The Canadian Investor - Corporate Venture Bets and an All-Weather Retirement Portfolio

Episode Date: September 16, 2024

In this episode, we dive into the world of big company moonshots, like Google’s Waymo, and how corporate venture capital (CVC) strategies are evolving in a post-free money environment. We discuss Waymo’s autonomous taxi service and its partnership with Uber, exploring how major companies are making strategic bets on the future.  Additionally, Simon shares recent changes he’s made to his parents' retirement portfolio, including rebalancing their equities and cash as well as adding gold, and Bitcoin allocations. Finally, we wrap up with a discussion on the power of compounding returns, referencing insights from Brookfield’s Bruce Flatt.   Tickers of Stocks & ETF discussed: CNQ.TO, TOU.TO XAW.TO, BN.TO   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 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 Belanger. The Canadian Investor Podcast. Welcome into the show. My name is Brayden Dennis. As always, joined by Simon Belanger. Usually record these on Tuesday afternoons, but it's Friday morning and the boys are looking sharp. Look at us, both collared up.

Yeah. Look at us. Oh, yeah. Collared hoodie for me. That's a really nice tarp. I like that one. Dude, we got some good content today. I'm going to talk about something that has been top of mind in my world. And then you're going to talk about something top of mind in your world with big changes, helping out with your parents' investment portfolio, which gets a lot of love on joinTCI.com. So if that's any indication of it getting a lot of love on the podcast, it's probably

a good call to talk about it here on the show. Dude, anything new in your world? No. I mean, aside from expecting a second baby girl, which you've been aware of. Yeah, so. Big announcement on the pod. There you go. Yeah, so girl dad times two. There you go. So I'm pretty excited for that, yeah.

There you guys go. That's awesome. Congratulations, my man. All right, I'm going to start today's show with the rise of moonshots from big corporations. I want you to check out something. Killedbygoogle.com. For those who are listening to the podcast and not driving a car, go to killedbygoogle.com. Killed by Google is the Google graveyard.

A free and open source list of discontinued Google services, products, devices, and apps. We aim to be a source of factual information about the history surrounding Google's dead projects. So it shows what's been shut down, but also what's planned for retirement. Because there's a lot of things that I saw in there like google podcasts which you can still use but it's supposed to be shut down and sunsetted by the end of the year uh i think they're trying to oh they're trying to roll it all into youtube and bundle youtube music okay it's a lot of stuff their big tack is in the game of bundle unbundle bundle unbundle right yeah and so a lot of stuff they've just blatantly shut down, but a lot of stuff it's like, okay, that still exists,

but now it's in some other service. Yeah, and we see it too with our metrics, right? The Google Podcast, like it's not very widely used. I mean, some people still use it, but not very widely used. And it's funny, the title, you said it, because I had to look at your notes before we recorded. And my first thing if you would say killed by google i thought it would be a list of businesses that got like

destroyed by google that would be my first that's also a pretty big list i assume yeah 296 products and services now that google has shut down the big moonshot out of other bets that Google is seeing reap awards and catching some headlines today is Waymo. And so Waymo is autonomous taxis. Think of if you went on the Uber app or you called a cab and you select your pickup, you select your drop-off, and then a car with no one driving comes and gets you. Like this robo-taxi comes and picks you up and drops you off, have a nice day. That's Waymo, and it's fully operational to the public in Phoenix and San Francisco, and shortly launching in Austin and LA. I just saw today, as of this morning, they're actually doing a partnership with Uber

for Austin and Atlanta. So it's basically exclusive on the Uber app to call a Waymo. So it seems like a can't beat them, join them situation for both companies. It's like, can't beat you on the tech Waymo, you got us. And Waymo's like, okay, can't beat you on the tech, Waymo. You got us. And Waymo's like, okay, can't beat you on the distribution moat here. Let's just partner up on this. So that kind of makes sense. But it leads me to my topic of the day, Simone, which is moonshots by big companies. I was just in Montreal. City's beautiful this time of year. I did 21 meetings in two days

with executives mostly of Canadian and US large financial institutions, some internationally as well. And most of my meetings are with these institutions because for me, it's like I'm trying to get in front of everyone who touches public equities. And for them, they're trying to strategically invest in, engage with startups and commercial partnerships, maybe biz dev, acquire fintech companies that slot nicely into what they do. Now, they are very eager to run venture capital style strategies on their balance sheet. And this is, of course, not a very new concept, the concept of CVC, which is corporate venture capital. These big Fortune 500 companies having a venture arm is not new, but it feels new that every single one has that mandate. And every single insurance company, bank, pension.

