The Canadian Investor - Alberta’s New Pipeline Deal, Inflation Returns & Chip Stocks Go Parabolic

Episode Date: May 16, 2026

In this episode, Simon and Daniel break down the growing macro risks facing Canada and the U.S., starting with the recent oil shock and what it could mean for inflation, consumer spending, and central bank policy. They discuss why Canada’s energy infrastructure is back in focus, including potential federal support for a new Alberta-to-West Coast pipeline, the bigger debate around a West-to-East pipeline, and why energy security could become a much larger political and economic issue. They also look at the latest U.S. CPI and PPI data, the relationship between producer prices and future inflation, and how central banks may respond if higher energy prices start flowing through the economy. The conversation then shifts to the sharp rally in semiconductor stocks, massive AI-related capex from the mega-cap tech companies, and whether markets are starting to show signs of excess. The episode wraps up with a discussion on privatizing Canadian infrastructure assets like airports and ports, rising U.S. Treasury yields, Canadian consumer debt, and why the current economy feels increasingly K-shaped. Tickers of stocks discussed: NVDA, TSM, INTC, SMH, GOOGL, META, MSFT, AMZN, ORCL Watch the full video on Our New Youtube Channel! 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 Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai 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.

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Welcome back, everybody. We are live, Daniel Foch, one of the two hosts of the Canadian real estate investor podcast and Simone Belanger, one of the two or three hosts of the Canadian investor podcast. That's right. Yeah. Yeah. The one constant there. Yeah, I guess you are. The, you know, you and I have sort of just become hobby macro observers and we had these sort of like regular macro phone calls we were doing anyways. So we were just like, why don't we, uh, why don't we turn this into a show? So that's what we're doing. And hopefully you guys like it. I know it's been,

you just mentioned to me, it's been pretty well attended on the, on the actual podcast feed for the recordings. I know on X, we seem to get like, you know, 250 views. So we're live on like as many platforms

as I can possibly figure out how to go live on at once. TikTok and today for the first time, Instagram, X, LinkedIn, Facebook, Twitch, YouTube.

I think that's it. That's it. That's everything. But that's pretty much everything that they'll allow us to go out on. Maybe an Alibaba platform or one from China. Maybe you can get on there. Yeah. We might get blacklisted, though.

Yeah, we chat, I think is what it is. Yeah. Yeah. Pretty sure we'll get blacklisted by the CCP, but, you know, worth a try. Maybe not. I don't know. I mean, like they, I feel like they have, I don't know, they, they, as long as it's not, I think we talk pretty objectively about everything.

So, but we might not make it past the great firewall of China. And I guess we both have kids in the house today. So if you do hear some screaming, crying, we do apologize. We have some on each end here. Everybody's kids are homesick right now. It's a Canadian tradition. Yeah. All right.

What are we talking about today? Yeah. Yes. I know we've been texting quite a bit about oil prices and contraction in the economy. Obviously, a lot of talk about recession. We've touched on the topic a couple times, I think, in the live stream. But I found an interesting study. I know you found some interesting posts and some readings on that.

too. Aside from that, we'll be talking about the U.S. CPI, PPI. I think some really interesting data that came out. We talked a little bit, Dan and I, Dan and I on the show earlier this week, just the CPI, just to get a quick idea of what it might look for Canada when it's released next week. But with PPI coming out too, with a strong correlation of things to come in the past, a PPI versus CPI. So that will potentially show us what's going to happen. We'll talk a little bit. too about the semiconductors and the parabolic rise almost that we've seen in the semiconductor stocks in the market overall. And then aside from that, I think there is also the announcement or I guess rumors of announcement

for a potential agreement, but still some stuff that needs to be sorted out between the federal government and the Alberta government for pipeline from Alberta to the West Coast. and am I missing anything? No, I think you're good. I think that's it. Oh, the selling of the ports, which is kind of speculation, but there's a article out on it. So we'll talk a little bit about the alleged selling of the ports, which, you know,

it's funny. Like, I feel like we talk about this a lot, but like the people, the cognitive dissonance and like people in different, from different political spheres of like, you know, people who are liberal and, you know, small ill liberal before were like anti- privatization of everything are now like, oh, yeah, it's fine. And people who are conservative are now like, oh, when are we, you know, we're selling off the whole country. It's like, wait, like, do you, do you know what your, what your political views are? So this part's been, been funny for me to observe. Yeah, and I don't know about you, but I've been, I've had people lay, try to label me like conservative or on more one side.

Oh, yeah, I get it all the same. And I, I really view myself and knowing you enough, I think we're both, I think we classify ourselves more as independent, right? Like, I don't think we belong to, to, any really sphere, we're probably a bit more center and we try to judge as best as we can on what the actual government and power is doing, not, you know, our political affiliation, but for us, it's not an issue. I think we're more independent. Yeah. My view on this, like, the politics stuff is, is pretty simple. It's like, I actually just think, like, trying to categorize all of it is like just inherently kind of stupid, to be honest. I think that like, But if we're like not looking at things objectively, especially from like an economic lens,

like I think that the economy as like a system is the most democratic system that we have. It's far better than voting. People can allocate capital based on their, you know, what they value. They communicate their values in the way that they spend their money, right? People vote with their dollars on a near constant basis. And so I think that politicians want to sort us into groups of people and we fall in line. by doing that, by, you know, saying that we're X group or Y group or this part of the political spectrum or the other part of the political spectrum. And I think that it's an exercise and divisiveness,

which makes us easier to lobby or sorry, rally to vote for a certain thing, makes us easier to control. It makes us easier or makes us less likely to stage a revolution if we're busy fighting one another rather than fighting them or observing like the class war that's happening. you know, they're telling us it's like a left and right or a identity this or whatever it is, you know, ESG versus like fossil fuels. Like they, you know, cut everything up into all these different categories. But the truth is like they're just kind of breaking you up into different groups so that you can, you are ignoring the fact that like disparity is the highest it's ever been.

