The Canadian Investor - Canada’s Housing Reset, AI Circular Financing and the Fed’s Impossible Choice

Episode Date: August 15, 2026

In this episode of Canadian Macro, Simon and Dan break down the disconnect between headline economic data and what households are actually experiencing. They discuss why strong jobs and GDP numbers may not tell the full story for Canadian consumers, how mortgage renewals and rising housing costs are putting pressure on household finances, and why the Bank of Canada may be stuck waiting for clearer signals before making its next move. They also dive into the growing debate around the AI boom — including Nvidia’s massive AI financing plans, the risks of circular financing, whether AI companies can eventually generate enough profits to justify current spending, and what could happen if investor expectations shift. Plus, they discuss oil markets, inflation risks, bond yields, the Fed’s difficult choices, and what a potential slowdown could mean for investors.   Watch the full video on Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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biggest quarters I've seen from this company in quite some time all right Right, welcome back to Canadian Macro, joined here by the always brilliant, Simone Belonger. How's it going, man? It's going. It's going. Aside from a little bit of tech issues, going well. Yeah, yeah, yeah. Well, it's, I mean, people have heard us have tech issues live on this show. So it shouldn't be surprising.

But, yeah, I mean, it's growing pains with the pod switching video platforms, et cetera. But, I mean, it never prevents us from getting episodes out, high-quality episodes twice a week. So here we are. I guess three times on your on your stream. No, exactly. And it's I think it'll be a fun one. We just have a lot of, a lot of stuff to cover. It feels like every week there is just a whole lot of stuff. I mean, we'll look at US CPI implication on rates in the US, but also obviously Canada, what it means there. I think you were going to look at what it's looking like for mortgages in Canada. I think some data coming out to that more and more homeowners are just underwater when it comes to the equity of their home and the mortgage. So they have zero equity, which makes refinancing a bit harder and hiding your debt into your mortgage, definitely harder than it

would have been, let's say, pre-pandemic or even during the pandemic at historically low rates, especially when you're looking at four, four and a half percent, whatever the rates are here. We'll talk about AI, a lot of circular financing situational awareness, the collapse there, what it means for markets, making some pretty huge bets on AI. NVDA's announcement for 500 billion AI financing where they're teaming up with some of the largest PE managers in the world, Apollo, Black, Rock, Blackstone, Brooks Field, and a few others. And that's, I think, pretty much it.

Anything else that I miss, Dan? No, I think we're, I think that's everything. The piece on the mortgages, the other piece I'd like to talk about is sort of, you know, we've mentioned a couple of times how like this debt burden could move its way into the consumer economy with lower spending, et cetera. And I think that that seems to be what's becoming more apparent with some of the data that you mentioned we're going to talk about today, where households could spend as much as 50% of their income. You know, you couldn't go get a mortgage and qualify today if you wanted to go get a mortgage using 50% of your income,

but on renewal, they don't ask. And so a lot of people were renewing into a greater portion of their income going towards their housing expense. And yeah, obviously, like the risks on the housing market, you don't have to ignore really. Or sorry, I don't have to describe really, but the risks for me on households now having significantly less take-home income is kind of part of the theme that we've been discussing a little bit. And then, yeah, I mean, it seems also like, you know, with USCPI and Canada, that rate cuts might be more of a conversation than hikes right now.

Even, and I don't know what your thoughts are on that with me. I don't think either is really likely. I think they're just going to be standing path. That's, I can, yeah, I can go over some of the probably things that they're, they're debating.

But for Canadian households, yeah, I mean, don't you feel like for homeowners, a lot of what's happening right now is just, let's just hope things get better? Like, I don't know.

Like, you just, the strategy is hope, right? I don't think there's a real strategy. Yeah, 100%. I would say that,

like, it's funny, every time I post positive economic data, people in the comments say that it's like, you know, government propaganda or whatever. Yeah, such a bull, Dan, it's such a bull. But then whenever I post negative economic data, they trust the data even though it's the same source. And, you know, it's a reflection of where we're at. So I think it's interesting because we're seeing a lot of positive economic news come out of Canada, right? Jobs print was strong, GDP print was strong.

you know, you should feel like Canadians should feel like we're in a economy that's doing well, but they don't, right? Instead, they feel like it's a vibe session, man. It is a vibe session for sure. But yeah. Shout out to Chris, yeah, for a feeling. I think that we have actually have vibe session T-shirts, which is pretty funny. But I think that the consumer sentiment, at least in my sector, is super important, right?

Like, people don't go and make the biggest investment of their lifetime if they don't feel confident in the economy. So I'm of the opinion that what consumers, how consumers interpret the data is just as important as the data itself. Sure, the bond market and whatever can interpret the data a certain way. But if the central banks hike or hold or don't cut as a result of the data that we're seeing right now, that's just going to delay. any recovery that you might see, at least in my sector in the housing market. I, you know, obviously stock market's a different story with what's happening there, and I'm sure you're going to talk about it, but it's interesting to me to watch this all play out. Because people don't feel like, like nobody resonates with the data that they're seeing,

that jobs are being added, or the economy, you know, that GDP, Q3G, Q2 GDP is going to track at like three point something percent annualized or whatever. Yeah, no one, no one gives a shit about that when they're both trying to buy a home, right? Like they're thinking about their prospects if they think their job will be stable. And they're looking over their shoulder at their neighbors and has a neighbor lost his job. Like that's what most people are looking at. Like we are the outliers. People watching us are the outliers.

