The Canadian Investor - Brookfield’s Big Acquisition and US Bank Earnings

Episode Date: April 20, 2023

In this episode, we talk about Braden’s new Finchat.io that is launching when this podcast comes out! We then look at Brookfield’s acquisition of Triton International and Teck Resources saying no to Glencore’s acquisition proposal. We also talk about the Bank of Canada announcement, CPI and what to make of US Bank earnings. Symbols of stocks discussed: TRTN, BIPC.TO, GLNCY, NVEI.TO, JPM, BLK, SCHW Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.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 Bélanger. The Canadian Investor Podcast today is Tuesday, April 18th. My name is Brayden Dennis, as always joined by the looking very sophisticated in his new fancy glasses, Simon Bélanger. Sir, welcome in. It is FinChat chat release day have you played around with it a bit

i did play around with it it's i think my timing was pretty bad though because i think you guys were doing some upgrades to it maintenance on it yeah yeah and then i'm like man like nothing seems to be working all the questions questions I'm prompting, it's like, oh, sorry, we couldn't answer it or error. Yeah, exactly. You're like, what? Like, why is Braden hyping this chat bot up? It doesn't work. So for those who do not know what I'm talking about or have not seen me just hype the heck

out of this thing on Twitter, today, this podcast comes out on April 20th, Thursday, April 20th. And this morning, when this podcast comes out, finchat.io is officially available. That is finchat.io. There is going to be a huge category winner in generative AI and the finance niche, which is a gigantic category in itself. And I think I have the potential to build the winner here for this entire category. The demand for every time I talk about it online, the reaction has been insane. I was just like, it was just like retweet if you want this. And it had like 800 retweets in the first like seven hours. Like I've never built anything that has that kind of demand before.

It's, it's been kind of nuts. Like this whole week, I've just felt like we're, we're onto something huge here, man. Hey, I mean, the AI train is on like every,

if people get excited. Yeah. If people get excited with it. I mean, for on like every people get excited yeah people get excited with i mean for good reason i get excited and scared at the same time for humanity but you know yeah and of course like it doesn't tell you how to think it just is like you're just like hey tell me how many subscribers dis Plus has compared to Netflix. And you just prompt that out in the English language and it comes out with those line items. Like it's just a tool for getting the data and the answers and transcripts and the filing you want as well as like it's loaded with 3,500 pages of essays from Warren Buffett and writings from him in Berkshire annual report. So it's pretty awesome. So give it a shot. It's free at finshot.io. You get 10 prompts per day for free. If you want to pay, you go up to 50. I'd love to just have it free for everyone for a while, but I would literally go broke in computing costs. So I got out of the dirt and ramen phase at the end of last year. And I don't want to go back into the

dirt and ramen phase. But I honestly think, Simone, people who have been listening to this podcast, I honestly think this could be a billion dollar idea one day. And maybe I'm a little excited here, but that would make me about as one third as rich and one one hundredth as handsome as Ryan Reynolds, who has made headlines again. This is me handing off the baton to our first topic here. Yeah. Is he before I go on, is he a billionaire? I don't think he's a billionaire, but I think he's worth at least $650 million. Yeah, that would make sense with some of the investments he made and obviously cashing out on those investments. He will be a billionaire without a doubt.

I would say with almost 100% certainty, which I don't say very often, but speak in certainty, he will be a billionaire soon. But I don't know, and the answer is I bet you he is worth more than $500 million, definitely. Yeah, no, that's a good point. And like you said, he made headlines again. Now, this time is because an investment he made into the canadian fintech payment processor noive so it is a company we've talked about before on the podcast usually during earnings season and the quote that essentially um he he said is right it's pretty interesting i know about as much about fintech as I did about gin or mobile a few years

ago, but Noive is impressive. The leadership team is exceedingly intelligent and hardworking, and it's about time a Canadian company got the type of attention American tech companies do. So it's interesting. Clearly, Noive is definitely using his investment as marketing because i went to their side because i was just checking a few things and his face is just plastered all over the place so i mean i think part of it is a human money printer exactly yeah any company that you know takes him on in that like advisory marketing role the guy just he's brilliant at this man did you see a commercial they did i yeah i think rockets yeah yeah that's right yeah i did see that it's pretty yeah it's pretty for those who haven't seen it the quick summary is he's sitting down in a in