Pension plans, a lot of them. Yeah, yeah. It's like they all have a VC strategy, a venture capital strategy. Let's not forget the teachers that invested in FTX. You remember that? Yeah, the teachers pension. Yeah, they had the 90 million, I think was the number, which is a drop in the bucket for them. But still.

Yeah, exactly. Yeah. The publicity was probably not what they wanted, but it just shows that they do take a lot of smaller bets. Yeah, still taking those small bets. And this CVC, corporate venture capital arm of these big companies, it's a new world to me. And so I wanted to look up some data on this. There are 7,658 active corporate venture capital investors. That number of active investors has gone from 494, so basically like just Fortune 500, to 2,273 with it peaking of nearly 3,000 active CVCs in 2021. I think to no one's surprise it peaked in 2021.

We'll see how this trend moves with the free money environment gone. It definitely makes me curious if there's a tougher, fuller acquisition market. Their way around this also is minority investment in the ecosystem and innovations happening in this industry. It's like, okay, we can acquire you, but we can take a 20% position, minority and a board seat and that'll be how we get around this yeah it it fascinates me just to look at this and think in at some point right will there be some bad investment made by companies because there's so much competition right i think we talked about private credit, same kind of thing. I mean, you get these big venture firms that have a whole lot of experience

in these kind of bets, and then you get more and more competition, but there's a case to be made that the top dogs will get the best deals. And then, you know, the new entrants are probably fighting over the the crumbs that's right i mean especially because i'm talking to a lot of them and they basically you know when you meet a venture investor the typical you know when you meet someone traveling you have like the trifecta like oh where are you from you know there's always like the the class yeah there's like the three questions that you small talk everyone you meet with traveling or like anywhere on a conference here's the here's the immediate conversation with a cbc arm or any venture investor it's what's a typical check size what's's the sweet spot, and what's the target of companies you're looking at.

Is it like fintech? Is it consumer? You know what I mean? Yeah. And these CVCs, they're not seed investing $1 million, $2 million, $3 million. Like, yeah, a typical check is around 50 million US. So that's basically series B, C, D companies and beyond only. It's not a huge, huge universe of companies.

It's really not that many venture-backed companies that are able to ingest a Leeds $50 million check. There's just not that many companies. 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 questtrade.com. So not so long ago, self-directed investors caught wind of the power of low cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing

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

up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I

encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Do you want to explain quickly the different seeds of financing for a startup? Just because I know there's probably some listeners that are hearing that and they're not quite sure what you're talking about. Yeah, sure. I mean, because this podcast touches on public company investing. And the reason it's

relevant to public company investing is these are public companies running venture arms out of them, right? Like a lot of these banks, like all the ones I talked to, 99% of them are public. right like a lot of these banks like all the ones i talked to 99 of them are public so what i mean by that is it's very arbitrary but they have different stages of companies so if you have just an idea maybe a little bit of traction maybe just a powerpoint idea and you have a grand vision for a company you will typically raise pre-seed or seed financing, which means the first money that comes in, it's usually not a very sophisticated due diligence process because there's not really that much to DD yet. You don't have maybe any customers, many supply agreements. You can have maybe no customers at this point and you raise a seed round.

And then as you get more and more traction, you look at series A, series B, series D. And what those just mean are sequential funding rounds. And sometimes you're doing a simple agreement for equity earlier, but these are usually priced equity rounds, meaning, okay, I'm going to buy 10% of your company, aka I'm going to add a $100 million valuation. So I'm going to give you $10 million for 10%. That sets the valuation of the company, let's say post money at $100 million. Then there's another round, there's another round, $100 million. Then there's another round, there's another round, there's another round. Again, eventually until IPO, these corporate venture capital arms, if they're investing $50 million checks out of JP Morgan's balance sheet, there's just not that many businesses that can accept

those checks at that size. The reason is, is if the company's only worth $75 million and you're investing 50 million, the founders have just basically gave up complete control of their company and the dilution is crippling. Yeah. And I think there's also compliance issues when you get over 10%, right? Like I know in the US, right, for publicly listed companies. So I think that's also a consideration for these companies. If I remember correctly, I know that's a big reason, right? Why Buffett tends to keep most of his investments below 10%. Yeah, exactly. There is compliance there, especially if they're a regulated bank like that. So yeah, that's the segment. It's a world to, I mean, venture is not a new world to me.

