The Canadian Investor - BlackRock Applies for a US Bitcoin ETF

Episode Date: June 22, 2023

In this episode, we discuss the recent SEC application from the world's largest asset manager, BlackRock, for a spot Bitcoin ETF and the historical context around it. We also discuss the recent job cuts from Bell Media and Adobe’s recent earnings.  Symbols of stocks discussed: ADBE, BLK, VEQT, DAL Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  TCI meetup registration Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.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 to the show. Today is June 20th, 2023. My name is Brayden Dennis, as always joined by the brilliant Simon Belanger. Have you ever been to the state of Utah?

Have you ever been to the state of Utah? No, I haven't been. The only place I've been out west is California just for a plane transfer and same thing for BC. Wait, you haven't been to BC other than their layover? No, no. Oh, buddy. The furthest out is Calgary. Yeah, yeah.

Oh, wow. You're like Sam Wise in Lord of the Rings. If I go another step, be the farthest west I ever go. I mean, I've been to Asia, Europe. We just got to take you west. Yeah.

Closer up west. All right. The listeners out west or at least in BC are saying we're going to get you on a flight real soon. We'll do maybe a meetup out there. No, as you can see here on the video for the people on joinTCI.com, I'm packing here. So we're going to close a little bit of place. So we have a good amount of news to get through today. It is a Thursday release, so you know we're talking current events.

Let's kick it off. Usually you go first, but I'll have the first one here today. Bell has cut 1,300 positions, the radio stations, and foreign bureaus in a large restructuring process. So they are shutting down or shutting down on a combination of selling nine radio stations and two foreign bureaus. I don't really know what that means, but this is largely the Bell Media division, right? And they have been making lots of changes to, they have a huge fleet of media branches and a lot of radio that have been slowly been changing over time. And I know someone who's worked at one of them as an anchor. And just so much has changed over that time just in the past couple of years. So this is kind of a long time coming from my kind of inside baseball knowledge of it.

This is kind of a long time coming from my kind of inside baseball knowledge of it. But this plan to adapt entails moving to a single newsroom approach. The company's media branch, quote, can't afford to continue operations of its various brands, such as CTV National News, BNN, CP24, its local TV news stations and radio channels, independently of one another, said Bell chief legal officer and regulatory officer Robert Malcolmson. Okay, so this is confusing to me because the local stations and the news stations, the radio, I get it. I understand. But I'm reading this article on BNN Bloomberg, which is a Bell Media asset. So I'm like, this is so weird reading the front cover of BNN Bloomberg being like, hey, we're getting sold and this is the news. So I thought that was strange. I get the local ones, but CTV,tv bnn cp24 seem like all very large

brands especially in this area yeah they um yeah i was surprised is it the actual bnn like the full brand or is it just like i think they had some bnn specific radio stations too right that is going with it that's included in one of the nine radio stations yeah okay so bnn bloomberg is you know a live program but it's also a huge digital asset i bet you they make more money off the digital asset than than live tv that that's my guess. Probably. Yeah, I mean, in Canada, it's almost the de facto kind of equivalent to a CNNBC, right? That's right. I would say so, yeah. Yeah.

Very interesting. So the layoffs here from Bell Media, not to be said, cuts around 3% of its total workforce. Management positions are also being sloshed by 6%, so more than the total. And yeah, so if this is affecting you, we are here for you. I'm sorry.

If you work at Bell Media in any of these radio divisions and you got affected by this, send us an email. We need help with the podcast. The podcast is growing, and I'm sure you probably have some elite skills that would be very valuable to us. So I didn't plan saying this, but if you have been affected by this and you've been working in radio or at BNN Bloomberg in the media division, there's a good chance you're probably a good fit for this finance podcast. All right, let's head some more. Yeah, and I know one more that has been affected.

I think they used to have a bunch of TSN radio stations. And now I think a while back, they shut down the Vancouver one. I think the Edmonton one was part of this announcement, and now I think they only have Ottawa, Montreal, and Toronto. I think those probably perform quite well. At least Montreal, Toronto. I don't know how well Ottawa performs, but bigger markets. Because Bell Media owns TSN, right? Yeah, exactly. I didn't see that mentioned in this press release.