the office of the ceo of nuve and he goes um are we working on any rockets? He's like, no, no, I don't think so. Like no plans for rockets. He's like, yeah, American tech companies are, and I'm paraphrasing, are always doing new and exciting stuff. We're just making sexy payment infrastructure. Like we're not building any rockets, but we're doing payments really well. And he has this way of just making marketing fun. And there's a reason that everything he touches turns into hundreds of million dollar exits in ridiculously short periods of time. So he kind of just has the ability to demand advisory equity and print money. it's just an easy playbook yeah exactly and i mean i don't know whether this will pan out for him or not i'm sure like you know i don't know if it's

just an investment like you said or there's kind of other things other kind of compensation uh but you know just as a reminder neuve has grown quite quickly over the past five years. They've grown their sales, their top line at a compound growth rate of 43% per year over the last five years. And obviously in big part fueled by the pandemic, revenues almost doubled from 2020 to 2021. And they've been doing pretty well overall, at least compared to other players in the tech space. They've remained free cash flow positive. And it's still down, though. been doing pretty well overall at least compared to other players in the tech space uh they've remained free cash flow positive and it's still down though like they've been hit like any other tech company it's still down 65 from its peak of summer 2021 but um you know when we did the earnings release a couple of quarters ago that That was one of the things I highlighted I remember

about Neuve is they're actually still free cash flow positive compared to, you know, a company like Lightspeed, for example, which, you know, have not been profitable on either a gap earnings basis or free cash flow basis pretty much ever, right? So. Yeah, the, I mean the this is a business that i just i like generally typically like these are the types of businesses i like you know payments infrastructure being like the kind of api layer for payments i mean it's just brilliant everywhere you look there's so many good businesses stripe adyen uh this the list goes on uh there's so many the only concern i have for the business is like sequentially the business hasn't really grown since the end of 2021. So I don't know what this next lever of growth really is. They rode up the beautiful

adoption of online gambling because they were a lot of the API layer for payments in that specific niche. That's where they really found product market fit. And now here, I'm curious what the next phase of growth for this business is. But time will tell. Yeah, no, exactly. Not much to add there. And we'll talk about another Canadian, well, I guess another Canadian company making the news. Another Canadian, well, I guess another Canadian company making the news. 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. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians,

and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet

incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Brookfield Infrastructure Partners has, wow, it's a big headline number, $13.3 billion take private transaction for Triton International. You texted me, I was having a busy day with work and you're like, it was like late in the day. You're like. I was having a busy day with work and it was late in

the day. You're like, did you see the Brookfield infrastructure news? I was like, no. Dude, I live under a rock. I texted you. I'm like, whoa, $13.3 billion. Here's the TLDR of it. There is Brookfield Infrastructure, BIP, the subsidiary of Brookfield, the infrastructure business has announced its plan to acquire Triton International, which is the world's largest owner and leaser of intermodal containers. So intermodal containers, it's a sexy name for shipping containers, good old shipping containers. So this is a stock and cash transaction worth a whopping $13.3 billion. will receive $85 per share, including $68.50 in cash to their account and $16.50 in Class A of Brookfield Infrastructure Corp. So this represents a 35% premium to Triton's stock price on April 11th. So that was the takeout premium, 35%. Now, this is a shipping containers business, right? That's what Triton does.

And this is a monster, monster deal. So for a business I'm analyzing for the first time, like Triton, it seems like they got pretty good value for an incredibly important business in global logistics. So they must have thought, hey, this is incredibly good value today on the open market. And we still think it's incredibly good value at a 35% premium. The margins are kind of nuts on this business. I didn't believe what I was seeing. I was looking at the margin profile and it's pretty incredible. Operating margins north of 40%. It grows pretty steady at a high single digits on the top line and over double digits on the bottom line profitability. Throws off an absurd amount of cash, pays a nice little dividend. And so maybe it makes sense talking to