I run a startup. But this corporate venture arm, I thought it was like the big techs and the Adobe's of the world that run this corporate venture arm, I didn't realize that there are over 2000 large venture arms out of these companies. And that's just from this data of world of corporate venturing. There's probably a ton that are not captured in there. I wouldn't be surprised if that universe is actually double or triple. Yeah, I knew there was quite a bit. I didn't know there was that many just because i'm you know i'm pretty familiar in the pension world but also i knew banks uh the big banks had definitely different divisions for that but i think obviously just based on the numbers it goes way beyond that

too so uh interesting to see the numbers and i guess for the seed rounds too maybe something i'll add is typically the further you get into, normally the valuation goes up, but we've seen after 2021, right, where it was the other way around for a lot of these businesses where they needed to raise capital at a lower valuation than the previous round. Yeah, that's called a down round. And there's no two worse words in venture world than a down round. It's like, it's ugly, right? It's disgusting. But usually you don't really, I'm going to go on a limb to say that you don't really have a choice when you

have to do a down round. And I think that this is for any of my, any of the listeners out there that want to go down this path and start their own company and look to raise money from venture investors is it can be exciting and enticing to raise at a really large valuation like the companies did in 2021. And then you get to say, oh, the company's worth a lot of money, right? That's the valuation of the company. However, if you don't grow fast enough into that valuation, you actually shoot yourself in the foot. Versus if it's a lower or fair valuation, that can be better for the founder, even if it's a little bit more dilution. bit more dilution because your chances of getting in a situation where you can't raise any more capital is smaller if you have a more reasonable valuation. And I guess too, the more you grow,

the more you get, the more rounds you do, and you're way more familiar with this space than I am, but the more rounds you do, I guess the more potential investors that you have as well. So it's dealing with sometimes maybe there are certain investors that are not necessarily on the same page, like all these different kind of internal politics, for lack of better words, that you have to deal with. Yeah, definitely. All of a sudden now it's like you're not just managing customers, but you're also managing your cap table, right? It's a tricky thing. But to close this one out and move on, I'm curious how this trend continues. It peaked in 2021 of active corporate venture investing. We'll see what happens. No more cheap money, probably a lot of competition for these deals if they're investing like 10 million

plus minimum check sizes. There's just not that many active companies that are able to accept that capital. And so we'll see what happens. I tend to think the trend will kind of normalize, but the alluring chance of a big bet for some of these stalwart low growth but highly, highly profitable companies is sure enticing. If you are one of those big Canadian banks and you only see earnings growth at inflation normalized over the next 10, 15 years, how are you going to deploy your capital in a way that moves the needle it's deploy huge checks on potential moon shots that's the model and one one that comes to mind and it's a weird example but i think you'll agree is again to go back to ftx but one of the reasons that uh customers saw a lot of their money back is because sb, Sam Bankman Freed, made a lot of various bets.

And one of those bets that ended up working out pretty well for him was Antropic. Right, the AI company. The AI company. So that just goes to show, obviously, that FTX was very dysfunctional. They had a whole lot of accounting issues, fraud going on. But I'm just kind of just as an exhibit where, you know, even in bankruptcy court, that ended up playing in their favor because the value that they got out of that bed. But granted, there was a bunch of other beds that didn't pan out. But I just wanted to provide that as an example.

He was doing a lot of CVC out of the FTX balance sheet. He would move from pension fund to ftx to some crypto yeah yeah exactly so i just thought it was uh kind of to illustrate a little bit but uh clearly these players are not ftx but so i guess we'll move on here so like you mentioned i made some big changes to my parents portfolio a couple months ago it is something I managed for them in retirement, but I do talk to my mom predominantly because she was an accountant and she's also interested in that stuff, probably along with your dad, one of our two most loyal listeners since the beginning. Yeah, that's right.

And so I decided to make some changes just because their situation evolved a little bit. So I've been thinking about it for quite a bit of time. So the first reason is my parents recently last year, they purchased an annuity with about 25% of retirement funds of their retirement funds. So for those not familiar, an annuity, it just provides you a guaranteed income. You purchase that from an insurance company in exchange for a lump sum payment. And, you know, there's different types of annuities, different bells and whistles. You know, the more you add on to the annuity, the higher the cost will be for a specific payment per month.

