The Canadian Investor - China’s Economic Challenges and Investing at All Time Highs

Episode Date: February 12, 2024

Join us for a new episode as we explore China’s growing economic challenges. From a struggling stock market to concerns over real estate and a declining population, we dissect key factors impacting China's global standing.  We then discuss the topic of investing at all time highs and why it shouldn’t be a reason to invest or not invest in a company or the stock market. We finish by talking about the new Loud Budgeting trend on Tiktok. We go over what it is and why it is not a good thing to be able to spend within your means.  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  Sign up for Finchat.io 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.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Bélanger. The Canadian Investor Podcast. Welcome into the show. My name is Brayden Dennis, as always joined by the IT consultant extraordinaire, Simon Bélanger. As we work through all of my tech breaking down in the exact same day like why in the last four years have we

gone from usb2 to usb3 to usbc to thunderbolt to back to usb what is happening dude i just have wires everywhere none of them work well i know the usbc question so that's because there was a european union ruling against apple that forced them to make it uh kind of a universal which the usbc is i know that answer and i think the they're just faster than usb one two and all that stuff i think that's yeah right yeah i can imagine that the tech is better. And you're right, Apple is finally playing nice with the other kids in the sandbox here when it comes to adaptability with their stuff. But then I just got this new MacBook with the M2 Pro chip and the charging is back to the magnetic one, not the USB-C. Oh, yeah. So I don't know what is going on here, man. It's been my MacBook is the same, so I don't know.

I just thought it was always like that because it was my first MacBook Pro, but it's still the magnet. I have the magnet too, yeah. You got the magnet? Yeah. Because my other Pro was the USB-C, which was nice because it worked with everything.

Anyways, there's a reason why my camera is lower than usual for people watching on jointici.com. Quick plug, get this podcast on video. And now you get a nice, you know, you get multiple angles of me on the pod lately because none of my stuff works. I must say though, before we get started, like I saw a video you posted, man,

you're doing pretty good on that workout stuff. You're looking pretty fit. Oh, thank you. Yeah, yeah i'm on the other hand i'm embracing the dad bod so it's uh the opposite uh spectrum no you are not you are not dad well it's more because i have back issues i have to i do a lot of rehab kind of you know mobility stuff so i do the most workout I can with my limited mobility. I'll just say that. Yeah. So I did ended up doing that like 75 hard for 45 days that I talked about last year. So that was 90 workouts in 45 days, which was absurd, no alcohol. And then now I'm doing five days a week working out right now. But, dude, it is so much more fun when you do sports in the mix. I got flag football on Thursdays, rock climbing tonight.

I've realized that that just makes it so much easier to stay fit. Enjoy it while you're still in your 20s and you can't do all these things together without requiring maintenance days afterwards like you'd be on the floor stretching for three weeks oh i think you are regardless but yeah pretty much but that's why the bike is nice that's why the bike is nice that's why you are into the into the bike it's like my dad same thing when he had a lot of pain with his knees and his hips. The bike, really good recovery too, like in terms of getting your muscles dialed in with low impact. Dude, what is happening with China? A lot of stuff.

I see here that you have China as our first segment of the day. And I wanted to start there because I don't know what's going on. So I'm excited that you're doing this. And I'm just going to be listening and learning and probing and asking questions because you're kind of more looped in on the geopolitical stuff. Yeah. But it feels to me there is very little confidence from the international and US capital that's just completely flown out of there. The ETF inflows to these China-based equity ETFs has dropped off a cliff and some of them have completely disbanded and pulled out. What is happening? There's a lot of stuff happening.

And I'll just caveat by saying this is just kind of high level. I've been reading a lot on it. I'm not going to do a deep dive on any of these points. So I do encourage people that are interested in that. There's some really good people, macro people out there, if you're interested in learning more about what's happening in China. One of the biggest challenges, however, in China is the CCP and the reliability of the data as well. So there's always some questions regarding the reliability of the data, or sometimes they'll just decide to stop publishing it. For example, they did that for youth unemployment. I think it was late last year, middle of last year, where it showed 25% of younger working age people were basically unemployed, which is extremely high. And they essentially just stopped publishing it.

So just things like that, that you have to take into account. Anytime a metric is stopped reporting is typically a red flag. This goes for companies too. Yeah. Dude, I want to start like a systematic trading thing with the FinChat data on companies that change reporting or stop reporting a core KPI. They're just like, oh, we don't want investors to be focusing on that anymore. Pivot.

Yeah. Well, I mean, it kind of goes right. If you remember, and I know we're diverging, but I guess it works well with the China story because Apple has such a big presence in China, too. But remember when Apple stopped saying how many units they were saying and just the revenue from iPhone? I mean, it's clear that they did that because, you know, they knew that the units had basically plateaued and that it wasn't really worthwhile. They moved to the installed base yeah they started

calling it the installed the installed base and just saying it as a segment right like a revenue segment which wasn't based on units per se and clearly you know i don't think you know obviously they have an interest in doing that and shifting kind of over the revenue and the installed base because it helps, you know, they bring more perspective to the services. But at the end of the day, they're probably the underlying reason is they knew that they had peaked in terms of units and they wanted to shift what investors were looking at. That's right. I totally agree. And this happens with almost every company that doesn't change segments. The only company that I can think of that has lasted the tail of time of being public

for decades upon decades and their segments never change and are just dialed in. Sometimes they'll add new ones if there's a new business, but they won't remove them and they won't mix them around like Disney. Disney's a bad actor for this. Is Berkshire Hathaway. Yeah. Berkshire Hathaway's segments have been clean as a whistle and just beautiful to look at for a very long time. And I'm going to talk more about Berkshire, but back to China. Back to China.