Like they follow the data more than probably 85, 90 percent of the people. So I think at the end of the day, that's more like what is driving a lot of potential home buyers is just what they're seeing with their own eyes. right? Like it's not, they're not digging into the data. They're just looking at it as my employer hiring. Am I at risk of losing my job? And is my neighbor losing his job? And is that making me nervous? I think that's just, that's just how it is. Yeah. Yeah, I completely agree. And I, in housing, you can see it. Like, housing numbers are bad. The job side, I think, like, it's also somewhat reasonable for people to be, you know, to take those numbers with a grain assault. Like the, I mean, Stackin LFS is frequently revised. We have, they've,

stack can has indicated that there are some discrepancies in the data with the non-permit residents, which we mentioned in last, last week's episode, which could skew the labor force up or down significantly. And then the other piece is, you know, we're looking at July, the labor force data, well, there was a huge hire for the World Cup. And most of the jobs gained were in the province of Ontario. So that's probably where you would have seen a lot of those. So, you know, like a lot of people say, oh, it's just seasonal jobs. Well, seasonal jobs would have hired in May realistically. And also, Labor Force survey is seasonally adjusted. So it shouldn't print a huge year over a year. So I'm interested to see if the strong economic numbers hold in

Canada, I don't think they will to tell you the truth. Yeah. Yeah. I mean, I think even the U.S. starting to roll over a little bit. I can't remember the percentages, but if you X out AI spend, It's not like the U.S. economy is just firing on all cylinders. And we had the U.S. CPI came in 3.4% year, 0.1 month, month, kind of in line with expectation. Energy was up around 15%. Both were essentially slightly down from June energy and oil. So there was some downwards pressure on prices.

So it was, I think, around 2, 3% decline versus June. We'll have to see because I think WTI, the price of oil was around $80 per barrel in July on average. And we'll have to see what kind of impact August will have. I suspect it'll probably tick up because of energy prices. Food inflation would stay pretty low at 2.7% in shelter, 3.2. Core was 0.2 month over month and 2.5B over a year. So obviously that strips out the most volatile components here.

And oil is definitely the biggest wildcard. Because I think I know you follow this and I'll just. share a tweet over here. So we've been seeing headlines, and that's pretty been pretty continuous here about the just strategic petroleum reserves, just being at their lows not seen in several decades. I think S&P 500 that was posted. This is more recent here. So it's down to 300, let's say below 300 million barrels.

And if you look back here and look at this here, then S&P updates. So that was July 15. So within a month, it's dropped from about like 20 million barrels. So they're definitely drawing down on it. At some point, they won't be able to because they'll want to keep some kind of minimal level for emergencies. But that's another thing to keep in mind because the international energy agencies, so the IEA said they project a supply deficit of 1.3 million barrels per day for all of

2026 because what there has been more of a supply deficit if you're looking just that pure supply, if you look at what's missing from the Middle East, but there's been some demand destructions. Of course, a lot of people say they're constantly wrong. That's fair. I mean, you have to get data somewhere from it. It also doesn't matter whether or not they're wrong. Like if that's your thesis, then use that. And it's still an indicator, right?

It's just an indicator to the opposite if you're fading that thesis. So, I mean, I'm like that with bond yields. Like, I literally am like, you know, I usually would assume that bond yields or that or Fed Fund futures are less or like that you should actually trade the opposite of what they're saying. And the same with Canadian consumer sentiment. Like if Canadians are piling into a trade, usually the opposite trade is the right trade. Yeah. Yeah.

Same probably for AI right now. I'll talk a bit about that. But and then again, we talked about the straight. We won't harp on it too much for what's happening in the middle. but how many times will be like a fake pump or whatever you call it in terms of or job owning in terms of a deal for the straight like honestly at this point like how many times has it happened like 15 times like I've lost track and the straight is still not full I don't think it's really open I've kind of lost track of what's happening all the time but you can make a case

that you know $80 per barrel is probably the floor at this point if there's no resolution and I don't see really the U.S. or Iran really wanting resolution anytime soon. So where I'm not an expert in the Middle East or anything like that, but that's upwards pressure. And in the U.S., you talked about, I think last week we talked about the jobs report. Canada came out with what, like 80K surprise. Like, what was the number? Do you remember?

75, yeah. And it was a lot of private sector, a lot of self-employed category is interesting because I think that includes like gig workers, like and stuff like that, the way the technical. But, you know, because you're technically a third-party contractor. But so maybe a lot of people picking up Uber jobs. I don't know. But the most fascinating part from KAA in jobs is that public sector employment as a percent of total and public sector employment period has actually fallen on a year

over-year basis for the first time in like 26 years since the year 2000, I believe. Mm-hmm. Yeah. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees. while paying little to no interest on the cash you need for day-to-day operations. That was our experience, too, until we switched to the new EQBank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance.

