The Canadian Investor - Doing Less is More & Chinese Stocks Imploding

Episode Date: March 21, 2022

In this episode of the Canadian Investor Podcast we are back to our regular schedule. Here’s an overview of what we discuss during the episode: Historical data shows that full year stock returns often turn positive even if they start the year poorly The causes behind chinese stocks to be significantly down in the past year How doing less often means better returns when investing Braden interviews Mahima Poddar from EQ Bank Tickers of stocks discussed: KWEB, BABA, PDD, TCEHY, JD, BIDU, CSU.TO    Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. Live from the great white north, 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. Today is March 16th, 2022.

I am Brayden Dennis, as always, joined by the great Simon Belanger. Now today, Simon, you had quite a time with your topics today. Yeah. Because you're going to talk a little bit about or a lot about Chinese tech stocks that have been getting absolutely crushed as of late. It is worth noting that even the best investors, notably Charlie Munger, has gotten destroyed in this trade on the wrong side of that one with Alibaba. And then today, they're just up a casual 30 plus percent. Very casual, right? Yeah, yeah.

No, there's a lot of stuff happening with Chinese stocks. So there's a lot of reason why this is all happening. There's like, that's volatility, right? Down like double digit one day, and then up 35% the next day. So that's the definition of volatility right there. Yeah, no kidding. There's a lot of moving parts here. And there are a lot of reasons for investors to be cautious given the regulatory environment. And we're going to talk a little bit about that. But before we do that, I just wanted to highlight some interesting data. So as of yesterday, so that'd be March 15th. Now, the S&P has had the market, aka the market, has had a rough start to 2022. Let's not kid ourselves.

Down over 10% on the S&P, but 12.5%. Since 1928, it is the fourth worst beginning of a year through the first 50 trading days. The first five worst years of trading days went as follows. 2020, ironically, down 23%. You know how that felt. From day 50 to the end of the year, the market did 51%. In 2009, the first 49 trading days were down 16%. The rest of the year, 47% to finish the year up 23.5%. 1935, the market started down 13.8%. From day 50 to year end, up 64%. 2022, down 12.5%. Yet to be seen what happens this year.

And in 82, the market started down 11.5% in the first 49 trading days from day 50 to year end up 30%. Now I'm not here to say something that, oh, because of this data, the market is going to have a great 2022 from this point forward. it is going to have a great 2022 from this point forward. The point I am trying to make is that during drawdowns, people start to get really pessimistic for the rest of the year. And I'm seeing it with my own eyes. And they go, oh, things are going to get a lot worse. Or I try to make an optimistic comment on Twitter and all the doomsday guys come after me. My point is, is if you're saying that, just stop telling me you know what's going to happen with the market because you don't know. It's just a complete guess. So this data is to remind folks that one, market timing is impossible.

And two, when stocks are depressed and on a decline like this there are some great businesses trading at more attractive valuations and that's all just to remind folks of that's the real data right there yeah yeah and look there are some years where it started badly and it continued badly for the years but it's very it's impossible to know right there's especially there's always so many moving parts especially this year i'm trying to think of any year that as far as i can remember that there were so many and i'm gonna go macro here but so many moving parts on a macro level right you have the war going on between russia and uk. You have high inflation, you have central banks saying they're increasing interest rates like at a pretty rapid pace. I know there are small increases,

but we're thinking it will happen at a pretty rapid pace overall. So there's a lot of moving parts and there's not really much to try and forecast what will happen with the stock market, because even if there was a similar situation in the past, you really don't know what will happen with the stock market. Because even if there was a similar situation in the past, you really don't know what will happen. So I think whether you want to be positive or pessimistic, I mean, your chance of being right or wrong is probably 50-50 in my opinion. Yeah. Either way. Flip a coin. So in the 14 years since 1928, that the market has been down more than 6% at this point of the year, eight out of 14 of them finished the year with a positive return. And some of them up,

you know, 40 plus percent, like finished, had great years with the start of a terrible year. finished, had great years with the start of a terrible year. So again, this is not me trying to extrapolate that data. It's me trying to tell you that no one knows what's going to happen with the market on any short-term basis. It is a complete coin flip. I believe that the market is positive just slightly like 55 of months so it actually made me less than that and like just a little bit more in terms of years but on a long horizon every rolling 20 years you're you've had fantastic returns in the stock market i don't make the data i just present, no, that's a really good point. Now we'll switch to what you referenced. So what's happening with Chinese companies right now? Well, I'm sure I know, Brayden, you own Tencent. I own Tencent as well. And I own the K-Web, which is the internet shares from Crane Shares. And, you know, they're down pretty significantly.