For them, it's not indexed, but it's still something they wanted to have at some additional guaranteed monthly income. They also have a DB pension, so defined benefit pension payment that is fully indexed that they get every month. Their guaranteed income, so it includes annuity, pension, CPP, and old age security more than covers their current expenses. And all of these expenses are fully indexed. All of these payments are fully indexed. All of these payments are fully indexed to the CPI with the exception of the annuity, like I said. And if you've listened for a while, you'll probably know that I used to have more dividend stocks for them, but it was just a lot of stock to stay on top. Some of them I own myself, so those it was easier for me to stay on top of,

but the other ones, it was just a bit harder so I wanted to simplify you know their portfolio going forward and since their expenses are fully covered by their guaranteed payments the income that they receive from the RIF and LIF so the retirement income fund is when you convert the RRSP to an income vehicle you have to do so by the time you turn 71. And the life income fund, which is a LIF, I'll talk about these two, same kind of thing. But these are for a locked in account. So you have to convert it when you turn 71 to generate some income. While essentially the payments that they have to take from these two accounts, which is the majority of their investments, it's just additional money for them. So they don't really need that for a living.

So they're in a pretty good situation. So they end up putting a lot of that income that they get from the RIF and the LIF to their savings account. So their TFSA, that is not yet maxed out. Any questions before I continue? Comments before I kind of... No, keep RIFing, man.

Keep RIFing. I will keep RIFing. So I simplified the whole thing so there's four big asset types that they'll now they now have so i have a target waiting because i find having like you know having a target waiting that's like let's say 30 static i do like more of a bracket because then if you go like one or two percent over the waiting, there's less kind of, you know, you don't have to ask yourself, OK, do I trim it down now? At what point do I start trimming if I go over the waiting and so on? So I did a target waiting. That's more of a bracket. So the first one is equities, 40% to 50%. The second one is cash and short-term fixed income, 20% to 30%.

Third one is gold, 15% to 20%. And the last one is Bitcoin through Bitcoin ETFs for 5% to 10%. We're going to coin this the modern all-weather portfolio. It's the all-weather regalio portfolio. It's basically this, gold, equities, fixed income. A little Bitcoin sprinkled in there. This is the small, all-weather, modern portfolio. Yeah, or the Fidelity.

Fidelity was one of the first asset managers to include that. Obviously, they're a sponsor, but they have their all-in-one ETFs. So, yeah, it's a smaller allocation clearly for bitcoin because they're in this different situation than i am but for if i drill down a bit more so the equities the largest holding here is xaw i own that one myself it represents about% of their portfolio currently. XAW is about 65% U.S. exposure and 35% rest of the world. It excludes Canada. They also have a handful of individual holdings. Each of the individual holding is between 2.5% and 5% of their portfolio. And there's also quite a few of these individual holdings that I own myself.

So it's much easier for me to stay on top of know what's going on with a company. And they're typically more kind of blue chip companies. So Termaline is one Canadian natural resources. Another they have Franco Nevada, I'm just kind of going because I didn't write all the names, the individual names here. But they are pretty stable companies. And I wanted to get them a bit more exposure to specific sectors. So that's why I chose those companies. There is Brookfield Infrastructure, Brookfield Renewable as well. And by having that 40 to 50% in equities, they still have significant exposure to equities, which provide them with some good upside should things continue to trend upwards in the next years, 5, 10, 15, 20 years. Now, the cash fixed income position, so that provides a bit more stability to their portfolio.

It's about 20% of their portfolio is currently in US treasury bills, provides some stability and protection against the Canadian dollar, and it yields currently about 5%. But clearly, that will soon go down. I think most people are predicting at least a 25 basis point rate cut from the US Fed. And it's possible it will go down, but I think there's still some time here that they will be able to get some good yield out of US Treasury bills. And I'm debating also adding some potentially two years U.S. Treasury to their portfolio. It's a bit more duration, maybe lock in some slightly, you know, some higher yield right now before interest rates start going down. But I would probably not go further out on the curve because then you start getting into interest rate risk.