Yeah, I'm sure that the Edmonton one got slashed too. Oh, okay. Interesting. All right. Anyways, yeah, for those into sports. But on a completely different subject here, so I guess some good news, at least for dividend lovers. Not a Canadian name, but Delta Airlines announced it was restarting its dividend after three years.

The board approved a new quarterly dividend of $0.10 per share at the current price of Delta. That's yielding around 1%. It's important to take note that Delta and other American airlines had stopped their dividends and share buybacks because it was a condition to accept federal financial aid in the U.S. when the pandemic started. And clearly the airlines needed that because volume, as we all know, in 2020 plummeted for airlines. And it hasn't gotten back to the 2019 levels until pretty much right now. So I was reading and it looks like we're back to pre-pandemic levels. So a full, what, like four years at this point?

Three years, I mean, after the pandemic started. And to put things in context as well, so Delta was paying 40 cents per share before the start of the pandemic. So clearly, you know, this is a small step towards that dividend that was pre-pandemic. Not quite there yet. towards that dividend that was pre-pandemic, not quite there yet. It'll be interesting to follow because it sounds like most airlines are very bullish in terms of air traffic in the upcoming years, whereas, you know, depending on where you're looking at from the rest of the economy, predictions are not necessarily as rosy. So it's interesting that they're quite bullish, at least for the medium term in terms of air travel.

There's been an interesting kind of trend, which is experiential spend is back in a major way. Live events and travel for pleasure are booming. We've seen it in the aggregators for accommodations, the Airbnbs, the Expedias, the bookings. And we've also seen it for air travel. And, you know, those two typically go hand in hand. We haven't seen that come back full with business travel yet. But it is fascinating to see in when most people say, you know, we are probably currently in a recession

or, you know, that's their prediction, or we're seeing a lot of economic weakness. And you have something that is completely, purely discretionary spend, like travel for pleasure, just dominating. And I think that that goes to two important things. There is one, a desire for long term for this generation to experience and not acquire things. and number two you were just starved of it for so long for those two years that you just had this like you know built up demand for it so i'm not surprised we're seeing this come out in the

numbers when it comes to airlines fool me once fool me once shame on me. Fool me twice. I messed that up. Fool me once, shame on you. Fool me twice, shame on me. Because I cannot be convinced to own any airline. Got it in my head. It ain't happening. Pull the trigger. It ain't happening.

I will not be owning any of these names. Yeah, and it's just really interesting, though. Like, I think you have two forces. Like you mentioned, people are starved for experiences. But at some point, you know, there's a lot of data coming out that people are still starting to draw more and more on their savings. They're not saving as much. At some point, you know, it feels like those two forces will clash together. And yes, people may prioritize experiences over goods, like we saw during the pandemic. But if people need to cut expenses, you know, that's going to be hit at some point. So I mean, I just find it fascinating because you get like two kind of

forces going at each other. And I'll be it's something I'll just keep an eye on over the next couple of years because it'll be interesting. I have no idea which direction it'll go. I think the airlines should be careful trying to make predictions going too far out in the future. But I guess, you know, they haven't learned from the 2019 predictions, I guess. We need to host a member there in school school like don't do drugs kids dare do you remember that oh we didn't i mean i went uh to school on the quebec side so we didn't we didn't have dare okay well many people will know what i'm talking about um i think it's in the u.s too

like it's like a big thing anyways they go around they bring like a police officer and they like teach you about like don't do drugs, kids, literally. I feel like we need a seminar. Their whole thing is not even once. Not even once is the tagline for starting to do drugs. Investing in airlines, not even once, folks. Don't do it. Save yourself the brain damage, not even once, folks. You know, save yourself the brain damage, not even once folks. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission

free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money.

Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. Hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started.

But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. All right, let's move on to Adobe. Adobe released earnings, and I have a lot of conflicting thoughts, which you'll see. I'm like, I like this, I hate that, I like this, I hate that. So I'll talk a little bit about the results and then long-term more about the business.