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Yeah, once in a while, but I haven't looked at it in a couple weeks. It's, I mean, it's basically like, there was a, yeah, like, yeah, like Trump says the straight's fully open. It's like, yeah, it doesn't look exceptionally open there. Yeah. Looks like Toronto traffic. It just goes to crawl. Yeah.

No, that's a good point there. And I mean, just on the jobs number, I don't know if you saw the U.S. job report. So they had massive revisions too when they came out with it. So they lost 20K jobs in July, but that was also there was also revision downwards of 100,000 jobs. So it's not like the U.S. is firing on all cylinders right now, especially if you start Xing out AI spend in the economy. And if you're looking at bond yields, I think the two-year bond yield is around 4.15%. So still pricing in like some rate hike. Yeah, there you go.

So 23,000. I knew it was around that amount. And so you have the two years that's, yeah, pricing in potentially. Like it's a good proxy for what the market expects the Fed to do. So slightly higher rates there. The 30 year, we talked about that. I think you sent me something about the 30 year and I'll show it here. So at reach levels not seen since pre-financial crisis.

So I think it was the highest level, 5.27% on the 30-year note, highest level since 2007. So I was trying to show here. There you go. From the Cobesie letters. And it's pretty close to that level right now. I think it's down maybe five, six basis point around 5.2. I don't have it on my screen per se. But why I'm talking about that is the use as debt is getting more expensive to refinance on the longhand.

And that's pretty meaningful because government accountability office in the U.S. said, as their projections, at the start of the year, there'd be around 10 trillion in debt that would be refinance in 2026. So it really puts the Fed in a tough situation because if you raise rates, you slow down the economy, there's more job losses, your increased refinancing costs. Hopefully you slow inflation, but it's not sure because it's driven a whole lot by what's happening in the Middle East and higher oil prices. Hopefully you stabilize long-term yield because that's what they want to see. They want to see you tackling inflation amongst other things. Could also have a negative impact on other foreign currencies like the yen, for example, because if you interest rates, the differential goes up. So that could create some other problems. Clearly, the U.S. is concerned about the levels of the yen. They would not have intervened if they were not.

If you lower rates, you stimulate the economy. There's more jobs, potentially higher inflation, though. likely higher yields on the long end of the curve because then bond market starts punishing the Fed for doing that because they start demanding higher yields because they're worried about inflation longer term. So really the Fed when you think about it is stuck between a rock and a hard place. Like they're really not in much of a position to start raising rates and then

you look at Canada and you know this as well as I do. So if the BOC starts lowering rates, sure. If they want to help homeowners, go for it, lower some rates. But hopefully that helps the economy. Who knows because it does nothing for tariffs. It will likely weaken the loony if the Fed doesn't do anything, increases potentially inflation as imports get more expensive. It might stimulate the economy, but we'll see if the height rates, then homeowner gets

hit harder. The loony might get stronger. Who knows, that's kind of hard to say. The economy slows even more unemployment rises. The tariffs don't go away magically. and hopefully inflation stays around the target. So it's basically like the options suck. Like that's why I think they're just going to stand path.

Yeah, I would agree with you. I think that there's no like there's no data significantly enough. There's too much volatility in the data one. Yeah. Like you have, you know, up and then down and then up and then down. GDP up, jobs up, down. You know, like so there's too much variance, too much volatility in the data points that they'd be using.

There's no trend. Like if you, if you were concerned that, inflation was running away, it would take a couple of months for you to make that decision. And I mean, maybe if we use COVID as a comp where, you know, because they've, they've said that oil price inflation, you know, would be transitory as well. And I think that. Yeah. Transit.

Yeah. That or uncertainty. Yeah. Or unprecedented. Sorry. But I think they are waiting for a more clear trend on, on. data and there isn't one. And I do think that if one evolves, it's more likely that we'll see a downtrend than an uptrend as a result of kind of like K-shaped economy, you know, the lower class

really suffering as a result of a lot of this stuff happening right now. But I could be, I could very well be wrong. The AI cap-ex spend could keep pushing the US economy up. This circular financing could end up actually delivering results for all of the parties involved. And, uh, are blowing up spectacularly in their faces. Yeah, but maybe we do get huge productivity gains from the AI stuff. Like there is a bulkcase to be found here. I just don't know if I believe it as much as like you still need people to be able to afford to consume stuff. You know, they still need to be able to pay for Chad GPT.

If these companies are going to make money when they IPO. One thing I was, I heard and it's a good point. So have you ever thought about all the financing required for AI, all this compute? Yeah. And at some point, there's just limit amount of capital, right? So how much of that financing is starting to take away from demand for government bonds? I think that's a good... Well, this is a big part about like the IPO is coming up, right?

Because you hear about like, I mean, so SpaceX, what? Is it back at all time highs? It was at some point in one. Oh, no, no, not even close. No, no. Are you sure? I think it is. No, no, no, no, I'll guarantee you.

It's not. No, I'm almost certain. I can't wait to be right on this one. It's above the IPO prize, but it's not... Yeah, it's 140. So the IPOed 135 and it peaked around $2.15. So it bounds back, but it's not, not anywhere near all the time highs. But yeah, it's what?

