The Canadian Investor - Home Ownership on The Decline in Canada?

Episode Date: December 2, 2024

The podcast covers three main topics: the benefits of opening a First Home Savings Account (FHSA), reasons for retail investor underperformance in 2024, and highlights from Warren Buffett’s latest shareholder letter, focusing on his philanthropic vision and legacy. 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

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so we're gonna talk about that of course and then dude you got some good data on the gap that under the underperformance of retail investors is quite staggering. It seems almost not believable, but yeah, like JP Morgan came out with some data that kind of suggests, you know, despite the S&P 500 being, well, and even the TSX being what, up 20 some percent. I mean, I think the TSX is one of the better performing indexes over the last while, but retail investors are returning nowhere near that. So yeah, that should be pretty interesting discussion. We'll go over why I think, just from a lot of years of talking to retail investors, dealing with a lot of them, just kind of the slip ups that

a lot of people have when it comes to their portfolios. kind of the slip ups that a lot of people have when it comes to their portfolios. Yeah. And a lot of behavioral issues. Simone, Mr. Belanger, we'll be back on the podcast in the near future. He's just taking a little bit of time off with a family issue. We love you, buddy. Myself, Dan, all the listeners, we got your back. We love you, pal. And we'll see you back on the show when you're ready. Before we get into the pod, Dan Foch from the Canadian Real Estate Investor podcast, our sister show, if you're a real estate investor, landlord, homeowner, go listen to that show. He shared this chart, which is Canadian data.

He shared this chart, which is Canadian data. And the takeaway from the chart is it shows a bunch of different age cohorts from every five years. So from 25 to 29, 30 to 34, 35 to 39, all the way up to 85 and older and the only cohorts that have home ownership increasing in terms of like the rate of home ownership in those age cohorts are for people above 70 years old so every age cohort below 70 years old home ownership is decreasing as a percentage of the population. Yeah, I mean, it's not surprising. Which is insane. Yeah, that's some strange data. I mean, 85, how is 85 and older increasing? 85 and older is the only one that's like really really increasing yeah

like i would have figured at that point in time you're looking to maybe sell off your real estate and uh move into a you know retirement home or something but uh yeah i mean clearly canadian real estate has been unaffordable for the masses for a very long time. But that is a shocking chart. And this data is from the National Household Survey 2011 and then the Census of Population 2016 and 2021. So it maps out data from 2011 to 2021. So that's the duration of this data. I guess the staggering thing is, look, it's not a surprise to anyone listening on the show that young people, let's say under, I don't know, the 35 and under cohort, that home ownership is decreasing.

But for the 45 to 60 cohorts, those three cohorts, that is shocking to me. That's very surprising. Yeah. I mean, there's been such a real estate bubble over the last three, four years here that maybe that age group is using it to fuel an early retirement. I mean, you got to think if you own real estate in a real estate hotbed, I mean, we don't really get too much of that in Alberta. Although right now we're kind of going crazy a bit, but I mean, if you cash out on a few properties in Toronto or Vancouver, I mean, I could fuel, you know, I could take 10, 15 years off your retirement. Yeah. They're like, you know what? I'm going to like index and chill and rent. Move to Alberta. Yeah.

So it reminded me to talk about the FHSA account here in Canada. Many of y'all know how it works. But overall, I don't see much discourse on this account, this type of investment account for Canadians. And I think we've only brought it up a handful of times, which honestly, it needs more attention. And that data that we just talked about is exactly why it needs more attention. I mean, look, statistically, less and less people are homeowners, which means more people are eligible for this new account. It started in 2023 and, you know, recording this year in November of 2024.

So it is a new account for pretty much everyone still. And it is a reminder, if you are eligible, which I'm going to talk about the eligibility, the point of what I'm bringing up here is open one. Open one if you can, man. Open one. And I'm going to tell you why. So to be eligible, you have to be a Canadian resident, at least 18 years of age or older, and have not owned a home in the current or previous four calendar years. So even if you owned a house back 10 years ago, you've been renting for a while, you can open an FHSA. So more people I think are eligible for this account than they may even realize.

than they may even realize. And the contribution room for the FHSA starts accumulating only after you open the account. So just to reiterate that, that's very, very important. Very, very important. If you are eligible, open one because contribution room for the FHSA starts accumulating only after you have opened the account, which is different from other registered accounts like an RSP or TFSA. So that's a very, very key distinction. And so whether you have money to dump into it now or not, open it. Because you want to have that accumulation room build. You can only carry over, I think, two years, like a total of 16K. But still, that's better than 8K, right?