So in terms of the results, creative ARR. So when I say ARR, I just mean annual recurring revenue. It's the most important metric of a software as a service business. And Adobe is fully the software as a service cloud business now that sells software and subscription. That pivot they did over the last decade to a pure play subscription business has been a very effective one, a very profitable one, and makes it very sticky to their recurring revenue streams. So creative annual recurring revenue. This is the Adobe Creative Cloud. This is their bread and butter of the business. It increased 7.6%. Document Cloud continues to see really good success at 17.5% in recurring revenue. The digital media business at 9.2%. Total revenue for the quarter at a record 4.82 billion, up 10% year over year. And they bought back 2.7 million shares. So barely double digits, top line growth. And the market's certainly

rewarding it for being that recurring software, sticky revenue streams, which is fair. Last time you and I talked about Adobe stock, the stock was getting crushed. It was the $20 billion acquisition news, the threat of artificial intelligence, increased competition on the web browsers like a Figma, like a Canva, all the bad sentiment and on and on and on. And I said, hey, look, if you want to buy, if you have been wanting to buy Adobe stock, this is your chance. And I will chalk that one up in the win column because it traded at $275 and it is now at $500. That was not that long ago. It's October. It's June. Like, it's not like, you know, it's not that long.

And it makes you realize it trades at around 30X enterprise value to EBITDA today. In 2021, the stock at 690, it was due for a correction. So as soon as this bad news hit, stock dropped like a rock and it should have. It was nearly 50 times ebd and so i tweeted out sell adobe stock because of ai at 275 buy adobe stock because of ai at 500 if you hate it at 275 you're gonna love it at 500 uh so yeah that's uh any any quick thoughts i mean no like it just goes to show that a lot of people tend to invest with the trends and in the next episode we'll look at the td investing index and i actually dug into it so people will want it to and on monday just to see they look at that's one of the things they'll look at sentiment and what direction people are are buying and it's not surprising I mean people get all excited and right now

I don't know it just feels like tech has had in general a bit of a run-up obviously being led by those AI names that we all know whether it's an NVIDIArosoft with open ai even google has done quite well shopify here in canada it just feels like we're getting i don't know about you it feels like we're getting back into that uh a bit of exuberance yeah exactly baby um so i you know it's uh it's not overly surprising i think the market people are seeing it it's's a pendulum, right? So it gets overbought and then oversold and then it kind of goes back and forth and the proper valuation is probably kind of more in the middle. That's right. Yes. And over a long run, what matters here? Is the business better or profitable? Have a better competitive advantage?

The brighter future moving forward? Everything else in the meantime, sentient shifts on price action so much. So just remember that. Like buying the stock in October when it's at its best valuation feels the worst psychologically because that's when there's at its best valuation, feels the worst psychologically. Because that's when there's a bad narrative.

That's why the stock is being sold off. So when you go against the grain and buy the best valuation is when it often feels the worst in your stomach. And that's why it's very important to not invest with emotion. All right. So they're AI products. So they came out with this demo. Did you see any of the demos that they posted?

No, I haven't. Okay. So basically, for those who haven't seen it, for you, they show like a bicyclist, a photo of a bicyclist on the road inside of Photoshop. And then they pull up the AI editor and they say, remove the yellow lines on the road and it'll remove it. And you like, say like, change the color of the sky. It'll do it. Like, or like there's another one they showed where it's like, you type in like extend the bottom of it to show a lake underneath this mountain and it's beautiful and then i saw someone on youtube try those same prompts and it was not as good at all it had to be in a controlled environment i guess yeah it was not like it's not that it wasn't cool it's just it sure was not as good as that demo