And, you know, usually when disparity runs this hot, you end up with like a political revolution, right? So I don't know if we'll see that because I think that, bread and circuses. We have like supercharged bread and circuses now with like social media dopamine constant like dopamine feeds and AI. But it's an interesting thing. But also it seems like there's a lot of the this divisiveness on sometimes like stuff that not that it doesn't matter, but it's not in the grand scheme of things.

It's not really important. Right. Like I think a lot of people that would have been extremely pro ESG right now are coming to the realization that if you're. your energy costs are soaring or you're having trouble putting food on the table, those ESG concerns kind of take, you know, they go on the back burner,

right? If you're having trouble living and feeding your family, I think your focus shifts from that to self-preservation and surviving, right? I think a lot of people are probably realizing that. And I think it's also a reflection of the economy we're seeing. I mean, I think it doesn't take a genius to see that we're living in a occasion. shape economy right now. Middle class is shrinking. And then you have the top of the K that are

spending, keeping the economy afloat, at least on the consumer perspective, and the bottom are having trouble making ends meet. And then especially if we start seeing some more inflation, it's going to be yeah, even more difficult for those at the bottom of the K. Yeah. Yeah, it's funny. Like I feel like I I was talking about, and Nick and I, like, talked about this a lot on the, on, on, on our show in the past, but the case shaped recovery, like, we, we've sort of been been beating that drum for, I want to say, like, years now. And now it just seems to be a very, very popular choice of language around what's happening in the economy right now. The, you know, the thing that you mentioned, like, about shifting priorities, Angus Reed put out this survey, which would probably be a typically left-leaning, I guess, data house. But now, like, you know, what you just described, Like it's very clear how quickly this has shifted, right? So you go back to 2021 and Canadians prioritized environmental protection, which you can see here at 63% over economic growth. And now 61, it's literally flipped almost completely where 61% prioritize economic growth over environmental protection. So you've seen this shift.

And, you know, I agree with what you're saying. Like it's very easy for us to sort of like invent problems when we don't have any real problems. like or find enemies to, humans want to struggle, right? So it's just, I think it's just like an inherent part of like what makes us feel like alive that, you know, that we want something to like sort of allocate the experience of suffering that we feel of just like human existence. And if we, if our economy's strong and we're all wealthy and nobody's really like feeling stressed or having a hard time just getting by, it's easy to just be like, oh, well, you know, the environment is, is our war, is our great war right now. It's our purpose. Yeah.

Finding a purpose. That's essentially what it is, right? Yeah. And but now we actually have real problems. And so people are like, well, maybe we, you know, now we prioritize the real problems, which are things like economic growth and not to not to say that any of those other things are less pertinent problems, but we have to actually face head on that those things just tend to go away and not be as, as important to us as a result, right? So I just find that that shift and this chart documents it exceptionally well, this shift is, is a, incredibly fascinating from my perspective. There is an old saying in investing. It's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom. They're the ones who spend the most time in the market. I've been a quest trade user for over five years, and the reason I stick with them is that they remove the friction of regular investing. With no commissions on stock and ETF trades, you don't. have to wait until you have thousands of dollars saved up to make a move. You can contribute

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I'm paying attention to stocks again. You know, I'm getting some positions. I'm making some trades. It's probably a good top indicator for everybody if anyone's looking for one. You've been, yeah, texting me more about certain trades. I can know. Yeah. Yeah.

So I'm just, this is what we're referring to. So like I said, there was a Wall Street Journal article. I think you said what the financial post had won two or the Toronto Star. Yeah. I don't know what the one was that, um, that you and I were, uh, I think I think he won in, yeah, Toronto Star, but if Wall Street Journal is covering it, I mean, it's an even more credible thing as well, I think, right? Yeah, and my understanding, I mean, I still haven't seen the announcement today, but I guess

we're recording the still morning in Alberta, so maybe it'll come later today. But apparently based on this, and I think the article you read too is they, they're supposed to announce some kind of an agreement with some carbon capture in place, but that would also bring and some federal support for the pipeline going from Alberta to the West Coast. I think there's still some conditions based on what I read where there would have to be private sector that would be involved in the project, I guess leading the project, and the federal government would act a bit more as a backer from what I've read again. We don't know until the actual announcement is made.

I don't think it's anything finalized, but the Alberta would kind of give in on the carbon capture side, and then the federal government would provide. some support for the pipeline, which of course hasn't been really there in the past, at least under the previous liberal government. Yeah. So what are your thoughts on this? Like I know, you know, where oil is right now, it feels very economically compelling for Canada to play a bigger role in the oil markets and oil trade.

But like, is this and is it like I'm all for diversifying Canada's economy. You know, we need to do this. We need to get economic growth. that is outside of us being dependent on residential investment, banking sectors, like sectors that you just shouldn't, your economy shouldn't be, if you have the most or second most resources in the world and you're, and you share a border with the largest economy on earth or second largest depending on the metric, you know, we should probably be doing a better job at, at like being producers, right? Extracting.

resources. So, so like I think this is a step in a positive direction. I guess my, my question for you is, is it actually an economically viable trade, you know, with the way that Canada's oil market is, is kind of structured. I mean, to me, I think it makes a whole lot of sense, especially with what we're seeing right now in the Middle East. If we need a wake up call, I think we are seeing it right now where we can really leverage our situation if we can get that oil out to the coasts with an S, not just. the west coast, but I think the bigger project will also be from west to east. And it's something I talk where actually it's going to be released on Monday, but I think the west to east is extremely important because a lot of people think about Canada as an export of energy. But the reality is that, yes, we are on the aggregate, but out east, Ontario, Quebec, Maritimes, we actually import some oil because we just don't have the infrastructure to get it from west to east. And if you want to have some energy independence and from a national security

perspective, I think you have to start thinking very seriously about having that kind of infrastructure. So pipeline from west to east, of course, people will say you can still carry some by rail. And that's true. But we saw the Lacmegancic explosion. I can't remember. when it was 15, 20 years ago, that I think has turned off a lot of people, especially in Quebec, in terms of having oil transport on trains, but it is feasible, but it's more on the margins. If you really want the volume, you need a pipeline. And I think from an energy security perspective, I think that's the other project.

