The Canadian Investor - How Many Stocks is Too Many?

Episode Date: June 10, 2024

In this episode of The Canadian Investor Podcast, we tackle a common challenge faced by many investors: how to effectively reduce the number of holdings in your portfolio if your portfolio has too many individual stock holdings. Additionally, we dive into the fascinating growth story of LinkedIn, from its early days to its acquisition by Microsoft, and its evolution into a critical tool for professionals worldwide. Finally, we explore the stock-to-flow ratio, its relevance to commodities like gold and Bitcoin, and its limitations. Ticker of stocks: MSFT Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Welcome into the show. My name is Brayden Dennis, as always joined by the exemplary, Mr. Simon Belanger. Good, sir. Today on the show, we're going to talk about a listener question about how many holdings to put in the portfolio.

I'm going to talk about the business of LinkedIn, which I think is quite fascinating. And then you're going to talk about the stock-to-flow ratio and then maybe a little treat at the end if we have time. How are you doing, dude? I'm so glad that it's truly feeling like summer these days you know i can't i can't really because because of the weather or the bank of canada cutting rates which one is it that's the strategy right yeah exactly destroy destroy the economy cut rates keep canadian homeowners happy you know as long as mortgages are intact canada's retirement thesis it just comes right into the fold like that's how i feel you heard that yeah yeah so yeah so braden's just referring to an interview that the prime minister, I think, did about like, you know, what he said, the quiet part out loud that, you know, a lot of Canadians, their retirement is their wealth is in their home.

Right. So it's not kid ourselves. It's true. Yeah, he's not wrong. I mean, he's just I think most people are just surprised that he said it out loud. Yeah. But, you know, I think the 25 basis point is probably more psychological. And Dan and I will kind of elaborate and we'll talk about the whole press conference on Thursday's episode. But when, you know, I encourage people just to do the math between, you know, I'm sure you know this, Braden, as a business owner, like 25 basis point is not going to be the deciding factor whether you take on the loan to grow your business

or not right it's not going to be that factor and for a lot of people it's not going to be the difference between buying a home or not so i think it's more psychological we'll see where things lead uh down the line but it was i mean twitter was blowing up when the the news came out and the canadian dollar kind of tanked on the news as well. I guess people are just reacting to it directionally more than the actual nominal amount. Long time waiting. We have a question from Brent. I'll read it and then you can take it away here.

But basically, what thought process would we use if we had too many holdings and we wanted to get rid of them dude this is a really great question i think it's something that you and i think about question that every investor thinks but it's a question that portfolio professional portfolio managers think about so take it away yeah yeah exactly and i think like you said i think it's a great question of course uh just to preface this, this is not financial advice. This is what I would do if I were in this situation and kind of what I did because I have been, we've talked about it on the podcast, I have reduced the number of individual stock holdings that I have. And I'll try to answer this a bit more from a stock perspective, even though I own a variety

of assets in my portfolio. So the first thing for me is just, I need to establish what is the optimal number of stocks in my portfolio. So that is something that's very personal. Obviously, I think there are some general rule of thumbs that I know you'll agree with, Brayden, when you're thinking about, if you have 100 individual stocks, you probably have too many individual holdings in your portfolio

and maybe worthwhile to maybe think about just buying an index fund at that point. Yeah. 100 is unbelievably unwieldy. I'll talk about later about what I think is unwieldy for me. This is just such a personal thing. What people feel comfortable with, you'll see investors that say, I'm sufficiently diversified with three companies. They'll say, I'm sufficiently diversified with 20. Some say 30. I personally think for individual investors who are not doing this full time. As soon as you get higher and higher, there becomes very little rationale for doing that versus owning a very low cost broad based index fund. That's been my position on this for a long, long time. And I don't see that changing. No, and I think that's a fair statement.