And I'm sure anyone else who owns Chinese stocks is feeling the pain right now. The Hong Kong Stock Exchange, so the Hang Seng Index, which is their main index, is actually down more than 30% for the trailing 12 months. And there's a lot of well-known companies that are dual listed in the U.S. as ADRs. So those are American Depository Rece receipts so i'll be using the term adr quite a bit so they're listed in the us through adrs as well as being on the hong kong stock exchange so you have companies here like alibaba jd.com tencent meituan they're all listed on the hong kong stock exchange as well let's have a look at a few of them, how they've been faring over the past 12 months. Alibaba, ticker BABA, is down 55%. JD.com. Does this include today's?

Yeah, I updated today because I did my notes last night. And usually, we do prepare in advance because we try to have some good notes, do some research before we actually do the podcast. And for the most part, right, we do when we do calculations and things like that, it can change a bit by the time we record. We understand that our listeners know. But when you're seeing Alibaba up, this is 35 percent moves like this is I just had to update the data. You don't see this. Exactly. Yeah. This is a very different situation.... I just had to update the data. You don't see this. Exactly. Yeah, this is a very different situation.

But I'm glad to see this is updated because today is significant. It is not out of the realm of significance. Yeah, exactly. And I'm just going on top of my head. So Alibaba going is down 55%. If I remember correctly, it's now back at the level from about a week ago. That just shows you how much of a drawdown it has been. And obviously, it's down 55% over the trailing 12 months.

JD.com is down 26% over the trailing 12 months. Tencent down 35%. Baidu, which is the major search engine in China, is down 45%. Pinduoduo is down 73%, which is an online shopping platform. That one was really overvalued. Yeah. I'll say that. PDD was super overvalued at the time. It's thicker, like you mentioned.

PDD, KWebShares, the ones I own, is down 61%. So like we referenced early on, there's a lot of reasons why this is happening. It all started, well, I wouldn't say it started there, but that was the triggering event when Jack Ma, who is the founder of Alibaba, suspended the IPO of the Ant Group. So Ant Group owns Alipay, which is widely used in China. An easy comparison for people who are not familiar with it would be like PayPal over there. So it's very comparable. The main driver being that the IPO was scrapped because the Chinese government did not like the comments that Jack Ma made in his speech, where he criticized the Chinese financial system, which is dominated by state-owned banks like ICBC.

Chinese financial system, which is dominated by state-owned banks like ICBC. The Chinese government has also been eyeing internet companies for quite some time for increased regulations, even like cracking down on them to make sure that they're in line with the values of the Chinese population, but also the Chinese Communist Party, the CCP, they've done at times some very quick regulation. So they've imposed some very quick regulation because they are not a democracy. So they can unilaterally impose these regulation where in Canada or the US, it's much harder, right? You have to go through in the US or through the Senate, through the House. There's a whole process to get it approved. And oftentimes there's not enough support for changing regulations. So if you want to conduct business in China, you have to play ball with the CCP, which Apple has done specifically for its data storage for China-based users. And then Brayden, you're a

shareholder. I'm sure you knew knew this google pulled out of china in 2010 just after four years of being in china and since then baidu has owned the lion's share of the search engine market representing more than 70 i have a quick comment about what you have what you've said here about the difference in the government being able to act quickly and impose laws against these tech companies what seemed like overnight like it happened so quick right i have made a mistake of anecdotally or i don't even know if that's the right word but taking the struggles that the u.s regulators have on imposing their own tech on imposing regulation on their own tech giants and watching that, lack of a better word, shitshow happen,

