The Canadian Investor - Carney’s Big Pivot: Jobs, Energy, Housing & Major Projects

Episode Date: May 9, 2026

In this episode, Simon and Daniel Foch break down the latest Canadian employment numbers, including rising unemployment, pressure on youth employment, and the growing divide between full-time and part-time work. They also discuss what Canada’s spring economic update could mean for housing, infrastructure, critical minerals, energy, and the federal government’s push to speed up major project approvals. Simon and Daniel look at whether Canada could be better positioned than many investors think in a world of geopolitical uncertainty, energy shocks, and shifting global supply chains. They also touch on the Bank of Canada’s latest monetary policy outlook, the impact of higher oil prices, why railways could benefit from elevated fuel costs, and what Berkshire Hathaway’s massive cash position says about patience, liquidity, and investing in uncertain markets. Tickers of stocks discussed: BRK.B, SHEL, ARX, CNR, CP, TSLA, NVDA   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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If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. All right, we are live once again on a couple of platforms. I think LinkedIn's still trying to figure itself out. more platforms this week. What are we on Facebook, Twitter, YouTube, and Instagram, I think, as well. I think I have to go click a button to go live on Instagram here. Yeah, maybe we can figure out blue sky and all. Yeah, yeah. But yeah, if you want to give me an idea of what we're talking about here today. Yeah, I think it'll be a fun one today. So we were talking earlier this week looking at employment payroll numbers.

obviously those were released earlier today for Canada. U.S. employment numbers also released today. Probably talk a little bit about in more detail the monetary policy report. That came out with the Bank of Canada update when they last did the interest rate announcement. The Canada Spring Update, just talk a little bit about that. I know you have some comments about housing, some of the initiative there. I definitely want to comment a little bit about the major projects office. what they had mentioned in the Canada Spring update and then probably some macro thoughts too

because I listened to almost the whole Berkshire Hathaway annual meeting with Greg Gable taking over from Warren Buffett. So some really good thoughts from there as well just to just just kind of how they're seeing the world right now and how they're actually thinking about investing too. Yeah, yeah. Yeah, 100%. Okay. Well, do you want to kick me off?

with what you want to start start us off with here. Yeah, let's do employment payroll numbers. So Canada lost 18,000 jobs in April. Unemployment rate increased 20 basis point to 6.9%. Employment rate also decreased 10 basis point to 60.5. And that's been on a steady decline since 2020 when it peaked around 62%. So before I go on, there was a lot of good information in there, but I just want to hear your thoughts on that. I mean, like, it seems like a continuation of a lot of the trends that we've seen over the last year, you know, public sector jobs up year over year, private sector jobs and self-employed down year over year. So I think we're just sort of like the government's spending money to suppress certain numbers, right? I mean, like, it may or may not be their

intention, but that's the result of policy. And, you know, we went from sort of post-election hearing that we're going to see 30,000 layoffs in the public sector to any, and I think you are on sort of like the OPEC side. I think we talked about this last last year, right? It was like kind of just creative accounting, right? Like you're still creating jobs on the CAPEX side and it just looks different on the budget because we're spending a lot on these special projects like you've discussed. So I think that this is where the question becomes like, are we genuinely trying to exercise kind of like, I don't want to use the word austerity, but are we trying to run a leaner budget and have an economy that is maybe more recessionary or like,

or are we trying to run like, you know, kind of the tail end of, like, you know, anticipating that the cycle is going to be bad and we're running make-work projects and all of these things. And the unemployment numbers sort of reflect that to me. One of the things that I will often track with when it comes to unemployment is mortgage relinquencies, right? Like, CBA puts out these numbers on a monthly basis. I'll see if I can screen share them here now.

But basically, you've got mortgage arrears in Canada. track quite, mortgage rateers in Canada to track quite tightly to unemployment. And so, you know, the question is like, are we, you know, if you look at historical cycles, assuming that this is kind of going to play out like a historical cycle. Unemployment continues to rise and we get to a point where mortgage delinquencies rise with it and then are we at the point where unemployment is ruling over? My guess is no, but I do think that the, that the, that the, that the, government is probably incentivized to keep unemployment lower. And it seems like they're willing to do what it takes to make that happen from the spending

side. Not that they're trying to keep mortgage delinquencies low. And I think this will still probably see mortgage relinquencies climb until the end of this year. These trends obviously matter to me because that just illustrates how unemployment rolls into the housing market. So I'm curious to get your thoughts on like, is the government, is the government like intentional, being intentional to, you know, to kind of use the word about trying to keep unemployment lower here. Yeah, I mean, I think on the private sector side, I would agree with you. I think

we're seeing some programs support to businesses that, especially the ones impacted by tariffs. It was interesting that release from Stats Canada, though, the private sector jobs looking on the last 12 months, those were up 91,000, self-employment down 55,000, and public sector essentially flat. So those are interesting numbers. And for me, I think you know it's a interesting perspective because I'm in Ottawa. So clearly when you're going to see impacts of the public sector, Ottawa is going to feel it a whole lot. And I think you're still not fully seeing the impact. So I know quite a few people in the public sector, quite a few people actually with departments that are being impacted by the layoffs.