like not even close i would say i would say like 20 as good as that demo so i get the vision and i'm sure it's gonna keep getting better but that demo is was such a rug pull because everyone was talking about how amazing it is and i don't think they had ever tried it yet so it's always yeah it's always important to do your own little due diligence via youtube yeah they need to do like google with baird and then mess up the demo but then impress people afterwards that they that's what they need to do not the opposite that's right yes because yeah you can create a lot of hype with that demo video and show how amazing it is and then if they don't have that magical experience on their first prompt like you have this sign up but it's a useless sign up because it instant churn about instead of nailing it or trying to get it better. And then, you know, or at least setting expectations, right? Like what you're kind of hinting at. All right. So that's the product. In terms of AI image generation with the creative cloud and video generation, they have a distinct advantage. They own a lot of unique assets and stock imagery and photos and videos. And they have the distribution inside the creative cloud. But this all is very bullish. But it doesn't mean they can out-execute the models like Midjourney, which, for example, is fantastic and extremely advanced and just seems to have that sauce right now.

Like on Midjourney V4, it's mesmerizing how far it's come so fast. And for the business here today, the valuation went from cheap to expensive really quick. And that's why it felt the most bombed out in October and the most uncomfortable. And that's when you could map out a really good ARR from there. Valuation multiples aside, the business is probably pretty well set up to keep going that subscription base over time. But right now it's at high single digits on the Creative Cloud ARR. And they do have that underlying competition threat and this like Figma deal looming over its head. I don't think the narrative has gotten a whole lot better than it was, you know, $250 ago on the stock. And so I don't expect the Creative

Cloud to be growing at this 25% compound annual growth rate that it's maintained over the last few years since 2015, probably closer to where it is now at high single digits, which is fine. But at the multiple, I'm not so sure about that. The document cloud business is growing faster than I thought it would. It's gone from a $265 million run rate to two and a half billion run rates since 2014. So that's clutch. I mean, they already had the PDF ecosystem, right? And so they didn't want DocuSign to completely eat their lunch. As you can tell, I have a lot of conflicting opinions about the stock today.

Whereas just last year, sitting at 17 times forward earnings, you can see a really nice path to forward returns. The problem here is I think that most of that IRR came in 10 months. And so for me, the valuation, I think, is a little frothy today. Yeah. And one thing I would also keep an eye on for people interested or who own Adobe, it's the margins. So the gross margins have held pretty steady, but the operating margins have been

trending down over the last couple of years. They kind of peaked in 2021, and then it's been kind of a bit of a slow trend down. Definitely would want that to stabilize as well, because it's not like they're growing. They're not going to be a high growth stock, right? I think it's going to be more steady growth. And then obviously there's potential disruptions coming into space too, whether it happens or not. But yeah, that's another thing I would keep an eye on. And look, this Adobe, this Figma deal, it's a huge, obviously overpay now after multiples took the slingshot back. But that's a really important deal for them to move to a collaborative cloud-first browser experience for the creative cloud. It's more than just buying their revenue. It's a lot more than that.

And so that threat still looms over their head. If this doesn't go through and they pull out of it or something, that's still a concern. And so I don't think that that's changed. And the stock's clearly 2x basically from that point. Yeah, and on that Figma deal, I just Googled quickly Adobe Figma because I wanted to see when they had announced the deal, which was in September of 2022, which I think that's why they were criticized quite a bit because the valuation at the time that they paid

and tech valuations were already starting to get smashed and coming down. But then to add to that, I guess it's really recent, the last 12 hours is that apparently EU regulators are looking at the deal and it could be under threat from the European Union as well. Absolutely. I mean, it's getting all the scrutiny. It's getting all the scrutiny. You're right. When that deal got announced, the stock got crushed because it was like, hey, Adobe, It's not last year. We were well into the fall of 22 when SaaS multiples had got cut in half from the November of 21. And it was like, hey, Adobe, you realize it's not September 2021 anymore, right?

So they definitely got a lot of scrutiny from here i don't know if this deal is going to go through it's just the regulators don't seem to like it very much yeah and it seems now like if the eu has an issue with it it sounds like the americans usually are not that far behind because we saw that with the activision, Blizzard, and Microsoft deal. It's the same kind of thing happened, right? The EU or the UK started raising concerns, and now the US are starting to raise concerns. So, I don't know. It could be telling us in terms of what's coming ahead, but something to keep in mind for anyone interested in the name. What is going on with Activision and Microsoft?