Brookfield Infrastructure. Look no further than the incredible unsexy business of shipping containers to get Brookfield excited in a deal they like. This is supposed to close in the fourth quarter of this year, 23, subject to the usual customary approvals. Yeah. I had heard of the business before a couple years ago. I mean, I heard of it, looked into it a little bit, but wasn't my cup of tea in terms of investment. There's definitely some cyclicality to it. So that's something people should be aware. But I mean, it's a pretty, it's pretty important in our economy in general. So it's definitely a big part of the infrastructure that require for, you know,

to make the economy go. That's pretty much the easiest way to put it. And what kind of comes to mind, though, right now is we've seen with bank failures in the US and Europe that credit is starting to tighten up. And that's a reason why the central banks are either pausing or, you know, That's a reason why the central banks are either pausing or slowing down the rate hikes. What that tells me is Brookfield is probably starting to be opportunistic here because if you're seeing credit tighten, it means that potential acquirers for these type of businesses, there's going to be less of them. A company like Brookfield can definitely leverage their financial position and their expertise to take advantage of these type of climates and we saw it when they did with uh sorry was it interpipeline that they bought i can't remember yeah it was

interpipeline yeah it was didn't want to confuse the name but that was another one when you know there was a lack of investment lack of interest in anything related to oil last year while they actually or was it it was the end of 2021 they pounced they pounced on it they even had to have been 2020 right uh i think it was end of 2021 if i remember correctly i'll look it up but it was it was when it was most ugly yeah it was exactly it was not sexy that's for sure and that's kind of what brookfield does it was it was when it was most ugly. Yeah, it was exactly. It was not sexy, that's for sure. And that's kind of what Brookfield does. You're right, it was 21, you're right.

I was off on that. Yeah, and to me, that's just them kind of continuing on that trend, right? Now they're seeing this kind of environment that's favorable to acquisitions if you have the capital because there's just not going to be as many suitors. So that's kind of what I take away from that.

That for sure. And that's not a new story, but it shows two important things, right? It's like they are truly value investors at their core. I'll say three things. They're truly value investors. They are always looking at things in this subsidiary, which are truly structurally critical infrastructure. Stuff where the snap your fingers, if this business goes away, what happens? The old snap test,

you snap your fingers and what happens to the largest owner and leaser of intermodal containers? Your stuff ain't showing up to your door next to the morning of on Amazon anymore. and the moves that they're willing to make on just gigantic sums. That gives them a unique advantage as both an operator and a capital allocator, which I think is kind of a deadly combo that you don't see out there in this business anywhere. And for all of those reasons, I am really happy to – like I just keep buying more Brookfield. I don't buy the individual subsidiary like infrastructure, but I just keep buying more brookfield i don't buy the individual subsidiary like infrastructure but i just keep buying more brookfield yeah i mean personally i own more of the subsidiaries and my favorite one of all of them has to be the infrastructure partner it's just the sustainability of the assets that they have regardless of the economic environment but there's also upside related to

those um to those utilities or whatever you want to call them to those assets if the economy goes well and there's kind of a floor if it doesn't go well so that's why i really love that infrastructure part and it's one of my bigger positions as all let's move on to the big macro. Yeah, macro update. Yeah, I tried to do it kind of three short parts because there were quite a bit of macro news that happened recently. So I'm going to do Bank of Canada interest rate decision, Canadian and US CPI. Canadian CPI actually came out today. So it'll be kind of two days. It was Tuesday. So if people are listening to this on Thursday, it was a couple of days ago. Now, Bank of Canada interest rate decision, the Bank of Canada said it was holding rates steady at four and a half percent.

They're still evaluating the effects that their rapid rate hikes will have on the economy. They mentioned that they are seeing rate hikes cooling cooling, larger purchases, overhaul, for example, housing. And because those are more dependent on credit, but the pause allows them to see what additional effects it might have. They also mentioned I could take 12 to 18 months for, you know, after the rate hikes to see their full effects on the economy. They also said that rates will most likely need to stay higher for a longer period of time. They expect inflation to be back to 3% this summer and 2% by the end of 2024 with some caveat. Of course, the energy wildcard there, if price of oil, for example, starts going up or gas could have a big impact on that and they did add that food and services

inflation remains high on that note um i'll kind of validate what they said with the canadian cpi update so looks like uh you know the bank of canada and tiff's predictions are looking good based on these uh the recent print the headline number was in line with expectation at 4.3% year over year. Food rose 8.9% year over year and 0.2% versus February. Shelter costs rose 5.4%. Energy was one of the big driver to inflation cooling down. So that's kind of the same for Canada and the U.S. here so it was down 6.9% year over year gas was down 13.8% on its own services were up 5.1% and 0.5% month over month so still seeing some sticky inflation for services here and the core measure that the Bank of Canada uses are still high but trending down the The three measures were 5.9%,

4.6%, and 4.4%. And for context, they were all above 5% in January. So you're seeing definitely some positive over here. And then for the US, it's much of the same, very similar numbers that we're seeing. The year-over-year number was 5%, increasing 0.1% month-over-month. Again, food remained elevated at 8.5%. Energy decreased 6.4%, so almost identical to Canada here. Services, less energy, was up 7.1%. So again, services were seeing stickier inflation there. Shelter, which also is a lagging indicator for both countries, was up 8.2%.