That's double in terms of contribution room. Any comments? Yeah, man, it's a great account. I mean, it's almost a no-brainer. I it's almost a a no-brainer i mean it is a no-brainer for for a first-time homeowner we did a a mailbag episode on i believe when we had like a q a and we did one on the fh that f i can't even say it i always mess up f h s a but yeah it's uh you know there's a lot of like different strategies in terms of you know how to invest in this account especially like depending on where you live like you might you know need to

be a lot more aggressive on it you know like depending how much you have saved where you have lived but i like the one thing i'm surprised is they put this barrier in there you know that you have to have the account open and if you really want to you know encourage home ownership just make it like the TFSA, where if you don't open one for three or four years, you get that three or four years contribution room. I don't know why. It's just confusing to me if they're trying to encourage home ownership that they kind of put this in place when in reality, it should just be like the TFSA. Yeah. For whatever reason, this is built out tinfoil hat or not uh for that rationale

we're coming into the end of the year here in the cal uh the calendar year so this is a just a timely reminder if you're eligible which is basically if you're 18 or older and do not currently own a home or have not owned one in the past five years, including, I guess, this calendar year and the previous four calendar years, get that thing open and then you'll increase your contribution room to $8,000 for the current year. So now, and then you'll get another 8K of contribution room next year. So if you opened one in 2023 and you didn't contribute, you'd have 16,000 of contribution room here now, 8,000 for 2023, 8,000 for 2024. You can carry forward, I believe a maximum of 8K to the next year. I don't think you can rack up like a huge... I'm not exactly sure on that.

I don't think you can rack that up. On your next segment, I'm going to confirm, but I'm pretty sure you can't. So this is a good example, right? We're in year two of this account. We're the same as you. We're here live on the pod. It's only been open for us the same amount of time as anyone else. No one in the world has more than 16,000 because there hasn't been more than two years. So these kinds of things you figure out as you go as an investor. Yeah. So you can carry forward 8,000. So you can carry forward up to a maximum of 8,000 unused room at the end of the year to use in the following year. I guess my question is, could then that turn into 24 if I didn't contribute? That's what I'm trying to figure out.

Oh, yeah, I guess. Yeah. That's the part I'm trying to figure out. I would say no, but. Yeah, TBD. So this is not like a TFSA where contribution room starts building each year. You have to go open the account. So when people say, don't leave money on the table, don't leave contribution room on the table. That's my tip to you here as we roll over the calendar year.

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Let's get to JP Morgan's data yeah you've studied this extensively you did the youtube video on this as well yeah it was actually uh pretty well well received youtube video but effectively jp morgan came out with some data so i mean this is canadian investor podcast i would imagine this is u.s data i't, it wouldn't be North American. I would imagine it would just be US data, but they came out last week highlighting, and honestly, it seems hard to imagine, but they said that the average retail investor

is up 3.7% versus at the time, I think the index has gained a little bit more, but it was 23% gains of the S&P 500. So three compared to 23, basically. They said that this will be the worst year on record for retail investors when the index posted double-digit gains in nearly a decade. So when the index posts double-digit gains, this will be the worst year in the last 10 years in terms of retail performance. And it's kind of interesting to have a chart of the S&P 500 and

retail investor returns, and it just collapses after the summertime. It's kind of steady throughout the year, and then the summertime, it just absolutely collapses. I don't know why that is, but I mean, it seems absurd to think, again, that the performance gap can be that wide, but I do believe there are some pretty key reasonings behind retail underperformance in general. I mean, this wouldn't be unique to this year, although this year is particularly bad, but I mean, retail investors fall into a ton of traps all the time. The one of them I do like to call is the bar of soap theory. So this is, it's effectively a Warren Buffett quote where he kind of speaks about how your portfolio is like a bar of soap. The more you play around with it, the smaller it's going to get. And I mean,