I agree with that in terms of, look, at the end of the day, you just have to be able to keep up with the number of companies you have in your stock portfolio. The reality is we have a finite amount of time, so we Even if you don't, you know, you have a regular job like you just said. So you have to be honest with yourself and just make sure you're able to stay on top of those companies. And based on that, you know, how many holdings do you think, you know, is appropriate for you? For me, the answer, the sweet spot is definitely around 10 to 15. But again, I use a hybrid approach. I do have some index fund and then I'll pick some individual companies that I think will outperform, but also allow me to diversify, especially right now, considered to like history, if we look back, so we're definitely at, you know, one of those peak concentration when it comes to the index. So that's how I view it. But again, for someone else, it might be higher for

someone else, it might be, you know, maybe they just want five holdings and the rest in index fund and use a hybrid strategy like that. So it's really a case by case basis. And, you know, like you said, someone could also, I'm sure there's lots of people that just own Berkshire and that's it because Berkshire, it's quite diversified in itself. So that's another example, right? Not all companies are created equal. So you have to look at that from that perspective too. have to look at that from that perspective too. Yeah, that's a great point. Diversification is not created equal. Someone who owns Berkshire Hathaway, 100% of their portfolio is, in my view, very sufficiently diversified. More so than if they own 10 individual cap like a bunch of mid cap software companies like berkshire hathaway in itself is very diversified company i don't know if you saw this but the nyse had some glitch

where it lost like 99.9 of its value last week or earlier this week actually and that was the a1 right that's the one that's trading at hundreds of thousands of dollars that was worth like a couple hundred bucks or something like that because of the glitch. I think it might have been the A shares. It's so funny. It was a glitch on FinChat too because it's not a data provider. It's the actual exchange. Yeah, yeah. So like even had Bloomberg have like some automated news article being like Berkshire Hathaway largest drop in its stock in history. Like they just pumped that AI article out and it's just a glitch.

No, and yeah, and that's just – it's just important to create that nuance here. And then the second thing I'll do is once that's established, I'll go by allocation size and look at the smallest allocations. First, the reason I'm saying that is, you know, I've been guilty of that. But if I have something that's less than 0.5% of my portfolio, I'll probably be selling it just based on that. Because unless I plan on adding in the future, why is it such a small portion for my portfolio? And the reasoning too is that when it gets so small, that's just personal to me. I just find that I kind of lose track of it and I don't keep up as well just because it's not as significant part of my portfolio. So that's something I've noticed and something I've been trying to rectify for our joint TCI listeners. They'll see that I have less and less. I had a

few and now I've actually either sold them or added to them. And that's something I'm working on. That was a big project for me last year was to, I think the key distinction was in the last part of your sentence there was if it's a small position like half a percent like for me like anything less than a percent that i don't have intention to add to with fresh capital in the short to medium term to me that's the tester because i have four positions that are all like one and a half percent including a new one i finally bought uber which you can yeah i saw that yeah yeah the newest join tci.com i finally did it i've been talking about potentially owning the company for a long time on the podcast now but i have roughly four names that are in that like

less than one and a half percent which is which is fine but i like all of them. I can think three of them right now I'm probably going to add capital to next month. So to me, that's the really important distinction. If I've had something sitting there for a long time with no intention of fresh capital to go into it, I don't have a really clear thesis for it moving forward, that's when it's on the shopping block. Yeah, definitely. definitely and actually side note on uber i used uber like not uber eats we use it really pretty not pretty regularly but once in a couple of weeks we just find it's better value than going to the restaurant and with the toddler you know the logistics with that it's not always easy sure but um i forgot how much the prices will fluctuate depending on the time of the day.

Because I used it like at the tail end of rush hour, but it was still rush hour. It was like $25 to go to where I was going. And then coming back, the same route, just the other way around, was outside of rush hour. And it was a third of the price. For the ride share or for Uber Eats? For no Uber. Yeah, for regular Uber. Just regular.

Okay. Great. I hadn't used it in like probably a couple of years. So that's why I kind of forgot about it. Yeah. Yeah. The pricing is so dynamic. I feel like it used to be even worse.