I don't think the deal is going to go through. Yeah. I'm just looking here. Like, I haven't checked up on it recently. Me neither. Yeah. And it looks like it's just stalled in. It's just in reverse, essentially.

As soon as it's stalling these deals, not moving forward is actually the same as moving backward with these deals. And it's just hung up. It looks like the U.S. judge has temporarily blocked it as of June 13th. Oh, so recently. Oh, so recently. Late on Tuesday, June 13th, a U.S. judge temporarily granted the FTC's request for a block on Microsoft's acquisition of Activision Blizzard. According to Reuters, Microsoft could theoretically have closed the deal as early as Friday, June 16th. We'll now have to wait for hearings next week in San Francisco. Dude, this is like I fell asleep so many months and years ago with this deal.

Wake me up when it's done. Or not done. Yeah. Is it really worth the trouble too for Activision, Blizzard, and Microsoft? Or let's just say Microsoft at that point. Because even if the deal gets approved, there's obviously going to be so many strings attached from regulators to do this not do that and all these different uh conditions if they approve the deal so i don't even know at this point whether you know they maybe they're just hoping that the deal gets next yeah like i don't know how they go about this this this breakup it's like it's not me it's you but it's it's it's not me it's you it's it's not you it's me and how i don't like you the easiest breakup yeah exactly um yeah yes now anything else to add for adobe or we'll move on to uh the big news in the crypto let's talk about my tinfoil hat

here okay it's growing huh yeah the tinfoil hat, you can kind of hear it crinkling above my head at the moment. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support

rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. That is questtrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network.

You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. That is airbnb.ca forward slash host. So for those of you follow the Bitcoin space, and even if you don't, this was like pretty big news that came out. I think it was Friday last week. So BlackRock, news came out that BlackRock was applying for a spot Bitcoin ETF in the US. And I'll give some historical context and then give my thoughts on what's happening as well. So last week, news came out

that BlackRock had submitted a spot Bitcoin ETF application to the SEC, which is the Securities Exchange Commission, the US or those who are new to the podcast. If approved, the ETF would be named the iShares Bitcoin Trust. It would still be an ETF, it's just a slightly different structure than the traditional ETF, but it would function the same way. Now, some of you might be listening and thinking, hey, aren't there already Bitcoin ETFs? And you would be correct. There are. There are Bitcoin ETFs, but there are futures ETFs in the US. So this means that the ETF trades based off of the CME's future Bitcoin contract, which is a type of derivative because it gets its value derived from the underlying asset, which would be the price of Bitcoin here. And in terms of spot Bitcoin ETFs, this would be ETFs that hold the Bitcoin actually in cold storage

for the most part so it follows the price of Bitcoin very closely and there are several spot Bitcoin ETFs in Canada and around the world but there are none in the US and a spot Bitcoin ETFs like I said would be I think it would be a pretty big game changer in the US because it would open it up to a lot of investors. But there's a lot of nuances here to take into account. So first, the SEC has long been denying spot Bitcoin ETFs. The first application was done by the Winklevoss twins in 2013. For those not aware, the Winklevoss twins are behind the crypto exchange Gemini, and they're very influential in the crypto and Bitcoin space. So there's been several applications since 2013.

So in October of 2021, the SEC actually approved the first Bitcoin Futures ETF. So it was the ProShares Bitcoin ETF, which trades under the ticker BITO. The SEC's reasoning behind not approving the spot Bitcoin ETF is that the price of Bitcoin can be manipulated since it transacts on unregulated exchanges, whereas the futures ETFs use the product traded on the regulated CME. And CME is the Chicago Mercantile