and ultimately it becomes really difficult for them to actually do anything. I looked over at the valuation multiples of fast-growing Chinese tech companies like Tencent and has a wonderful investment wing, founder-led, super high returns on invested capital. And I went, the regulatory environment for them, like, yeah, sure, they're cheap because they're going to get cracked down from the feds. And I'm like, I've seen how hard it is to regulate these things. It works slowly. People don't even know what they're doing. You know what I mean? Every time it was a good time to buy US tech stocks when the negative sentiment on them was regulation. For the past 10 years, every time Google, Microsoft, Microsoft's a bad example because

it got cheap in like 2013, but every time like Amazon and Google got cheap, every time Facebook got cheap, it was around regulatory pressure primarily. And it was pretty much always a good time to buy them whenever that happened. I extrapolated that to the Chinese tech companies and I made a mistake. I just want to clear that up. I fully have made a mistake on my thesis for this regulatory environment. Yeah, I personally knew it was different, but I didn't think they would be as swift as they were. swift as they were so i i'm in kind of that same boat as you is i didn't think they would impose these regulations oftentimes overnight almost as quickly as they did but i think we're

learning a hard lesson where that it's not a democracy if the ccp wants to impose something whether it makes sense in our view or not that they will do it so another reason here actually that caused the most recent drop in prices for a lot of these Chinese ADRs that are listed in the US is that the US is making their auditing requirement more stringent for Chinese companies so if these companies do not comply with U.S. auditing requirements, they face being delisted from the U.S. stock exchange. And last week, the SEC actually identified five companies that could face delisting in the U.S., which was the first time it had done so. And that was one of the big triggers of the drawdown that we saw in the past like 10 days or so so obviously before

the big pop that we saw today and then today news came out that the chinese and u.s regulators are progressing towards more cooperation on u.s listed chinese stocks adrs they also said that the chinese government also said through their state media that the crackdown on technology companies should end soon. Whatever that means, that's just me. That really highlights one of the risks of investing in China. Because, sure, okay, that's positive news. I'll hand it to investors that shot these companies up 35%. But it could still change very quickly.

35%, but it could still change very quickly. We all know that there's a lot of tensions between the US and China on various different fronts, not only just stocks and listings in the US. So yeah, it's good news, but it could change quickly. And the last thing here that I think is impacting some of the prices is really what's happening in China right now. There are increasing lockdowns. More specifically, there is a province that's fully locked down and there's also the technology hub of Shenzhen. That's important because Toyota, Volkswagen and Foxconn, which is a major supplier for Apple, will all be affected by production disruptions by those lockdown. So it's hard to say what extent it will be having on the Chinese economy, Chinese stocks, and even some ripple effects with Canada, US, Europe as well for these type of companies that are using China as a supplier. And we've seen the issues of supply chain constraint, which can cause and potentially impact inflation as well and then you

add the whole Russian invasion of Ukraine which a lot of people are a bit scared that it could have eventually some impacts on China because they're seeing what impact the sanctions against Russia's economy is having and I think a lot lot of investors are projecting that at some point in the future, it could happen to China. I'm not saying it will. There's a lot of things that could happen, but I think a lot of investors are probably projecting that as well.

Despite today being like, oh yeah, look at these things. They're up 35%, thank God. Look, I'm not going to be like, look, I was right the whole time. Because in the reality, they have been getting crushed and I'm still down like 35% on my 10 cent position. It is the only stock that I own that I have a cost basis that is higher than what it trades for today just because i own stuff for a little really long time now i tweeted out something of the three major tech plays with or i guess jd baba and tencent and i tweeted just their performance on a trailing year using like you know showing the

stock chart using stratospherephere's charting technology. And a guy DM'd me something. And I'll keep him anonymous because he's... I feel like it's going to be good. I have no idea what the DM was. So this is brand new information for me as well. Well, no, it was nice. And I'll keep him anonymous because he goes anonymously. And it wasn't a mean thing, by the way.