What's going on? Before he took a little detour into the Apple, let's just say it. So the stock market, first of all, has been doing terribly in China. Because of this, Chinese official have also placed some restrictions on short selling. If you're new, short selling is just a way of betting against either the stock market or a specific company. So you essentially bet against it by short selling. I won't go into the mechanics of it. We've talked about in previous episodes. If you're interested

in us going over how it works, just reach out to us on Twitter or email and we'll happily direct you to that episode. Sovereign wealth funds. So sovereign wealth funds in China, those based in China, is actually, they're buying up ETF shares to boost the Chinese stock market. And there's a lot of reasons why the Chinese stock market hasn't performed well in the last five years. Clearly, there's been a shift in terms of free market and government intervention in the economy and in business. And obviously, like you kind of alluded to, that has definitely scared foreign capital. If you're a foreign investor investing in China, there's a couple of ways to do it. You can invest directly. If you're an individual investor like us, you can go the ETF route or an ADR, which is an American depository receipt that gives you essentially some economic equivalent to the shares. But at the end of the

day, if there's any kind of capital controls from the CCP in China, there is a strong case to be made that it will affect foreign investors very negatively. And capital controls essentially, you know, an example of that is you own shares, let's just say directly of Alibaba. You own the Chinese shares that are listed over there. You sell for profit, but the money is with the bank that you're dealing with in China, and they won't let you get that money back out to Canada or the U.S. That's a very basic example, but that's what capital controls is. And that's a big reason why investors like investing in the U. That's a very basic example, but that's what capital controls is. And that's a big reason why investors like investing in the US. I mean, there are some counter arguments to that as well, but because the capital controls, they're much lesser or not present in certain circumstances.

And a few weeks ago, there were reports that China was also considering. So Bloomberg said that China was considering a $278 billion stock rescue package to pump up the stock market. So there's definitely signs that the Chinese, the CCP, is well aware that the Chinese market has not been doing well. And they're mulling different things or even taking action to try and help the Chinese market has not been doing well. And they're mulling different things or even taking action to try and help the stock market. So that's the first thing that's going on there. Anything you want to add? I mean, look no further than like Alibaba as a chart. The story around that company, the growth stalling out,

the founder and CEO gone missing out of, you know, it just looks to me as the pinnacle. And we've lost a lot of confidence and multiples have come down. And people will say that the stocks are very cheap because, you know, the businesses are still intact. And I think that they are. But I'm just going to pull up a graph here of Tencent. Okay. This is Tencent's top line revenue in Chinese yen. Okay. Let's throw it in USD here.

The business basically up until like the Q3, Q4 of 2021 was growing very steady. Right when we had these kind of concerns around government intervention, that's around when those discussions kind of popped up, right? And the stock got hit very hard. But look at the actual numbers. These companies haven't grown since. There is a direct correlation. I mean, they haven't shrank and the businesses are still intact. They own great assets. But, you know, if I take this graph out on the top line for Tencent since then. It peaked at 45 billion USD in 2021, and it's now down at 41. Prior to that, this was a runaway freight train in terms of growth. And so beyond just the narrative, the metrics are not as bad as the story, The metrics are not as bad as the story, but they do show how this change in the way that these companies operate and how the government's going to interact with them is directly resulting in financial results for these companies as well.

So it's a bit of a double whammy. Yeah. Yeah. And Tencent, they obviously were pretty impacted. The CCP put in restrictions. They heard i bought the stock yeah they literally they literally heard i bought the stock it's right about then and uh they they kept the i think it was kids are under a certain age can't play more than i think an hour a day of video games or something like that so i mean whether you think that's a good thing or not you know that's beside the point I think the point is that they kind of will act unilaterally because it's

not a democracy. And some people may say that's a good or bad thing because they can get decisions faster. I mean, I'm not there to debate that. But from an investing perspective, I think it's a bad thing because there's not really a court system. It's really the CCP. I mean, they have their courts, but I don't know to what extent they really have a say of this. The leadership doesn't want something, but it just goes to show they can really take action that will adversely affect especially foreign investors. That's right. I mean, Xi Jinping, didn't like change it so he's in power for life no matter what like yeah correct me if i'm wrong like there was yeah there was something that was

was done years ago that made him you know remain in power until he dies yeah i i think so i'm not 100 sure but i think you're right and but one thing i know is that the power is definitely consolidated much more around him whereas in the past it was more you know more like kind of governing by committee there was more a select group of key officials that would make decisions together now it's basically xi jinping that decides like what direction they're going and then basically tells his lieutenants on, we're doing this, get it done type of deal. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them,

you can buy all North American ETFs, not just a few select ones, all commission free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. That is questtrade.com.

Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is air Airbnb.ca forward slash host. That is Airbnb.ca forward slash host.

Now, to add to that, so we've kind of been getting to this point. So there's also been a significant drop in direct investment in China. So especially foreign direct investment has fallen off a cliff. So that can be, and I don't have the graphic in front of me, but if you look it up, if you look foreign direct investment in China, it's pretty eye-popping. And that can be a pretty severe problem for China because, sure, the governments could intervene here and do a massive stimulus package with the economy. do a massive stimulus package with the economy. But if they do that, there's most likely going to be some severe repercussions on the Chinese yuan and its value. It's most likely going to depreciate it a lot, which would create some more problems for China. So a lot of people have been saying, oh, you know, they can always do a big stimulus package. Well, the issue is that there

could be some pretty severe consequences because of that. And the fact that foreign direct investment has like rapidly declined is putting a lot of pressure on the Chinese economy. The third one here is the population decline. So that made headlines. I mean, for now, and I know the UN, I believe, has some projections that are either it's the IMF or the UN, one of those international bodies that shows that China's population will be under a billion by like 2100, year 2100. I think that's a bit like doing projections that far out. I mean, I think they should, you always should look at those with a big grain of salt. But nonetheless, their population has stalled. It's actually declining.

They still have 1.4 billion. But again, this is not good for economic growth. Some people may say, well, they still have a lot of China that's kind of rural, that there's still a lot of potential. And rightfully so. of rural, that there's still a lot of potential and rightfully so. But nonetheless, their population is still at the very best stagnating, but most likely going to be continuing to decline in years and decades to come, according to most predictions. And one of the big reasons for that is the one child policy that was in effect from 1975 to 1979 to 2015.

That's still having some- Was it that long? Oh yeah, yeah, it was a very long time. I thought it was well after 79. Oh, that's fascinating. I didn't realize that it started all the way back then. Yeah, and the issue with it too is it just, you know, it's been gone almost for a decade now,

but it's the behavior that it's conditioned people. And the population pyramid that results from that. Yeah, exactly. Few decades. Yeah. Yeah. And I think for a lot of, you know, when I was a bit younger, I know that families looking to adopt children, a lot of them were looking to adopt specifically girls from China because a lot of families, they wanted, obviously, specifically girls from China because a lot of families they wanted obviously there was a one child policy so they wanted to have a boy so there was a large amount of Chinese girls that were up

for adoption because of that I mean there's all different kinds of unintended consequences to that but I mean from what I've seen as well and what I've read, there's also an increase. You know, China, as their economy has really grown in the past couple of decades. So cost of living has risen. There's been a change in social values, ideologies and so on. So it's going to probably take some time to reverse the trend. How long? Who knows? Will it just keep declining? Maybe, maybe not.

But it's definitely from an economic perspective not a great thing to see your population level out and the Chinese real estate problem is probably the one that has gotten the most press so this one obviously we heard I think it was last week or maybe the week before that Evergrande was filing for bankruptcy in Hong Kong. And the issue that it may pose for creditor outside of China who are owed more than $25 billion of the debt. So if those creditors are not treated fairly in the bankruptcy, you know, in favor of Chinese creditor, which it's a big, it's, you know, I don't think it's a non-zero chance here. Well, that could even further impact foreign direct investment

because why would you provide debt to Chinese companies if you're going to be at the end of the line? Probably, who knows, maybe you'll even be behind Chinese-based shareholders because they want to give priority. Yeah, usually it's debtor before shareholders and there's different levels of debt as well. So some will have priority over others. But that's something to keep in mind because depending how that goes, it could really damper investor sentiment. And there's a substantial

part of its liabilities that our project under construction. That's more of a probably a societal issue here because the question here is what will happen to those projects and the deposit that were put on those by normal Chinese people? For the most part, what happens to the companies that are owed money by Evergrande? It looks like, you know, for now, it looks like they'll try to keep the operations going. But for how long will creditors just ask for liquidation of all the assets? Will the Chinese government intervene? A lot of questions still remain in the air. And the Chinese government has said that it is looking to work with, an air quote here,

high quality developers to ensure that they can stay in business and complete housing projects. Now, this is extremely worrisome. housing projects now this is extremely worrisome i think it's actually even more so than the ever gone filing because in my view if high quality developers need assistance how big is the real estate issue in china because you know by definition a high quality developer should not in my view maybe you have a different view brayden but in my view should not, in my view, maybe you have a different view, Brayden, but in my view, you should not require government assistance. A high quality developer. How are we defining high quality? I mean, the way I define it in my mind is, you know, you're talking about, you know, someone who's independent.

Independent, but also, you know, manages their business well, has experience in this. You can count on them to complete projects, make a bit of a profit. It's like a high-quality employee. Yeah. So it's a high-quality business, right? To me, that's kind of the implied truth about a high-quality developer. But I thought that was fascinating. Yeah.