And for the most part, I think the way they're going about it is, first of all, trying to get some voluntary departures, people going for early retirement. So that's usually the first phase. But then if they have a group of, say, 50 employees and they want to get rid of 15 job within that group of 50 employees, essentially those 50 employees once they've gone through the voluntary departure, then they go through a competition process. where the 50 employees fight for 35 jobs. So that's essentially how it is.

So my understanding, again, I do know some people around me that are impacted by that. My understanding is that there's still a lot of them in the competition process. So I think they've done the first phase and now they're kind of thinning out that last part. So I would assume this will probably be reflected in the job numbers, probably in the next six months or so. So it may, we might actually see a decline in public sector employment. I don't know for sure, but this is more anecdotal. But again, Ottawa being, you know, a government town, it's definitely something that I do take notice of. Yeah, 100%.

For anybody watching, drop us a question in the chat on whatever platform you're on and we can go from there. Yeah. So you think that we'll see further increase in the unemployment rate, more job losses. We'll have to see, right, in terms of the overall unemployment rate, especially because, you know, the fact that people are actively looking for jobs or not or give up that will have an impact too. So we'll have to see there. But the public sector, I think it'll probably remain flat for a little bit or possibly decline. Just based on what I've heard, again, I'm not this more anecdotal, like I've said, but I've heard that from more than one person in various departments with the federal government. So it's not just isolated to one department here.

And obviously it'll vary depending on what the priorities are for the Kearney government. Some departments are not being impacted whatsoever. I don't have any friends. Actually, I do have some friends in defense. I should reach out to them just to see how they are being impacted. I suspect that there's not many jobs that are being impacted in defense. Just from seeing all the ads when I watch the Habs games in the Stanley Cup playoffs about joining the armed forces.

I would assume that's not one of the part that's being impacted. But the other thing on the employment side, and I'd love to hear what you have to say about that, I think you're probably pretty passionate, but it's not looking good for youth employment. So yeah, go ahead. Just between people between the age of 15 and 24. So the unemployment rate is 14.3%. And just for context, because the unemployment rate for that age group is typically higher than the broader unemployment rate. So for context here, it was 10.8% on average between 2017 and

2019. And I think that's pretty good to keep that context because that was pre-pandemic. Obviously, pandemic times, everything got skewed a little bit. But 14.3, this is definitely on the iron end and has me a little bit worried for the younger generation. I'll be very honest. Yeah. Well, I mean, like, again, I'm not, I'm no good at stocks, right? So I interpret everything through a housing lens. But when I look at youth unemployment being where it is, those are your future homebuyers. So, you know, the idea. And so you've got, I mean, if you look at the population pyramid of Canada, I think we covered

this like on the last one of the last shows. But, you know, if you, you have two major cohorts, right? You have your baby boomers who are net owners of lots of real estate. And then you have your, you have your gen, or millennials and Gen Zs who, are net buyers of real estate because they're typically first time home buyers, first time home buyers are 50% of the purchase pool in real estate. It doesn't reflect exceptionally positively on the idea that we are going to be trying to move 66% of the real estate as boomers retire, downsize and deceased to a generation that can't afford it on a priced income basis and also

can't afford it on a employment basis. So I think that this is a very, very serious, long-term headwind for the real estate market when I look at that great wealth transfer, which in Canada and the U.S. is very much a great house transfer because we carry most of our assets in our primary residence. And I don't think a lot of people are thinking about it. And setting just that aside, like these are also your individuals who are most likely to be affected by AI replacing their jobs, like entry-level careers. Yeah. There are your individuals who, you know, are going to have the hardest time, whose jobs they're going to be most disproportionate impacted during layoffs because they typically will kind of carve out the bottom end.

It's a worrisome trend. I completely agree with you. Youth unemployment. And I was, I'll finish with this. I was feeling optimistic because it actually improved quite a bit heading into seasonal hiring. And it was sort of correlated with the forefront of that trend of non-permit residence numbers and temporary foreign workers leaving the country.

And if that was the case, then you would, you know, you would assume that. the correlation was, okay, well, non-perment residents were giving up a lot of these, or temporary foreign workers were giving up a lot of these entry-level jobs, and those jobs were now being filled by young people. And so it looked good. And that trend was exciting to me. And then it just completely reverted, like, within months, right? So like, you can see, yeah, you can see it there. If you look at your unemployment, it dropped for, like, basically the seasonal hiring period. Yeah. And it was mostly like purely Alberta jobs. And then it just came right back up. I mean, we're not back to where we were before, but we're, I mean,

give us another month and I think it looks like we will be, right? No, exactly. So it is something to keep an eye out for, definitely. And then when you're looking at the start of the year, 112,000 jobs loss, one thing we were talking about before coming on here is just full-time employment and part-time employment. So full-time employment fell 47,000 for April, while part-time employment was up 29,000. And that's always a worrying sign because the headline number may not look great, but for the most part, you can make an assumption here that a lot of these full-time employees, maybe they have to go and get part-time employment, but it's not out of choice, right? It's out of necessity. And the U.S. is seeing the same kind of trend as well. So the U.S. numbers also

came in, 150,000 jobs gain in April, although I assume it will be revised. at some point, unemployment rate is unchanged at 4.3%. But one key point in the release is that the number of people employed part-time, but would rather work full-time increase by $445,000 in April to $4.9 million. So I think those are always important to look at because it doesn't, you know, it's not not all jobs are created equal. And these headline numbers oftentimes, they just treat all jobs like they're the same. Yeah, yeah. And you mentioned like there was a data point that sort of illustrates that like most people would be under employed, right?