It's up like 40% in the last couple of days? Yeah, five days. Just looking at the five days here. This is a new Tesla like Wall Street bets trade, man. Like it feels like the, feels like the, you know, the like just the volatility. like you're getting 10, 20% swings, right? But they did launch an exceptional model today, or yesterday with GROC 4-6,

and they launched GROC-BOT, which I've had a chance to play around with, which is crazy expensive, like 450 bucks a month, I think you have to pay for GROC-heavy, but I had to do because I got to test it, you know, to see how people can use it in my industry

because we do a lot of content on that stuff because we build AI tools for real estate professionals. Is it good? It's good. It is. It's definitely the most user-friendly of, Like a lot of the, like all of the labs are pivoting towards harnesses now, right? Everybody says like, oh, open claw is dead.

It's like, well, open claw is dead. It's not dead. It's, it's that everybody is building off of the idea of open claw now, right? Which is it doing its job. And I think it's interesting. Like they're all becoming harness companies, right? They're trying to create practical uses for the AI compute. And whoever, you know, whoever gets to the point where they can build this kind of like

proper interface for you to do. execute tasks on your computer. I thought Microsoft or meta or Google would have had the easiest time getting into the harness game because they already have the active users. You just plug it in, you know, but none of them are really doing a really good

exceptional job at it. So now you've got three new players to consumer tech, so to speak. X probably has the best user base to pull from with the way they integrated GROC into Twitter. So that's probably pretty bullish on that stock. I agree. I agree.

I took a big tangent there, but to the IPO stuff, like when they IPOed, you saw everything else kind of draw down a little bit because all that retail capital was chasing the new trade. And it's going to be the same thing when I think Anthropics supposed to IPO sometime in September October. I think it's October now. Yeah, but now you also have the hyper-scale that are issuing debt and equity that is pulling capital from the market. And I think it's making governments and the U.S. government nervous. Like, why else would they intervene to try and prevent Japan from selling U.S. treasuries? Like, they're nervous about the level that the long-term yields are. And they don't want it to go too much higher because then if it does, they'll probably be stuck at just issuing on the shorthand.

And then at some point, that becomes a problem because then the Fed, like, they can't raise, right? Like they have to keep rates as is or lowering them. If not, the interest expense just gets too high. So that's why I was kind of getting to add earlier is you're like, you're damned if you do, damned if you don't. Filsic fiscal dominance. Yeah. I mean, it is fiscal dominance, right? If they keep issuing tons of debt, then they're, they're like they're unintentionally and unfortunately very much on on the, you know, in control of the,

the yield because they're dictating what consumers are willing to or sorry what the bond investors are willing to pay. Yeah. So did you see that Nvidia 500 billion AI financing plan? Yeah. Like I pulled up the circular financing. But yeah, I mean, it is getting crazy. Like it does kind of feel like GFC stuff a little bit, right? Like a lot of people would argue like, oh, you know, it's not the same because this is a new technology and it's economically productive and it's going to drive productivity. It's like, well, people felt that way about the housing market ripping too. Like that, you know, asking me of a contractor felt like that, like that was economically

productive in 2006, probably, you know, or a realtor or a mortgage broker or a bank. Like there are other sectors. This is not a, it's becoming a large sector, but it's not a massive sector before this game started. But all this cross collateralization, you create this like huge. huge issue for if one of these players ends up in a bad position for the systemic or contagious exposure. I think like, I mean, this was one of the issues that I had with Bitcoin. Like, this was one of the reasons I really, really got sour on Bitcoin, which I told you guys about

you and, you and, you and Hayden. I was like, I really think that Sailor like killed the spirit of Bitcoin with all this like cross collateralization and it's centralizing and it's being offered to, you know, government, sovereign wealth funds are purchasing into it. It's, the, the spirit of it has been gone, but also it's been like centralized and and risked and stacked upon. And I think the AI trade didn't need to be this, but here we are. It's because like everything just turns into a casino in the US. Yeah. And you're getting and really the ground zero for all of this, I think would be like it all

starts with open AI and tropic. I think if Dave, one of them fails or both fails and you can raise some question, we don't fully know their financials, but based on reports, they're losing tons of money. And they would not be raising constantly, like raising cash every like five to six months, if not that at record valuation, record amounts. If cash was, if they were producing cash or break even, they would not, they would not need to do that. So that is a really big concern there. So Nvidia, they came out with that $500 billion AI financing plan. So it's a plan with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, KKR to mobilize essentially $500 billion in AI infrastructure in terms of a fund that would, I guess, invest in that.

It's not a $500 billion NVIDIA fund. It's really the goal is to bring private equity into it, private credit, pension, institutional investor. Almost like create like as an asset, investable asset class with future returns, like almost like toll road, which is absolutely ridiculous when you think about the lifespan of. a GPU, but I digress. And Vidia is helping to help the fund de-risk. So they could backstop up to 25% of the financing, potentially around $125 billion. And they've already done similar things. And that's where the secular financing gets a little worrisome.

So you have CoreWeave, where they have, you can look that up. It's an official filing. So $6 billion capacity backstop if CoreWeave doesn't sell all of its capacity. They also invested $2 billion in CoreWeave, who is an NVIDIA customer, of course. NVIDIA also invested $30 billion in OpenAI equity earlier this year. Of course, Open AI needs compute. And then they'll be renting that compute from some of the hyperscalers who, guess what kind of chips they're mostly buying, Nvidia chips.