Now, there is also the question about Country Garden, which defaulted on its US denominated debt back last fall, although it seems like they are trying to make arrangement with creditors. So that remains to be seen where it goes. And 30% of China's GDP is actually tied to real estate and approximately 70% of household wealth is tied to real estate. So if you thought Canadians were high on real estate, I think again, I mean, we probably are, but a bit behind China, it sounds like. I was going to say, this sounds familiar. Yeah. No. And investment bank Nomura estimated that there's approximately 20 million homes in China that are unfinished,

and the funding gap to finish these homes would be approximately $446 billion. When I watched a YouTube video the other day of this guy who was traveling through mainland China, showing off all these unbelievably high-tech cities that just randomly have the population of Toronto times two that you've never heard of. There's all these city centers that you've never heard of in your life if you're not familiar with the country that are gigantic populations. And then there's all these really cool futuristic cities that are also around, he literally brings you around that are abandoned. Unfinished housing starts, impressive infrastructure, and no one lives there. No one's an exaggeration.

But of course, they were built out for a population of 10 million and in the thousands or tens of thousands or hundreds of thousands at the max are living there. It's just weird. How did that happen? I guess it was just like, let's build, let's build, let's build. Oh, wait, population pyramid. These things are connected. All these problems that you're mentioning, they're connected. The population pyramid leads to issues with real estate, which leads to the creditors, which leads to – these things are connected. Yeah, and a lot of the local governments, or if not all of them, a lot of their revenues was tied to, I think, the land being used to build these developments.

So they were dependent on that for sources of revenue. I don't know like the intricacies, like exactly how it worked, but I know there's a relationship there. And for people who want to look at something a bit like you were talking as maybe a proof of how, you know, China overbuilt or kind of built and then uses it for a little bit and just forgets about it. Google images of the 2008 Olympic Stadium. It's centrally abandoned.

Yeah. And if people a bit like maybe you were a bit young for those Olympics, but I'm sure you remember. I mean, it was. That was Beijing. That was Beijing 2008. Yeah. I mean, this was, you know, it was amazing to show that they did.

And I think there were some, you know, just the old, like the amount of money that was put in there. And to see that, you know, that building barely used or like from what I can see abandoned from most. Yeah. It looks like it's falling apart. Yeah. Like it's literally crumbling. Yeah. Based on this image.

So it's anyways, I just thought when you mentioned that, that was kind of easy. Sorry, that reminded me of that. Oh, these pictures are eerie. It looks like a... A capsule in time almost, huh? Yeah. It looks like Chernobyl. It's like all eerie, like just abandoned.

Oh, wow. And the last thing I'll mention here to show that there are signs that things are not going well. So the People's Bank of China, so the PBOC, announced a few weeks ago. So they're the central bank over there that the RR rate, so triple R rate, which is the reserve ratio requirement for banks would be cut by 50 basis points on February 5th. So they announced that in advance, which is not usual for them. And the RRR is the amount of liquidity that banks need to have on hand. So the higher the requirement is, the less the banks have to loan out and do other banking activities. So in theory, if this is lowered, then banks will have more room to make loans, which in turn should help spur economic activity.

The problem with that is lowering those requirements doesn't mean the banks will turn around and do more loans if they feel like there's not the opportunities, not really worthwhile or it's too risky. And that's clearly an indicator that the Chinese official, the CCP, is aware that the economy is struggling and they're trying any way to stimulate the economy. And the last thing I'll say is over, I mean, if you look in the past year or so, you can compare the CSI 300. If you want an ETF that tracks it it's ASHR and you'll really see that it's not it's not great I mean it's it's completely trailed the S&P 500 it's been in a massive drawdown over the last couple of years and I think it just shows that there's a lot of capital fleeing China whether you know if people want to make some bets on China, betting that, you know, all these risks are overblown, you know, is their own money. Personally, I think there's just too

many risks. And even with such low valuations, I think there's still a whole lot of risk and the upside is somewhat limited. And maybe the last thing I haven't even mentioned for investing in China is what happens if they start being aggressive towards taiwan or do an invasion what kind of sanctions will there be on china what kind of capital control will they impose against foreign investors if that happens so there's all these different risks uh involved with china right now the whole market is f if that happens yeah no one's producing any chips. Like, dude. No, it's going to be a bigger problem. Yeah. It's not going to be just China, to be clear to your point. But the S&P will get crushed if that happens. So I think it's just a good lesson, especially for those who are kind of new. And I

invested in China a few years ago. I think I sold my position a year and a half, two years ago. And I took a bit, I think I broke even on Tencent, took half, two years ago. And I think I broke even on Tencent, took a loss on the ETF I had. So I've been there. But just to be aware and assign appropriate probabilities to different outcomes if you do want to invest in China, because there's a lot of risks. It's not just one thing. There's a lot of risks. For me, it's kind of like one of those fool me once, fool me twice thing. Because I got value trapped on the Chinese tech names. I lost some money doing that.

I'm happy to be open about it and what I've learned from it. The main thing I've learned from this is I don't know anything about China. I really don't. I've been to Hong Kong. I've never been to mainland China. I don't know anything. And I'm willing to say I don't know anything. I don't know what products are popular.