And there's about 5% in high yield savings account. And that is used to fund their RIF and LIF monthly payments, just because they can't have all of their money in USD since the payments might be made in CAD. And that avoids having to deal with fluctuating exchange rate too constantly. So having that 5%, it yields a bit less. It yields, I think, around 4%, but still provides them some stability here in the form of Canadian dollar. Now, the next one here

on the list is gold. So by having that target allocation of 15 to 20%, it gives you something in your portfolio that will be definitely more resilient if we look at least historically if there's a big market correction or a big drawdown that happened and although gold has fallen in value in the short term when there are significant market drawdowns if you look at graphics you'll see and i am sharing this for joint ti joint tci's viewers is that you'll see that gold will typically be pretty resilient when it comes to kind of being you know not affected too much by drawdowns when there's kind of significant market events and i'm just having issues with showing so i won't be able to share it right now. But I encourage everyone to have a look at a chart if you compare the price of gold versus,

say, the S&P 500, the Dow Jones, whichever. You'll see that in 2008, for example, 2009, gold saw a bit of a drawdown, but not nearly as much as you would have seen with the S&P 500. So that's why it gives them a bit of a balance there. And then the last thing here in their portfolio, I mentioned earlier, is Bitcoin. So I did add Bitcoin to their portfolio last summer, which ended up being a really good move in hindsight. I actually had become over 10% of their portfolio. So I cut back on that allocation three, four months ago to get it down back closer to 5% because it was starting to be a bit too big and having too much of an impact on the volatility of their portfolio. The goal here

is having a small allocation target. So the Bitcoin allocation is relatively small. If my parents didn't have a guaranteed retirement, I would probably have kept it below 5%. But because they can live, essentially cover all their expenses with just their guaranteed income, I think here 5 to 10 is reasonable. It has a strong long-term performance. So whatever you think about Bitcoin, there is no five-year period where the S&P 500 has outperformed Bitcoin. Granted, a lot of volatility in between. So you could have seen some massive drawdowns and a lot of people have been burnt with investing in Bitcoin because they were not expecting the massive drawdowns.

They were drinking the Kool-Aid, you know, of people saying it would just go up from here, no longer have any cycles. They bought at $22,000, sold at $6,000, and then watched it go into $80,000. In that order. That's it. So the holding part is the most difficult part, obviously.

I've held it for quite some time myself, and it's not always easy to see the drawdowns, but I am comfortable with that. And having an allocation that you can stomach those drawdowns, I think it's very important. And keep in mind, be prepared for drawdowns for like 70 to 80 percent. If you're not prepared with that to deal with that, with the allocation that you have, then you're probably you probably should have a smaller allocation. Or allocation or you know if you're really not comfortable with it at all I mean it's up to you you just have none in your portfolio and then the

portfolio balance as well so with the cash and gold making up pretty much 40% of their portfolio they do hold asset that should perform well and shouldn't be too volatile when there is high market volatility so it does kind of counterbalance bitcoin but also equities and then obviously a long-term inflation hedge emphasis on long term here because it does even though it's an etf it still offers in my view protection against the fiat fiat currency debasement. So I think that's inevitable. History suggests that it's likely the directions we're heading, especially if we enter recessions. Government will typically try to stimulate the economy if we enter a recession.

And we're already looking at massive deficits in the US and Canada in times that are supposed to be good. Obviously, things seem to be turning around a little bit now, but when you have massive deficits like that, when the economy is doing well, you can just take a second, step back and think about what governments will be doing if the economy rolls over. I'm going to go on a limb and say they will probably not cut spending, but that's just an educated guess on what has happened historically. Things could be different, but it does offer some protection against that. And so far, I mean, it's just been a couple months since I've done this change for them.

But it's been very interesting to watch because we've had, and obviously you've seen this, but we've had quite a bit of volatility, I would say, in the past two, three months in the stock market. And by volatility, I'm not saying like down or up. Well, I am saying like down or up, not just down. So we've had weeks where the S&P and the NASDAQ are just ripping. Other weeks where people think the world's ending pretty much and what's been really fascinating is just kind of watching their portfolio and it's been very resilient when there's been big drawdowns i would say so far from what i've seen it's about like 25 to 30 percent the

volatility of the snp 500 and the returns have been a bit below, but for given their situation, I think it's a good fit for them. Because clearly, it's a bit more at that time in their life about capital preservation versus having 30, 40, 50, 60 years to invest. My parents are in their early 70s. I do hope they have 20 plus years ahead of them. But you're more in the late stages of your life. So at that point, you have to look at more capital preservation. And, you know, I'm their only beneficiary. And my goal is to encourage them to spend the money even more.

So, mom, if you're listening to that, book some trips. I don't want your money. Spend it. Yeah, well, that's I mean, obviously obviously they worked hard for it their whole life. So, you know, I think I've been encouraging them. Hopefully at some point they'll listen a bit more. But that's the overview. And I have committed for our Join TCI listeners because I did a special post for subscribers.