Like way back when I first started using it, there'd be like that surge pricing and you'd wake up and you're like, whoa, came home from the bar last night, I spent $80 on an Uber that brought me three blocks. Like, what is this? It's like, oh, there's a limited amount of Uber at 2am or 2.30 and all of a sudden, a lot of people want to use it. Yeah. What's that all about, huh? Yeah. And the third here is then I'll really start reviewing all the other names and look back at my original investment thesis. If the investment thesis has changed significantly and I've lost conviction, then I'll go ahead and sell that name no matter how large the position

is. That's unlikely to happen, though. I will mention that because for the main reason I just said about, you know know having a position that was too small when the positions are proper size or large or definitely the larger positions i guess it's the extra incentive right that i have personally but i think as humans we probably have is you know we tend to keep a very close eye on those larger positions because we have definitely more skin in the game and the incentive is there as well. Yeah. No, this is something that is close to home for both of us. It was a big project for me last year to really consolidate and be concentrated because that's where I'm comfortable. I'm actually more comfortable, more concentrated. A lot of investors are the

opposite. And I think that that's totally fine. There's no one way to win here when it comes to portfolio management. For me and for you, increasingly, if I understand what you're saying correctly, we feel really comfortable owning large allocations to companies we have a lot of conviction in. I mean, the portfolio that Charlie Munger in his nearly a hundred years, nearly a centenarian was Costco, Berkshire and his apartment building complex. So like,

that's, he's like, what do you mean? I'm Costco's the best enterprise ever. Why would I, why would I be not sufficiently you mean? I'm Costco's the best enterprise ever. Why would I, why would I be not sufficiently diversified? Berkshire's the greatest company ever. Why would I not be sufficiently diversified? So that's the kind of thinking that I think about, right?

When, if you meet some like business magnet and they're like, yeah, I own four companies and you're like, wow, that's crazy. Like so diversified, four businesses, like that's, that's crazy. Like so diversified. You have four businesses. Like that's really cool. And they're all, you know, big or whatever. That's the approach that I take to owning minority equity investments in stocks. Like that's the mindset I take towards owning individual equities. And I think that's really instructive in terms of

owning long term, enduring enterprises that you want to be a shareholder in for as long as you can. Yeah, it's fascinating the mindset that people will have, right? They'll hear about like a business owner has a successful business, maybe like it's a small medium business, but you know, they're doing quite well, yet all of their wealth is in that business and people will not bat an eye or the same thing. Right. Someone will have a good paying job. Nothing crazy, but good job. They bought their home 10, 15 years ago. They have a substantial amount of equity in their home.

But that's essentially like all of their wealth is the equity in their home. And that's completely fine. But then you have someone that has like five to 10 stocks with maybe some being in the 10, 15, 20% range. And that's like super concentrated. It's just I do find I see that a lot where people don't bat an eye. And then it's about like, you know, your stock portfolio and say, Oh, my God, you're so concentrated, which, you know, I'm not saying is right or wrong. I'm just saying it's kind of funny, the perception that people will have. It's the same for me. I mean, between Constellation, Luma Group, Topicus, that's like

almost 1,100 software companies and three individual stocks. That's very, very diversified. Maybe not sectorial, but number of businesses wise, it certainly is. So no, I like that. I think the takeaway here is what you said at the beginning. Diversification is not created equal. I think that's a really powerful statement. 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 money sense 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

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it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. So, you ready for the business of LinkedIn? I got a segment here. Yeah, the most annoying social network for me, but... Sure, yeah. But it's a good one for making money.