I get all kinds of mean tweets. But no, it was this. He thing, by the way. I get all kinds of mean tweets, but no, it was this. He goes, I have a grim analogy. A well-known investor once told me governance risk is like carbon monoxide poisoning. By the time you realize it hits, it's too late. And I was like, damn, dude, that's literally what I got like my mistake with tensang is i i'm like i didn't foresee what i was talking about earlier with their ability to move quickly and do things that i don't understand and so it's a great company i'm not gonna make some ridiculous like moves based on based on volatility but i do think that that was interesting he said governance risk aka like regulatory risk is carbon monoxide poisoning by the time you realize it hits you it's too late i was like damn that's a good quote yeah this is why i love twitter this is why

i absolutely love twitter because you like that was some like next level stuff man yeah no that's really that's a good quote twitter is really good i mean once you kind of zone out the negative and the trolls oh yeah it happens to everyone especially in a bear market the trolls are like i'm loving it it's like they love negative yeah it's like dude cheer up what is it like misery loves company or something like that yeah that's right it's like they love negative yeah it's like dude cheer up what is it like misery loves company or something like that yeah that's right it's that's the one i know you're going to talk a little bit more about alibaba in a sec here too but i've learned a lot from this experience that's what i'll that's what i'll say i've learned a lot it's not to say that these are not good companies and they could very well be undervalued, we'll see. They very well could

be heavily undervalued. And that's the best way to put it. I think I always think of it not as mistakes, but as learning opportunities. So just trying to put a positive spin to it. Yeah. Yeah. Fair enough. I've done all right. I'll be all right. 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. Okay, so I have a segment here called investing is a strange pursuit ofness. I've had this thought where I've been trying to eloquently put together something for the podcast, the thought of

how investing is the strangest pursuit of greatness. Most investors want to be great. Who wants to be good at this? I feel like everyone wants to be great at managing their money. Who wants to be good at this? I feel like everyone wants to be great at managing their money. Anytime you spend significant time or energy on something, you'll want to do well. And hopefully, since it's our money and our future, you don't want to just do well. You want to do extremely well. So investors want great returns and they want it to compound into material wealth. This seems totally fair. Okay. Now we've set the stage, but if you want to be great at something, what do you typically do? If you want to be the best at something, typically, what do you do just across the board? What does it take in the,

in a person to be great at something? I mean, for obviously for me me i think it's all about practice and essentially and i think passion i think practice and passion passion and practice putting the practice obviously putting the work in but i feel like if you're passionate about something you put the work in you practice a lot eventually you'll get better right You think about like just professional sports athletes, hockey players. How many times do you hear the best goal scorer who was, you know, shooting a puck in his driveway two hours a day for like five years in his childhood? Well, there's a reason why he's good today. Yeah, exactly. Okay, perfect.

This is this. You set the stage incredibly well. We did not rehearse that. Okay, perfect. You set the stage incredibly well. We did not rehearse that. My analogy here is like becoming the best three-point shooter in the world in basketball. What you talked about with practice, like passion's important, but with practice and we were talking about shooting the puck in your basement, it's reps. It's repetition and consistency to be the best. repetition and consistency to be the best. And if you want to be the next Steph Curry shooting three-pointers from all over the court, by the way, that dude is a freak, like outrageously talented dude. What do you do if you want to get to that point? You work your ass off every single

day. You're in the gym shooting hoops. You're perfecting your form. The pursuit of greatness of that sport requires reps and constant action. I think the most important word here to keep in mind during my segment here is it requires action. Now, the pursuit of being a great investor is the only thing I can think of that requires constant inaction. It requires you to do nothing most of the time to be great. How strange is that? I mean, this doesn't mean you're not doing reps in terms of learning new concepts, finding new ideas, listening to podcasts like this one to expand your knowledge, expand your brain. Everyone knows Warren Buffett basically sits in his office and reads for 12 hours a day

instead of like doing things. Because to be the best like him requires 12 hours a day of sitting in your office of inaction. How weird is that? So curiosity, like infinite curiosity is important, but hardly any time actually doing things. So tinkering with your portfolio is a thing that I would consider as doing something. Making huge portfolio changes for no reason, reacting to market volatility, aggressive trading, changing your mind, swapping this company for that company. Those are all actions. These are what I would call actions that do nothing but hurt you over a long period of time, typically. Now, you know, selling a stock that turns out to be a dud, that could be a good action. What I'm saying is don't do unnecessary overaction. So here are three