I did a special post about a month, month and a half ago for that went into even more detail to do some quarterly updates there. There's probably not going to be much in terms of changes, probably going just to make sure that things stay in the target allocation that I have. But I will still provide some updates and then the returns as well of the portfolio compared to the market. It's like that. i have not read it but the die with zero book i think a lot of people really really like that one for how to spend and i'll just leave massive amounts of money uh behind you know enjoy it yeah enjoy it while you're while you're younger too if you can yeah i depends, right? Some people may want to leave an inheritance.

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

yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Calling all DIY, do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios,

their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas

and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Speaking of that, I actually saw an interesting Twitter post where someone did the FIRE thing. So, financial independence, retire early. So, for people not familiar with that is you get, some people can get pretty extreme about it. They basically like cut all their expense to the bare minimum. I've seen even people like eat like crab dinner right or if it were you ramen noodles almost every meal to cut as much as possible their expenses and then with the hopes that in their late 30s early 40s they're able to retire and be financially independent well there was a post on

reddit that was shared where the person was in their early 40s and had retired they did the whole fire thing and they were regretting it because a lot of their friends and family members were still working you know brothers sisters still working friends still working they have family they have kids so this person was essentially retired but was like regretting not living a bit more when they were younger because you know that's when they could have spent more time with their friends doing some experiences and now they also found you know, I can't do the same thing at my age that I'm 39 that I was doing at 22, right? So, or 25, 27. And that was something to keep in mind. So, for me, and we've talked about that, it's always about being, I think, just balancing.

Just balancing, exactly. Like, you know, just living in the present, but also saving for the future. I mean, you don't know right like you're you know some you however young or you are like you could die tomorrow like it's just that's just the reality of it it's probably very low probability but you also want to make sure you did enjoy your life up to that point i it's so funny because this was i was just thinking about this is like a shower thought of mine yesterday it's like yeah i know you love your shower thoughts those are those are fantastic it's kind of like you're always in this give and take balance between

living in the moment and doing yourself your future self favors like it's it's it's this constant push and pull between living in the moment and doing your future self favors and that that's that's the whole like yeah it's cliche but work hard play hard that's like i i truly think that that's really important because if you're able to just lock in, set dedicated times and like, this is my time where I'm working and I'm focused, I'm doing myself favors for the future, whether it's my career, whether it's chores, whatever crap you want to do. So you're setting yourself up in the future. But also like that balance of like, I'm going to schedule in all this fun stuff too, you know, and like stuff for my health. And like, you know, these are my goals outside of my career as well. But you're always in this tug of war between those two, what seem like conflicting ideas. seem like conflicting ideas, but I think if you kind of bundle them together and not have them conflicting, that's when you're actually in balance. But it's hard, man. Like I struggle with this literally every day. Yeah, me too. I mean, having a family too, you have to consider

for your kids, right? When you want to make sure you're able to provide for them, you want to also spend time with them, but I have to, you know, make sure I make a living at the same time. So it's always creating that balance. It's not an easy thing, but I think also, I think the whole FIRE thing, I think to the extreme, I don't believe in it. That's just my own view. I think it's just too extreme when you cut everything out. But I think it's important to also think about like, what does retirement look like for you? Because for some people, it could be just they don't work full time anymore. They may be in their early 50s, but they have a part time job somewhere. They just do consulting work like 10 to 15, 20 hours a week.

And for them, that's retirement. And that's awesome because they still get stimulated by that work or they're working part-time as a passion. And the rest of the time they get to set their own schedule, do whatever they want. So I think, I don't know about you, but we tend to be programmed at like, okay, once you hit like 60 or whatever the retirement age is, like you stop working, you retire, you just kind of play golf all day. Yeah, flip a switch. You do nothing else or you go travel.

You do nothing else. Like you just sell into the sunset. But the reality is, I think for everyone, you know, a perfect retirement will look just a little bit different than the next person. Yeah, totally. And it's such a push and pull. But I think that, again, I'm not a therapist or psychologist

or accredited in whatever way, but I've seen people who are very unhappy when they can't strike the balance between that push and pull, between doing yourself favors tomorrow and living for now, it's like, if you only live for now, you'd like you spiral out of control and things get bad.