I believe this is one of the main reasons for investor underperformance. I think this is driven by a lot of things. I think for one brokerages, I mean, they make more money when you actively trade. So they encourage you to trade a lot through strategic marketing. I mean, we're seeing a company like Wealthsimple, they're coming out with options trading, they're coming out with covered calls, they're coming out with margin accounts. Everything is directed towards you trading more, which ultimately is almost a guarantee that you're going to earn less. Secondly, I believe it would be just complete information overhaul that is available on the internet today. I mean, this is especially true post pandemic. I mean, the lockdowns during the pandemic brought on a boatload of financial influencers,

influencers, I would call them. I hate that word, but there's more than there ever has been. I've been doing this since, well, for going on 10 years now, I've never seen the sheer amount of financial content available to investors more than there is now. And I think honestly, I mean, you can read a report on a stock, you can get five different opinions on a single stock in five minutes. And I mean, for those who really don't really have a solid thesis or an understanding as to, you know, why they're buying something, I mean, these opinions, they can cause you to just, you know, overreact, again, trade too much. I mean, a lot of retail investors react to short-term headlines. They're constantly tinkering with their portfolios,

whether it to be to take advantage of particular events or hedge against other events that they're worried, excited about. And I mean, there's literally a century, over a century worth of history that pretty much highlights buying and holding strong companies, whether it be through indexing, through, you know, if you want to buy individual stocks over the long term has been one of the best ways to generate wealth. Yet, I just feel like a lot of retail investors just can't seem to get out of their own way when it comes to this. I mean, they obsess over their returns this week, this month, this year, they're constantly tinkering. And there's no surprise that that is, I think that's like

data backed, that this is one of the main reasons why investors underperformed. And I mean, it's not necessarily just with individual stocks. Like a lot of people will kind of, you know, this type of theory, they'll attribute it to you. Oh, well, you should just buy index funds. I've witnessed a ton of people blow up their accounts with index funds as well. I mean, there's no difference between, you can buy the S&P 500 at the top and sell it at the bottom. Plenty of people, You can buy the S&P 500 at the top and sell it at the bottom. Plenty of people.

It's not just individual stocks that this comes from. It's sad. I mean, it's frustrating and it definitely reinforces the point of what we're doing here, right? It's like managing the behavioral mistakes. The best Schwab accounts over the last 40 years have been retail investors that forgot their password. Yeah, exactly. And I'm not just saying that facetiously. I'm serious. This is actually what has happened. And I think what young people, new investors have grown up in this world of everything becoming a casino. You know, the Vegasification of anything, you know, sit on the toilet and build a parlay for Sunday's football games.

Like that's all fine. That's all fun. But your investment account should not be treated that way. And there's a big difference between these types of things. And, you know, the meme, Hawk Tua, girl, just made a meme coin. Yeah, I saw that. Like, are we at the, like,

I can just see Steve Carell in the big short saying, we're in a bubble. Like, you know, like these are the types, no one rings a bell at the top, but like, if not a bell i don't know what is 2021 vibes yeah exactly for sure so like the vegasification of our world the degenerate economy just needs to that's all fine and fun but it's just not there's no place for that in your account. No. And I mean, you look at, they have data, you know, they go back to the seventies and they, they kind of show the average holding period of an equity and it's like six years.

And then you fast forward till now and it's like under 10 months. And I'm like, a lot of this has to do like, a lot of people will assume that like you know investors back in the in the 70s were you know better investors you know more patient things like that i just think they didn't have the technology to trade as much as they did or trust me that would be way way lower there's some reason to sell it yeah exactly and i mean you think of like the available news in the 70s i mean you couldn't log on to facebook and see 20 different opinions on a single stock you couldn't you know go to i mean the internet didn't exist back then i mean i can't even imagine how you were getting from the newspaper i guess so like

there's a lot of different information in that regard but again if if we had if people in the 70s had the tech that we had today i guarantee you that holding period will be would be down to 10 months because this is just human nature yeah it just to constantly tinker and i mean the next one the next main issue here i believe would be emotional like one could argue this is probably the top reason retail loses and underperforms. I'd put it at the top of the tinkering, pretty much equal with it. And I mean, emotional investing can be a mix of a lot of things. It can be panic driven. It can be FOMO driven, fear of missing out. Chasing returns is a massive one. And I do think this is where emotions truly do get investors. I mean,

a prime example of this, at least for me over the last nine, 10 months would be because we're like stock trades. It's exclusively Canadian. I think like 95% of our audience is Canadian investors. And I've, again, we started it. It would have been 10 years ago now. I've never seen the amount of Canadian investors come to me, whether it be through Google search, anything, whether directly to me about the S&P 500. Like everybody wanted to know how to buy the S&P 500. And a lot of them, it was at expense of their Canadian equities and routing that money to the S&P 500. And for the most part, the basis of that was that the S&P 500 had done good over the last while and the TSX hadn't. And I mean, that's just, it's one prime example of chasing performance. And I mean, don't get me wrong,