It is certainly cringe at times, some of the stuff you see on there. I've noticed that there's also like a new trend of people posting on LinkedIn of just straight up comedy, like just being funny. Because they're counter positioning against like how serious the platform is. Oh, yeah. Yeah. And it's working really well. And I think that it's actually a really good idea if I was to be a content creator. So the business of LinkedIn, I got a fairly long segment here, mediumly long segment here. So jump in wherever, but I'm going to be cooking here. So

founded in 2002, launched in 2003. Basically as the bubbles crashing, LinkedIn was born. And through that time, as of today, and it's reached the status well before this recording, but it has become the de facto social network for professionals, for your professional forward-facing resume, your public resume. And as part of that network effect with now 1 billion users across 200 countries, it has built simply a remarkable business and arguably one of the widest moat platforms that exist in my view. Today, the business is really impressive. They've done this thing called LinkedIn Sales Navigator. I'm a subscriber to it. My sales guys are subscribers to it. There's other subscriptions like LinkedIn Premium that if you go on someone's profile and you see the golden

LinkedIn badge on the top, right, that's LinkedIn premium. The advertising business, of course, you know, on a long enough time horizon, every social network is an advertising business. Learning and training, they, I don't know how big that is, but that's also one of the things that they offer. And then job postings. So HR, recruitment. Basically, as the tech bubble was crashing, Eric Lee and Reid Hoffman started this company. And Eric Lee was already successful in the early internet days. And Reid Hoffman was part of the very infamous PayPal mafia. Simone, you're familiar. I've talked about the PayPal mafia on the podcast before, but for the listeners,

the PayPal mafia refers to the people and business people that were early, early days in PayPal. And the list is mind-blowing. Peter Thiel, he's referred to as like the Don of the PayPal mafia. He's a mega, mega billionaire. Zero to One is a fantastic book. If you're thinking about being an entrepreneur or starting a business, Zero to One by Peter Thiel is probably one of the best I can think of. Max Levchin, he was this you know, this initial CTO, very famous entrepreneur.

Elon Musk, I don't know if you've heard of him. He's part of that. David Sachs, who ended up starting Yammer, that sold to Microsoft. He's now on that big podcast. Steve Chen and Jawed Karim, those guys started YouTube. And Reid Hoffman, of course, who started LinkedIn.

Keith Raboy, the list goes on and on and on. Very famous people went on to start famous venture capital firms in the Valley, other very successful startups. So roundabout way to saying this was an elite group of people. By 2004, LinkedIn had already reached 1 million users. So that was rapid scale go to market because they launched it in 2003. The company had grew and grew and grew until 2011. They went public under the ticker LNKD. they went public under the ticker LNKD. At this point, the company was doing about 121 million in revenue. And this was largely advertising. In 2016, I went into their filings because in Fincha, we have all the like D listed companies in there. You go to their filings and their last public quarter, they did $960 million in revenue.

So just shy of $1 billion in revenue in the quarter. And most of it was advertising or sorry, most of it was hiring related, my bad. So that's really where this started to kick in post IPO, hiring related was 60%, 20% was advertising and 20% was subscriptions. So if you have a job posting and you want to boost it or you want to like don't hit their max cap, for instance, I have two job postings out right now. And if I don't boost them or like pay,

they basically just say, oh, sorry, you've hit your limit. Like too many people have seen this. You know, put a budget on this job. Yeah. And it's kind of like similar to the Google ads platform where you have like a bidding system to put it to the top, but you need to have some amount of money going through it or else it'll just cut you off. And that's really critical because for me, I post it to like my careers page. Like I don't want them applying on LinkedIn because it's too easy. There's not enough friction. So you get a lot of junky applications. So I want them to go through my actual application, but I want them to see it through LinkedIn. All the clicks, since I have it on that setting, all the clicks count as a job application.