And core CPI rose 5.6% year over year and 0.5% month over month. So you're seeing here some kind of similar things, both for the Canadian and US CPI. I think what they're predicting in terms of 3% this summer and then 2% by the end of 2024, I think the biggest wildcard before people start making one conclusion one way or another, start saying that Tiff is out to lunch, she doesn't know what he's talking about, or the other side of the argument saying, look, inflation is done, we're in the clear. It's going to be, to be honest,'s it's gonna be dependent on energy what happens with energy cause that's gonna be the biggest wild card yeah totally and and it's just so unpredictable and no one know like it it doesn't matter who's in the chair uh you know that number is gonna be impossible to get right i'm'm happy to see the 0.2% sequential inflation on food in Canada. That was the item that I think I was the most happy to hear you

rifle off on this entire list. It just feels like the one that has been such a stinger over the last two years uh anecdotally and from the discussion broader that i hear yeah yeah and it hurts uh you know unfortunately it hurts the people who make the less money the lowest household incomes the most um unfortunately because people have more money to spend at the end of the day food's a smaller percentage of their overall budget if you have you know you make less money it's going to be a higher percentage so you really feel that increase more um and hopefully it levels off because let's be honest like you know eight plus percent over a year is high yeah yeah it's it's high for sure

i guess when you've only when you're so used to seeing those numbers seeing a sequential number almost flat on an important line item is like ah you know like i'm not exhaling fully yet, but it feels nice. And my goodness, dude, I am so glad I get to be here on this podcast because people at home who are listening, this is me getting this news as well at the same time via Simon every single week. Like this is my time to learn the news as well at the same time via simone every single week like this is like this is this is my time to to learn the news as well and i appreciate you very much hey no problem i enjoy doing it you have to i like to kind of break it down a bit more because it's easy to just look at the headline number and at the end of the day headline number is a headline number when you

look at the data it's usually more nuanced than whichever way you're looking at the headline number. Let's talk about another major news piece here in Canada, Glencore and tech resources. All right, so big news last week-ish. I forget what it was, but it was last week. week-ish. I forget what it was, but it was last week. And I wanted to speak to it here on the pod, but frankly, it was too fresh and I wasn't up to speed on the proposal. So I didn't want to just come on here and spew some nonsense. So here it goes. Swiss commodities giant Glencore has proposed a takeover of Canada's very own tech resources, which is of course, a mining giant here from Canada that

many people will be familiar with, gigantic employer. Among others, their main products are copper, zinc, and steel-making coal. This is Tech Resources. They also have lead, specialty metals, such as germanium, indium, cadmium, in addition to some gold and silver. And as a cyclical commodity business, one can expect their stock chart looking pretty boom or bust over time. And that is definitely the case, although they've had a pretty magnificent run as of late. So again, cyclical business. Their plan to maximize value and in the CEO's words, ESG it up. They want to spin off the steel making coal business from the metal business. They want to make two separate entities. And the way they spin this is like they're two

really good businesses. And of course, the metals is very important for the electrification of the grid infrastructure. And I believe that's all very true, especially copper. And then of course, the steel making coal, they say that it's actually helpful for the decarbonization process for steel. So, okay, whatever. helpful for the decarbonization process for steel. So, okay, whatever. So, they want to split this two business. Now, Glencore, this gigantic Swiss commodities business says, come here tech, we have a proposal to take out your business. We want to acquire you guys. And tech has replied with, no, our best pass forward for shareholders is our continued execution and split of the steel making coal business and the metal business. They came back with another proposal, updated proposal. And tech CEO basically told them to take a walk again. Take a hike. He said on BNN, Jonathan Price, CEO said,

it is a non-starter. I listened to the entire interview. He's a good lad, that guy. Now, one thing I think that he said that makes a little bit of sense here, if you are bullish on tech and their execution plan and this split of the two businesses is that it's not good value. And then two, it's a giant distraction with regulatory hurdles that just takes on all of their mental energy for the next year or two to make this deal happen. And so this story is certainly not over yet. Glencore doesn't think this story is over yet. And we'll be here with the news as final decisions are made. Any thoughts here? I don't know if you've caught up to speed on this deal yet.