like I do expect the S&P over the long run to outperform the TSX. I mean, our index is way too cyclical. Like it's just, it's going to be an index that does outperform. But if you look at, you know, the best performing index over the last nine or ten months it's the tsx it's returned more than the s&p 500 over that last while and i mean obviously really yeah i that that i did not realize that yet it's up i believe 22 percent over the last while it's it's been great i mean most of that i would imagine a lot of that is due to you know gold producers they've done quite well over the last while but if we look at returns from i believe what would it be year to date it's not uh most of the breakout was you know in march or april i believe

but yeah it's been you know over the last nine months it's been uh the best best performing major index in uh in north america that's interesting okay cool i mean no one's been upset holding any of them probably yeah i know and i mean i've had i've had a ton you've only been upset if you've been trading them like we've been talking exactly in and out of stuff and i mean in terms of the emotional investing and like chasing returns, I cannot think of a better example than ARK, which has effectively like this isn't even an exaggeration. It's been the worst wealth destroyer in history almost. I think it was something like 15 billion plus. I mean. Of pure retail.

Yeah. Yeah. Like pure retail. Of pure retail money. Yeah, yeah. Like pure retail. And like at this point, like remember on the previous episode or like when we're talking about earnings, we were talking about Shopify and like how it was trading at, you know, like I can't even remember what it was, like almost 70 times EV revenue. I mean, in ARK at the peak, like these companies were trading at just obscene valuation levels, but people just didn't care because all they were doing was looking at, you know, past performance, what she had done, you know, over the last year

or so, they just wanted a piece of the pie. And ultimately, um, I mean, it just tanked. What have you done for me lately? Exactly. And I mean, that, uh, that's one of the main things as well with, uh, with a lot of these popular fund managers too is like once they receive all those inflows from crushing it that year they generally i believe there's actually like a study they ran on this that said like once they have a year like that it's very very likely they underperform the next year and i I mean, obviously ARK has just had a poor three years now, but yeah. Chasing returns.

This isn't a sign of the times. I can't believe they still have this blog post up. This is a blog post. I come to remind myself that people act insane in extreme bull bubbly markets and people will follow a leader who has a path to them promising huge returns yeah they have some fancy model they built out with a bull case for zoom video which now it's just changed their name to Zoom Communications, actually like two days ago, of $2,000 a share. It's $80 pretty much. Zoom stock is currently, it's had like a good quarter and the stock's up, and it's $83 a share. It reached much lower in the 50s.

reached uh much lower in the 50s their their prediction was two thousand dollars per share for the video conferencing stock like what are we doing here yeah i just picked a number and said yeah that sounds good pretty much yeah i mean i i would love to see what you know i think i mean that must have been into them that would be a trillion dollar market yeah it would be probably yeah yeah it would have they're 25 billion right now so i mean i guess it wouldn't be yeah crazy i mean and that was the one thing like didn't she sell she sold nvidia at like i think she soldVIDIA right before it launched. Mm-hmm. Yeah. Yeah. ARK is a good bellwether for how insane retail got hoodwinked. Oh, yeah.

It was complete. Like, I remember just the inquiries I was getting from ARK in, you know, 2020, 2021. It was crazy how many people were interested in this fund and it kind of seems like at least here in canada i mean the s&p 500 is giving that kind of vibe like there's so many people who exclusively want to that's good to hear that's good i'll take the counter side of that argument that that's really good that people are wanting to figure out how to index in a broad-based low-cost index fund yeah into a yeah like you know 500 largest most successful corporations in the united states speculative biotech yeah i keep in mind i did not want to compare arc to the s&p but just more that element of chasing returns. So theoretically, we get

maybe investors now, they buy into the S&P 500, valuations are no doubt high. So maybe over the next 12, 18 months, it doesn't do all that well. Then they get into that element of chasing returns again, where they made the mistake of maybe buying at peaks when even if they did, I mean, it's been proven that if you just buy it and hold it over the longterm, you will have strong returns, especially in a, you know, a major index like the S and P 500. But like I said, they just kind of get in a situation, you know, they get in a situation where they just kind of, you know, they can't get out of their own way. They, you know. They bought that at the peak. It didn't return all that well.