And then if you only do yourself favors for tomorrow, tomorrow comes and you're like, shit, what do I do? Yeah. One, what do i do yeah one what do i do now and why didn't i take advantage of all the things i could have been doing before it's i think a really useful exercise and i've been meaning to do this is just like because i keep saying to myself right like i run this company

and i'm like what am i gonna do when i sell it? You know, because eventually I probably will in the next 10 years, whenever that comes. It's like, what's the exercise where it's like, if I sold it today and all that money was wired into my bank account, I had tens of millions of dollars in my bank account today, what would I do tomorrow? And it's like- Good question, huh?

It's like, well, I should stop delaying that conversation in my mind. Right. Because it might be instructive on how to live better now. It might be and it might not. I don't know. I think it's worth doing the doing the exercise, though. Sometimes just write it down, right? It could be a little thing you do that day and like, oh yeah, like that's something I could really pursue down the line. And you kind of write it down because I don't know about you, but if I sometimes stuff like that or even topics for the podcast, right? I'll be like, I'll think about something. And if I don't write it down in my notes, I will completely forget about it. Even though I'm like, okay, I'll never forget about this.

Like this is too good. If I don't write it down, I always end up someone asked me how do i always come like how do you guys constantly come up with topics for the podcast because they're episodes like you know what are we at like multiple hundreds now four or thirty yeah yeah it's absurd right um i'm like the the quick answer is i have all these ideas all the time and i have a note that I just write them down right away. I'll be in the middle of a conversation with someone. I'll be like, sorry, one sec. I have to write this down.

Because if I don't, the show won't go on. I need to take advantage of this right now. I'm like that too. Yeah. And people are fine with it. If you tell them, oh, you have to write it down, people understand. And people are fine with it. If you tell them like, oh, you have to write it down,

people like understand. Like no, I mean, unless you're like gifted in terms of memory, most people need to write things down. I only have one comment on your allocation here on your segment. Yeah. Is that I personally don't like gold. I'm not a precious metals guy. I've never been convinced. I like the rest of the allocation. I think it all makes sense. A lot of people will kind of pluck stuff in and out,

which they have more conviction in. And that's fine. My conviction is not going to be identical to yours. I find it wild how similar our returns have been over the last three, four years, which, by the way, I'm going to pat ourselves on the back here and give us our flowers, been very, very good. But we have such different portfolios. They're not even really similar. We have some overlapping holdings, but the weightings are gigantically different. We've both just been really, really concentrated in some things that have really really worked but those are not the same things no exactly and i mean i think gold the biggest case is just um the history right it just has a track record of being hard money for thousands

of years i think that's probably the the most attractiveness of this but in terms of returns i mean if you look at the past hundred years i think it's underperformed at the snp 500 i don't have in front of me but i think again i'm not where i take exception with gold is when someone is like 100 in gold i think you're doing yourself a disservice and whenever you're 100 anything anything, I just think it's a whole lot of risk. I think it's good to have diversification of different assets. That's my personal view on it. It's the whole idea of if you don't think that there's any risk to an investment, then you don't actually understand it.

Exactly. Because if you only see the bullish case and don't see any possible bear case and haven't explored the train of thought or the school of thought on the other side of the trade, then you don't fully understand the idea. And if you've never even thought about any of those downsides, leaning to 100% allocation, it's like you haven't done the work. That's just it. You're probably going to get a nasty surprise at some point. That's probably what's going to happen. That's the thing, right? I try to think in probabilities and the future is unknown. So I try to place it as best as I can

to perform well in the most wide range of scenarios. I think that's it. All right, we got a few minutes left before my next meeting so i'm gonna finish off with uh it's bruce flat time i have a brookfield shareholder letter quote from q2 of 2018 that bruce flat writ wrote wrote writ wrote called the miracle don't don't ask the french canadian guy um it's called the miracle of compounding quote one of the great miracles of modern finance is the compounding of returns this is of course easy to understand when dealing with interest-based returns, but harder when looking at businesses. The miracle, though, works exceptionally well within a business that compounds at returns greater than 10%, and exponentially when compounded at greater than 15%. The trick is to not lose confidence on the way and of course, pick good businesses.