Yeah, I did. I saw your notes. So I had seen some of the headlines, but I wanted to just understand a little bit better what was happening. And, I mean, I think their largest shareholder too came back and back management of tech resources as well so i think obviously it's i think it's a chinese company is the largest shareholder uh i thought it was a canadian guy like a billionaire anyways i'll look it up uh tech ceo confident biggest b shareholder China Investment Corp. Oh, okay. Will stand behind their decision.

Okay. I'm sure they have a couple of world shareholders. Yeah, I wonder if that's related to the share class, though. And the way they phrase it. Yeah, anyways, my thoughts here is it's actually on a more, I guess, macro perspective, just because if you're looking at these, and no pun intended, these like, you know, resources, natural resources type of companies, I think we're going to see governments more and more protective of those

in the coming decade because we're starting to see the world shifting from a U.S-dominated world to a world that's going to be in more faction. I'm not saying that the US is not going to be a major player. It will probably be for decades to come. That's not what I'm saying. But I think you're going to have a multipolar world where you'll have countries that align more with China and Russia and all those type of countries, and then countries that align more with China and Russia and all those type of countries and then countries that align more with the U.S. and maybe some countries that are kind of in between they don't want to really take sides but regardless I think countries like Canada, Australia, even the U.S., China, whichever country you're looking at they're going to be more

productive about their natural resources and I could see the government intervening if they don't like the deal or the potential buyer. And I saw an article that mentioned that apparently, according to sources, the federal government is keeping a close eye on that because they're not that keen on, I guess, a Canadian, a major Canadian mining company being acquired by a company from a foreign country, even though it's a friendly foreign country. 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. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world,

while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full

disclaimers and more information. All right, let's move on to some earnings. We have, you got Schwab. I'm going to do BlackRock and then you're going to talk about JP Morgan. We got the financials. It's the financials roundup. Yeah, it's a financial week. Yeah, and it's an interesting one because it's really the first time we're seeing, especially in the U.S.,

that we're seeing the bank's earnings following the collapse of SVB, Silvergate, and Signature Bank, and obviously the collapse in Europe or whatever you want to call it, the buyout of Kidz E-Swiss. And Schwab stock was up on the earnings release, but I'll be honest, I do wonder why. Because there's a lot of things that are kind of scary. So on the surface, I'll admit it, it looks good. So revenues were up 10 percent and

income was up 14 percent their net interest margin expanded by 81 basis points year over year due to higher interest rates however this is where it starts being like not that great deposits were down 11 versus the last quarter so the previous quarter not even from a year ago and then 30 from a year ago that's a lot and the good news is that they saw an increase of 150 in their money market funds that schwab does have a lot of you know schwab money market funds uh year over year and 28 versus the last quarter however that's not great for them at the same time because they collect what ends up happening is instead of making money on the interest spread that they would do on deposits while the money market funds they collect fees and schwab's offer some pretty low fee the average fee

for their money market fund is 27 basis points and it's even lower if it's for like through a third party money market fund. So it's not, you know, it's not that great. I feel like their bottom line will definitely start, you know, probably being hit down the line. I don't know how quickly, but I think people were really excited by the headline numbers and to show that things aren't going that well they paused their buyback plan so that's clear to me that the management there is definitely i don't know if they're just being prudent or they're kind of doing damage control here but what comes to mind is you know we talked about no commission trades when robin hood the whole fiasco with GameStop happened and payment for order flow. Well, Schwab has a bit of a different model.

Not that they don't use payment for order flow, but it's not. They have, I guess, a policy of just doing what's best for their customers trade. So not exclusive rights with any firm, but they had to find other ways to make money and for schwab it was the deposit and really good at that finding other ways to make yeah but the reality is they were using deposits to get that interest margin and essentially be able to uh to make money off of that and the other way is admit its fees from their products. So it's going to be interesting. Schwab is going to be a very interesting company to follow in the next quarters, years to come, because especially as people are going for products that offer better yield, I don't know how they're going to do it in terms of it feels like the revenues are going to take a big, big hit and