So they cut me off like right away if I don't pay. So that's how they have this business absolutely dialed in. So it's a pretty amazing network effect right in there. Yeah. One thing I was going to say, like more a side note, but I like what you mentioned, like getting people to apply on your page. And for those who, you know, are looking to get a new job or something like that, I think it's and I have some experience in HR and even in staffing when I was younger. And I think it's important when you apply to a job, especially one that you really want, make sure you tweak the resume. Like, obviously, you still want to be truthful and not lie on your resume, but make sure you highlight things that

are applicable to that job. Because if you use something like LinkedIn and you just have kind of a standard resume for everything, it just doesn't show as well. And hiring managers or staffing recruiter, whatever it is, they will notice these things that you actually took the time and it is more targeted to the actual job you're applying for. 100 million percent. I couldn't agree more. LinkedIn easy apply is too easy. That means that there's just too much competition. And for me as someone looking through them, I've just made myself a huge job. Like I'm trying to hire quickly and efficiently. I don't want to sift through 900 applicants who've just pressed the one single

button. Like there's no intention there. There's no friction there. So yeah. So that's why I used to always wonder why companies are like, why are you making me take my resume and spit it out again on this application? Like, can't you just look at my resume? Well, it's like, no, because that PDF is really hard to parse. There's no kind of standard structure. So the people hiring, they need to do this efficiently and quickly. So yes, if you are looking for a job, i would say quality over quantity in terms of spraying and praying you've got to apply to a lot of jobs of course but just doing low effort applications out into the into the wild you just won't stand out so uh yeah good good call because you and i have

looked at a lot of resumes oh yeah and don't five pages make it shorter you need to make it shorter. You need to make it shorter. Yeah, like one, two pages max. If not- Two is great. Yeah. More than that, you will, like literally you're losing out because it's too long. They don't have the time to look at it. So that was their last public quarter as a separate entity, ticker LNKD for LinkedIn, doing about a billion in revenue per quarter. So yeah, roughly $4 billion a year, top line revenue business. It was purchased by Microsoft

at the end of 2016 and the deal closed for 26.2 billion. And the shares on the open market, I remember that day actually very clearly because they shot up dramatically because the public market had the market cap on the business at 17 billion. So this buyout was obviously at a premium, which is standard for any good company that is sought after by any acquirer, especially like a Microsoft who can pay up. And so today, Microsoft doesn't break out the different segments of LinkedIn, but they do break out the segment of LinkedIn itself within Microsoft. In my view, this was an incredibly good acquisition for Microsoft. It's grown at double digits compound annual growth rate. It's now doing over 4 billion in sales per

quarter. So this is a 16 billion run rate business. Advertising is obviously cyclical, but not the rest of the business. It looks like a software revenue chart because the subscription businesses are crushing it. When purchased in 2016, they had basically just launched what I think is one of the crown jewel assets in the world, which is LinkedIn Sales Navigator. If you're listening and you're in sales, you probably have a subscription to LinkedIn Sales Navigator or your company's paying for LinkedIn Sales Navigator. This has become a very core tool for the modern salesperson. I have account executives working for me. And the first thing they say is, hey, can you sling me that corporate credit card?

I got to buy me some sales navigator. And cold email is very crowded. It's hard to get attention. Where LinkedIn is a bit better is they do set limits to avoid spam, which I'm very grateful for, but it's not nearly as crowded as an email inbox. The hit rate is way higher for salespeople. as crowded as an email inbox. The hit rate is way higher for salespeople. So this has been an absolute beast of a product for LinkedIn. And it's basically impossible to compete with because of the network effect. LinkedIn is a core example of a business that has built an exceptional network effect and flywheel, meaning the more people who use LinkedIn, the better the product is, makes more people use it. And then you have this positive feedback loop until you have over a billion users across the

world. Now it's job business, which I talked about a little bit before, how it's definitely dinging my wallet at the moment. The job postings require you to do more and more spending. That's the name of the game here, more and more spending. It's advertising network and subscriptions for SalesNav and LinkedIn Premium are exceptional. You have the business now that's going to be doing over $20 billion in revenue in the very near term with really good margins. It was bought for just a little over 20 billion by Microsoft. And despite only being 7% of Microsoft's total revenue today, I think LinkedIn is a fairly substantial piece of the investment thesis with Microsoft. And I'm a Microsoft shareholder. I think that this is one of the most durable assets you can find. Of course, the story right now for