And there's also tags that Nvidia Wood is looking to backstop $250 billion of financing for Open AI to lease compute for a data center. that'll be built by soft banks. So, of course, the data center. I'll let you guess what kind of chips that they'd be using. So it is like, it's pretty crazy. InVitya kind of has like a, like it has the like monopoly on this because everybody has to develop on this like CUDA platform that they've created, right? Like there's no, it's not just because of that.

In part, yeah. There has been competing chips. I think the TPU, Google came out with, I think meta. also has a competing chip as well. And the problem is then when you start looking at the hyperscalers, is they're not very straightforward on their AI revenues. And also who's generating most of the AI revenue. But most of the estimates now that we're starting to see

and Steve Eisman from, you know, the big short, by Karel, by Steve Karell, I think he was playing the big short. He has his own podcast. He goes on CNBC. once in a while. And I did some digging here and based on some internal memos from example at Microsoft, but you can also kind of piece some things is you could be looking at OpenAI Anthropic accounting for as much of 70% of the AI revenue from Microsoft, Amazon, AWS, Google, and Oracle. So that's why I'm saying like what the hell happens to growth if these companies go under and they can't get any more

financing. And then you have the issue that, okay, and then you have these Xiperscaler that are spending billions buying NVIDIA chip to provide that compute infrastructure. So that comes back to NVIDIA. So it's really, there's definitely a circular thing. Like, there could be a massive ripple effect if something goes down here. And that's why, like, that is, to me, that's a big concern. The market seems to be disregarding those risks altogether. I mean, these companies are just burning so much money. It's absolutely insane. And they're being relied upon for growth for companies that like these.

So, Nvidia, Microsoft, Amazon, Alphabet, Broadcom, meta, and Microns. So all tied to the AI trade, they account for 29% of the SMP 500. Have you seen this like the table on like how much compute you get per plan? Have I showed you? I think I've pulled that up before on this. Check this out. Like, if you buy, like, do it. Because I just want people to understand the magnitude at which they are incinerating cash.

Because I don't know how this ends. Like, to me, there's a couple of ways. But one is they actually are efficient at reducing costs of the models over time. And it seems like we're kind of progressing in that direction. Like, we've sort of reached an upper end of how much they really want to develop to super intelligent. Like, I think Fable 5 really showed the market or showed the, the producer. that the consumers who are going to spend money on this stuff don't really need super intelligence. Like I don't need super intelligence.

My job is pretty simple. And I like using AI for my job. I don't really use it for anything else than that. I don't use it in my personal life or any of those things. So why do I need the smartest model ever or the closest thing to AGI that we've ever had? I don't. I need something that is cheap and reliable and specialized. And that is what it seems like you're starting to see GROC and DeepSeek, like a lot of the U.S.

or the Chinese competitors coming in the market trying to lower the token cost. Maybe we get to a point where in a year or two, you know, token costs are enough that actually people can use this at scale. But then the perceived margins that, you know, that we had on these businesses are also going to end up shrinking as a result. As it stands right now, just to reference the table on the screen and then I can pull it down, if you buy a Claude Pro Well, it'd be clear they have no margins right now.

Right, yeah. Their margins are deeply negative, yeah. Yeah. But on API cost, right? So assuming you're actually paying them at cost. But if you use, if you're using the like Claude max 20x plan for $200 a month, you're using $8,000 worth of compute. And that's like, and you can feel a distinct difference if you use Claude versus chat GPT, how much more compute you get for chat, GPT, because they have, you know,

I mean, Dario is famously quoted saying that, Altman's approach to compute was very yolo and he didn't think it was going to play out, but they obviously have way more compute ability. And so you spend $200 a month with chat, GPT, you're getting $14,000 a month worth of compute. Like, they're subsidizing your spend to the tunes of like, what, that's like almost a, is that 70x magnitude? 70, 700? I think you'd have to put back to. But it's a lot, but how do they make money?

I still don't. They lose it. Yeah, exactly. Yeah, you're right. And then so then, but then, you know, SpaceX, I think is an interesting case study in this regard because it's like they've IPOed and it doesn't really seem like the market cares that much that they're not making. Yeah, but they're selling, they're selling some of the compute that they're not using. So I think that is padding their losses a bit right now.

It could be a whole lot worse, but I think Open AI Entropic are using everything they can use. So they're not in this position that they can do that. And so what do they do? They're not integrated, right? Like they just make models. They don't launch data centers. Exactly. That's it.

So what did they do? They jag the prices. Then everyone goes to the cheaper models or they try to be more. Like I don't know how they make money. Like every way you start thinking about it, they just lose a lot of money or a bit less money, but they still lose a lot. Like I just don't understand how they can become profitable. like I agree.