their profits too. At the surface level, with the work I have done on Schwab in the past, I'll say like Schwab and Allix, I was trying to understand these businesses. What would it have been? It was during the kind of Robinhood rise. I was like, how does that affect these businesses? And saw some quarters play out after their hand was forced to follow Robinhood into zero commission trades. So I was curious how that affected their business. And I left so impressed with how good they were at adapting and finding other ways to make money. And you mentioned a lot of those things. Yes, deposits down 11%, mentioned a lot of those things. Yes, deposits down 11%, down 30% from a year ago. Those numbers are definitely concerning. I think the management team pausing buybacks is probably a pretty good

call. But you see that the business is still financially so resilient through all of that. And money market funds, holy smokes, that's an explosion. I have mixed thoughts here. But my final thought here is that Schwab looks objectively very cheap here. I think it looks objectively very cheap here. If you're looking for value, you have to find things that are very ugly. And this is very ugly right now on a business that has been resilient, has a great management team, and it isn't going away anytime soon. They have really strong market share. And yeah, I'll leave it at that. I think that it's attractive here. Yeah. I mean, the only thing I would say is that it could get uglier. That's probably the only thing.

Oh, 100%. 100%. Don't hear what I'm not saying. Yeah. Every single ugly stock, you know, if you're trying to buy things that look ugly and find value, the bear case is always, it's probably going to get uglier, right? That's why it's cheap. If it wasn't the case, it wouldn't be cheap. And so I do objectively here, don't hear what I'm saying. I'm not buying Schwab stock. I don't buy

these financial stocks. I never have, and I probably never will. Never say never, but I don't have it on my radar. That being said, I think many of these financials are objectively cheap here if you find quality. And I think Schwab is quality. That's fair. That's fair. Yeah. Let's move on to BlackRock, a business that doesn't like bear markets. BlackRock. I don't know if you follow like every once in a while. I don't have TikTok, but on Twitter, people always post these, the same video. People just copy the same video of how BlackRock's evil and owns the world. Have you seen these things?

I've heard of it. I haven't seen the videos, but I've heard the news and stuff. Yeah, I mean, it's not news, definitely. I've heard of that for sure. It's just like, you made this entire video to explain to me that you don't know what an ETF is. Just tell me you don't know what an ETF is on TikTok and call it a day. A business that does not like bear markets. Revenue is down 10% and earnings per share down

18% on the quarter. It's the year over year number. But total net flows was positive of 110 million this quarter. So you're seeing a nice bounce back. Again, this is very correlated to market performance and the euphoria of markets, ins and out flows of how the market's doing. So the market's down, but really, well, not in Q1, but you saw really high inflows, good positive sign for the long-term story and ingesting more inflows than what's out there in the asset management business. It's a really incredible business. It just keeps getting bigger and eating up more and more assets under management. They did hit 10 trillion at one point, assets under management.

They hit that 3 trillion in assets under management for the ETF business. And they have, once again, now topped that $3 trillion assets under management mark. So I think they had like three or four quarters dipped under that mark last year. Remember last year? Yeah, me too. Assets under management year over year is down 5% from the March 22 quarter. No surprise. But if anything, it shows you how good Q1 was for the markets in terms of a rally off of last year that AUM was only down 5% from a year ago. Equity, asset center management down 8%, but again, not that useful. I think the sequential number here is important. The better number here is the sequential asset center management,

which is across the board risen. Equity, fixed income, multi-asset class, cash management, alternatives, advisory, iShares, ETFs, all up high single digits or low double digits on asset center management from the December ending quarter. So nothing hugely surprising here. This is kind of like backwards looking on market performance. But the long-term story here remains in the fact that they hiked the dividend again. This is a business that I don't see them not hiking every year for a really, really long time. And they keep buying back stocks. They deployed 375 million in share repurchases, which is about in line with what they do. They got more aggressive last year. So I think that that's prudent capital allocation. They were really aggressive deploying 500 million a quarter last year. And so the share is outstanding, continues to drop over time.

So it's a stalwart compounder at this point and uh that's uh that's that's black rock's q1 yeah i'm just uh it's that's the difference right between black rock and a schwab where black rock they make their money on those fees for the most part where schwab is kind of a mix of both and i'd be interested in bank yeah more like exactly well i think it is uh yeah they're being chartered in the US. So, yeah, it is a bank. But just generally, just comparing them, you know, one's a management business, one's a bank. Yeah, exactly.