tips that I personally use for managing my own portfolio to take the excessive action out of managing my portfolio. One, I have a rule that if I like a company and start doing research on it, it'll still be great tomorrow, still be great the next week, it'll still be great tomorrow still be great the next week it'll still be great the next quarter and year maybe decade so i do not allow myself to buy shares like just getting hooked on a new idea and like impulsively buy something my hurdle rate has to be much higher so basically it's don't fomo that's what it is don't fomo exactly exactly and and if it is. Don't FOMO. Exactly. Exactly. And if it is a great business, a couple trading days or a couple trading weeks of performance is going to make a difference for you. So just hang on. Take your time. Be patient. Number two, have a regular contribution to your brokerage account automated. I mean, this is like this unsexy thing to talk about, but it's like so useful. Like

operationally, this is what I do. I literally have a bill payment that goes right from my bank. It fits into my budget every month. And if I want to do more, like if I'm like, oh, like this month, I want to double my contribution. I have a bunch of extra cash laying around, whatever, then I can do that. That's like, that's an action I can go do. But my regular contribution is automated. And number three, I do not make any transactions on my brokerage app. I may as well delete the app. The phone app, I don't use it. I may as well delete it. Because if I'm making important decisions, they don't need to be on the go. They don't need to be the drive-through of Tim Hortons. I see excessive trading come from people on their phones, selling things

unnecessarily, reacting to volatility, outright irrational behavior when they're using their mobile device. Sit down on the computer, on the full web application, do the process, have everything in front of you, your spreadsheets, your data, whatever it is you use in your process. Do it right. You know, like I think you've mentioned that before. Don't be doing your investing on like on the go on your phone. I know that that's what these new trading platforms want you to do. They want you to manage it from your phone and stuff like that.

I think it's too important to be doing that personally. Yeah, I agree with that. I've mentioned that before where that extra work that you need to actually open your laptop, log in or, you know, start up your desktop, whatever it is, that little extra work oftentimes is just enough so you don't make a rash decision because you have to be home or, you know, wherever, whether it's at work or home, wherever you have access to a computer, you have to be home or, you know, wherever, whether it's at work or home, wherever you have access to a computer, you have to have access. Whereas on your phone, you know, you could be doing anything, your phone's on you. And then if you freak out and then you, you make a rash decision. You're with your buddies at the bar after work and you've had a couple pops

and your buddy's like, Oh, get out of that stock. It's trash. And he's only saying that because the stock's down 20% in the past, in the year, which is like in line with pretty much everything else in the market. And you're like, oh, wow, I should probably sell this thing. It's like, no, no, no. Take your time. Have to have that friction of going in and doing it right. This is one of the things that I think of like reduced friction as a bad thing. You know, like maybe that brokerage commission that you have to pay could be the best thing ever for your finances.

So you're not over trading. It's the same reason why like I get so many requests for, dude, I get so many requests from people to make Stratosphere a phone application. We're working on it because it's requested so much and i get it's convenient we're doing actual research and getting the benefit of like doing the app on a larger screen all the data like that's where the actual value is like you need that real estate on a on your laptop or on your external monitor at whatever your you know work setup is and do it right you know that's what i'm trying to say do it right yeah no that's a good point and you know i'm sure some people may not have access to a an actual computer so obviously

take that to account i know like pretty much everyone has a phone nowadays so i i know not everyone may have a computer so obviously you, you have to factor that in. But I think that extra, like Brayden said, sometimes just having the fee is actually an extra barrier that is good because you don't want to pay that $5 or $9.99 or whatever it is for each transaction because you don't want to pay that fee. So it makes you think really about the decision you're about to take and may allow you to not make any rash decisions. That's right.

And that's ultimately what we're trying to avoid by when I say investing is a strange pursuit of greatness where the best to ever do it have a knack for inaction. And that's so strange. It's such a strange thing. And that's why I find it so interesting and fascinating. Yeah, no, that was a good segment. Now we'll move on to, like you mentioned earlier, we'll just talk about a little bit about Alibaba and just looking at Chinese stock valuation. But like you referenced, Charlie Munger through the investment firm, The Daily Journal, which he is a chairman of, revealed that he invested recently $71.5 million