If they're getting these part-time jobs, like people, it's not like people want that. They're doing it. And the other phenomena is, and there was, I think the number kind of reverted, but in the U.S., you can see like there's a huge instance of people working two jobs, which is probably, I mean, you know, it increases your employer, your, your employment number of jobs relative to employees, but it is not a positive signal for the, you know, it's, it increases. economy if people have to work two jobs to make ends me. Well, yeah, and they're probably usually they're not as well paid. On the first hand, you also tend to not have the same kind of benefits when you're a part-time employee. Obviously, that's more impactful in the U.S. where health insurance is a big thing. But even in Canada, some of the basic benefits you just don't get when they are part-time

employee. I've had some experience working in HR and you just don't. So some employers will offer some benefits to part-time employees, but most of the them, they either have no or very poor benefits compared to the full-time employees. Yeah. Did you check hours worked? I actually forgot to check it on the most recent one. No, I didn't. I forgot to check it as well. Yeah, yeah. I'll see if we can pull it up. There is an old saying in investing. It's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom.

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Seems expensive and probably over-leveraging and dangerous. So we can use that maybe to pivot to the spring economic update and some of the changes that might be happening to those CMHC programs. But also, so I'll just quickly cover sort of what this is. Like I've said for a long time that the, like using CMHCMLI is basically like a, it's like a bond trade, right? Like you're functionally a bond trader who's using real estate to go levered long on interest rates, not going massively up over the long period of time. Do you want to explain how MLI? works though for people who are not familiar with it. Yeah, so basically you get debt that's insured by CMHC. You get it through like to any of your typical lenders will do these types of deals,

but you can get a 90 to 95% loan to value. You're not seeing a lot of people doing that. A lot of people are like 85, 90, but you can get up to 90, 95% loan to value. So 5% down, right, 20x levered position. You can get a 50 year amortization. So that buys down your cash flows, or buy, down your debt service costs, which increases your cash flows. And you can get approved with just a 1.1 debt service coverage ratio, which is like very lean cash flow positivity, right? You're only 10% cash flow positive above your debt service coverage ratio after debt service coverage after all the rest of your costs. So very, very thin margins, super risky deals. Like they, like they're, you know, I've never indicated that these were safe plays, right? But a lot of people are doing them because they,

they believe that rents are going to go up, which isn't the case right now. Vacancies are going to fall, which also isn't the case right now. Or valuations are going to go up, which also isn't the case right now. But, you know, people are buying them on a very long-term timeline. So do I think that they are, the question that they ask is, do I really believe in it? For the right deal, I think it's a good program as long as the investor. So for the right deal and for the right investor, I certainly think that they can be good deals. the unfortunate reality is in my lines, we don't have a lot of those good and, you know,

those, those, yeah, those types of investors in Canadian real estate. And so I would say at the margin, if you apply it to the marginal buyer, I think it is. Yeah, it's totally dangerous. But here we are. And this is Canada. Canadians, I think, have indicated that we cannot be trusted with crazy debt programs. Yeah, I mean, yeah, like I think, well, clearly it worked on until it didn't, right? So it worked for decades and then now people are, I think, are face reality. And I was showing just because you were talking about rents that are falling, I mean, you know there's better than I do, but just looking at rental.ca, the May 2026 rent report and pretty much every single province is falling except those that had cheap rents to begin with

is pretty much a trend I'm going. Yeah, basically places where rents were not affordable have returned to the affordability, right? And house prices have been doing the same thing. Like, If you're 9x price to income, your market is going to get closer to that for four to five X price to income. And it's not has nothing to do with the market. It's that's where lenders will approve deals. It's not to say that Toronto will end up back at four to five X or Vancouver because they probably won't. Historically, they've traded in kind of like your five to six, six to seven X income because there's wealth effect. People have equity.

People are borrowing money from their parents, getting cosines, whatever. But yeah, so I would say that that is very much a thing worth thinking about when we're, you know, when we're evaluating deals like this, right? Things are every, all of the inputs in your, in your economic model of a deal are not going in the direction that you want. Yeah. So in the economic spring report, like what else in terms of housing initiatives did you see in there?

So I saw it, like, I thought there was a couple of interesting like narrative violations maybe. Like they mentioned housing affordability. I'm going to try and pull up the charts here. But like housing affordability was improving as a result of, I just find it here. As a result of house prices going down. Let me see. Let me see.

I can find it. And then they also kind of cheer, like they're giving themselves pats on the back for, you know, like so house prices, a population growth, so like demand going away. Can't find all the charts here that pull up. There we go. So yeah, they show house prices have declined. Rental affordability is improving. And these are just market forces, right?