So maybe in 12 to 18 months, they sell it, and they try to find some other way to earn those returns. And it's just a big, big chasing performance. It kills long-term returns. Yeah, definitely. So the third one that I want to go over and is one that I see all the time. And I mean, I don't think it has as large of an impact as the other two, but that'd be sunk cost fallacy. I mean, it's one of the biggest psychological barriers I think a lot of investors have

difficulty with. And I mean, the whole arc thing kind of leads me into this because it is sunk cost fallacy that i think attributes to a good chunk of underperformance and again like sunk cost is effectively when you refuse to sell a position even though you don't really believe it anymore believe in it anymore because you're in the red so you know the mic the money would likely be better placed elsewhere but you kind of do the whole cross your fingers thing and hope it works out. And it can even get even worse in the event that investors continue to buy into that particular investment, even though they don't believe in it anymore. And I mean, you lower your adjusted cost base. You kind of hope that it rebounds. And I mean, the one thing that I'll say is outside of tax situations in like a cash account,

like there can be elements of capital gains, capital losses, things like that. But the only thing you really need to be thinking about is where the money is best placed moving forward. So if you bought $10,000 worth of a stock or a fund and it's down 50 you don't have that 10k anymore you have 5k and you need to be able to make decisions based on where that 5k is best placed moving forward and just like you know just take the hit to your ego accepting the fact that you know you lost 50 and don't get me wrong like there might be some instances where you're down 50%

and you still believe that that is the best place for the money moving forward. But sunk cost is typically a situation where you don't feel that anymore. But you just like the idea of selling in the red is it's like that psychological barrier, like you can't sell now you're down too much when in reality i mean if you know an investment is obviously and you can never guarantee it but if you know an investment is probably gonna underperform moving forward and you you know see a better opportunity for that money even though it's not 100 guaranteed that whatever you buy in later will outperform what you own now. I mean, you will recoup your money faster putting it in higher quality companies than you would

holding on to a dud, I guess I would say, over the long term. And it is that element of the red. People don't want to admit they're wrong. And I mean, especially if you're buying, this is less relevant with an index, but if you're buying individual stocks, you're going to be wrong. You are going to be wrong. There's going to be ones that you have to sell. I've lost plenty of money on numerous holdings. And I mean, once you get to the point where if the reason why you bought is not there anymore, you cut ties, you move on to something else. I mean, this will reason why you bought is not there anymore. You cut ties, you move on to something else. I mean, this will ultimately improve your portfolio rather than, again, that psychological element of not being able to sell just because you're in the red. Yeah. It's the idea of buy right,

sit tight. That's great. But things happen. The competition changes, the world changes, technology changes, capitalism does its thing and you might have bought right and you're trying to sit tight but this is why you need to have some reason or some understanding of why you own it why you bought it because if that does change and the facts change then you have some actual non-emotional objective decision tree that you can work off of. You can re-underwrite your thesis and go from there. And back to your whole thing around, yeah, if you've lost money on something, ego aside, the market just doesn't care that you're down 50%.

The market has now re-rated something to now this is what people are willing to pay for it. Nowhere in what I said does it say, oh, but Braden bought it at $30 and now it's $15. It doesn't matter. If I was selling fax machines back in the day and my business I thought was worth $100 million because I'm crushing it. And I did 50 million in sales last year. But next year, oh, things are tough. I'm not selling fax machines anymore. The world's changed, technology's changed. And the market is only going to tell me my business is worth 25% of what it was last year, which this happens all the time in public markets. I have to either pivot or re-underwrite my understanding of what this company is worth and do what I can with the capital. Not cry wolf around how the world's changed. It's tough. It's really difficult psychologically.

But when you finally recognize and realize the market doesn't care about your performance, it just values businesses, then you can go ahead and make a good decision. Yep. Oh, yeah. It was well explained. And I mean i think you you like you said that was a a peter lynch quote is know what you own and why you own it because as soon as you know what you own and why you own it it becomes very easy to just cut something to just sell it i mean obviously you can't get you know you can't be selling from an emotional perspective but if you have a solid investment thesis you will know almost immediately when you should move on from something. And like the one thing I think a lot of investors fall into the trap of is they're buying things based on very simplistic thesis is overall. I mean, let's take,

for example, a stock with a high dividend yield. I mean, it's like, if that's what you're basing the investment on, you're really going to have a hard time when it's down an additional 30%. The dividend yield is still high, but you have no idea whether, you know, you should continue to own it, whether you should sell it, something like that. And yeah, I mean, it's again, it's really hard. Like stuff like this even impacts me. I mean, nobody is immune to this type of stuff. Like you don't want to take a big L on an investment, but if you sit back, you know, you've done your research, you've kind of, you're not just panic selling something. You kind of understand that, you know, this business isn't really all that viable anymore.