into Alibaba. It's actually a significant bet on the company since it's a way smaller company than Berkshire. And Alibaba did roughly $112 billion USD in revenues in 2021. I said roughly since their statements are obviously in Chinese Yuan. But currently, Alibaba's market cap is around $337 billion. It was actually $220 last night when I did the notes. Oh, shit. Their net income was about $22 billion for their 2021 financial year, which ended last March of last year. So keep that in mind. So let's say they're trading about 15 times earnings based on those results. So clearly, that's a pretty cheap price to pay for a company that's grown at more than 40% annually over the

past five years. It's actually crazy cheap when you think about it. It's so cheap, man. Yeah. If you believe in the financials. Exactly. It's so cheap. And that's one of the risks with Chinese companies and why US regulators are putting these more stringent auditing requirements because you never really know if it's really that when it comes to Chinese companies, even for a company as well known as Alibaba. And I think the most important question that any investor needs to ask himself or herself for investing in Chinese companies, I think there's three main questions. Once you kind of strip out the whole valuation, growth, whatever you think about the business,

I think the three questions here are, is there a risk of the shares being delisted from US markets? What type of multiple expansion or contraction are you expecting in the future? And how much risk do you think unilateral regulations poses to the Chinese business you're looking to invest in? And clearly, these are questions that are tied together. And the last thing I want to mention here about China is what happens if a Chinese company gets delisted from the US. So their ADR gets delisted. Well, you could have a share buyback where the company just reimburses you for the share. There's an agreed upon price.

They could also transfer your share to their Chinese listed stock. Most of the time it is in Hong Kong or the shares end up being over the counter, which that would probably be one of the worst outcomes because over the counter, there's oftentimes less liquidity. Prices swing way more. It's sometimes much harder to trade as well. So it's usually not a great outcome. So that's something to keep in mind if you're looking to invest in Chinese shares that are listed in the US.

you're looking to invest in Chinese shares that are listed in the US. But the last thing I wanted to mention, a potential alternative, and I do own this ETF, so the K-Web Crane Shares China Internet ETF, has actually already swapped out most of his ADR for Hong Kong listed shares. And I saw a news release of a couple days ago that they're aiming to fully convert all of their ADRs in the upcoming months to the actual Chinese listing share and I think that's a good way of going about it because if they do get delisted from the US they'll still be listed in Hong Kong so I do like that they're doing that so me, I'm not selling the shares I have in that fund. I'm not selling Tencent. I will definitely be cautious with more investment in China.

But there's clearly a lot of risks. So don't tweet at us saying like, oh, you own Chinese shares. I told you so. You should never own them. We invested in Chinese stock because we thought the companies had good prospects. We knew there were increased risks that you don't have for US or Canadian listed companies. And we were fine with taking that risk. Clearly, you know, so far, it's not worked out all that well. But yeah, I mean, it is, you know, something that you do when you're investing. And I'm going to

speak for myself here, but I'm pretty sure it's the same thing for you you know it's a pretty small portion of my portfolio and we've talked about that before where allocation can really help you mitigate risk yes I'm down on my k-web position I'm slightly up on my 10 cent position because I've owned it for a while but I'm definitely tracking the market lacking lacking the market returns or behind them. But yeah, it's a small portion, so it doesn't affect me too badly. I'm not going to sell right now. I don't want to make a panic move. I am keeping an eye on it and I'll see what's happening down the road this year.

I think it's important to just mention here, we're not some huge Chinese tech stock bulls that just own a huge portion of our portfolio. It's literally like 3% for me. Because, yeah, good fundamentals, really good valuation, really sketchy regulatory environment that's eating our lunch. Now that we've got that out of the way, I think it's important to just touch on something that you mentioned here, which is sometimes on a valuation basis or like a trailing multiple basis, things are really cheap. Things can look really, really cheap. And you have to ask yourself, and maybe I should have been asking myself this a little bit better, is why is it so cheap? And

if you don't know the answer, you haven't done enough work. Like everyone's found this like growing stock that's like, you know, the top line looks great. Like, you know, the margins look great. The profits are good. Like, why does this thing trade at eight times earnings? Like, why is this semiconductor company trading at eight times earnings when it's growing like a weed while their peers trade at like 38 times earnings? What is the arbitrage? And if you don't know the answer to the discrepancy,