Exchange. It's the, I guess, the largest derivative exchange in the US. And the crypto industry has long criticized this because the futures contracts are still ultimately based on the current price of Bitcoin, the future expectation of the price of Bitcoin. So it's a bit bizarre that the SEC would use this reasoning with approving the futures contract, but not the spot Bitcoin ETFs. And now in recent development, Grayscale, the operator of GBTC, which is the Grayscale Bitcoin Trust, is currently in court with the SEC. Grayscale is suing the SEC because of the refusal to allow them to convert GBTC into a spot Bitcoin ETF. And from what I understand, a decision by the courts is expected at some point before the end

of 2023. And for those not aware, GBTC owns around 637 000 bitcoin which is slightly more than three percent of the total supply of bitcoin of 21 million obviously the total end game supply if you like it they've not all been uh mined so far so gbtc does have a whole lot of bitcoin under its umbrella and there's a few things to know regarding the BlackRock Bitcoin application. First, the SEC denied Fidelity's spot Bitcoin ETF application in early 2022. For those not aware, Fidelity is smaller than BlackRock, but they still have well over $4 trillion in asset under management. So they're by no means a small player. They're actually a very large player in the asset management space. But Fidelity has also been more kind of open to the crypto space. So, you know, let's take that into account here. BlackRock has made historically 576 ETF

applications to the SEC in the US and only one, yes, I'm repeating that only one has been not approved or denied. Do you know what it was? No, I don't know what it was. So if you want to look that up, that'd be interesting. I'll look it up. It must have been a vegan ETF. Could be, could be. But regardless, I mean, all that to say that BlackRock, they typically don't submit an application for an ETF unless they think it's going to be approved. Now, at the GBTC SEC hearing that I just referenced a few minutes ago, judges seem to be quite critical of the SEC's decision to deny the spot Bitcoin ETF application from Grayscale. from Grayscale when they were alluding to the Grayscale reasoning in terms of doesn't make sense that the SEC would approve the futures ETF, but not the spot Bitcoin ETF, because ultimately they reference the same price action. And there could also be the same manipulation that the SEC is apparently afraid of. So it's possible that BlackRock is anticipating

that the courts will rule against the SEC on that matter. And they're just lining themselves up to be well-positioned there. Did you find out who it was, by the way? The only thing I have here is this was in 2014. And the proposed ETF was characterized by its non-transparent nature, which would have hidden its holdings from investors akin to a blind trust. Moreover, Shepard, Smith, Edwards, and Kanta, S-S-E-K, noted that this ETF did not provide insurance that its trading would be aligned with the net asset value. What is it? Okay, so it's a transparency issue that they got denied on but what was the etf

yeah anyways i'll keep going and um and at the end let me know if you found anything i'll keep but i'll keep digging but it's yeah blackrock has you know removed all all knowledge of it from the internet yeah so coinbase would be the custodian for the BlackRock ETF, which is interesting because it could potentially cannibalize Coinbase's business, which they make by trading fees. Because BlackRock, yes, they would pay Coinbase to be the custodian, but that would most likely be much smaller in terms of fees than what they get from their clients trading Bitcoin. And there is a surveillance sharing agreement in the application, which should alleviate concerns of a potential price manipulation. So BlackRock put that in there.

There's other thing in the crypto space that I looked at, but I think some of them people were pointing out to the filing saying that some of the conditions, for example, if there's a Bitcoin fork, that BlackRock could decide which fork to go towards to. It might not be the actual original Bitcoin protocol and so on. But I think a lot of it, too, is there's just a lot of legal elements to these filings and asset managers definitely want to protect themselves. So whether you believe one side or the other, and like you said, you know, you're more like, you know, maybe you have a tinfoil ad and you're more skeptical about the SEC's intention. I'll leave that to people to decide, but there's always, you know, you have to keep in mind, there's tends to be two sides to each thing now a couple more things here in terms of my takes is black rock like i mentioned they don't lose very often um so i think if they're doing this it's because they think there's a

very high chance of the etf being approved by the sec they could be trying to send a message to the sec and politicians that have been anti-crypto in the US without naming any names, and just tell them that Bitcoin is here to stay and it's not going away and that the US needs to have some regulatory framework on this because BlackRock and other asset managers like Fidelity want to get into this space and TradFi or traditional finance definitely wants a share of this pie. And BlackRock has also been a big proponent of the ESG push in investing, which everyone knows we've been pretty critical about, mostly because it tends to be more of a marketing take, at least that's my opinion. And when they put their weight on the scale,