Like they, you know, but yeah, so there's that. So, you know, existing home prices have declined. Like, it was, it was less than a year ago that multiple politicians said that they didn't want to see house prices decline, right? Like, I'm not, that's correct. Yeah. Oh, yeah. Like, well, remember that infamous Trudeau interview where he's actually admitted that they

couldn't home prices go down. And didn't Trump say the same thing in the fall or something where they, I mean, I mean, it is the reality that politicians are fighting, right? Like, do you want to piss off the cohort that has the highest voter turnout? Voter turnout exactly. Yeah, I mean, why would they make policies for young people? Like, young people have proven that they're not a threat to politicians. Like, you know, we in Canada, you have record levels of young people yelling on the internet

about politics in the last election. And yet we had a voter turnout that was up ever so slightly. Like, young people could have decided the outcome in the last, last election. and they chose not to. Yeah, I mean, on one hand, it's hard to blame them because they're, they feel like whatever they do probably won't have an impact, but on the other end, if they were going out more. The death of democracy, though, if people are apathetic, right? Yeah, exactly. So, no, that's, uh, yeah, that's definitely something. I'm just looking at my mic here. My mic is a bit low, but I feel like I have it, uh, I don't want the game to be, okay. Yeah. I can

So sorry, sorry about that. I'll do my best, maybe talk a little bit closer. These mics are notoriously low. But in terms of the spring update, too, I had some pretty interesting takeaways. I was looking more focusing on the major project office. Did you look at that one a little bit? Yeah, there's some, I mean, like, they obviously intend to spend a ton of money on infrastructure. Carney loves infrastructure.

He's got home. He's in infrastructure. Like, I mean, it's a logical direction to take things. We need it. You go back to any historic recession. I mean, even before the election, like both Pierre and Carney were proposing deficits that indicated that they believed that we're in economic trouble, right, and that we would need to spend money to stimulate Canada's economy.

If they do that, then that should ideally create economic growth. It will be enough to offset any contraction in GDP that we might see as a result of oil price spike, et cetera. And I feel like my oil price spike thoughts are kind of different to right now, which we can chat a little bit about. but like can they outspend any risk of economic contraction? I don't know what you think. Yeah, I mean, it's it's hard to say at this point.

I think the approach they're really, obviously they're highlighting the amount of jobs that could be created with these major projects. I'm just showing here some of the 15 projects that have been referred so far, whether it actually means that they're going to see the light of they will have to see, but it represent 125 billion investment. And they are saying it could create up to 60,000 jobs. So clearly that's been a big focus of them, probably the same kind of focus if the conservatives would be in power right now. And what's really I find interesting, but I don't think this will be just for Canada as those like what they call. I don't know if you saw the transformative strategies.

So there's like five major area here. So the Altohoi speed rail, so the Ontario Quebec corridor, or the critical mineral strategy. So this one's really interesting because it's definitely putting an emphasis on Canada being more self-sufficient and having some secure supply chains. So that is a theme that I think we'll see more and more in years to come. And not just for Canada.

We're clearly seeing the U.S. do the exact same thing to be more self-sufficient themselves with their supply chains. So it's nothing really new. And with the oil shock that we're seeing, I think more countries will be like. looking to do that. At least for Canada, this situation we're in, is quite good because for the most part, we have access to those critical minerals. It's really just developing the infrastructure to be able to access those. And the Northwest Critical Conservation Corridor, that one seems to be really focused on

you have northwestern BC, southern Yukon, because there are a lot of minerals in those areas, but my understanding is there's just definitely not the infrastructure. structure in place to go and extract those minerals. So I think they're wanting to invest in that. Pathway Plus, so even with the announcement of the Canada's strong fund, I think you're seeing the Carney government really being different from the Trudeau government on that point where I think they're starting, my impression, and maybe I could be wrong, is that they are just doing an almost energy strategy, not renewable energy, not a transition energy.

I think they're not saying no to any forms of energy, but they're also realizing that conventional energy is important. And they had that wording in the Canada's strong fund update as well. Yeah. I think it's like they have sort of just realized that it's kind of foolish to ignore it. Like it's great when, I mean, I think we have real economic problems, right? And this is like you see this on an individual basis as well. Like it's fun to invent new like enemies when we don't have them. you know, like it feels virtuous to like pick these like, you know, ESG or whatever when like we

don't have like other problems that we are facing that we ought to be solving. And so I think that they were they certainly did that with like those things. But now we have like, I think other things like, you know, you have trade war. You have oil price shops. You have real things that are making it challenging for Canadians to be able to afford to live and all these other things. If that's where we're at, then we should face those problems and using the energy that is necessary to accomplish those goals is going to be the prudent strategy. So, I mean, look at data centers. I think we pulled this up in one of the last episodes, but I'll pull up this article from the logic, but, you know, they, like most of the data centers in Canada are, or most of the

data center growth in Canada is, it is in Alberta, right? And, um, A lot of that's because they're basically flaring natural gas and it's like the cheapest place that they can generate electricity to, you know, to power these things. This is like, it's a good thing because we're getting access exposure to one of the fastest growing industries in the world. But it's a bad thing from the ESG lens of policymakers who, you know, otherwise wanted a different outcome. I think it's kind of just, it's going to be a necessary evil. And it's like, it's just sort of a joke when you compare it to like, you know, it's a drop in the bucket when we're like talking about how. how we admire the economic progress of China and all of these things. It's like, well, who consumes the most coal energy out of like, it's like literally ever,

it's like the next 10 on the list combined, right? So it's sort of like, it doesn't matter what can. I think what Canada can do is like protect our forests so that we, you know, can, can absorb as much carbon as possible. If that like that, that to me is, is just as meaningful as, uh, as trying to consume less of it. Yeah. I mean, I think China just want energy and in the independence, right?

