of company that I think it's fine to not be a super long-term holder, that is, you know, it's still tricky to figure it out. But, you know, I think this is a type of company that you kind of buy when things don't look good.

And when things get a little bit crazy, I think it's very fine to sell the position or trim. These are the type of companies, personally, I'd be fine with doing that. Or, you know, old and long-term, you just realize that you'll have some little gullies around the way. Yeah, yeah, absolutely. Okay, I'll round us out here with another TSX name. The company is called Neat.com with a K.

K-N-E-A-T.com. I got a small cap. Dude, I should have just bought every small cap I ever bring to this segment because it's been on a tear. Actually, I drive past a building in Ottawa with Neat.com. I never knew what it was.

I drive when I go to my in-laws, we always drive by. And every time I'm like, what the hell is this? Yeah. I didn't know they had a, had a Ottawa off. I think that they're Irish headquartered. Anyways, need.com. I got, this one was brought to my attention by my friend Shomik. Shout out to him, Shomik Ghosh on Twitter.

I'm leaning a bit on his work here with the report he put together and sent me in an email a week or two ago. And so it's a TSX listing. The ticker is KSI. It's only 500 million in market cap. I believe it's an Irish limerick-based company. This is a brand new name, but I think I'm finally understanding the value proposition. And man, some of these software companies,

like same way you drive by and like neat.com, what the hell is that? Some of these software companies, I go on their website and I'm looking at it and I'm still like, what the hell do you do? You know what I mean? You got to like ServiceNow's website, which I understand what the business does. They're a massive software company.

But it's like, hey, can you just cut it with the bullshit jargon and tell me like what you really do? Like help me as a buyer. Help me pitch this to my management team. Anyway, so neat.com, they're in the validation business. And what does that mean? I'll go back to, you know, my time at auto manufacturing. So if you're a manufacturer and you have a bunch of equipment, Simone, and it's the law for some machine to get inspected on a regular basis safety-wise. This is typically done like clipboard checks. It's been done like that for a long, long time, which generates a lot of paper, a lot of documentation around the facility.

The Iron Mountain box is piled to the ceiling. The trend over the last, you know, however many years has been towards the iPad or the tablet documentation and verification. And a lot of this type of information, you need a really good way to actually build the inspections and the checks and the verification and validation of what you're doing in your process. But then you also need to store it and have it in a way that's like audit ready. So that if the regulator comes and knocks on your door, you have it. And this is why you need some sort of organizational management system. Biotech is a really big vertical for them because that's very process driven,

very regulated by something like the US Food and Drug Administration needing to get approvals for them to do your business and be audit ready if the FDA did knock on your door. There's a lot of process that you need to do and you have to have a system that's a single source of truth and have it, you know, I think you have to have these records for the FDA, for instance, for like 20 years on file. So they could go to your facility and be like, show me your records 18 years ago that you guys are being good actors. And so that leads itself to being extremely sticky because if you have to be audit ready for some of these kind of regulatory capture items,

building the documentation, the actual intake forms, the organization, no one wants to switch that out, especially if you've done it at multiple facilities. It's like, okay, you started at plant one, but now we're going to roll it out at plant B, C, and D, and E. So they do this kind of land and expand, go to market market they have over 130 net retention which is basically demonstrated by that like it's more like i sell you the system to start using at your painting facility as an auto manufacturing but now you're also going to start using it at the manufacturing facility and now you're going to start using it at the you know assembly facility and so that's kind of that land and expand model as

it gets used at more facilities and sites. Things to like is still led by the initial founding team. Gross margins are rapidly increasing, which is quite interesting to see on a operating leverage perspective on a gross margin unit economics expanding every quarter. It's really cool. They're knocking on the door of consistent profitability. I think they had to raise a bunch of money. Growth from 2020 onwards is spectacular from 3 million in annual recurring revenue. So small series A type company to now 50 million in ARR that they have in annual recurring revenue. Questions that I had for ShowMaker were like, why did this founding team start this company in like 2007 and now they're getting traction? Like, what were they doing? And apparently it was just kind

of a consulting business that they realized that could be scalable software after, which makes sense. And then I was like, why do they not own that much stock? But I think they had to do a significant amount of private venture and then the go public, a significant amount of dilution. One of the chairman and founder does own around 6.5% of the company still too. So not bad, still things to like there.

But I would like to see at a 500 million market cap them own more of the company. So it's great that it's run by the founders, but it's also like, eh, you have less than a percent of skin in the game here at this size. I'd like to see more. So that's kind of the pros and cons of this company. I don't know a whole lot. I'm still learning, but something growing this fast, a a tsx only listing there you can typically be pretty early to something like this if it's only 500 million market cap yeah i mean uh now i have i'm showing for joint tci so the just annually but revenue growth net income and free cash flow so net income they're losing less money So net income, they're losing less money, which is good,

but they're profitable over the last 12 months on a free cash flow basis. So probably SBC, right? The culprit, I would have to guess without looking at the financials here. So it looks like it has the making of a nice little business at this point and uh probably flying under the radar for uh you know for most people except if you're uh driving to bar haven in ottawa then you probably see it you probably see it on a building and wonder what it is yeah no no you'll uh you'll be driving along like i know i know what those guys do so interesting business course, this is one of those unsexy, hey, we used to do this via clipboard check. And now we're doing this via a digital solution. But the kind of CRM-ification of it around like the actual organization of it and having one

single source of truth for the whole site. And then in some cases, you know, 50 manufacturing facilities that might be under there. It's pretty exciting. If it can get adopted by more biotech, I think that that's probably a really good vertical for them. And they keep mentioning it in their conference calls. So I'm curious about what the actual go-to-market is. What's the sales team like? These are things that I, as a software founder myself, I'd want to dig into more. The only thing I would be concerned is potential disruption from AI. Yes.

I think that would be the one thing that I'd like to understand, if there's a risk of that happening. Whether they get disrupted or use the technology to actually benefit their business those are two different things but you want to have an understanding of that and just try to figure out which which of the two is the most probable yes because ai is really good at document extraction so if you have those hard copies and AI can use a vision model or traditional text parsing to save, store, organize all that data instead of the traditional method. And then also all the automation that can be done with those kinds of vision models in terms of inspection in facilities is at the forefront of AI adoption in almost all

manufacturing capacities right now. It's not been rolled out. It's one of those things where like every company's thinking about it, or every company's planning, they know they're going to do it, but the technology is still coming a long way. Those two things could definitely be, as you mentioned, not necessarily a disruption, but a change in how things are going to be done in the future. And so, you kind of hope that they're on the right side of that.

Oh, exactly. Nothing more to add, but I think it's definitely, it's a name I'll keep an eye on for sure. Thanks for listening to the pod, folks. We really appreciate you. You can support the show by leaving us a review on the podcast player,

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