Microsoft is all about cloud, all about AI, and for good reason. I mean, the Azure story is very important. But I suspect LinkedIn could be one of the best internet assets and potentially the most enduring compared to all of the social networks due to the nature of it being your professional online resume. There's no appetite for LinkedIn 2.0 right now. There's LinkedIn, there's, sorry, there's appetite for TikTok 2.0, but there's really no appetite for LinkedIn 2.0. Looking forward, growth is going to be slower than it is at that high 20, high 30% that they achieved post-acquisition. You've seen that number come down to like low double digits, high single digits, but there's still so much they can do. Once you build that active network

with over a billion users, essentially no competition, optionality becomes the name of the game. So that is the business of LinkedIn. I was trying to think to myself, what would this be worth if it was still public and those were its current financials? You'd be pushing over 100 billion for sure. I think without a doubt, actually. Yeah, probably. I mean, how profit- What's the meta? I'm trying to see what meta multiples are right now. Meta's trading at

almost nine times sales on enterprise value. And this thing's doing 16 billion. Yeah, probably 150, 160 billion, I would say. Yeah. And very durable. Yeah. And less cyclical than traditional advertising because of the subscription business. Like, yeah, I think this is at least $150 billion asset. No, no. I mean, obviously, it was a great purchase by Microsoft, and it's one of the more durable networks. So that's for sure. And that's what we're seeing, right? I think we're starting to see the social because it is a social media

platform is just catered more towards professionals. But I think we're seeing a bit of a consolidation with the top ones. Now, I think they're, they're going to be hard to disrupt, whether you have x Twitter, you have Facebook. I think Facebook with especially their marketplace. I know that's the one I use quite a bit. And then like obviously they own Instagram. That's strong, too. You have YouTube and then you have LinkedIn.

Am I missing any? I think those are the there are some smaller ones. Obviously, TikTok. This one is a bit in limbo because of what's happening in the US. But then there's Snap. But the other ones I feel like are more kind of an afterthought a little bit. They have kind of more their niche user base. But I think those are the big ones for me.

Yeah, I think you've mentioned the ones that are reaching billions of people. Yeah. Right? Like that's such a scarce asset to have something reaching a good percentage of the population on earth. Meta just reported their daily active people is 3.24 billion. Daily active. That is absurd. So you can kind of start to map out there that they're going to have roughly 4 billion active people daily on those platforms in the fairly near term. We'll see. I mean, Instagram and WhatsApp are such scarce assets. Of course, Facebook Blue is such a scarce asset. But

in my view, LinkedIn is the true golden goose in terms of being so scarce. And the content on there kind of sucks. That's almost the investment thesis is, okay, no one's going to be able to disrupt it. And the content kind of sucks. There's no reason to show up to LinkedIn every day, unless you're a recruiter or a salesperson. There's no reason for the average professional working in engineering to show up to LinkedIn every day, right now, as of today. And I think that that's kind of their opportunity. Yeah. And I think the case in point too in terms of how sticky these platforms can be as a whole the big ones is what's going on with meta threads i feel like that is kind of case in point right like it's i don't know i don't know anyone who

uses that so i don't have i don't have it but I saw the platform yesterday. Funny you say that. I was scrolling through it. Okay, yeah. And I was like, oh, can I see your phone? I want to see what this is all about. Threads was in my 30-second sample size. It was like all brands.

They were showing all the different brands' threads, like Ryanair and all all these like consumer-facing brands were just making memes and stuff and posting them on threads. I didn't, it seemed like it was mostly ads in my view, but I'm not surprised. Yeah, I mean. Have you seen Mark Zuckerberg lately? I'm not surprised. Yeah, well, I mean, and something when they report, I'll be interested to see what they say about it and something I'll zone in.