they don't care where it comes from. So they'll go whatever is easier to achieve it. Joe had a comment that there's a lot of talking points and press conferences from the liberal governments. I mean, that's a fair criticism. But I think we also have to give them a chance to see which projects will actually happen, if any, of course. But I think just the fact that Gibo resigned in the fall is probably an indication that

they are serious about this. Again, well, the proof will be in the process. putting whether these projects actually see the light of they, but it does seem like to me, Carney is definitely a pragmatic and I don't think he's stupid. He definitely sees that there's a need for this. And the benefit of it is some of these projects going through, it's going to create some jobs and probably reflect well on their government too. And then you also have the fact that they're starting to recognize the importance of the Arctic. And again, I think it's, it seems to be an a policy that is more targeted now on overall energy and not just renewable energy. So I think

that's probably a good pivot that they've made. But again, we'll have to see whether these projects actually come through. They've only been in power for a year. So we'll see in three years from now what is actually happening. Did you see all the tweets on, I'm going to undo the share here. Did you see all the tweets on Texas being like the leader in renewable energy right now? No, I didn't see that. What's it about? It's just, I'll see if I can find it, but basically like in the U.S., like, so easy way to think about it in the context of the conversation that we're having right now is like, people hear that, you know, California is so ESG and, you know, they want to develop all this renewable energy, but like Texas is just capitalism and like they're pro money and they're, you know, and they're anti things getting in the way. Housing too, right? You know, it's funny. Like you get, you know, California, California versus Texas is such an easy, easy comparison in contrast to make. So. California talks a big game about all these initiatives, ESG, affordable housing, whatever. Texas has built the most housing, therefore has the most affordable rents, and has built

the most renewable energy, therefore has the most renewable energy production. And it's because they're just, there's no red tape that they're efficient and pragmatic capitalist system, right? So I think that this is funny. Like, if they know that it's one way to get electricity and that it monetizes well, they're just going to do it, right? And you don't need to sit there and talk. And so I hope that Canada is going in that direction where,

we're kind of past the point of talking about it in press conferences like Joe's mentioning and more like let's actually just do some stuff. Because if we don't, I mean, they're not, they, it's not hard for them to not win the next election if it's just another four years of liberal promises that get broken and people are, you know, oh, this is the exact same thing. Like they do have produced results, I think, to win. Yeah, I think so too, because they don't have any excuses now, right? Like, they have the majority.

So they don't have any excuse to say, well, we were a minority government. We got some roadblocks from other parties. We could have done it if we were a majority. Now they actually have to execute. So whether they do or not, and I know a lot of people just say it's the same government and it was prior with Trudeau. But the reality is they aren't. I mean, at least the way they're talking is definitely different than the Trudeau government.

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and just the potential range of outcomes, if that pricing, if that oil price is not, stays higher for longer, it'll be interesting what actually happens. I don't know if you have any thoughts on that. Yeah, so my thoughts have kind of been revised because I look back at a lot of the cycles that we've referenced in previous shows. And I've sort of concluded that, you know, where we're at right now, like, it really depends on the magnitude of the elevation of the price, right? Like if we go, if we go to 120, then I think that that's, that's probably going to give this scenario that you and I discussed in the first episode of the lives where, you know, you get an oil price spike, demand destruction, prices blow off. And because people can't afford to buy stuff. If you're at like 125, right now, I think you say, say like 95, 100.

I mean, yeah, yeah, I think oil would have to get high, higher than I originally anticipated, like kind of when I actually took the time to model it. out, you know, like 120 to 150 range to like be unabsorvable by the consumer. So if you end up in like that 90 to 120 range and the consumer can actually continue to absorb the cost of inflation, that cost push inflation, then you actually end up with a sticky inflation scenario and like stagflation. I mean, neither outcome is good, by the way, like, you know, those being the two outcomes, like you basically get either stagflation or you get a recession. I think politicians and central banks probably prefer a recession over inflation or stagnation. But that's what kind of interested me about their model because it looks like they expect

inflation to kind of stay in the 3% range now until next year. And that, I don't know, like that kind of traps them, traps the Fed if inflation stays there. Well, I mean, weren't they saying it was going to peak around 3% and then slowly come down to 2% next year? Yeah, yeah, exactly. but it'll get to 2% by next year, which still means you're running 3% for a year, which is, you know, it's a 50% higher rate of growth than what people were used to. And people were already yelling about inflation because they interpret cumulative inflation,

right? Like your average consumer doesn't think about how much did this cost me a year ago. They compare it to the price that they've benchmarked that product at in their head from like five years ago in COVID. And they're like, oh, a banana, maybe not a banana, but like, you know, whatever grocery item is 50% more than it was. that period of time. A tank of gas is now, you know, $200 versus $100 that I was paying X amount of time ago. And so this is why people are yelling about cumulative inflation. They don't realize they think they're yelling about annual inflation, but they're yelling about cumulative inflation. So, yeah. Yeah. And what's interesting, too, is like as high as oil prices feel right now or gas

prices, on a real basis, I mean, it's not that high, right? When you adjust them for inflation, And I know it's been a shock because we were used to those lower prices, but it is nowhere near where it was. I think what was it when it last peak? Was it 2013 or no, it would have been before the GFC, right, the last peak? Yeah, there was a peak before the GFC. There's always a peak before, you know, major recession. But was that the straw that broke the camels back and the GFC probably not, right? No, exactly.