I don't know which things are up and coming. I don't have a good grasp on if Chinese equities are value traps or opportunities today here. If you look at the metrics, they look like slam dunk opportunities. You factor in all these other things and you question value trap. The answer is I just don't know. And I just don't care to opine on it anymore with the equities. I used to have a hot take on them being critically undervalued. And now I've just realized that I don't know. Well, they're still more undervalued than they were then. I know. I know. Exactly. That's a crazy thing. Yeah.

I know. I know. Exactly. That's a crazy thing. Yeah. Yeah. That was like 30% to go on the index. And I thought it was extreme value then. Right?

So it's like, I mean, someone's right. And one pandemic later too. That's right. Yeah, exactly. Someone's going to be right on this, whatever way they take the trade. And I'm okay if i have no hot take on it now at this point i used to i used to feel like i have to have an opinion on this and i just don't no i agree with you for me there's just too much risk i'm so fascinated by you know

reading on it but uh not enough to put my my heart or money in there to invest. That's right. And you know what? For those listening, we have lots of Chinese listeners. We have lots of Chinese Canadian listeners who listen to the show. That chances are, you know a lot more than both of us about this stuff. And maybe you're in a better position to have a particularly hot take. You know, we appreciate you. Thank you for listening. And there's a really good chance you're listening to this and thinking, I know what I'm

talking about. Perfect. You're in a position to make better decisions and go with what you know here is the number one thing with investing. It's just like, whatever you understand, what you know. Yeah. The last thing I'll mention, you actually reminded me something. So I was talking to someone a couple months ago who was like, she lives in a country that there's, I think it's Guana. It's just on the edge of Venezuela. And there's been some contention about the oil reserve and Venezuela trying to take claim and so on. And I was aware a little bit of this situation, but she's from there. And the insights you can get from talking to someone who's actually from there versus the reporting that's done,

I always find that super fascinating. She was amazed that I knew about her country. She was surprised I was asking questions. But I think it goes to what you say, you know, if you're, if you have friends or family in China, you're probably getting different insights that we are, because they are on the ground, like they can see what's happening. And I think that's valuable. Yes, it's maybe more anecdotal. But I think that's also some very valuable information. If that's something that interests you to invest in Chinese equity is gather information from all

the various places that you can. Yeah. And build conviction in a way that makes sense, right? Like there are the ways that we get this news and media and the way that people actually understand it across the world with political interests, this information, who knows, man? Who really knows? And I just have no confidence anymore to opine on it. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or

TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be

a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Let's talk about all time highs, Sion. I'm just looking at time. I know you have a hard stop in like 30 minutes. We'll do this segment. But before that, quick question for you today is Apple Vision Pro. If you had to bet some money on it, you've seen the photos, you've seen people posting people Posting people with it. People have it in their hands now. Apple Vision Pro.

Winner or dog for... Winner, dog, or distraction for Apple over the next five years? If you had to pick one. I would say it's probably winner, dog, or distraction. Probably more of a distraction, to be honest. I think it'll become a nice little segment for them but i i don't think it's gonna be significant of a segment in the next five years it may become after that but i think it's still too early five years yeah they'll need you know think about it when you know when you just think about it for a second just a cost is prohibitive right now for a lot of people. So they'll have to come out with a more affordable version. When is that

version coming out? And then when that more affordable version comes out, then they also have to give it time for adoption, making sure developers go on this new platform, because I'm sure the apps will be different than the laptops than on your iPhonehone so i just think five years is too short of a time i think it'll probably do well over 10 15 years but yeah i wouldn't put large sums of money on it okay fair enough yeah i just look at the demo of a kind of as i look at all these these cords on my desk uh it is timely as I'm having this tech explosion here with nothing working. A form factor of a virtual workstation without all this hardware and junk with just one device, I think is inevitable. I think is inevitable. So the virtual workstation where we go into this dystopian,

where we go into the cafes and people aren't working on their laptops anymore, which is probably dystopian for someone 20 years ago, is actually just going to be some sort of form factor, whether it's this big goggles, whether it's like some chip in your brain, neural link crap. There is going to be a digital workspace. I think that that's inevitable. And Apple's just in a good position to be able to capture that because they already own the ecosystem when it comes to the hardware and the tech. And Microsoft also as well. I just don't have any confidence that they can build hardware like Apple can. And so they're in a really good position right now to be able to capitalize on that. And on cost, one last point on cost. If you look at inflation adjusted, the original Mac is like four times

more expensive than this Apple Vision Pro coming out today. And so, you know, Moore's Law type of thing, I do think you're going to see a lot of deflationary pressure from them making this thing over time. And a MacBook Pro is like four grand if you want the, you know, decent RAM on it anyway. So we're not that far off, you know, in terms of cost. No, definitely not definitely not i think my

main thing is if you have a macbook pro like you don't really you know that the original mac yeah it was very expensive but it's because there wasn't really much alternatives right you didn't already have something that does very similar in terms of productivity. Sure, it might be a little increment, but to me, like my MacBook Pro, I have no desire to dish out with like four grand Canadian, 4,500. I don't know what the cost is. 3,500 USD, is that the price?