And like in unless they, they go to API only. Like at a certain point, I think we're going to get to, you know, consumer plans are probably going to go away. And you'll either pay per use or you'll have fixed costs that are actually,

it seems like they're all hoping that they can get their costs down at some point. Like models are getting more efficient with CoreWeave that new like 10X announcement with Nvidia. They are getting more efficient at running the models. I think the models are becoming. leaner and like better at accomplishing the job with less compute required. So I think that there are a lot of like positive catalyst that could make the economics of this whole thing improve slightly. But like I don't. I mean it's it's all

it's almost like me right. I'm like people watching in the live like I don't have a whole lot of hair. And I can keep hoping that I get more hair, but it's not going to happen. So it's, maybe if I put some Rotene, though, grow slightly. I've read the comments on my, on Reddit. And I'm like, there's so many people that care more about my hair than I did. I appreciate it. Thank you. Yeah.

No, no. But, no, I think that's, that was kind of the gist of it, not to go harp on AI for too long. And then the whole social situational awareness collapse. I think I just wanted to talk about that quickly. The fund went from 1.5 to 20 billion in the U.M. They were basically using leverage to bet on AI winners, including chip makers. they were also shorting SaaS companies that could be disrupted. So essentially it's the same trade on both sides.

Okay, yeah, sorry, it was $45 billion. I saw some numbers of $20,000, but $45 billion, but essentially they were doing the same trade twice, right? If you're going long and leveraging that on the AI winners and then you're shorting companies that will get disrupted by AI. So if the AI winners keeps ripping, well, the ones you're shorting are probably going down, so you're winning. but if the inverse happens and AI winners go downhill,

the SaaS stocks that were beaten up or probably going to start going up and then you just get, you know, essentially what happened with them. And I think to me it's just like just this shows like this was a 25 year old kid, I think 24, 25 year old that had no experience in running a fund whatsoever, a hedge fund, which not really hedging whatsoever. Was you five X levered? Yeah, obviously it wasn't hedging if like,

like one down day, took him down completely, right? Yeah, and I read reports that he went to New York and was trying to get some investments before it imploded a couple months ago. And apparently he didn't have an answer in terms of the questions being, well, what would you do if the AI trades reverts back? And he had no answer for that. And it's just a good, I think it's just really insightful at looking at like how a lot of the market is acting right now, especially retail.

traders, they just don't think this trade can go away. And I think that's just a very dangerous situation to be in where people just put risk management completely out the window and they just go all in on this trade. And I fear that that's what we're seeing a whole lot right now. Well, what did Greenspan call that during the last time we saw a detachment on price earnings this high? It was irrational exuberance. Yeah. You got it. Yeah. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience too, until we switch to the new EQBank business account.

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Conditions apply. So that, just to kind of tie that back up in the whole AI trade, but we had a few questions about real estate that I know it's right up your alley. Well, yeah, this is actually just one of the bulls that's on my, I'll pull this one back up. It's one of the bulls that watches me on YouTube. And he's, he loves buying real estate in BC. So he said, what a great time to buy BC real estate.

I mean, you're not, I feel like you're not far from. you're BC and Ontario catching a bottom, but I think there's still a little bit of pain left in the market. This doesn't mean you can't get good deals right now, right? Yeah. There's another good question here, actually. Shout out to Lilo. Besson said K-shaped recovery is over.

Albao, please, the best. Did you see that? I'm going to pull this up. It wasn't. I remember seeing it. I meant to do something along. What else is he going to say, right? Like, he's probably, he was saying,

like, he's going to say that everything is sunshines and lollipops and going well. well, like he's still a political figure. Yeah, yeah, 100%. Well, let me share my screen for some reason here. Let me try again. There we go. I went to Syracuse. I can tell you that if it's over, it's definitely, it's not visible.

That's for sure. Yeah, I mean, it's pretty clear that the U.S., and like, especially this AI CapEx trade, is very much distributing wealth upwards and taking wealth away from the bottom end of the market. So, like, I don't know. Yeah, I mean, it's very hard for me to agree that a shaped economy is. suddenly over. Yeah.

Yeah, he was also the one that was criticizing yelling for financing most of the refinancing of the U.S. dead with the short end of the curve and now he's doing the same thing. So, I mean, yeah. Yeah. Yeah, there's another good one here. This one just came in from Joe and the Six. Shout out to Joe. Jobs are strong.

Come on. Look at wage increase and mostly part-time jobs. And then most of the strength is in Alberta and Saskatchew on 10% of the population. I think I put some charts up on this on my Instagram, but basically, I think it was like cumulative job growth is like the vast majority of it is happening in the prairies. I'm not complaining about that by the way. Like the more that the more that we can diversify Canada's economy into those sectors and the more exposure that we're getting to those sectors, I think that's a good thing.

I agree that I don't really think that job sprint in Canada is strong. And maybe they're earlier in this stream and watching the recording and they didn't, you know, they didn't catch like our full commentary on that. But a lot of it's published me by FIFA. But there is a lot of part-time, you know, there is a lot of self-employed. And the way that we group those are a little bit unreliable per se. I think like with the gig worker stuff, I mentioned, independent contractors, etc. But I- It's a good chart here.

It kind of aligns with what he's saying. Yeah. Yeah. So that's July 2026 is the unemployment rate. So you can see the change. And yeah, you're right. It's mostly concentrated in a few provinces. I guess Ontario was better than I thought it would be.