Something else might be. It's ultimately only going to improve the performance of your portfolio. Yeah. Know what you own. It's so important if you're picking individual stocks. And if you're not in a position to want to, have the capacity to, or desire to have that kind of nailed down, then broad-based, low-cost index funds are fantastic. Exactly. BMO is a sponsor of the pod.

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All right, let's move on to the last topic of the day. Yesterday, as of recording, so November 25th, Warren E. Buffett, you ever heard of him? He dropped a letter basically saying what he's doing with a lot of his Class A shares. He's been offloading a lot of his Class A shares. So for those who don't know, Berkshire has Class A and B shares. The Class A shares, what's a class a share worth these days like 600 grand probably 650 grand i say berkshire uh yeah let me look at fidget oh 718 grand seven yeah the shares of 718 000 with uh with fractional ownership now you can own class A shares.

Oh, there you go. And the B shares are obviously like the common shares, what most folks own who can't fork up close to a million dollars for one share. So he's been offloading a lot of his class A shares over time for his philanthropic efforts, for his donations to the foundations that he supported for a long, long time. I think he set out a framework for giving away his money in 2004. Yeah.

So Buffett, obviously the GOAT investor, extremely wealthy. I don't think the public knows really how philanthropic he has been. I mean, when he keeps compounding and keeps his billions turn into more billions, he's giving it away at a rapid, rapid pace, but he's a good investor. So he keeps making more money. And Berkshire has been a fantastic, you know, if not market beating vehicle, at least at least high-performing vehicle for the last several years too. And so in 2004, he owned over 500,000 shares of Class A of Berkshire, which would be worth... By the way, this is personally. This is not the total shares outstanding. This is personally, that would be worth $361 billion today at that 700 grand price point. And 140 billion he owns in the class B, I mean, firmly the richest person on the planet,

just a little more than Elon. And I mean, he's been compounding at Michael Jordan greatness levels for 80 years, right? Like you could definitely make the argument that if Zuck or Elon just get, you know, market returns for the next, their lifetime, like they're, they're still, well, he's Zuck certainly still young, but like, it makes sense that he has had this incredible accumulation of wealth when you do the math but he's given a ton of it away he now has 2.4 no how many shares does he have now i had this written down anyways he's not sure, his share count's gone down significantly. And so he's firmly donated more than $100 billion to date.

And so the letter, the letter. He wrote yesterday, basically, hey, I know I'm not going to live forever. And he's written that and discussed that at the shareholder meeting many, many times. They had actually, when I went to the shareholder meeting in Omaha a couple of years back, 2022, I believe, the movie that they played was a clip of every analyst question at the Berkshire meeting over the last like 40 years of asking

what the succession plan when they retire is. Yeah. And like the videos are like so pixelated because they're so old. Like people have been asking him what's the succession plan for Berkshire for so freaking long. And he's 94 now and still doing it. Still doing it. And so I took the letter that he wrote yesterday

that was this press release that they put on the website as, hey, I know i've been talking about this for a long time but like by the way like i think i'm on the decline that's how i personally read it yeah i think so it was a kind of a farewell a farewell like here's what i'm doing with all my money like here's the plan that's how i read it it I was kind of like, it was tough to read at some parts, to be honest. Yeah. I mean, he's, it kind of, that's how it came off as well. I mean, he, like you said, I think he's planning to give away,

I think it's 99 and a half percent of like all his wealth. He's just going to give it back. And that was back in 2006 that he did that and i mean he donates it effectively to organizations well the one organization he runs which effectively does like they do university grants to like uh kids in nebraska and they also do like a lot of reproductive health and things like that and i think that like his that was he started that like back in the 60s but he renamed it to his wife's foundation after she died like she died suddenly the susan the susan thompson foundation yeah so they renamed that after she died i can't remember when she died but it was

i think it was pretty sudden she just had like a brain hemorrhage. And then like when she passed away, she had $3 billion. She was worth $3 billion. And they effectively donated everything. Yeah. Yeah. They gave $10 million to each of their kids. They had three kids. I mean, obviously $10 million is nothing to scoff at.