Yeah. I think that's the price, yeah. So that's probably the perspective I take, but maybe in the next upgrade cycle, then it would be something to consider. Let's look at all time highs. The market has ripped. I did almost double digits on my portfolio in January. Absurd. I think that's only happened to my portfolio three or four times, and it happened twice last year, January this year. This is what's happening with

the market. And I wanted to comment on the concept of all-time highs, particularly when it comes to an individual security and not sort of any commentary on which direction the market moves when it reaches new all-time highs. When it comes to individual companies, I tweeted this out in Jan, which is, a company's stock can trade at all-time highs and be at its most attractive investment opportunity ever based on the risk, reward, and valuation. And additionally, this can also be true that a company stock can trade at all-time highs and be at its least attractive investment opportunity, like cannabis 2018, versus at its most attractive opportunity of maybe one of the big techs in 2012 as they asserted domination cloud computing on the world. In a vacuum, all-time highs have no bearing on future long-term returns. It has no bearing

on the future performance of the equity. Let's use Berkshire and go back a few decades to the mid-90s for this experiment. Berkshire Hathaway hit a big peak after a huge run-up in 1997. Another new peak one year later in 98. In 2000, it was coming up on a peak and then it was a terrible few dog years for the market, technology in particular, and not even Berkshire was spared. The stock did nothing for years, and then it ran up and hit an all-time high peak in 2004. Did it again for a few years, ran up big, all-time high in 07, again in 08. Stock hits $100 per share, the B-class. The great financial crisis happens. The stock doesn't recover, trades flat basically till 2013. The stock rips, moves to all-time highs. Wow, Berkshire's at all-time highs again.

again. It then proceeded to make all-time highs, Simon, in 2014, 15, 16, 17, 18, 19, 2020, 2021. It made all-time highs in every single year consecutively. And then 2022 happens and the market goes down. 2023 all-time highs last year. Again, the stock has been ripping and the B share is looking to cross $400 per share at all-time highs. Imagine you had that huge run-up in 2004 and you sold the stock because it had just ripped to all-time highs. Now, Berkshire Hathaway is not the norm here. I'm not trying to suggest that. This is a once-in-a-lifetime stock, once-in-a-lifetime wealth generator run by once-in-a-generation type talents. But the important lesson here is that if your investment thesis is panning out as you hoped,

I bought the stock, I'm hoping it goes up. If you're going to hold it for a long time, don't you want it to hit all-time highs consecutively like Berkshire did in 14, 15, 16, 17, 18, 19, 20, 21? I've seen pundits mention that you should sell stock because it has reached all-time highs here in the early innings of 2024 and if you bought a stock with the intentions of seeing it hit all-time highs aka it goes up it just makes no sense so to loop this back around to my original statement, a stock can both trade at its most attractive and least attractive investment opportunity in its history at all-time highs,

aka it has no bearing on future long-term returns. No, that's exactly true. And all-time highs, you always have to put it in perspective because it's only a price, right? It's only, you know, it's a share price. A share price means nothing on its own, right? You have to put it in perspective. That's where valuation comes in. That's where the future prospects of the business comes in. Clearly, if something reaches all-time high, and we learned, you know, this is the hard way.

At least I won't speak for you, but I learned this is the hard way in 2021, right? The worst stocks that hit all-time high and the valuations were absolutely crazy. Like in hindsight, I should have sold all my Teladoc stock at the time. Obviously, hindsight is 2020, but now I'm more aware of this. And if I do see kind of a big run-up, it won't be because it's at a all-time high. It's going to be because the valuation is all out of this. And if I do see kind of a big run up, it won't be because it's at a all time high. It's going to be because the valuation is all out of whack. And I think it's just like the market's gone completely crazy. That would be my reason to sell, not because it's at all time high. I mean, it happened to be at an all time high, but that's not the reason. Yeah, it just happened to be.

Exactly. Right. Like at that all time high, you can have trading at one of its most attractive multiples maybe ever, but it can also be its least attractive multiple ever. The lesson here is actually just that it doesn't matter. In a vacuum, it has no bearing on returns and actually really has no bearing on valuation in itself. Valuation in itself needs to be looked at as in a vacuum, whether you're using trailing or forward looking metrics or projecting. Whatever you were using in 2021, it was crazy. Forward trailing doesn't matter. Price to innovation, baby. We're back. There you go. Yeah, that's it. We could have time for the next segment here,

the one I wanted to do last week. Let's do your last segment and then I'll shelf my last segment and put it at the top of the box. Sounds good. So this one, I mean, it's called loud budgeting. So it's been making the rounds, and it's a new trend apparently on TikTok that is really catching on. So have you ever heard of this? No, but I mean, we were going to do this last time, and we were here on the pod. And loud, but you just

caught me at tiktok that okay people are making tiktoks so let's go okay so loud budgeting is people going on social media or tiktok obviously and being vocal about not spending or cautiously spending so it's funny that it's going viral now personally i've been saying it for years well before i started the podcast budgeting is sexy all of a sudden here on social media. Yeah, exactly. But I think to me, it's always been okay to say no to a friend, family member. Let's say that, you know, they want to go out for an expensive dinner or something like that. Just saying no and saying you don't have the money for it. There's really no shame in saying that. And I've always been very vocal. You'd be surprised. I've said it before. I mean, I could have gone, you know, just sometimes going out or restaurants.