people in power take note. So that's something BlackRock has been kind of pushing opinion. And when they put their weight on the scale, people in power take note. So that's something BlackRock has been kind of pushing for. And the reason why they have so much influence is all that money that goes into these ETFs, at least for public company, it makes BlackRock oftentimes the largest shareholder in terms of percentage of holdings for the shares of a company. of holdings for the shares of a company. I do find it odd that at the same time BlackRock does this because they've been, it's kind of weird that BlackRock is putting this forward when they've been, you know, big on the ESG front. Yet one of the big criticism of Bitcoin from its opponents is that there's a lot of energy consumption. So either

BlackRock doesn't agree with that concern or they just don't care. So I don't know which way it is. And then the last thing, the timing is really interesting because it also comes as the SEC is cracking down on the U.S. crypto industry. And like I said, without getting into conspiracies, many in the crypto space think that it might be part of a playbook to get traditional finance in control of the crypto space and not those crypto native companies like even a Coinbase, for example, that's been there and is focusing on crypto and kind of getting those out and making sure traditional finance has a stronghold on this space. They at one point hit 10 trillion of AUM. I think, I mean, I can look on Stratosphere. At that point, I recall the ETF AUM was about three and a half trillion. That sounds about right. Yeah. Yeah. And I can look that up quickly. But the thing is here is like, you're right.

They have, they're just kind of like the de facto in the industry, them and Vanguard. And so they kind of just always get their way. And now this is like, the timing of it is like, the SEC is like, really? You're kidding, right? of it is like the sec is like really like you're kidding right i never did find what the unapproved etf was because google's algorithm favors new content so much and there are tens and tens and tens of thousands of articles being written right now about this bitcoin etf being being filed by blackrock so i don't know if i'm ever going to find it but um no i don't have anything to add more than that clearly clearly this is a a hot topic for the sec

clearly one that they need to have alignment on or else we just go in this never-ending on or else we just go in this never-ending cycle about its relationship with the sec but it's messy and i don't see it being solved very quickly yeah and blackrock i mean people listen right when blackrock does something and i'm sure they they lobby quite a bit uh in washington too so i mean it could be from, you know, if you own Bitcoin, I mean, I think there's pros and cons here. Obviously, it would increase demand because it would make Bitcoin available to a lot of U.S. investors. Not that they can't with the U.S. traded ones in Canada and other countries, but it's much easier for U.S. investors to buy a U.S. Bitcoin ETF than it would from other countries.

So it will probably open that up and probably also open up some, you know, for retirement accounts. I'm assuming a lot of those would be eligible for retirement accounts. A lot of money could be potentially be poured into Bitcoin ETFs and that would increase demand and most likely impact the price of Bitcoin. So that's, you know, the potential impact it could have. But again, I think nothing really, in my opinion, is a good alternative versus actually owning your own Bitcoin. There are some positives and disadvantages to each and ETFs makes it very easy, but that's kind of my stance on it

because I want to control my own Bitcoin. I have here on the screen, BlackRock iShares ETF assets under management. So it's at about 3.1 trillion today. It peaked at about $3.26 trillion. For ETFs, yeah. Yeah, for ETFs in December of 2021. Total AUM, I believe, peaked at about $10 trillion, which is kind of absurd to think about.