That's probably, to me, the elephant in the room. Like if there is a time to get that project going and support, I think right now is the time. Because do you want to be like Australia or India? We saw Modi that actually was. Crazy. Yeah, telling people, telling Indian is an Indian population that they have to start taking more public transportation, carpool if they can, reduce their usage of gasoline. I mean, India is a major country in the world. And they're starting to see the impacts.

Do we want to have that same kind of situation in Canada? when we really shouldn't, we have the natural resources. We just need the infrastructure here. Yeah. I guess that actually, it's crazy. I feel like the countries that, you know, like that aren't wealthy, probably stand to fall into a lot more trouble as a result of this oil price issue right now, right? Like, you know, India being a good example, even China, you know, a lot of the, a lot of the east.

I mean, everybody's going to feel it, but I think they're going to, they're really going to melt down a lot quicker from an oil price shock than Canada or the US where we have the we have domestic production capacity. We have reserves, et cetera. Yeah. Yeah. And I mean, obviously the project is from, you know, to the West Coast. But the other argument from West to East is we want your, this government is clearly trying to, you know, get even closer to their European Union and European countries. Well, if we want to be able to support them in the future and give them in next. another way to acquire oil outside of the U.S. and the Middle East or even Russia, why having that west-to-east pipeline would be a pretty big step in that direction.

Don't get me wrong, this would be a massive project. There'd have to be federal guarantees. They'd have to negotiate with indigenous people, the various provinces, because you're going through a bunch of different provinces here. It would be major, probably a consortium that they'd have to do. But I think if there's any time that you have to start thinking about these big projects, I think that's now is the time. And of course, you try to do it as, you know, in concert as much without to minimize the environmental impact.

But if you start thinking on the grander scheme of things, what China is doing, like, they don't care. They're just going for energy, whatever it is, right? Whether it's coal, whether it's solar, whether it's nuclear, you name it. They don't really care where it's coming from. They just want to be as independent as possible for energy. So that's why, yes, there are some environmental concerns, but you have to think about, I think, the planet in the grander scheme of things. Well, I think China also has been, like, crushing it on renewables, right?

Like, they don't want it. Like, yeah, there's consequences, but they also have, like, one of the second largest populace on Earth. They have the highest energy demand on Earth. Like, yeah, they're going to use a lot of coal as it stands right now, but it's not like they're planning to do that indefinitely. by the way it looks at least. And there's a couple of charts I had on it. I'll try and pull them up.

I wasn't really prepared for that, but I'll go, I'll go find them while you're chatting. But basically like, I think, you know, it seems like from my perspective that China is, like they saw this early. They, and they just started producing like an insane amount of electricity. And I think if you go to like the US, the US is kind of ironic. Well, they saw their vulnerability early, right? Yeah.

So they saw that they could be vulnerable from there. And they, yeah. And they also build. some massive oil reserves too. Yeah. Yeah. And I think, you know, the U.S. and Canada are like much of the Anglosphere.

It looks like, you know, we have just have so much red tape and like nimbias. Like you're seeing it with the data centers right now, right? Like, you know, I have like Bernie Sanders and AOC saying like we're, they're trying to completely stop data centers and people are showing up at public hearings, you know, about data centers with, you know, protesting and all of that stuff. And it's like we, we, you. how can you have economic growth when everything takes so much time and energy and you have to like kind of meet all the needs of all of these different groups of people? China, I think like that's where

authoritarianism really shines. They're just like, we're just going to do it. We don't have to ask anybody. Come to the meeting if you want. We're not going to listen, you know? So yeah, it's interesting in that regard. But sustainable energy in the U.S. or renewable energy in the U.S., like Texas, which is, you know, what you wouldn't expect, Texas is actually the biggest biggest producer of wind and solar right now. And it's because they can just get stuff done, right? They don't, they don't like, if they want to build a solar farm, they just do it. They don't, it's not like in California and most of the West Coast who likes to talk about this stuff and virtual, virtual signal about it.

They have so many layers of red tape wrapped around everything that they actually can't, can't really produce results, which is, is ironic. I don't know if you, did you see that that post on, on Twitter about how Texas is kind of like leading the charge on that in the U.S.? Yeah, I saw that. Yeah. Yeah, free market. They're, they're big on that.

I can't say I disagree. I used to be very reluctant about Texas when I was younger, but the more I learned about it, the more. There more there is to like, but talking about the oil shock a little bit because obviously we're talking about the pipeline. So we've been talking quite a bit about, you know, is it going to drive a recession in Canada? Can you want to go over about a few things that you actually found about that? Yeah. So let's start with like the like why this matters.

So I think that, you know, you have a, you have to observe like a sort of range of potential outcomes. And the range of potential outcomes from my perspective is. I think I started at like you hear a lot of people talk about stagflation, but I feel like that's not like a really credible argument because the economy is growing. Like, and it and it doesn't really show like that it would stop because most of the projects don't depend heavily on on fuel that, you know, that are growing like your data center capax or, you know, a lot of these large projects like we're talking about in Canada. I would just increase the costs. It'll increase the cost. Yeah, we increase the cost. But that's just more more money spent by the government that ends up in private savings, right?

So, you know, the classic MMT argument. So there's, let's say, okay, so in the middle is kind of stagflation. So you get no economic growth. You get inflation. To the upside, you would have inflation plus economic growth. And then to the downside, you would have deflation or disinflation as a result of an oil price shock where it causes demand destruction. People can't afford to buy things to stop buying things. And then you would get a recession.