But probably because of, yeah. the World Cup. But yeah, you see that the biggest changes, you know, tend to be in those smaller provinces. Yeah, I got to find there was a Ben Rabinoo chart somewhere on the jobs basically being, I'll just pull it up from my Instagram when I get a minute here. But I mean, the, you know, the reality is that the like, yeah, sure, our majority of job growth is happening in natural resource sectors. The GDP report said the same thing, right? It was an increase in exposure to natural resources, oil and gas and mining. and metals were like the biggest growth factors in Canada's economy in the in the strong GDP print

that we had. These are good things. Like I'm not I've been sitting around complaining for the last decade that we were ignoring these economies and they were one of the greatest opportunities that we had in our country to to actually create some meaningful economic growth. I'm not going to be upset now that we're actually seeing it. You know? No, no, exactly. No, I mean, I think look, it's I think what we were mostly saying is that the job numbers don't like they're not looking as great as maybe the the last job report in Canada. And we were also saying that the US job numbers are definitely not as good as a lot of people were anticipated. And now we're seeing some revisions. I wouldn't be surprised if we for August, we see a job losses in Canada. I wouldn't be surprised

at all. Especially if you factor in, you know, those kind of seasonal hiring, especially with the World Cup being over. I wouldn't be surprised. Probably a real thing for sure. Yeah. And I don't think one jobs print or one positive GDP print is going to give us a lot of, like, it doesn't even seem like the bond market really bought it, you know? Like all of the improvements that we saw in bond yields kind of got erased within a short

period of time. Like the bond market was basically saying like this isn't really real growth. Right. It takes, you know, takes a little bit for them to kind of come to terms with. yeah, Bank of Canada is probably not hiking because we had one job print. Why? Because Canada's economy isn't strong. If anything, we need stimulus and you know, you need rates to come down because we're so indebted. And Canadian consumers are tapped out. We talked about how we're going to get into mortgages on that a little bit, but mortgages like a lot of people resetting at

50% of household income. Like there are way more things negatively on individual households that are factors in the economy right now than things in aggregate or happening to the country, industries that are growing, that could offset it. So I think that to me, the picture is,

it's not massively bearish, but I think the picture is pretty bearish for Canada, like relatively bearish. Yeah, I mean, it feels like we'll be in a period overall, and knowing that real estate is very regional and very market-specific,

but it does feel like we might be, entering for a long period of where prices are kind of just going sideways for for a while. Yeah. Yeah. For sure. Yeah, I think there's going to be, I don't, like, I don't, I just don't see a positive economic catalyst for Canada's economy other than rates coming down, which is like, you know, rates have to come down because of a bunch of negative economic catalyst.

So careful what you wish for with that one. Yeah, but then like we talked earlier, like you start lowering rates then. what's the like the second order effect right I think you you want to help this industry but then you start hurting other parts of the economy like it's not an easy thing like until the fed lowers rates I just don't see the bank of Canada I think they'll be too scared of just hammering the loony and if you start losing the currency starts getting out of control then you have to really you have to hit the panic button and then that doesn't look all that good yeah Yeah, 100%. Yeah, I think it's easy for, like, I guess the difference in Canada versus the U.S. is like, obviously, I can't see the bank of Canada really doing anything unless the Fed has to make a move.

Like, I think that they're just going to hold and really the Fed's the one calling the shot. But I think the difference in Canada is our household indebtedness, right? And I'll pull up this chart that I always look at reference whenever it comes out from Desjardin about Canadian household indebtedness. I think I've mentioned this a couple of times on this stream, but I mean, household debt in Canada came, you know, we, we topped it, I think, 188%. And we're climbing again. We bought, you know, we hit a bottom. It looks like Canadians were de-leveraging a little bit. And now we're back at 180%. You go, you go compare that. Like, look at Canada versus the U.S. just because those are the two that we're talking about in the way that the rates interact with one another. U.S. is, I mean, still high, 100% debt to household income. But interest rates aren't as stimulative in just saving households from, their debt burden as they would be in Canada because they don't they're not as irresponsibly levered as as Canadians. I mean, you know, taking on debt in Canada is their national sport, right? And so I think that that's something that the central banks are also probably paying a bit of attention to. Well, you had two years. I think we mentioned it a little bit where people were just tacking on

high interest debt onto their their mortgages onto their home equities, right? Because they could tap in, they could refinance. I think didn't they just increase the refinance requirement where you needed to have more than a certain, like was it 80% to be able to refinance or have a helock or something like that and was lower than that? Or you could go higher than that prior. 55 LTV is what you can do with a he lock. There are, there's been a handful of, of constrictive lending changes, I would say for, yeah, for Canadian borrowers on on the mortgage side. Stress test is still intact. They've changed the, loan to income requirements slightly across the bank's entire portfolios. So banks have to hit

four point like if you take all of your borrowers and all of their incomes versus all of their loan sizes that can't be greater than 4.5x percent. So that's constricting. Banks are obviously starting to be selective about what you know what high loan to income loans they're putting on their books because there's a limited amount. I think it has to be less than 8 less than 18 percent I want to say is is over 4.5x. So there's a lot of stuff happening. this is just credit contraction. This is what you see in a kind of a recessionary or even just like a contractive housing market

and cycle is banks are trying to de-risk. Regulators are trying to de-risk. And the most prudent way they know how to do that is by forcing borrowers to take on less risk because borrowers are really at the end of the day, they're irresponsible ones. Like it's so easy for us to say, oh, it's policymakers's fault. I saw somebody in one of my Reddit posts yesterday. They were like, oh, this country,

has ruined my family's finances. It's like, I think you might have played a role in that personally. Yeah. You know, and it's funny. Oh, what is the old thing?