But I mean- We're talking about tens of billions of dollars. Yeah. Yeah. So they donated everything. So, I mean, instead, you know, they sent it back to those foundations to be, you know, given to people who need help effectively. And I mean, I know back in 2006, they didn't really feel their children were ready to assume all the wealth from the wife's passing. So that's effectively why they gave him that really small amount of money and i know he had mentioned that he was like

testing them so like he was gonna test you know how well they were like how they were gonna engage and all these you know activities in their younger years and i think he stated in the letter like the most recent letter that you know they more than you know, that he trusts them enough that he is going to effectively assign them to distribute the wealth. But they're pretty old too. That's exactly. I was just going to say. He's got so much. It's a freaking money.

It's a bit of a strange thing because his kids are not exactly young bucks themselves. And he even called out this irony in the letter. He lists their ages in the letter. So the oldest is in their 70s, in the early 70s, and the other two are in their late 60s. So of course, they're much younger than 94. But he even called out this irony of like passing on my wealth to my kids but like they're in touching their 70s now right like because he's he's lived so long so he did he did actually call that out too in the in the letter but yes he's basically said they've passed

the test they're gonna get the the foundations. They're going to run it. I trust their decisions. And this is what we're doing. And we've never needed to live crazy, exuberant lives. And all my money should be passed on to people that need it. Here's one quote that I'll leave us with. Quote, very early on, I had confidence that I would become rich, but in no way did I or anyone else dream of the fortunes that would have been attainable in America during the last few decades. It has been mind-blowing. Beyond the imaginations of Ford,

Carnegie, Morgan, or even Rockefeller, billions became the new millions. Things didn't look great when I arrived at the beginning of the Great Depression, but the real action from compounding takes place in the final 20 years of a lifetime. By not stepping on any banana peels, I now remain in circulation at 94 with huge sums of savings. Call these units of deferred consumption that can be passed along to others who were given a very short straw at birth. I am also lucky that my philanthropic philosophy has been enthusiastically embraced and widened by both of my wives. Neither I, Susie Sr., nor Astrid, who succeeded her, believed in dynastic wealth. who succeeded her, believed in dynastic wealth. Instead, we shared a view that equal opportunity should begin at birth and extreme look-at-me styles of living should be legal but not admirable.

As a family, we have had everything we needed or simply liked, but we have never sought enjoyment from the fact that others craved what we had. It also has been a particular pleasure to me that so many Berkshire shareholders have independently arrived at a similar view. They have saved, lived well, taken care of their families, and by extended compounding of their savings passed along large, sometimes huge sums back into society. Their claim checks are being widely distributed to others less lucky. This was before a segment how he talked about how lucky he has been growing up at the right time,

the right opportunity, the right things given to him and the right timing to amass this fortune, which is cool, which says, quote, mind-blowing beyond the imaginations of Ford, Carnegie, Morgan, or Rockefeller. That's pretty badass. But yeah, it's cool, man. It's kind of like a farewell letter almost as the way I read it, knowing him, he's probably going to do three more of these shareholder meetings. Yeah, exactly. Somehow keep stringing it along. I don't know. Keep pushing it out.

shareholder meetings yeah exactly somehow keep stringing it along i don't know keep pushing it out uh but it was it was uh it's cool to see him kind of put pen to paper on what the strategy is with this money yeah and i mean you look at it like his his he's got so much money that his kids who were in their most two of them in their mid-60s like they had to find other successors to the kids to figure out to make sure that the money gets distributed well like that's how much money that he has and he's keeping like next to none of it he's just giving it all away which is i think why like you know a lot of people i would imagine if you ask most people you know to name a few billionaires i don't even think buffett would come to their mind like you think like i'm talking like people who aren't really all that in the investing you

know they don't yeah i don't even think they would know they would you know jeff bezos like duckerberg musk all those types of guys i don't think they would name buffett and i mean he's arguably like he doesn't really have that stigma you know that billionaire stigma attached to him it's just kind of like a relative i mean he's lived so simply yeah exactly you'd never hear about him i mean outside of you know the berkshire uh reports and i mean if you don't pay attention to the markets you You wouldn't even hear about that. And he's just like under the radar, crushed it for so long. And it's probably like arguably financially

one of the most successful people ever. Oh yeah, yeah, without question. Yeah, without question. And I think this ties well to your piece about, hey, look, the market's up big, but the data says that the average person in their trading account is getting waxed because they're over-trading, they're not thinking rationally, they're treating it like the stock market casino instead of a long-term generational wealth machine

is like, it's not for Dan and I to sit on our high horse and go, no, you shouldn't trade. You shouldn't gamble. You shouldn't. It's that, look, here's a guy who's 94, who's most of his wealth has come from a few, holding a few investments for a really, really long time. Really long time. Think of Coca-Cola, American Express, Moody's, long time really long time think of coca-cola american express moody's those types of things has been unbelievable uh you know buying out geico at the right time purchasing the railroads at the right time and holding these assets for quote-unquote forever has been the right way to do it like in terms of actually making money so that's a good example of why you don't constantly trade things in and out of stuff when the story still looks good