We would note two other important points. The first is that a loss of capital partway through the compounding periods can be very detrimental to returns. The second, which can be even more detrimental, is dilution to shareholder through share issuances. is dilution to shareholder through share issuances. A company that issues shares must do it at the right time and for equivalent value. If not, it can be very damaging to returns. Many of you know companies that had to issue a large number of shares during the financial crisis of 2008, 2009. While market caps have recovered of these businesses, the dilution from the

share issuance has all but destroyed per share value. Companies in these circumstances can recover. Their share prices seldom do. Three things that I thought were fantastic from his little segment called The Miracle of Compounding in brookfield q2 letter by our boy bruce flat uh three things one he talked about returns are exceptional compounded over 10 percent but exponential at 15 so i mean it's always exponential in these curves if you're compounding at that rate but yeah it really touches on something here right like if you're compounding at that rate. But it really touches on something here, right? If you have returns close to or greater than 10%, you're going to experience generational wealth. You just are if it's over a long time period. But people who really hit on that 15 plus,

which I really have as my hurdle rate, because if not, I would just invest in the index and call it a day you now are like on a rocket ship to to wealth if you can sustain those those track records it's every four and a half 4.8 years something correct you double right yeah it's that rule of 72 or whatever yeah my mental my mental math you have unbelievable track record if you're able to reach those amounts. And he points to their long-term returns in that number coming up in a table below this segment. So very cool. The second point is,

he says the first detrimental thing that they can do is have like pausing in your compounding it's like what uh charlie munger says what's the quote it's like the first rule of compounding is to never interrupt it inter and unnecessarily something like yeah never interrupt it unnecessarily so he's touching on that piece and then, around dilution and stock-based compensation and issuing of shares. It's like the business can do well, but if they are doing a lot of share issuance, the investors are not going to do well. The existing shareholders just keep getting diluted and their returns keep getting diluted.

And we've seen this with a lot of technology companies over the last five years it's like you had they just don't they don't have performed the share dilution it's as simple as yeah you have like this basic math equation where it's like wow amazing the business is growing 25 a year for 10 years straight and the share count grew 20 it's like net, you actually didn't do that good. So three really interesting things I thought were worth pointing out, which I think it should just be a recurring segment called It's Bruce Flat Time.

Yeah. No, I think it was good. No, definitely. I guess before we go, quick thoughts on Alimantation Custal trying to buy 7 and I or 7.11. I think, I mean, I don't fully seven and I, or seven 11. I, I think, I mean,

I don't fully get it. I'll be honest. That's me. But, uh, Dan and I talked about it, but I know you, you're a big fan of, yeah.

What did, what was your guys' take? I haven't, I haven't heard the take. They're biting too much. Then like they're, they're trying to, they're pushing for a too big acquisition and they should try to continue to do small acquisitions over time.

Probably take advantage of, you know, companies that are struggling a bit more because of the macroeconomic environment. Whereas Seven and I is clearly in the driver's seat here in terms of driving the price up where smaller operators may be struggling. Seeing sales go down and Arata is on kush talk and just offer them a lifeline and get a pretty good deal out of their two latest big blockbuster ideas have been this 7-eleven idea which is a holding company out of japan and care for which i know i'm sick careful thank you yeah yeah that's what we have the french canadian representation on the podcast here which is a france-based grocery store conglomerate mega company yeah and that was going to be a huge deal that got declined as well those are two geographies that are not particularly keen to foreign investment and foreign well i take over it's not the right world but full acquisition

full majority acquisition those two geographies are not particularly keen on that and you saw that with care for and i just worry with kush hard not that i actually don't think it's too much that they can biting off too much that they can chew. I think that these guys are the best operators of convenience stores in the world with the Circle K brand. And they've done ambitious things like carve out things that are bigger than them, bring it in. And it's been really impressive what they've done. So I don't have that opinion i have the opinion that it's going to drag on for so damn long that all that capital is going to be tied up there's going to be a lot of dilution a lot of debt and they're going to lose out on two years of deals that's my worry because it's

going to take so long it's going to take so long. We'll be talking about this for two years. It's either going to get nipped in the butt this calendar year or we're talking about it in 2026. Those are the two outcomes, I think. That's a good take. Anyways, I put you on

the spot. We hadn't prepared, but it's a good take. I think we should call it a show because you got a meeting to get to. Thanks for listening to the pod, folks. We hadn't prepared, but it's a good take. And I think we should call it a show because you got a meeting to get to. Yeah. Thanks for listening to the pod, folks. We really appreciate you. We're here Mondays and Thursdays with myself and Simone here on the Mondays, Dan and Simone on the Thursdays, as well as the real estate show is available in your ears, the Canadian Real Estate Investor Podcast. If you're a landlord, you're thinking about buying a house, you're thinking about investing in real estate,

these guys are Canadian real estate and two human beings. That is Dan and Nick. Go listen to the show if you haven't already. That is the Canadian Real Estate Investor Podcast. We'll see you in a few days. Take care. Boo-bye.