And I'd be interested. I haven't looked at it, but just to see if they provide it or maybe their next quarter will be a better indication. Because they do have money market ETFs and money market funds as well for BlackRock. So it'll be interesting to see. Don't worry. They were quick to call those numbers at the top of the press release. Yeah. Okay.

So I'm assuming they're up. Look no further than Larry Fink's first eight words on the conference call. And then mention ESG five times. Exactly. In that order. Yeah, exactly. Larry Fink playbook. Yeah, I mean, we, you know, I wouldn't say we blaze, but we're critical of ESG quite a bit just because we've talked about it before.

It's not the fact that we don't think going to, you know, reducing emissions and obviously global warming and all that. know reducing emissions and obviously global warming and all that it's more the fact that there's been a lot of marketing around the esg for products that are not environmentally friendly and there's also a lack of data and some of the things that they do and black rock you know is is definitely guilty of that i've seen some of the products that they have you know they'll they'll kind of label something as he's at g for canada and essentially it's full of oil and gas plays as well which there's nothing wrong with i'm just i don't love that they're labeling these things esg when it's just a way to get extra fees it's so scummy like it it's unbelievable uh you know what they call esg you know i'll buy i'll buy uh blackrock stock when they perform the full scam on the financial markets

and roll up that e uh vegan etf buddy vegan etf i'm like okay these guys are ready to make some serious money or yeah and then i would it would be best if they did vegan etf the pelosi etf and to be both sides of the uh both sides of the aisle that republican equivalent one so you have the ted cruise one so that i wonder who would buy that and then and then they'll roll out the uh the trudeau versus uh pierre uh etf you know just just get them all just get them all and charge lots of fees and keep this thing going bipartisan esg etf that's what it should be called all the buzzwords give me all the buzzwords you can find roll them up

into an etf charge tons of money and maybe i'll become a black rock shareholder yeah okay i'll we'll finish here with uh last earnings on bankings before we go on and on and probably say something we shouldn't uh so gp morgan earnings like the the biggest u.s bank i think it's the largest bank in the world if i remember correctly i think it's at the top of the gc that are a chinese one yeah yeah exactly so they had their earnings again like i mentioned after the turmoil in the u.s banking regional banking market i thought it just thought it'd be interesting to have a quick look how it looked for them. The market definitely liked the earnings report with the stock being up 7% in that range for most of the day. Revenues were up 11% versus Q4 of 2022. Provision for loan losses

were in line with Q4, but up 50% versus last year, which is not surprising. It's what we've seen kind of across banks in Canada and the US. Net income was up 15% versus Q4. And I'm looking more at Q4 here just because, you know, it makes a bit more sense in my head to look sequential, especially given some of the issues that we've seen recently. Deposits are up 2% compared to Q4, but down 7% versus last year. And their average deposit margin, so the interest margin on consumer banking was 2.78% compared to 1.22% in Q1 of last year. So that's a, my God, that's a 155, 56 basis point increase.

Pretty impressive. But I think where JP Morgan could see some slowdown in those results is I think that interest margin will definitely get pressured as we've talked about those money market funds where people are using those as alternative to deposits in the US. So I wouldn't be surprised if you see that interest margin actually tick down over the next quarters. But they have seen as well a big inflows in deposit since the failure of Silicon Valley Bank and the other regional banks. So it's kind of a bit mixed bank, which clearly JP Morgan is. They're definitely not a regional bank.

Systemically? Systematically? I'm not sure anymore. Yeah, whatever. G-SIB. It's all just G-SIB. Exactly. This won't include all the deposits that I think they would have eaten up from those bank failures, would it? No, that would be next quarter. That's a good question. I'm not sure.

I think it may. No, I think it was up until the end of March. Yeah, I think they're pretty quick to turn around their results. I could be wrong. Yeah, I could be wrong, but i think it would include part of it at least yeah because the sbv stuff happened in mid-march yeah yeah i think march was a 10th 8 to 10 was like the three days was it like the 12th the sunday that they came out and like yeah anyways yeah so early mid-march all of that so yeah and then they would

they would have got a bunch of deposits that following week so yeah this this includes it right yeah as far as i'm concerned wow i you know i didn't realize i'm just looking here because you're like which one's the biggest bank yes jp morgan's certainly is which which we which we thought but i didn't realize how much bigger they were than Bank of America. J.P. Morgan today has a market cap of $413 billion and Bank of America, the next largest bank, is $243 billion. Holy smokes. Yeah, and if you look for – because the banks, you really want to look at what their assets are. Yeah, I'm just talking market cap here.