I'm of the opinion that we'll probably end up with like either the upside or the downside scenario. I think stagflation like, I don't know. Do you think that is possible? Like I feel like maybe a short like very very short period of time, but not like a long term stagflationary economy. Yeah, I feel like I don't yeah, it's kind of hard to say. I think it might vary depending on the country too, right? I think that'll that might vary like comparing the US to Canada. If I had to probably guess because what I come back to is that case shape economy, right?

So I always think that the top of the K will probably just brush this off. And for them, it's, you know, just things they continue to spend. It's not a problem. Where I do wonder the impact of higher oil prices, higher gas prices, and energy prices, which will ripple through a whole lot. You know, there's second order effects if you just think about the food and we're not even talking about fertilizers just yet. I do wonder, yeah, like that demand destruction, how big it will be. be on that bottom of the K and what kind of impact it will have. It just, yeah, I kind of flip

flop because of there's, there's some consumers that will have no problem absorbing this shock and just continue because they own assets, because they're, you know, they've, they own good jobs, they have savings. It's not going to be an issue. But I really do wonder like how it's going to weigh and is there going to be more weighting in the top of the K? And then the economy just keeps growing. There's some inflation. Maybe it picks up a little bit levels off. Or do we really see that demand destruction of the lower part of the K, which is the majority of the of people really start pulling down the economy and then you see a lot of demand destruction happening from there. Yeah. Yeah, I feel like it's it's kind of more of it ends up being

a disparity question. Like does the does the top end of the K like wealthy people don't spend disproportionately more because like you know, they don't consume like a million. A million. times more food than the average person or a million times more couches or houses or whatever, you know, rent than the average person because they have a million times more money. So on the consumption-based economy, which I think is like, it's greater than 50% of the U.S. economy. It's two-thirds. Yeah.

It's 26%. Yeah. So, you know, like if you're, if you're counting on disparity to drive economic growth, it's not a really a sustainable model, right? I'm not saying it's good, but I just, I do wonder, you know, not that their spending would necessarily increase, but it would just continue chugging along, right? They wouldn't really see the impact. I just don't know if that will outweigh, you know, it's almost like market cap weighted when you're talking about the SMP 500. If you look at the SMP 500, you compare into the equal weighted. It's like two different worlds.

Yeah. Like you see how the strong are lifting everything else. and doesn't mean that the index is up, I don't know how much it's up so far this year, maybe like 10, 10, 12%. Does it mean that the overall index is doing well? Just means that the top dogs are pulling, pulling their weight and then some.

Yeah. So, but like how does that translate to the consumer? Because that can't be true for at people spending money. I don't think. I could be wrong, but I don't, I think it's like it doesn't. Yeah. But I think it'll,

a lot of it, you know, and I think we're getting there, but a lot of it will have to do how central banks respond, right? So I think, I don't know if you saw the paper I found by the San Francisco Fed, so they did a study back in 2023. And what the TLDR is that they found that the contractionary pressures from oil spikes are actually, you know, a lot of the contraction is due to how central banks will respond. So if rates are already high and banks don't do anything in terms of rate, they leave them there, it's likely to be more negative. If rates are near zero and they define that as 0.5% or less, then it could actually be expansionary when you have increased in oil prices because what happens is inflation expectations actually increase. So if you have extremely low

rates and they're near zero, they're not changing, but inflation expectations are going up. You're essentially saying that you're spread between the rates you're getting and inflation are expanding, so the real rates are actually going much lower. So you can have some additional economic activity because of that, but they also found that if central banks start hiking to tame inflation, if that's their main goal, that's when you can really start getting into some pretty, not severe, but some contraction in the economy. So their findings was that it's most likely a lot of it will depend on how central banks react. However, one caveat of this study is that a lot of it was centered around Japan because they had near zero rates for so long. So they did a lot of the studies around there. They use other countries as well because we've seen near zero rates for periods of time in the last couple decades in Canada, Europe as well, even the U.S. but they also measured when they saw price increases from oil about like oil increasing more than 10%.

So whether that applies right now or not, we'll have to see because the increase is much greater than 10%. And it could be greater than that if it doesn't get resolved in the Middle East anytime soon. And then you, the longer it lasts, the more of an impact you can also have on growth. So there's there's all these different things. Of course, the study was 2023. So they studied the information that they had. But it is interesting that they found that a lot of the, the impact of those rises have to do with what central banks do. Yeah.

So what do you, what do you see happening then in regards to like if I'm, I guess it's not Powell anymore? No. Well, you know, like I don't see, I don't see anyone hiking, right? Like, you know, and I think I've, I've pulled up like the chart about the bond market. being wrong all the time, right? Like, or Fed Fund futures being wrong all the time. So, you know, if the market, obviously, like, it makes sense that the market is pricing rates to go up as it stands.

But the, like, because it has to use inputs that it can't, you can't just invent inputs or, like, make assumptions based on like that until we know that an oil price spike is going to cause demand destruction, it would be irresponsible to assume that it's going to cause demand destruction. So all we know right now is that it's materializing in inflation. And clearly in the U.S. with what's happening, you know, I mean, we discuss PPI, which we should actually probably talk about as a leading indicator on CPI. But, you know, inflation is what, 3.8?

Yeah. And so it's obviously materializing in inflation in both the U.S. and Canada is a little bit slower. Baskets a little bit more creative. But it's like consumers can feel it. That, you know, you would assume inflation means rates go up or at least stay higher for longer. but rates don't really change. They can't stop the war in Iran, right? So the Fed can't hike away that.