But it feels like it's kind of fallen off and people thinking it would just disrupt X, right? I don't think that's happening. So I can't believe I'm saying X either. Twitter. I still should say Twitter. But no, I think it was a great thread and definitely interesting. Well, I just controlled F on their Q1.

The FinChat investor relations page on Meta. Oh, the control F. The wonderful control F. I control F threads and it was mentioned three times on the earnings call. And two of them were in the same sentence. So it was mentioned twice. Threads is going well too. Who's talking here? Is this too. Who's talking here?

Is this Mark? Who is talking here? Holy smokes. This is a long passage. Threads is going well too. There are now over 150 monthly actives and it continues to generally be on the trajectory that I hope to see.

And of course, my daughters would want me to mention that Taylor Swift is now on Threads, which was a big deal in my house. Okay. Her team downloaded threads. Yeah. Yeah. I think the lack of detail speaks volume.

I think it's just that's right there, right? It's just saying like kind of general things. Whenever you see a company just say general things, not too specific, it's because they probably don't want to be super specific. Yeah. How's it going, Simone? Taylor Swift, aka her PR team, joined Threads. So that's going great. Yeah, exactly. 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

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So not so long ago, self-directed investors caught wind of the power of low cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF.

One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. No, I think that was great. So we'll finish off. I don't think I'll do my last segment, just this one that I wanted to do on that stock to flow ratio.

Something I've, you know, I've looked into for quite a while now, but it is quite useful, especially for those that are interested in investing in commodities. That's really where it becomes very useful and Bitcoin as well. The stock to flow ratio, the goal when using it is comparing the existing supply for commodity with the annual production of that commodity. So the calculation is pretty simple. You just need to get the actual numbers. So you take the total existing supply of the commodity and you divide it by the annual production. The higher the number, the more scarce the commodity will be because obviously there's a bigger supply already available and not that much

being added to it every year. And essentially the number is meant to represent the number of years that you'll need to get to the current stock by the new supply that goes into production each year. For example, gold and Bitcoin will have high stock-to-flow ratios because the existing supply is much greater than the new production each year. For gold, that would be approximately 60, but that can, of course, vary from year to year depending on how much new gold is produced. So in other words, it could mean that it would take approximately 60 years at the current production rate to get the current stock of gold.

And gold specifically, and I've mentioned that before, the new production of gold is surprisingly very stable when you look at history. There's kind of different factors for that, but typically it will increase between 1% and 2%. And people will say, oh like well with new technology like wouldn't that be a risk that it increases well the issue is that the easiest gold to have been mined has already been mined because it was easily accessible right in the past when technology wasn't as good and now as technology progresses we're you, the technology is getting

better, but we're trying to get gold that's harder to access. So that's why it's almost nature's way of making it a pretty scarce asset in itself, because it's pretty difficult to get some new supply. And for Bitcoin, it's actually very easy to calculate. You can get these numbers on the internet very easily. So I'll just show, you know, because it's an easy example. There is currently about 133 blocks produced per 24 hours. And each block gets a mining reward of 3.125 Bitcoin. So you multiply both, which means you have 415.63 Bitcoin that are created every 24 hours. And then you take that amount and multiply it by 365 days.

So you get just a bit shy 152,000 Bitcoin per year that is newly produced. And that obviously increased recently with the halving. And you divide that by the current supply of 19 million and 700 19 million and 700 000 and change by the amount that essentially was produced each year and you get a stock to flow ratio of 130 now keep in mind i think this is you you can get into much more detailed calculation because when you factor in in terms of Bitcoin, for example, there's always it's hard to estimate the amount of Bitcoins that are actually lost. So think about people that passed away and didn't have like, you know, a proper plan set up to give that to their family members or their inheritance, people that lost their keys and things like that. So it's hard to say the exact estimate of Bitcoin that's been lost.