And sure, I could have, you know, put it on my credit card or but it would have affected my savings plan and other things. And I would just say, look, I don't have any money for it. And most people will be very understanding. And to be honest, if they're not, then, you know, probably worth rethinking. You need friends. Yeah, exactly. Probably worth rethinking your friendship with them if they're your friends. But can I just jump in there?

I love this. And when people say this, like, you know, just are open and honest about like, hey, guys, this sounds really fun. But, you know, like I'm in a cash crunch right now, or I'm really trying to save money, this kind of thing. I was on a bachelor party trip last year, and one of the guys we were looking at, we were going to play three rounds of golf, and each round of golf was like 200 bucks a round or whatever. And that's, I'm forking that. We're already doing the trip. We're already getting the plane ticket. We're already getting the Airbnb.

And he's like, guys, like I, I am just going to be out on golf, but like you guys go, don't worry about it. Like, it's just a lot to just started a new job. Like,

you know, this is going to be tough. And we're just like, Oh dude, perfect. There's seven of us. We're going to pull our money and we're all going to spend 50 bucks and you're going to play all three rounds of golf.

Like, don't worry. We, we got it. We covered like, we're so like, we want him to be golfing with golf. Like, don't worry. We, we got it. We covered like worse. So like, we want him to be golfing with us, but we don't want it to be stressful for him to do so.

So just like the fact that he texted us that like one respect and two, then he gets to have a good time. We get to have a good time and it all works out. Yeah. Even, uh, even our recording software is giving him a thumbs up. So

dude, Yeah, even our recording software is giving him a thumbs up. Dude, they're all using the same API because the Google Zoom, the Riverside, you did the thumbs up on a Zoom call. You weren't doing the thumbs up either. It just did it on its own. No, it happens when you count. So I'm a big like, I do like a 0.1, 0.2, 0.3. But no, but it's true. Exactly. I mean, honestly, if someone said that to me, I'd be understanding or you'll see that oftentimes you can find some lower cost alternatives. So for example, instead of going for dinner and drinks, you could just say, well, I can just do

one of both either dinner or drinks, or you could go to your place or your friend's place and do a potluck and buy a bottle of wine right so there's there's ways to still be able to do things socially i'm not saying not to do anything because uh you know you want to save money necessarily maybe you're in a really tough spot and that's what you need to do but there are oftentimes alternatives i mean you can go to ikea and have some meatballs and some swed, right? It's pretty cost effective. Or go see a comedy show and have drinks at your place before you go if you want to drink. And so take a page out of your college or university here and just pre-drink before the comedy show.

Get a solid pre-game in. Exactly. But, you know, my opinion here is that, you know, like if you if your friends giving you a hard time, like I said, it's probably worth reconsidering that friendship. But even if you think that someone has plenty of money, they might not. So I think that's important for people to remember, because we live in a society where a lot of people, you know, they'll see someone and they'll see a nice car, for example, and they'll think automatically this person is rich. Well, we've talked about this before, but Canadians are extremely indebted. The scary thing is that most metrics include, do not include the buy now, pay later data. Did you know that? The buy now, pay later debt metrics

are very rarely reported to credit bureaus. And so it's very difficult to get a good handle on that. So I think that's something just to keep in mind. Like if I use a firm or something or like one of these buy now, pay later, it doesn't go to my credit bureau. Like they don't hit my score. It's very loosely tracked. Yeah. It's very loosely tracked.

Yeah. Perfect. So we have more debt than we thought yeah yeah most likely and if you see someone with uh if we go back to the car example with a nice new car well the data i found is that there's 53 chance they got financing on the purchase so the most common number for um leasing as well is 20 so if you add the both of them, essentially three quarters of new cars are either financed or leased. So keep that in mind if you think, you know, you see someone, you think automatically they're rich. Maybe they are, but there's a chance they're not, that they're just using way too much credit. Maybe they're using just enough credit.

I'm not saying that they are necessarily. And it's the same thing for used cars. 55% are purchased with financing. And that's according to data from J.D. Power from March of 2023. So I'm assuming as in change. And average car payments are right around $800 a month in Canada. Yeah, it's pretty crazy. And new cars now cost $61,000 on average, which is pretty crazy and new cars now cost 61 000 on average which is pretty pretty crazy car

finance was like 250 a month or something oh yeah well you're not getting you're not getting a new car and now unless you're yeah but it's not like this was like it's not like i'm like dating myself this is like 20 years ago it wasn't that long long ago. No, I mean, essentially, yeah, it's not like what people are doing now is they're doing the financing over like seven, eight, nine years. So it's before insurance, before all this. All the other costs. Yeah. And to make things, you know, to make things like I just said, like worse, like the loans are just being extended and my whole point the car example here is that you know a lot of Canadians are indebted and it was more to show that sometimes trying to keep up