So I don't see the Fed actually trying to respond because monetary policy is not really a tool that is going to do anything about this type of inflation. If they're concerned that the economy is running too hot, which it doesn't really seem to be, but if they're concerned that the economy is running too hot and that's fueling further inflation and the inflationary costs are getting absorbed too well by the consumer or by businesses or anything. else in the economy. Yeah, like, they might do that. But I don't, I don't have any reason to believe that they would. So, like, hikes feel like an unlikely, a very unlikely scenario here, right? Like, but based on this study, just the fact that if they do nothing, that could also have a perverse impact, right? So they, they definitely looked at it when it was near zero rates. I'm not

advocating that they should get the rates near zero, but even not doing anything could start slowing down the economy just because rates are probably a bit like, like it's hard to say where rates should be if we're being really honest here, but you can probably argue that the rates are already quite elevated in terms comparing to the economy, the economic growth we're seeing. Right. Yeah, I would agree with that. But that doesn't give them a runway to cut yet. Like they're going to have to wait for some negative economic data before they, before they have like sort of the market's permission. Which is lagging, right? So they, you know, that's been the issue with central banks with Powell and McLem. I mean, the reason why they hide from what like 0.25 to 5%

within what like six months was it? Roughly. Yeah. Yeah, six month period. There's a reason they hike so quickly because they were behind the ball. Turned out inflation wasn't transitory. Yeah, exactly. Who would have thought that, you know, two years of helicopter money and record low interest rates would result in entrenched inflation. Yeah, that's it. And for anyone listening, I do encourage you. So we were referencing PPI. So that one came in year over year. And this is the final demand PPI. So there's different, that's the headline one, but they have intermediate demand. So it just depends how far into the producer chain you are. But for the most part, the final demand PPI is the one that's referenced here. And it was up 6% year over year. It's the largest monthly increase on a year

year basis since 2022. Yeah. So I think it was December of 2022, the last increase to that on a month. And that was when PPI was actually trending down. So it had peaked around, I think, 11% and was starting to trend down. Yeah. And basically, if you pull up a CPI, pull forward CPI by two to three months, you get like basically keep up. So, so it's pretty clear what's going to happen here, I think.

Like unless, and so if I think like our. original conversation on this discussion was this is like a near immediate massive spike in inflation. So, you know, within the next two or three months, you end up with CPI that's at like four, five, six. Yeah. It's not one to one, right? Like yeah, people need to realize it's not one for one, but there is a correlation. So there's a strong correlation between the two. And there's limitations to it, PPI versus, for example, services, right?

some services will have a lot less, especially if we think a lot of this has to do with higher energy prices. Well, depending on the kind of services, some may be very impacted by higher energy prices where others will have very little impact from energy prices. So you have to keep that in mind. But for the most part, you pull a table and you have that graphic, like you pull a table side by side, month by month, PPI and CPI. And it's pretty crazy.

You literally just look at PPI and then look a few months like ahead after that and you start seeing CPI going up. Yeah, it's it's a scary setup. I understand why folks are concerned about this. So then if we end up with a CPI that jumps up, you know, if it follows the correlation, like there are periods where it breaks, right? If you look at like 2010 here, you can see like the correlation breaks a little bit. there's some spreads, increases in spreads, but like, you know, the correlation's less strong enough that it's worth observing. Yeah.

If the correlation holds CPI is at whatever, four or six percent, four to six percent range, like this is going, that is not a good setup, right? Like, this means that people are going to be experiencing serious financial stress. Yeah. Yeah, exactly. I mean, how much flexibility do a lot of people have right now? Like, it's... None. Like, this is the thing, like, at least in Canada. So, but the challenge is that in the U.S.,

so let's, let's actually like dive in on this one, because in Canada, like, the consumer's been tapped out for years. Like, you know, we, there was a period where we were de-leveraging a little bit, you know, coming out of like kind of that rate hiking cycle, people started to shore up some equity and pay off some debt because capital costs were killing them. And then we started levering up again. And now you're seeing people piling on credit card debt. Credit card debts are rising. U.S. is the same thing. But, I think that the U.S. consumer has a little bit more runway to absorb this than the Canadian consumer. Like, Canadians are, and that's just based on what I would say about, like, household indebtedness.

I'll find that the charts that I'm referencing and pull them up. But the, you know, we can't cut too much before the Fed, I think. So, like, we kind of are forced to follow whatever the U.S. Fed does. And there's nothing that tells me that they're going to cut anytime soon. I think the data will change over the next couple of months. but as it stands right now, like they're not going to cut into into four or five percent,

you know, until they start seeing job losses and, and any kind of recessionary indicators, GDP contraction, whatever it is, right? Yeah. No, yeah, it's hard to disagree with that. And I was trying to find some data on the amount of people that are living paycheck to paycheck,

but it's still pretty high. I'll pull up the Canada one, yeah. Yeah, the Canada one. Yeah. Yeah. And then you have to factor in for the U.S. I don't, I know, Dave, the repayments for student loans restarted, but I think there's some deadlines coming up where people will soon be forced to restart the payments. I think those are coming up soon.

I remember reading that somewhere. So that could be a pressure point for the U.S. I'm just going based on memory here. I don't have anything in front of me, but a lot of people have student loans in the U.S. and, you know, potentially some student loans that will be difficult to pay, especially if there started being some job losses. But what we're seeing at the very least, it's It seems like people who have a job are keeping it for the most part. The hiring, there's not too much hiring happening, but if you have a job, you're okay. So I guess that's the saving grace, right? Like for now at least.

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Sign up for your $1 per month trial today at Shopify.ca. Go to Shopify.ca. That's Shopify.ca. Cheching. Well, the other thing is like the U.S. mortgage insurance system is paying like hundreds or like millions of dollars in delinquent loans every month as well, which like stopped being talked about because people were using it kind of as like a criticism of the Biden administration during that. But it was actually, it was a Trump COVID era policy where it started and it just

kind of ended up lagging. But like none of that's been unwound. Like that. So there's that. There's there's there's student loans in, you know, in Canada. This is the interesting part on this chart to me with Canada is like you can just see like Canada when everybody else, well, the UK and the US obviously started to de-lever after 08 and Canada just like just started piling on debt. And, you know, we like I was, I was feeling optimistic when I started to see this downleg here on Canadians de-levering heading out of the rate hiking cycle. But then we started to increase our debt to disposable income. And it makes me fearful.