And it's just, it was also interesting. that monetary policy report how they're saying that Canada is definitely better plays than a lot of countries to deal with that oil shock. There's kind of two ways to look at it. Consumer and businesses will face higher fuel and input costs and they're already stressed to some extent, especially consumers, but national income should see a boost in energy sector revenues taxes and then it may support even some investments. And then we saw, I don't know you saw that Dan. I know it's not something you look at as close as I do, but whether it's a sign of things to come or not. Last week, we saw Shell announce an agreement to acquire ARC resources. So getting some access

to natural gas in BC and Alberta. So something is it, is it a sign of things to come? It could be also a sign that the federal government is more open to just allowing investments in the oil and gas sector where I think in the past it was very difficult under the Trudeau government. Yeah. I mean, look, super necessary things for Canada's economy to do even remotely well during what we're seeing right now. I hope that we, I hope that we keep progressing in this direction. I mean, like, everything is, these are all things that I'm a fan of, you know.

Did you see the interview with like Toby, uh, Toby Lutka on, I don't know what podcast he was on, he was talking about, he was talking about, like, TDS, but also like just like, you saw that he mentioned the TDS, but I didn't see a full end. Yeah, the rest of the video is really good, right? It's like, you know, we're, these are all things, like, you know, a lot of the things that are happening right now politically, like, it's hard to disagree with, diversifying Canada's economy, spending money on capital projects that are good. I mean, hopefully, hopefully we actually see results delivered and this grows Canada's economy because, I mean, this is going to set us up for decades of success if it's executed properly, right? Like, you know, highways and rail to the right places to get, to extract our resources to, you know, I mean, you look at like the ring of fire or like, I mean, fertilizers, another. a huge thing. Like we are, you know, as a result of like, this is, this is one of the commodity trade

things that gets discounted when you're talking about Iran, but like there, you know, there's a huge fertilizer impact. Well, who's well positioned to take, take that over? I mean, we, we are very well positioned to benefit and succeed from a lot of the geopolitics that's happening right now. It's an important moment to capture. So I hope they, I hope they do it. Yeah. And as, look, as hard, as difficult as it may have been to invest in natural resources with the Trudeau government, I think a lot of people forget right now, especially those who really hated the Trudeau government. And, you know, I can understand why I'm not going to push back against that. But the reality is Canada is in a place where if you have foreign investments, there are

worse place to invest than Canada right now. sure, you do have some uncertainty when it comes to regulations and the government, although the government has been saying this right things, whether they execute or not, we'll have to see, but you're away from a whole lot from all of these conflicts. So if you want to do some foreign investments, there are worse place to invest than Canada. Sure, you have the U.S., but again, we have the midterms coming up. Maybe the Democrats will be in office as, you know, will win the presidential race in two and a half years from now. There's a lot of uncertainty in the U.S. as well.

So I would actually argue that there's probably a bit more certainty on the Canadian side of things in terms of making those investments, having those resources. So I think Canada is very well positioned. Europe is a bit of a shit show. So, I mean, I don't know why you'd really want to invest in Europe right now. So, I mean, I don't know what your thoughts are on that, but I think it is something that people are really underestimated. I think a lot of commentary on Canada was done with the lens of what happened in the last 10 years

versus the current reality where I think you're getting these geopolitical forces and it can really, yeah, can really play to the benefit of Canada. Yeah, totally agree. And I think, you know, naturally you also just see what you would call like a flight to quality during like periods of geopolitical turmoil. And so I think that Canada, I mean, it's so. easy for Canadians to like think about this as if it's not true. But the reality is that Canada is a stable economy. It is a, it's a safe place for capital. It is a, you know, I mean, we're,

we're, we're comparing our lived experience as Canadians, the ones who, who are critical of, of what's happening, which, you know, I'm certainly one of them. Like, we're comparing that lived experience to what we've experienced in our country and from our country over the last, whatever, 10 years, you know, what we remember it being like. And obviously, it is certainly change. But if you travel around the world, you know, I mean, people who I think really, really say Canada sucks have not spent enough time outside Canada, right? And I think that global capital knows this. People who, you know, typically global capital is, you know, very, very wealthy individuals, that money's still flowing here. Why? Because they've been to all of the other places and they realize that Canada does

have something that a lot of other places don't. And so I would say that, you know, my expectation is that we'll probably see continued increase in foreign direct investment in Canada over the coming years, hopefully in more diverse. It's so funny too, right? Because you'll see, like, I'll post a chart of like, I just post data, right? Like I don't even really put a narrative on it. But, you know, I'll post a chart that says like a foreign direct investment contracted massively, right? And then people are like, oh, you know, Carney's scaring away investors.

Yeah. And it's like, okay. And then I'll post another chart that says foreign direct investment just jumped up massively. And they're like, oh. oh, well, Carney's selling the country off to foreign investors. And I'm like, well, which one, like, it's just the cognitive dissonance between, and it's not just the right that does it. It's the left that does it as well, right? You know, it's like, oh, we don't like, can't elect Trump because of crony capitalism.