Same thing for gold. There's a certain amount that's been lost. But something to keep in mind if you're interested in looking into these ratios, there are certain limitations to the stock to flow ratio. And one of the other limitations when you're looking at commodities, for example, so traditional commodities like gold, silver, any of, you know, pick your commodity here. One of the biggest issues is it does not incorporate usage. So for commodity, the usage is a big part of the annual production, at least for certain commodities. And the perfect example here is silver. So

approximately 50% of silver annuals production is used for industrial purposes, which is a much higher rate than gold. Gold, I think the figures I've seen is around 10%. And in order to take that into account, you can actually calculate the net stock to flow ratio. So you get this by taking the existing supply of silver divided by the annual production minus the usage. So that'll give you a better idea, especially if it's a commodity that has predominantly not really a store value, but predominantly industrial uses. You can use that to calculate the stock to flow ratio. And like I said, it's a good indicator of the scarcity of the actual commodity. And I would think if you want to start investing in commodities, even companies that produce those commodities, I would encourage people to get familiar with this ratio because

it is something, you know, just to understand, it should be part, in my opinion, of your investment thesis. Three comments slash questions. One, stock to flow ratio is a metric that just makes you instantly sound smart. It just is what it is. It's not that complicated though. No, it's not. It's not. It just sounds cool. Two, so with this silver example, Two, so with this silver example, that's to net out the stock to flow ratio if it has uses beyond being a shiny object. Yeah, beyond basically being a store of value or having a strong monetary premium in terms of commodity. Yeah. Got it. Okay. in terms of commodity. Yeah. Got it. Okay. I guess I have four then, because three is in this Bitcoin or gold example, that number is going down over time, as I understand it, because supply-

Yeah. So the number for Bitcoin will actually, the stock to flow ratio will go up. So right now with the halving, it essentially went from, it almost doubled, right? Because the halving cut the new supply of Bitcoin in half. So it went from in the 60s to in the 130s because the amount of new Bitcoin actually was cut in half. So the denominator was actually smaller. Oh, I had the denominator and numerator flipped around here. Okay, okay, I'm with you. I'm with you.

So that number is going to go up over time because supply is going down. Exactly. Yeah. For gold, it should stay relatively stable though because of that, you know, it only increases by 1% to 2% every year. Yeah. Yeah. And the better economics for gold, the more people mine.

Yeah, exactly. Generally. The extra incentive. Yeah. That's it. Yeah. Okay. I'm with you.

So that goes up over time. And then, okay, this is interesting. This is out of my world. So I'm learning something right now. But I think you can apply it to pretty much any commodity. That's what's kind of cool about it, is you can obviously, if there's a super low stock-to-flow ratio, it means it's something that is produced quite heavily, right? And there's probably a lot of usage as well, but it's going to have a much lower value because the scarcity is much lower. Got it. What's the stock-to-flow ratio on homes in the greater Toronto area?

Yeah, that's a good one. I'm not sure. I need to know the stock to flow. Yeah, it's probably, yeah, the scarcity. I don't know. I would have to ask Dan for that. Yeah, I'll ask Dan from the Canadian Real Estate Investor Show. We really got to differentiate.

We keep saying that. We haven't been differentiating them. Dan Foch, Dan Kent, not the same human being both come on the show no both great looking guys but different both handsome yeah yeah incredible stuff simone thank you for this is i i just learned something it's one of those things where i hear it and i just like pretend i know what it is but i don't i don't actually look at commodities really ever. And so it's good to learn something here on the show. Thank you for listening to the podcast.

We really appreciate you. We are here Mondays and Thursdays as always. And maybe that's a good handoff actually, is the Canadian Real Estate Investor Show. If you want to know what's going on with rates and the real estate market, there's really no two guys better tuned into that world than Dan Foch and Nick Hill from the Canadian Real Estate Investor Podcast. They're under our family of podcasts. So it's all in the family. You can find it on your podcast player. If you're not already subscribed, you should do that. You can get dialed in on what's happening with rates and the golden goose that is Canadian real estate. 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.