then it's time to get to work or move on. One of the two. But it's never a reason to own a security outright just because of that multiple. It's a way to get absolutely burned is buying a stock just on its trailing multiples. I think a lot of new investors make that mistake. It's like the same thing when they buy high dividend yields, just buying it strictly for

the dividend yield. It's like, I'm going to buy this stock just because trading at eight times earnings. That's a way to get absolutely crushed in the market. Yeah, you can have the best models out there that just looks at metrics and future prospects and free cash flow or discounted cash flow models, whatever it is. At the end of the day, those model, I mean, sure, if you want, but I think investing is a lot more subjective than just basing all of it on some mathematical model that you might have come up with, because there's a lot of things that are very hard to quantify. And I think, you know, that's one of the things we struggled with the most here with our Chinese investments,

is we didn't really, we weren't able to properly quantify that regulatory risk. Our positions are down now, maybe we'll finish, like it'll finish being a great investment five ten years down the line but it is what it is at the time being and it's something that obviously same for me i probably should have put more importance on that good thing 50 of my portfolios in one company called consolation software yeah should just be 100 all, let's wrap this up because my dog just somehow opened the door and I seen that and now he's now staring at me like- Let's go walk. Let's go outside. Okay, buddy, we'll get you out there. 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, 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 shift gears here because we have an interview with Mahim Poddar. She is one of the senior vice presidents at EQ Bank, and she's led their personal banking division. No better person to talk to on the rise of digital banking. So I sit down with her and just get a primer on digital banking as a whole, because I think many Canadians out there and people across the world are looking at what their banks are doing for them and thinking, I could do this all online if I'm not already. And so no better person to talk to. I hope you guys enjoy it. Take care.

The Canadian Investor Podcast listeners, Braden here. I have an awesome interview here with Mahima Poddar, and she leads EQ Bank, who is a sponsor of this podcast. You guys know that me and Simone are huge fans of their platform, so we're excited to have Mahima here. Mahima is going to go through why digital banking, because I know that many people are tired of some of the nonsense in traditional banking, and why EQ Bank. Mahima, thanks for taking the time and welcome to the show. Thanks for having me. Excited to be here. Digital banking, it still feels like we're in the early days, at least from my opinion. And when I look at EQ Bank's platform, I'm amazed at how refined and seamless it is when

what still feels like a nascent stage of adoption. When did your team realize like, hey, offer way more value to our customers by not having these in-person branches? At EQ Bank, we're just at such a different starting point than the big banks that we're all used to. We have none of that legacy infrastructure, including branches. We don't have that old, outdated technology that a lot of the big banks are dealing with. So we can definitely operate at a lower cost than the big banks. And while that is really important, the actual crux of this is that EQ Bank, our whole purpose is around trying to do more for our customers. The reason that we can actually give more value to customers is because we are willing to accept lower profitability so that our customers get more. When you have 0% savings rates or near 0% savings rates at the big

banks and checking accounts that definitely don't pay interest and charge fees. The big banks generate huge profit pools from those deposits and it would be really hard for them to walk away from it. At eKibank, we never had those profit pools, right? We started from scratch and we knew that we had to do something better

than what was out there to A, give customers a better option, but B, to even get any sort of interest or demand in the market. And so that's exactly what we're doing. We're actively designing products to give back more to customers and we're passing the profit on from our savings from operating as a digital bank back to the customer. And we've been doing that since day one. Nice. I like that you touched on some of that technical debt that you guys don't have. I think about that so much with banks, right? Like this infrastructure is obviously incredibly important and it's not something you can just mess up, right? Like it's not just like for my business,

if we have something down, like, okay, there might be a feature down for five hours or something. And then while that might suck and we try not to do that, you just, that's just a different ball game when it comes to banking. Right. So you like, you cannot mess around with people's money, right? Like this is people's livelihoods. Like even our average balances in the account are so high, like $25,000. If people can't access that money even for 10 minutes, it will create huge havoc. But to your point, with the big banks, the difference is they started, I don't know, 100 years ago, maybe more, with these technology stacks.