And it's like, well, Carney's super well connected, so we should elect it. It's like, okay. Anyway, I just think it's, I would say that I would argue that foreign direct investment will probably, it's probably something that's really worth watching. And then I think money flowing into capital and growing Canada is, money flowing into Canada and growing Canada's economy should do well over the next little bit. Yeah. Yeah, no, definitely. I mean, just thinking about it, right, the easy example, and this is just like an obvious one, but you don't just Google what's happening in terms of investments in Dubai right now. And Dubai was really the financial capital in the Middle East. It's not like people are fighting to invest in Dubai right now. And that's just an example. Obviously, that's really a hot war that's going on, on and off, whoever, like, who knows what's going to be happening when you're listening to this, if it's the recording. But that's just an example. example of the extra uncertainty that will probably make investors think twice of investing in certain

regions. So that's just what's something I wanted to point out. Any comments on that? And I can just mention a few takeaways from the Berkshire Hathaway meeting. Yeah, do you. Yeah, before. I know your cash pile videos are getting getting a lot of attention. Yeah, the cash pile, which grew up close to 400 billion. It's funny some of the comments that we got from those videos where a lot of people are just saying that, you know, Buffett has lost it, Berkshire has lost it. They are just sitting on cash, not doing anything, but really what they're saying during that meeting is it is a very, I wouldn't say these are my own words, but a bit of a volatile environment. You're seeing some change in shifts with tariffs, war energy, very high valuation in the markets and liquidity,

they think is really a competitive advantage. So having that least, liquidity. And I mean, you can make that parallel to in Canada, right? If you're looking to buy real estate, having liquidity right now, it's probably a pretty good thing. They're obviously looking at bigger picture things, but if you're liquid and you're flexible on what you're purchasing, you tell me them, but I feel like you can have some pretty good deals right now. Yeah. I mean, I think on, you know, within the asset class that we're paying attention to, I think that there is some opportunity. I wouldn't say, like, it really depends where you're looking.

And I think most people are still interpreting for their downside risk on the housing asset class, which is probably correct. So, you know, nobody's in a rush to go and catch the falling knife, right? I would say, I don't know, when I look at, like, when I look at Buffett, it's like, you know, people are like, oh, yeah, they were sitting on all this cash. Like, we'll get the return that they could have made had they, you know, put it in whatever thing. Like, what was the opportunity cost? It's like, well, they still made, you know, exceptional returns on all of the other capital that they had allocated.

Like, you know, it was, the assumption is that they made, like, they had a cost, they ran the cost benefit that they stood to benefit more from waiting, you know, and that they'll get better, better deals. Because they're not, like, I don't think that, you know, Berkshire and I think real estate investors are very similar, the good ones. I don't think most people will care what happened in a one year period when they had a record cash pile, you know, when they're buying the next asset and they're waiting for an exceptionally good price and terms. Like, it's not just just price, especially, you know, it's like, am I buying it at a good rate of return on the price that I'm paying on that day? Is it sensible relative to the debt that I'm using, et cetera? They're buying it for 20 to 30 years, you know? So this would be an indication that they feel that there will be, or that at least for that cash that they're sitting on, there probably will be better deals ahead. And I would say that, you know, depending on the asset class, it appears to be true. Yeah. And you have to keep in mind, too, with a company as large as Berkshire, they may see some small deals, but sometimes the small deals, they just don't move enough the needle for us. So, you know, a billion or two may not be worthwhile. Sometimes you also get into the percentage that they can own from a company without being the actual owner. That's why

they'll usually stay under 10% of, like, that 10% threshold in the U.S. But it was also interesting for Berkshire, too. They did talk about tariffs and geopolitical risks, and it is creating some pressure on rising input costs. They're managing their businesses as well. They're not making any rash decision on it. The subsidiaries are working through prices, contracts, and customer relationship. they think things will over time level themselves out.

But higher energy prices, that was interesting. It's definitely a negative for obviously energy costs, pressuring consumers. They actually have clients that are large retailers saying that they are seeing consumers make tough spending choices. But what's really interesting and for a more macro look is higher fuel costs because they own the NSF railway is actually a big tailwind for the railway. because railways are much more efficient energy-wise than trucking, for example. So they're seeing a big tailwind from higher gas prices and higher energy cause because they're able to weather them more. Of course, it's going to increase their cause, but much less than you'd see versus trucking. And I assume that the Canadian railways here will probably see that same type of benefit.

And it probably goes back. It ties in well to the spring update where the, I think the federal government is going to look to have better supply chains to the Arctic as well. So we'll have to see whether exactly how they'll be doing that. It's still some big picture lines. But railway is, yeah, it's a big tailwinds for them right now. Yeah. What's your read on that? Like, is that going to, I mean, are we kind of in an environment where that benefit is sustained over like, I guess, the foreseeable future until this geopolitical risk goes away, right?

Yeah, I would think so. I mean, if prices stay elevated, I mean, you can't do railway everywhere. Let's be honest, trucking still has its place, even with higher cause. But clearly the risk for trucking gets way higher if the price stays elevated or goes even higher. And one other thing here, the AI, they touch about AI a little bit. And they do own some energy companies. And they were saying that data centers and hyper-scalers are increasing demand for electricity. but Berkshire Hathaway Energy is already seeing this and Abel, Greg Abel, who is Canadian, by the way, working to get his American citizenship. They said that data-related data-center related demand will grow materially over the next five years. But one thing that I saw was really interesting is they don't want for their utilities to have customers and businesses subsidizing the grid upgrades for AI data center. So if hyperscalers need the power, the infrastructure, they believe that they need to bear the full cost of upgrading that. They don't want those costs to be bear on the customer.