Like we, we cannot weather an economic shock nearly as well as the US. So like Canadians, you know, the best case outcome for Canada is that we, the sooner that we see a global recession that gives us more runway to to cut, but without destroying the currency and importing inflation is, I mean, it sucks to have to say that that's like the outcome that you're cheering for because that's obviously not a good outcome for anybody. But I mean, that's probably the only thing that could really save us from like a big mess right now, I would say, personally. I don't know. I mean, not to be too, like, too bearish about it, obviously. But that just feels like that's the, that's the reality that we're faced with right now. Yeah. Yeah.

I mean, it's, it's kind of weird watching markets. I'll be honest right now. There's just a lot of stuff where, you know, a lot of it comes back to the energy shock or the oil shock that we're seeing in the Middle East. It does seem like you're on one hand, obviously following more the stock market, but you're seeing almost people fully brushing it off, right? People were concerned when it started in March and then we were texting about this like semiconductor. So chip stocks have just been on an absolute tear, just driving up the stock market. And it's probably helping, honestly, keeping the economy up because of the wealth effect. So if you have those are holding assets, obviously it's not the majority. It's a minority of people who hold

the majority of assets. But if those people feel wealthy, they'll keep spending and prop up the economy. So I do wonder what would happen if we got a sharp market correction and how I know the stock market is not the economy, but because we're so consumer driven, two thirds of spending comes from consumers, at some point you have to think that a sharp market correction would have would have ripple effects in the economy and force some of those bigger spenders to actually potentially start cutting back on their spending. Yeah, like I can't I can't imagine a world where that doesn't take place, right? Like there's there's like what what circumstances under which can this perpetuate forever?

I guess like if the printer just keeps running, right? Like if they're just, if they're, if they're if money supply, like that's really the, but that that would just feel more inflation, no? Yeah, you think so. Yeah. So I'm just showing, yeah, the Philadelphia semiconductor index. So stocks for those not familiar with it, it's just been on an absolute tear. The kind of stuff we haven't seen really since the dot-com bubble.

So in the past year, that's up 137%. Past month, it's up 27% alone. Six months, 71%. And then if you start looking here, so SMHDF, that's an interesting one to look at too. So this one is, you know, just think about your favorite chip stocks. They're all in there with the largest ones being more heavily weighted in that ETF. And yeah, over the last three months, it's up 41%. Same kind of thing in the high 20s for the last month.

And then you're looking at names here in Nvidia, 16% of it. of the index, TSM, 9%, Intel, surprisingly, 8.5%. That's probably the most concerning one here, if for me is Intel. Because Intel, for those are not aware, is actually still losing money. Obviously, it went through some big restructuration, but there you go. Here, like this is absolutely insane. Like, if you're listening to this, it's essentially like parabolic, what you've seen from Intel since the end of March.

Like this stock. That's when Trump bought it, isn't it? Like it also doesn't help that like that. No, he was just on TV like telling people what stocks to buy all the time to. No, I think, well, the, the US government got a position in Intel.

I think it was last year, late last year in the fall. So they got a stake in Intel, but they're still losing money. And now they're just trading at an insane valuation. I mean, it's 543.3. billion in market cap. And that's, that to me is a good indicator that there's a lot of fraud

in there. But on the other hand, you have just these companies that are spending absolute crazy amounts in capital expenditure for a lot of it going to those semiconductors. So I'm showing here the CAPEX, so capital expenditure, spent by Google, meta, Microsoft, Amazon, and Oracle. So a lot of the big names building those data centers and the hyper scalers. And I put the projection of CAPEX spending for 2026. And this is not super accurate because if you listen to the conference calls, it seems like every quarter they're adjusting their guidance up in terms of CAPEX spending. But roughly you can kind of ballpark so far this year. The estimates is that they'll spend about 750 billion, just these five companies.

Yeah, so think about that for a second. So yes, maybe semiconductors, stocks have gone up too quickly, too fast. But then on the other end, you have these companies that a lot of them are just doing it with just profits, free cash flow, right? With their own cash flow that they produce and they're still producing free cash flow. And they're still spending these crazy amounts issuing debt at low rates with the exception of Oracle. But that would be the other probably side of the argument that there could still be. room to run here. But it's also probably an explanation why the economy is doing okay right now because you have, I mean, the sheer size of the numbers I just said, it's going to have at least

a short-term ripple effect in the economy to the upside. Yeah, like this is, it's economic growth, right? Like this, of course it will. It's just that it won't be like, I don't they're concentrated. This is the challenge. But I mean like same thing as pipelines. Like any of these massive infrastructure projects, which is what these are and Canada saw this with housing during the, you know, during the pandemic. Like they all have, they produce positive economic growth. It's just not necessarily. It's localized and it could and fortunately or unfortunately it ends up getting concentrated into the hands of very few. And so it doesn't, who knows if it'll end up distributing properly to. grow the economy, right? Like broadly. And I don't know. Like I guess the other question when you're talking about AI is like if we end up getting all of this compute, AI keeps improving, making workflows better.

Obviously a huge head win for jobs like for entry level labor. But it's also a massive tailwind for productivity. Like I think Stack can put out a report saying 18 plus percent, but there's an 18 plus percent improvement in productivity from firms adopting AI in Canada. you know, like we do this stuff. We build AI tools for real estate professionals. Like that's the business that I'm at. Like that's what we do, right?