with the Joneses or your friend that you think is rich is really trying to keep up with a friend that has a lot of debt and perception is just perception and it might be close to reality for some but might be way off for others. So just keep that in mind. And don't be afraid to be honest with people if you don't have the money to do something. And, you know, I'll just say it for me, like, I, I don't know, maybe it's my age, maybe it's my personality. I was clearly different when I was in high school. I, you know, you're at that age, you want to impress people, it's but as i got older i changed and i mean i got a a new used car and it's a 2017 jetta and i like it no bells and whistles it's standard paid it cash and i'll just tell a little story so the daycare that we use for

my daughter literally like the average car is like $100,000 to that daycare. And I think some people may feel like they don't belong or something like that. I'm just rolling it with my standard Jetta that the key doesn't even work anymore. The beeper, I have to like manually open it. And I'm happy because I don't have any payments on this car. And I think it's just being comfortable with yourself. And I know it's just being comfortable with yourself. And I know it's more of a, you know, it relates maybe a little less to investing, but I think it still does because if you're comfortable with yourself and you're not spending money on trying to impress others, it's more money that you get to invest in yourself. So whether it's investing and being able to grow your income because you're learning

new things or it's investing by investing in the stock market. I think just being comfortable with yourself will actually be able to, you won't feel like you're giving up anything or the need to actually impress others. Yeah, I love this segment because you never underestimate people's willingness to spend money on things to impress other people. I think if I was to look back all the times as a young man that I spent money to impress other people, I almost always had buyer's remorse. Oh, yeah. I can relate to that.

I can't think of one thing that I'm like, all right, that was a good buy. Like really good buy back in the day. I can't think of one example of that, you know, and cars is just an easy example. Yeah. Cars is an easy example to point to. A lot of people love cars. And if that's what makes you happy, go for it. Exactly.

And that's the, what I wanted to finish on. If you're a car enthusiast and you really love, you know, whether it's like a kind of muscle car, the 60s, 70s cars, or there's a certain type of car you're just passionate about. And I know some people that are really passionate about that. Then have at it. You'll just have to make sure that, you know, you allocate a reasonable amount of money to your, you know, from your budget there. And that's completely fine but you know as well as i do a lot of people that have bmws audis or whatever name your german luxury car oftentimes is just trying to impress others and they're not car enthusiasts by any stretch of the imagination they just want to fit in with

their friends that also have those cars it's utility right like i i only i make a joke to my friends i live like midtown toronto i make a joke to my friends, because I live like midtown Toronto, I make a joke to my friends that my car only drives north because it is a utility. I don't take it downtown. I think that that's, dude, I lose like, I feel wrinkles form on my face when I drive downtown. It's just like so stress inducing.

It's like going to Costco on a Saturday morning. Yeah, it's just like, why'd you do that's like going to costco on a saturday morning yeah it's just like what do you why'd you do that to yourself like you chose to do this to yourself yeah great analogy costco on a saturday morning so my car only goes south because its utility is to bring me to my cottage in the summer and bring me bring my ass to the golf course two things which i get immense value and happiness out of. I don't care what I show up in. I really don't care. I mean, of course, I want like a nice, respectable.

I don't want to show up in a beater. I want the car to be reliable. Yeah, I just want it to be reliable and get me point A to point B and be safe. That's it. Those are my three criterias for a car. That's it. My new spending framework is by like my quality gauge is going up because I'm realizing that it's not like always cheaper. And I don't like throwing out crap anymore.

Like I'm anti things and crap. So my new thing is I have to be able to consume it i have to be able to use it or like a gym membership is like a good example of like a use it where i don't gain any stuff you know my membership doesn't give me more crap that i have to own in my house so consume it use it uh think of like the gym membership or it's really small yeah like it's not gonna no no i think that's good or if it's clothes go to winners dude go to winners it gets nice stuff you just gotta grind you gotta grind at winners dude it lasts me about five years so it's. I feel like the cost per year is pretty good.

What does? Lulu. Lulu. Oh, yeah. Pants, I'm Lulu only. Have you seen the shoes, the Lulu shoes? Have you seen them? Yeah, I've seen them.

The men's ones, they just came out with the men's ones. They've had the women's shoes for probably close to a better part of a year. The men's shoes, if you haven't looked them up yet and you're listening to the show, men's Lulu shoes, they're super ugly. I don't know if you've looked at them. I was disappointed. They got to step it up. Well, I'll have to do another segment on that. I'll have to go soon. Okay. You got to jump. Thanks for listening to the pod, folks. We really appreciate you. Thanks for tuning in. You can support the show at jointtci.com. You can leave us a review, a five-star rating on Spotify, Apple Podcasts, and you can go to finchat.io. Finchat is the best equity research platform out there for looking at the fundamentals for long-term investors. If you're listening to this show,

there's a chance you're either using Finchat or if you're not, you should be using FinChat. You can go on there completely for free at FinChat.io. I am one of the co-founders and CEO of the company, and Simone's an investor, so that supports us as well by using FinChat.io. Thanks for listening. We'll see you in a few days. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.