And I think that's a really, maybe a good point to finish on and just want to know what you think about that. But the risk of AI and data center for rising energy costs and how people, all the population could quickly turn against these data centers, even if they create, some jobs if they start seeing their electricity bills really starting to increase because you have an AI and data center, you probably have customers that are pretty inelastic when it comes to energy prices, right? Like if they need to pay a higher premium to make sure that they get that energy, they will, that electricity they will, where you and I, you know, we have finite budgets. So there is just so much we'll be willing to pay for electricity.

And nowadays, it's pretty much a, uh, a, uh, necessity. Yeah, it's a good question. I mean, it makes you wonder if, like, you know, there's a really strong bullcase for, like, I guess it's, is it Tesla, the solar shingles now, or did they put it in SpaceX AI? I can't remember, but basically, yeah, it's all so confusing now. Like, even the, anyway, I won't get into it. But, you know, I felt for a long time that if we want to meaningfully develop real estate

in Canada especially because we have so much available rural property. There's so much land here, right? And it's not like everybody wants to live in an urban area. I understand that like the vast majority of the country is completely uninhabitable, but that still leaves like the size of Europe that is inhabitable. And there's a bunch of land there that doesn't have water and sewer and it doesn't have electricity. Well, how do you solve for that problem in an easy and meaningful way? is on-site services, right, private services.

So you can go and develop a house with well and septic, but if you don't have electricity, you still kind of screwed. As other technologies, so, so like the same way that you were talking about how the net benefit of rail over trucking as gas, you know, like the- As energy prices are rising, yeah. Yeah, exactly. Like, you know, gas prices go up, rail becomes more economical. I think the same thing will be true for, for on-site electricity.

Like, people will just say, I'm going to pay, and I'm sure. they'll have financing programs or stuff like this. And then you get, you know, you have Starlink, which allows you to have, and this isn't just a big Elon sales pitch, but like you have Starlink that allows you to get access to internet in rural areas. Unpaid promotion. Yeah, but then, you know, but then the interesting part is like

Nvidia and you can't remember what other company they were, they were talking about it. I put a tweet out about it, but they're talking about basically allowing people to have like on-site development of, or on-site data centers on their properties, right? So, you know, like you get like a little server them on your property and you could benefit. Because at a certain point, they're going to have to decentralize this, right?

Like centralizing it, it takes too much from the grid in one location and that it does add competition to the market. And you've seen like people posting their electricity bills in the US basically saying, like, if you're competing with some huge Nvidia data center around the corner, you're going to see the cost. How do we, how do we hedge against that? Well, you decentralize the system and add it to somebody's house. And I think like Canada is a really interesting use case in that because, you know, more

months of the year than not, we need heating for our houses. And these things produce a lot of heat and they consume a lot of electricity. We have a lot of electricity and a lot of need for heat. So it's an interesting thing to me that I think is going to be, I mean, the natural solution is build nuclear, build solar, build wind, build proper storage facilities, overload the grid and it's not a problem anymore. But the U.S. outside of basically Texas is not efficient at doing that. China is amazingly efficient because they have authoritarian regime and they do whatever they want. Yeah. Anyway, yeah, I don't know. What do you think? Yeah. Yeah, I mean, that's an interesting take. I hadn't really thought about it too much. But yeah, it could also mean that people who are self-sufficient in terms of energy, whether they produce sufficient solar power or geothermal, whatever it is, if they're able to, yeah, instead of reselling that to the utility, maybe they make use other way. It's, no, it's an interesting one. The reason I was bringing up is, yeah, if governments are not be careful about that. And it's, It's not just Canada as the U.S. too. These are the kind of things that can lead to the rise of populism and to the extreme to a revolution. Like if people, electricity is a necessity in our society, right? So if you can't afford it, you're going to get a whole lot of pissed off people. Yeah.

Yeah, 100%. Yeah, no, I think fuel costs and food costs are like that too. And those are the two most inflationary things right now, I think, right? Outside of, yeah. Any last things before? Where we go our separate ways. I don't think so. No, yeah, I think I'm good.

I mean, this is a good chat. I always enjoy these. And I guess the only thing I'll say is anybody listening to this live. The recordings are going to be hosted on the Canadian Investor podcast stream. I am one of the two hosts of the Canadian real estate investor podcast. And Simul is one of the two hosts of the Canadian investor podcast. We'd love who checked out the shows. Hit the subscribe button if you like the things that we're chatting about here.

We're going to keep doing these every single Friday until it starts failing, which probably hopefully is never. Hopefully it'll grow definitely. Yeah. And yeah, so thanks a lot for tuning in and give us some stuff you want to hear us talk about in the next couple of episodes. We're going to do, I think we're going to, we're hopefully going to do AI with, with Braden for Toronto Tech Week. Yeah. At the end of the dialogue day. Yeah. Cool. Yeah, but if there are certain topics you want us to talk about, let us know. If not, we kind of try to talk about what's the, what's been happening in the news like this morning, the employment numbers came out. So that was pretty good timing on that. But if there is something else, even if it's a weaker tool, or even a bit more. As long as we know a bit in advance, if it's something we're not as familiar, we'll do the research and talk about it.

100%. Amazing. Thank you, man. Have a great weekend. You too. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests 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.