Like that is really our primary function. We monetize that as a real estate brokerage or as a SaaS company. But like that's like we're a tech company that builds those tools for real estate professionals. The amount of like stuff that can be automated away from these like simple mundane like dragging paperwork from one place to another, you know, the like. And that's like 80, 90% of like, what work is right now, like for most people. So if in like two, like AI is the worst that it's ever going to be right now. You know?

Yeah. Like so it's, and also just an easy example, who would hire research assistant right now? Yeah. I know it's funny because like, you know, I'll talk to rooms full of realtors and they're all like, oh,

I'll talk about like what, what's like a hedge against this. And they're like, oh, like, you know, better like critical thinking skills or like better analysis. I'm like, no, like I'm not. like I'm not protected. Like I'm the least protected real estate professional in this industry right now because I'm, I have very low EQ.

Like I'm not an exceptionally good, like emotional person, you know. And people who can build strong relationships and understand their customers' needs and meet them are the ones who are going to be successful in any business, right? Sales will be a very defensible skill. Personal brand will be a very defensible skill. That's why you and I do this stuff. Or at least I is one of the reasons that I do, right? Yeah. Analysis, aggregating data, doing like what would.

a lot of what we do right now is actually not really a defensible skill at all. Like one of the top ranked, it would be interesting to see how this plays out because, you know, they talk about economic analysis being like this like skill that AI should be able to do very well. But so maybe it maybe it solves this solves the economy. But if you're like analytical professions, I definitely have a short shelf life in a current economy. Yeah. Well, the yeah, the most difficult thing about economic analysis is just human behavior, right? You can, it's, you can look at past, at the past, you can look historically, but you're, yeah, the, you know, history often rhymes, I think is the saying, but it often rhymes, but there's a reason why it's not exactly the same, right? So you have,

you have different variables that are in place, you might have others that are very similar to the past, and then trying to make projections based on that. I mean, we, you say, send me a really good post about why oil isn't trading much higher. A lot of oil analysts and I've listened to some really sharp ones. I've been surprised, man. Yeah. That's why I've been like why. A lot of oil analysts.

Yeah. Would have thought it would have been probably closer to $150, $200 a barrel at this point if the straight was still close to and a half months into this conflict. And it's hovering around $100. And these are some of the smartest people. when it comes to that, right? They dedicate their life to analyzing the oil markets. And I was listening to quite a few. And the arguments they were making made the whole lot of sense. But then this post also, you know, brought up some good points. Some I had already seen before. But you have, you know,

when you have traders that are potentially going along, they might also start seeing the Truder in chief, Donald Trump. You know, they know he's unpredictable. They know that. any post could impact the markets, so they start not being as long on oil, maybe hedge it, maybe do it for a shorter period of times. And we've seen Trump with this post impact the price of oil. I mean, we've seen a drop from 120 roughly to like 195 by saying that there was a peace deal in place or truce or whatever word of the day he's using or a ceasefire. And how much it's impacted. That could have been one of the things. There's also what's publicly available. or I guess what was what were they using kind of the known oil reserves versus the unknown

ones that could have an impact on that too so there's my point being is that there's all different kind of factors that too many factors man too many factors exactly that we may not have seen when this all started and that we may be brushed off to the side a little bit too much and trying to make some price predictions that would have been significantly higher, but not taking to the count those potential other factors. And that's why it's so difficult to predict. Like, I don't think AI would have been able to predict that. And I don't know if it will be able to predict that two, three, four, five years down the line. Yeah. I like, you're right. Yeah, you're absolutely right. It's a good point. We had a couple of questions here. So I want to get to,

to them to be thankful for all of the people who leave us questions in the chat here. So Andre asked, Let me pull this one up here. This was back when we were talking about the people levering back up to you. I think it's lack of discipline as well. I think that for sure, like Canadians have proven that we can not be trusted with credit, right? Like, you know, and cheap debt. I mean, look no further than CMHC, MLI select that has basically turned into like a rental market casino lately. You know, that being said, like I think we do have a really, like we do have bad financial discipline in Canada.

Canadians like to pile on debt. They are not going to deferring gratification. They always want a new car, shiny house, bigger car, bigger house, shinier car, you know, for sure. The status, status is big, right? Yeah. People think that, you know, owning that brand new BMW, Tesla, whatever it is, it'll make I'm happy. And I've seen some good posts.

I think the wolf of all streets, I can remember his name on X. He's pretty big into crypto, but he posted something where he bought his, like I'm sure he's a multimillionaire. he bought his dream car and just to realize that a month in it was just sitting is in garage and he's like yeah probably the dumbest purchase i've ever made i'm looking to sell it now or something like that maybe butching the pose but i think it's just a good indicator that sometimes people just get into that mindset like oh i want to look good i want this thing i want you know these material things and um they just they lag the discipline they just kind of go ahead lever up to buy it

And then, you know, lo and behold, the month later, they're like, wow, now I'm drowning in debt. And I have this thing that I can't even enjoy because it's stressing me out too much to pay for it. Yeah, I think like wealth creation isn't complicated. You know, it's like spend more, spend less money than you make. And if you don't, you know, if you, if you can't do that, then you have to either make more money or spend less money. And then convert savings into assets as quickly as possible, right? Like as the most, as efficiently as you can do that pro.