And they were all built around in-person banking. At EQ, we started with mobile first and and everything was digital from day one so there was never an option to like troubleshoot by sending you to the branch right the big banks like ultimately their fall safe is to send customers to a branch to like validate your id or have them show a piece of paper. Like we're at such a big advantage because we will never do that. Right. Yeah. The default solution to fixing some problems of having to go to the branch as kind of like the first option, just something that people just don't want to do anymore. And I think that that's why you guys are seeing the success. The terms I see on your website quite a lot are, by the way, which I like this warning, no nonsense is great, by the way,

because that resonates with people. Nonsense resonates with people. Exactly. The amount of nonsense that we've all had to deal with growing up with the big banks has been like, yeah. And they're like, by the way, sorry, we can't fix this over the phone. You're going to have to pop into the bank. It's like, aren't I talking to the bank? Internally, we actually call it bullshit, but I mean, you can't use that in marketing materials. So no nonsense it is. Well, you can use it here on the show and no hidden fee. So those are the two terms, Well, you can use it here on the show and no hidden fee. So those are the two terms, at least that I see a lot in the, in the marketing material.

What makes the offering at EQ bank just different overall in terms of like customer service and the actual like benefits. I know that the rates are higher as well than, than what you'll see out there typically. Is that kind of the most common use cases out there that Canadians are finding the value in? Yeah. I mean, like our whole ethos is around being pro-consumer and how do we find ways to allow the customer to, you know, make more money without the friction that they're used to. Our core product is really a hybrid checking and savings account.

So we provide all the benefits of a regular transaction account, but with high interest and none of the fees that you're used to. So all of the products are really designed to eliminate those traditional like gotcha moments that again, maybe you're used to experiencing at the big banks. At EQ Bank, we really want our customers to trust that we have their back. They're not going to get dinged with annoying fees here and there. Their transaction history is not going to disappear after three months. We're not going to ask you for information that we don't need, et cetera. Like I remember when I used to bank with another bank, this was before EQ Bank existed. One of the

most annoying experiences for me was getting dinged $30 when my bank account went from 5,000 plus to like $4,995. And it was one day and it was a $30 fee. And it was just that irritation of knowing that, that the big banks are like, they're just looking for that moment that you slip a tiny bit so that they can like hit you with a fee. That's the thing with EQ is like, that's never going to happen because like, we really have our customers interests at heart at the center of what we do. And that honesty, transparency, and that whole value piece is what we're known for. What I say to folks is it doesn't have to be like one or the other, right? Like I know that a lot of your customers are using a lot of the

benefits of EQ Bank and just signing up with that. Like, it's not like you, you know, those huge high switching costs of banking. It's not like you have to just completely uplift your entire financial life and start using EQ. Do you want to just quickly talk about that? This can be used in a hybrid and the benefits of what you guys have, you can sign up and start using it without having to have this huge switching cost in your financial life. Yeah. I mean, it's just so completely flexible.

And I think the other thing is because there are no costs to the platform, like you don't have to worry about, you know, am I getting the most of my fee, et cetera, but we do allow you to put your payroll into the account automatically. You obviously don't need to, but you can pay bills from the account. You can send as many free e-transfers as you want. You can send money internationally at the cheapest way possible in the country. It's up to 11 times cheaper than the big banks. I think one of the big features is that you can link your other bank account to EQ Bank and then move money back and forth at no cost. So that makes it really flexible to use EQ Bank for what you want to use it for. And then you still can have your other bank account if you've already set up a whole bunch of pre-authorized bills and don't want to move them, for example.

in a savings account per se. It's just in an account that they can transact from so that they're not having to manage these buckets of money. And if they do want to manage buckets of money, it's also very easy to just open sub accounts that earn that same amount of interest. So it's a really flexible platform depending on what people's needs are. Yeah. Everything that you've said makes me think of words I have never constructed before, which is they are dealing with the first mover disadvantage, right? They have all these kind of processes in place that just really don't make a lot of sense for the customer. And you guys come in and kind of just like, it doesn't have to be like that. Go ahead and go to eqbank.ca, to be like that. Go ahead and go to eqbank.ca. Use forward slash TCI to support the show. That is eqbank.ca forward slash TCI. You don't have to uplift your whole financial life to start

seeing all the benefits of it. You can just make an account free and start seeing some better rates on your money, at least for starters. And then you can dabble with some of the other features. Mahima, thanks so much for joining the show. I really appreciate it. Thanks, Brayden. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.