Look at the growth, though. to think about. Look at the growth though. In December of 12, iShares had 534 billion AUM. That compounded at well over 20% to 3.2 trillion in December 21. And now we're seeing i mean i think i was talking about this last week is uh all the all the inflows from retail inflows from retail are at all-time highs right now it's surpassed the the the 21 peak yeah and i'll i'll actually be touching on that um not this week but the following week so i'm working on a segment based on the report that national bank does for etfs in canada and just a little preview it does align with what you're saying is etf inflows is quite high and has been quite high at least in canada since the beginning of the year and i won't spoil, but it's interesting the different asset classes that

people are putting money into. And you'll probably be surprised by some of the ones that are doing well versus some of the ones that aren't. You've caught my attention. You said all the right things. You've caught my attention. All right, last topic here you have for us. Yeah, last topic. So just a quick one here. So for those who've been listening since the beginning of the year, you know, I started a little ETF project. It's just to encourage people who don't have a lot of money to invest every single month, just to show them that even if you invest as little as $50 a month, you can still do well long term and that even smaller amounts of money can

actually, you know, make a pretty big difference over long periods of time. So what I'm doing is I'm putting $50 a month towards the VQT ETF, it's a broad base index ETF, very low fees. And it's also I'll just know that it's also a viable avenue if you're looking to pick your own stocks to use something like CDRs that we talked about recently because they offer it at a low cost. But the only caution I would say is that with such a small amount, you'll want to make sure that you have zero commission, at least for purchasing, because if you have a five or ten10 fee, obviously that's going to eat massively into your return. So you want to make sure at least for purchasing, you don't have any costs. So, so far since the beginning of the year, 50 bucks a month, I invested a little more, $308. The reason is that what I do is I'll buy a share, which is typically of theTF, which is typically around like $33, $34. And the remaining amount, I'll roll it over for the next month. And then usually what happens the next month,

I just, I'm just shy of being able to buy two shares. So to not make it too complicated and rolling over everything, you know, if I'm a couple of dollars away, I'll still buy the two shares. So that's why I should have done the iShares one. It's only $26. Yeah. I mean, yeah. Obviously, it's not a huge difference. If you're investing $50, chances are you can afford $51 a month or $52. But so far, I invested $308 and my returns have been 1.27%. I know it's not crazy returns. It's

because it's a very well diversified index fund. It's not specifically US or Canada. It's a broad-based index fund for holdings around the world, but I'll keep people posted. Obviously, I'm happy. I'm making a little bit of money on it, but it's an easy way to get some broad-based exposure. And even if you're younger, you don't have that much money, you can follow along with me or pick another index ETF that you like or potentially even CDRs

if you have a $0 commission for purchases. I love this because it basically shuts down the notion that you can't invest, especially with the no commission on buying ETFs. There's no fees associated with this. You're going to pay, what, like eight basis points on your ETF there? Less than that, maybe? Yeah, there's cents. I can't remember exactly what they are, but they're very, very low. They're so low.

And so there's basically, we'll call it zero fees, the free buy on the ETF, that six basis points or whatever it is. And you get all of the market returns of the index you're invested in. This one is a broad-based global equity fund. And you just needed $35 or whatever the share price was a month. That's very achievable for almost everyone. And that's why I love this little project this it's not for you to make money simone's simone's rich on bitcoin he doesn't need this okay not quite yeah yeah i was laughing dude um all. All jokes aside, this is a good project to kind of show people, look, you don't need a whole lot to get started.

And it will accumulate to more than you ever expect with enough time. It just requires a lot of time and properly managed expectations that the market goes up, it goes down, it goes sideways, but over the long run, it compounds. All right. Thanks, folks, for listening. We appreciate you very much. For those folks we'll see in person in less than a month, I'm very excited to see you guys. Have a great rest of your day, great rest of your week. We'll see you in a few days. If you have not checked out FinChat.io or Stratosphere.io, one thing I want to start probably telling y'all on the podcast here for Stratosphere

is prices are doubling because we are now bringing in institutional data quality from Capital IQ. So your boy is spending some serious cash on the data, all right? It's not cheap, C-Bob. You should buy S&P stock because it is absurd. Your boy ain't cheaping out on the data quality. And given that, it's a little bit more of an institutional product and we have to raise the prices. But we're going to grandfather you in. So you have about two and a half, three weeks official date, not done yet for my dev team, but two, three weeks

before prices increase dramatically on Stratosphere. So if you want to get grandfathered in, you can buy a subscription to Pro basically for half price today. Roughly half price, not quite, but roughly. We'll see you in a few days. Take care. Bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.