process, you will be successful. Anything that stands in the way of that is going to be a net negative. Yeah, like, I, it is, I think it is a discipline thing a lot for, for Canadians for sure. We didn't learn during the, during the global financial crisis, because we didn't go through the same economic pain as anybody else. I think we're kind of paying, you know, we're, we're, we're paying for it now, right? Yeah. Yeah, yeah, exactly. There was some on, uh, on Instagram here. And for those of you, I was still watching on Instagram. I apologize, the crops messed up. Yeah. But I'll only have about another. five, ten minutes. I'll have to start looking after my daughter soon. That's okay. Yeah. For the record,

my wife is looking at her right now. She just has somewhere to go in five, ten minutes. Yeah. Yeah, okay. The, okay, so what are our thoughts on selling federal assets to fund nation building projects? So ports, it was the one that was that was kind of proposed in the new article that, uh, that we mentioned today, but also airports were already, airports have already kind of been, been publicly discussed. Look, it, this is like, I, I, I, talked about the cognitive dissonance of this. Like if you, if your politics or economic perspective lean conservative, you should support privatization, right? Like, you can't just hate it because Carney is doing it. That's my like, you know, that's, so that's my take on this. And I would typically

lean towards the private sector doing a better job at a lot of things than the public sector. And so for the most part, I would say I support privatization of a lot of, of a lot of these things. I don't know what your thoughts are on there. Yeah, I think wherever it makes sense, right? Right. I think I've always thought, and that hasn't really changed. I think sometimes the government has to step in for certain infrastructure project because it's just not viable from a private perspective. So if you're thinking, I'm thinking here like a small city airport that would need to, you know, still have an airport that's rarely used. I'm going to say the private sector is not probably not going to want to operate that. And if they do, it'll probably just make, you know, it will not be good for the community. So I think for me, it's more that where I think for the most part I'm in favor of that, where it makes sense and the private sector can run it better than the government. But in other situations, I think the government has to step in more case by case,

but I don't think it's a bad idea to try and sell some of those assets that could be run better by the private sector and use the proceeds to build projects that will create more value for Canada as a whole as a country. So I don't think it's, I don't think it's a bad idea. Yeah. I think the airports is a really interesting one. And port's probably the same thing. Like airports are already privately run. Like people are acting like like something is materially going to change.

The only thing that would change is that the government currently makes money leasing the land that the airports are on to the operators of the airports. You know, most or many airports are already privately run. So it's a real estate play and it's a divestiture of real estate to give it to somebody who probably Like there are there are companies out there that are better at owning real estate than the Canadian government. I promise there are many of them, tons. If they can free up billions of dollars and it's not at the cost of the taxpayer, I don't know, doesn't, doesn't scare me, right?

Like that doesn't bother me too much. As long as that capital is reallocated into productive things. This one I wanted to hear your take on to a US 30 year treasury yield source to 5.12% the highest since the run up the global financial crisis. What's your opinion on this? Somebody asked that. Galen, thank you for the question,

Galen. Yeah, and I mean, even the 10 year, it's up 4.6%. I thought the U.S. government would try to intervene somehow, because it seems like any time this new-

He's proven he can't. No, exactly, because every time we've seen since Trump and Besson have been into power now for what, like a year and a half or so, it seems like the threshold has been like four and a half percent

for the 10-year. the 30 year is getting up there in 5.12%. I mean, could be different things. Look, the amount of debt the U.S. government's taking on is not decreasing. If anything, it's accelerating. It could also be the bond markets realizing that this Middle East conflict may require the U.S. to spend even more. Exactly. Yeah. So they're just basically like, oh, that's going to be a big demand for bonds. Let's just let's just go around. Yeah. Yeah, there's going to be more supply of bonds. And then clearly, if you have more supply, demand kind of remains stable or doesn't keep up with supply. Clearly, you have this kind of, I mean, I didn't even realize.

I looked at it. I think yesterday was like 4.5. Yeah. No, yeah, I jumped up. Am I crazy? It just feels like I was pretty surprised to see almost 4.6%. I mean, to me, it would, it might just be the market. Yeah.

Just a supply and demand imbalance and the market becoming extremely like increasingly nervous. about the state of the U.S. finances in general. I mean, now they have to pay back a bunch of tariffs, right? After the tariff revenues after the Supreme Court, not that it's probably a drop in the buck in the grander scheme of things, but at some point these things add up, right? They have these tax refunds too coming out. Like at some point you've got to get more money coming in.

They have all these unfunded liabilities with Social Security that will just keep getting worse and worse. no political will to make any radical changes to that. Like, it's not looking good. Nobody wants to spend, there's nobody running that wants to spend less money. Like, it's just math. Exactly. If you're, if you're, if you're trading bonds, you're like, I can see that the government

is going to need more money. So I might as well just set my, my yield demand higher, right? Pay less for bonds. Yeah. Like, personally, I would not touch anything more than like a couple years in terms of US, US bills are bonds. Your US treasury is probably the better term to use. So I do have US dollars, but I typically just keep them in US treasury bills.

I mean, it gives me a higher yield than the equivalent in Canada. So can't complain. And I'm fine dealing with the fluctuation interest rates. Yeah. Or in exchange rates, I mean, yeah. All right, man. I will leave it there. I know there's a couple other questions, but they're just kind of comments.

Thanks for Rob. Yeah. the AI Data Center stuff with Kevin O'Leary. I'm going to, we're going to talk more about that. That's why I didn't cover that one here. We're going to do, I think, I think we have Braddon locked in. I don't know. I still waiting to hear from them, but for Toronto Tech, hopefully the 20,

the 29 show, yeah. So we'll talk. I'd rather just get somebody who's like obviously super qualified to talk about the AI stuff is pretty embedded in that space. So, you know, we'll research as much as we can, but we're going to cover that in like its own kind of dedicated episode. Andre as well, thanks for the comments on YouTube there. And yeah, everybody, we're going to keep doing these, I think.

Like they're going really well. TikTok, we had like 180 some likes on it. So that's good. And then Instagram, I'm going to figure out the crop. Oh, that's my goal. That's my, my task for next week. I got to figure out how to crop this thing properly on Instagram. I got to show you how to schedule them too.

There's a way to schedule them and it shows up. So people can actually get reminders in advance. Cool. All right. Yeah, well, thanks a lot of everybody for tuning in. Simone, have a great weekend. Have fun with you to Audre this afternoon. And yeah, we'll see again, see you all again as soon as we can.

Yeah, thanks, everyone. The Canadian Investor podcast should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.