20 years ago he could have sold coca-cola for sure but the story still looked good and so he still liked it and he talks about that a lot too he He goes, you know, when he gets asked about a certain position, he says that a lot. He said that a lot on the meetings over the years. Charlie and I still really like it. Just simple. Yeah. I mean, we still really like the business.

We're owners of it and we intend to continue to be owners of it. And next question, right? Like, yeah, nothing else needs to be said yeah he uh i mean he's kind of the the poster boy for buy strong companies and and hold them long term i mean there's probably plenty of he's he's been through pretty much every economic situation you can imagine i mean he could have easily you know dumped holdings or or whatever, you know, a lot of retail investors do to completely blow their accounts up. But he just, I mean, once you understand that you're buying companies and not, you know, tickers on a screen, it begins to be a little bit, you know, different of an element.

And I mean, he just welcomed those types of opportunities to just accumulate more and uh i mean here we are sitting at you know hundreds of billions of dollars later yes wild well we'll see how all the when you're donating such a mass amount of money it becomes really hard to do it effectively. And make sure that the impact is really seen when we're talking about these types of sums of money. It's a lot of bureaucracy. A lot of people want to get involved that shouldn't be involved. Oh, yeah. It's tough. So what he's done there is he's effectively made it so that he's got three kids and they need unanimous votes, yes, to do any donation.

So if two people want to do it and one person doesn't want to do it, it's a no-go. Like that's how picky he is. Unanimous votes from all three of them and that's the only way they'll ever donate money. So I think they're going to have a hard time getting rid of all of it in their lifetimes. Yeah, no, I certainly,

I mean, especially if it's just sitting in T bills while they try to deploy it. Yeah, exactly. Hundreds of billions of dollars in treasury bills. Right. Cause God crazy. They're going to run it like a family office.

Yeah. With the, I mean, this is just me guessing. I don't know all the ins and outs, but you run it like a family office, single LP, aka Warren Buffett and family money, single LP family office with the intention of giving it all away. Yeah.

But while you give it all away, you probably have it prudently invested by people that Buffett trusts, either in the index or within T-bills. And it's going to be really hard to spend it fast enough. Yeah, I think so too. But I mean, good problem to have if you're trying to make a big difference.

You just, these things are hard to pull off. Like in terms of making sure the impact is maximized it's really hard yeah i mean the fact that he's you know family's doing it and they've kind of shown that they've been able to do it for you know a long time i mean he tested them at first and they succeeded so that's it's it's interesting i mean three billion dollar uh three billion dollar inheritance and they give the kids one of it one percent of it and give away the other 99 i mean and they still stuck with it yeah i guess someone like that knows like there is like this lifestyle improvement as you go up and it reaches this asymptote like it's like that's

the curve right it's like okay life gets better life gets better i don't have to worry about any of this crap anymore and then it asymptotes some level i don't know what that level is but yeah i don't know what it would be either probably i mean i know we anywhere between maybe 100 million 50 million yeah and i mean he gave his kids 10 million i think she passed away like over 20 years ago now so i mean 10 million dollars back then i mean it sounds crazy to say but goes a lot further than 10 million dollars today but yeah mathematically it does for sure yeah thanks for listening folks we appreciate you tuning in and um we'll be here monday and thursdays holding down the fort if you want to support the show and follow along on your podcast player we really appreciate it that says subscribing on the Apple podcast player, following on the Spotify player or whatever podcast player you're using. Our Twitter is at CDN underscore investing. Our website is

thecanadianinvestorpodcast.com. You'll see all of our links to support the show. And today's the last day, Cyber Monday, last day of the FinChat Black Friday, Cyber Monday sale. last day of the FinChat Black Friday, Cyber Monday sale. That is 25% off. We only offer 25% off twice a year. This is one of them. And so you can automatically go get that on the FinChat.io website on any paid plan. We'll see you in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.