Yeah, it's just crazy i think it's probably um four three four trillion something like that yeah i would jamey diamond jamey trillionaire energy diamond yeah so according to a little platform i heard of, I think it's called stratosphere.io. It says that, yes, it's over $3.5 trillion in assets. So it's pretty large. I mean, I think Royal Bank is in the 1.4, 1.5 for context. I'm just going on memory here. 3.5 trillion.

That's like Ryan Reynolds' bank account in like six weeks it's a bit bigger than that but yeah absolute trillionaire energy dude that's that's nuts uh i what a good quarter i mean i'm not surprised that you know that this whole banking thing is the bigger get bigger you get that g-sib get that beat that g-sib stamp of approval too big to fail that's what it is yeah yeah royal bank is royal bank is just under two trillion so if people want to put some context so the largest canadian bank is about half the size of gp morgan still impressive for rbc given you know i, it shows you how much more concentrated our banking is. Yeah, definitely.

And which, yeah. We're starting, we're going to see it in the US. I think that's inevitable. Give it 10 years and we'll probably see like, I don't know. I'm just going to, maybe that'll be a bold prediction or something. The number of reduction in banks in the US when we do our bold predictions. Yeah, it starts, the US banking starts looking more like Canada's banking. I think it's just a generic prediction.

Thank you so much for listening to the podcast. GoCheckOutFinChat.io. It came out today. So you're going to be one of the first people using it. It is pretty special. You get 10 prompts for free. It's only 20 bucks a month if you want more prompts. And I love, like I said, love to make free, love to do that. But I'd be back to Dirt and Ramen and competing costs. So if you want to support the project, it's 20 bucks a month. It's really cheap. And it's awesome. the one tip that i would recommend is if you're prompting it is be specific that's

what these that's what these chat bots love like i don't know if you've been playing with chat gpt be specific if you want specifically this thing to give you you know don't don't make don't let it don't assume it knows what you're talking about is what i'm trying to say be be very specific or try to get it to fall in love with you in 10 prompts or less is that the new challenge today's valentine's day you love me uh have you seen the things where people are getting like auto GPT where it'll be like, hey, tell me the 10 steps to do this. But they built this GitHub repo that automatically kind of keeps prompting it with the AI. So the AI is then getting the answer. It's like, okay, well, yes, let's do these 10 steps to start your business and build your website.

And then it's like, and then the auto GP replies like the computer is now applying to the computer being like, okay, let's start step one. What should break out in detail? And then it's, so it just keeps prompting it in this never ending loop. just keeps prompting it in this never-ending loop next thing you know it's actually done the thing for you not just told you what to do it's actually now done it yeah i think that's going to be really probably the future for those all those personal assistants um i think that's going to be definitely something that could be leveraged for that but if people are like kind of confused at what we're talking about basically chat gpt you ask it a question and then you have to kind of reprompt it to whether you want to get narrower on a certain you know topic or something like that whereas what braden's talking about auto gd gpt is you essentially does it for you so you ask the

first question and then it auto prompts itself and then will give you kind of you'll avoid asking it more and more follow-up questions without making this episode too long but just a conversation is i yeah yes there's going to be some ai bubble yes it's brewing yes it's going to be you know the dot com all over again. I think deservingly so. It is that holy, holy, every moment. Every 24 hours, I see a new thing that is completely outrageously cool, but also incredibly terrifying as well. I just think we've been trained to see so many hype cycles and technology since the groundbreaking evolution of the internet. And for the first time since then, and same with, this is what Bill Gates has said too, and I agree, is for the first time since that moment,

there's this, wow, this is different. And I was so out on the web 3.0. And don't include Bitcoin in this because I think Bitcoin's legit. I'm talking about the people paying $2 million for a pet rock JPEG. That was such a load of shit from the start. And this is so much different. It is so cool, man. But i said incredibly terrifying yeah no i share that i mean i said it earlier i was like half joking because it's like super exciting but scary at the same time i mean uh yeah i guess time will tell right uh so if you're a doomsday prepper or whatever maybe that's the time to prepare prepperpper. Terminator style. Yeah. We learned what a prepper was live on the show. Thanks for listening. We'll see you in a few days. Again, finchat.io.

Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.