Just the government just, um, holds your head for everything. Yeah. So this is, it is funny because like, you know, that this is one of my,

my gripes with the conservative movement direction. It's heading in Canada as somebody who, you know, has been that way for my whole lifetime is there's no, like they're always blaming. And it's, it seems like a systemic. issue in Canada and the U.S. now where people are just blaming politicians and the economy

and whatever for their individual circumstances. It's like, well, what about the principle of personal accountability, right? So it's just very interesting to me. And it's no blames a lot of other people like children. Yeah. That's like that's how kids act. Yeah. Sometimes you just have to take ownership. You did some mistake. You know with personal finances. Like that's personal and personal finances. Yeah, exactly. You like your personal life too, right? Like wherever you your ad, like you have to take ownership. You can't start blaming the world for for everything that's going on. And I think to me, one thing I've been pretty vocal about is just having better education for personal finance in our education system. There's just not much that's given. People are not really

aware. And I think that would go a much longer way than just saying, oh, regulators screwed us over and blah, blah, blah. You know what would do a whole lot better than trying to get regulators to fix everything is to actually have a better education program when it comes to personal finance because then people would actually be like, okay, well, is it a good idea to spend that much on a house and have so much of my income and what happens? Like people would actually start making those kind of, you know, calculations, first of all, being able to see if they actually afforded with all of their other expenses, but they would probably be able to see a whole lot of bullshit that, for example, realtor is worth selling in 21, 22, where if you don't buy now, you'll never be able to buy.

Yeah. There's an interesting one on Instagram. It says, as a mortgage broker, reverse mortgages are becoming more and more popular. Pensions no longer covering living costs, that generation focused on paying a mortgage, not investing outside of it. Totally true. I think this one's like very interesting. I think this is one of the, will be one of the defining pieces of Canada's housing market

for the next 20 years is baby boomers, how they're consuming their housing wealth, what they're going to have to do to liquidate to afford to retire, are they going to sell and maybe become renters, like because they don't want the burden of homeownership anymore and, you know, mobility or whatever. And then like are they going to be using debt against their houses to fund retirements? Reverse mortgage is a huge thing. Yeah. That we're seeing like big, big trend. I think they're hitting record highs right now.

I have to pull up the chart, but I think reverse mortgage. balance is. Let me find it. Anything else you wanted to go through on today's episode? No, I think that's about it. Maybe on the pension part, that's a part I know well. I think pension, yeah, it's, it really depends whether people are relying solely on CPP, old age security, if they have a private pension and then private pension, if you start looking at those, some are fully indexed, some are partially indexed, some are not indexed at all. Some are defined contributions, which is essentially an RSP matching with the employer. So there's no guaranteed income. So you have to be able to meet with a qualified financial planner to have a good plan or plan it yourself.

So I think, yeah, the pension side, it's, I don't disagree with the person seeing with that, but I think it gets a little more complex where there's not all pensions are created equal. Some are much better than other. But it is definitely those fully indexed defined benefit pension where you're promise a certain amount for when you're retired based on your usually best five years or something like that, a formula. and a certain percentage for East's year, those pensions are becoming less and less likely. So people are relying even more on either their homes or other investments that they would have. But we know as Canadians, a lot of Canadians just have most of their wealth in their homes. Yeah. Yeah, I think I do have some charts on like wealth concentration in Canada.

But we will cover that in another episode because I think, you know, I've been wanting to, We've talked about this a couple of times and just the debate of like stocks versus real estate. And, you know, in Canada, we love using our homes as our primary residence as a wealth creation vehicle. But it's not always the best deal. For most Canadians, it makes sense because Canadians are horrible at saving money. Yeah, for saving. Yeah. Yeah.

Yeah. Yeah. Yeah. Into a hard asset that is illiquid. Like, it's difficult for you to sell. So this is why I think it's done well for people. but that's like really more of a behavioral. They're buying a behavioral, you know,

constriction or limitation rather than anything else. So we'll touch on that and I'll bring some data on, you know, household. Because it's not that different in the U.S. as well. Like U.S., you know, if you look at your vast majority of households, it's mostly wealth concentrated in their primary residence. I think it's like 60% of their wealth below or like the bottom 80% is concentrated in the household. If you go to the bottom 50% or bottom 70%, it goes up to like 80%.

percent of wealth because as you get richer, your primary residence gets becomes a smaller and smaller portion of your net worth. I have some cool charts on that too. So anyway, we'll cover it all next week because we're, I think we're at 1 o'clock. Yeah, no, it was a fun one. We'll be back next week and thanks everyone. Thanks a lot. Yeah, this was a lit thread. We've, we've been dealing with the summer, everybody kind of out for the summer. So it was good to see everyone on the comments here. We had tons of questions and all that stuff. So I appreciate everybody tuning in and keep it coming. And we'll see you again next week. The Canadian Investor Podcast should not be construed as investment or financial advice.

The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.