The Canadian Investor - How Markets Are Reacting to Russia Invading Ukraine

Episode Date: March 3, 2022

In this special episode of the Canadian Investor Podcast we discuss the invasion of Ukraine by Russian Forces. Our discussion focuses on what impact this could have on markets and the world economy.  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.

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My name is Brayden Dennis, as always joined by Simon Belanger. So we have a pressing episode to record today as a very evolving, fast moving situation, complicated situation of Russia invading Ukraine. We're here to break down what we think about the situation, what it can impact financial markets, your portfolio, how to react, how to remain optimistic and thinking about the long term with your portfolio, even when things like this come up, because they always come up and they'll continue to come up, unfortunately, which is the kind of fluctuations and volatility of our world. Simon, how you doing, buddy?

Yeah, I've been doing good. volatility of our world. Simon, how you doing, buddy? Yeah, I've been doing good. It's definitely been difficult watching what's been going on in Ukraine with the invasion by Russia. But we'll be talking about it, giving our opinion on what's going on and also what's happening in the markets, how it's affecting, like you said. So I think it'll be an interesting discussion. Definitely long overdue. Our timing was really bad with our last recording essentially we recorded the night before Russia started invading Ukraine so that's why we haven't talked about it so far which is that just our timing wasn't great but we have recording schedule in place yeah that's right so we'll talk about it pretty much the entire episode I know we have some some news and earnings

but we might just save it for the next episode because there's just so much to talk about here. Before we start, just our thoughts as humans, our thoughts are with the Ukrainian people. You know, war is the most terrible form of human suffering. No one wants this with the exception of one tyrannical man. There are close to one and a half million Ukrainian Canadians living in Canada. It is the largest population of Ukrainians behind Russia and Ukraine itself. So there is a huge Ukrainian community here. I have Ukrainian friends, my analyst is Stratosphere, him and his girlfriend, both have family in Ukraine. and so it's very scary time for a lot of people we are recording this on february 28th and this is just a point in time right this is a rapidly changing and unfortunately escalating situation just a general observation

from following along yeah ukrainians are tough as, man. And President Zelensky has literally solidified himself on the global scale as a hero and a legend and a great leader. I'll let you take it away with some thoughts, but two major developments that we are going to talk about more later are the Russian ban on SWIFT and the US and EU announcing sanctions against the Russian ban on SWIFT, and the US and EU announcing sanctions against the Russian central bank. I'll go into detail on those two pieces more shortly, but I know you have some thoughts early here too. Yeah, yeah, no, I think you put it well. I mean, it touches me also a bit on a personal basis because I've never mentioned it before, but one of my first jobs was a guide at the War Museum. And when I was a guide at the War Museum,

there was a lot of veterans that would actually volunteer their time. So I spoke to some veterans from the Korean War, from the Second World War, even from some more recent conflicts. And I've seen these elder gentlemen that were still more massive than me. And I'm 5'11", 180 pounds. They were like still, you know, 6'2", big guys. And I've seen some just break down in tears talking about some of the things they've gone through. And I think the last thing I wanted to mention is I think you put it well.

This is really being led by one person, Vladimir Putin. And a lot of people in Russia are against this war. So I think it's important to remember that, you know, a lot of their population is not supporting this. And to keep that in mind, obviously, our thoughts go with Ukrainian people in all of this, but I think that's good to remember as well. Yeah, that's so interesting to think about now that I'm just be making up random stats, but you got to think a very large portion of the population in Russia wants nothing to do with this. And we're now living in a very interesting time where it's incredibly difficult for Russian state media to control

the narrative. This is a completely different paradigm shift from all other major wars. The propaganda can only go so far and the infiltration of the truth to the people who actually live there, this is ultimately a good thing. This is one of the good things about the internet and connectivity and open communication. Like that's one of the best things. On a personal note too, I've actually been to Kiev. It doesn't really count. I was there for like a few hours.

I was there and then I was back on another airplane. But to think that the place I was at literally has endured shelling like that airport. It's crazy to think about. And I don't want this to make this about me because it's not. But I think a lot of Canadians have tons of personal connection to this, given how big the Ukrainian population here is in Canada. So yeah, it's a good point. Yeah. So now we'll shift to some of the investing components of everything that's going on. There's a lot of macro things, but I think this is one situation where a lot of the macro actually

intersects the investment piece. So obviously, there's been a lot of volatility when the news came out. And ever since, essentially, I know last night I was checking my phone, the futures for the stock market, and it was looking, I think, going to open this morning like 3% down, then open this morning almost flat. You just see those fluctuations that are happening kind of constantly. So a lot of volatility. That's normal. The markets don't like uncertainty.

And where there's a lot of uncertainty, there will be some volatility. That's normal. The markets don't like uncertainty. And where there's a lot of uncertainty, there will be some volatility. So I think the first thing to remember is it's to be expected. Volatility will happen. I think it's going to happen probably for a wide variety of stocks, but more specifically, more the things that we know in terms of high growth stocks, but also some of the potential sectors that could be adversely impacted by a lot of the sanctions that are being posed on Russia. So a few things I wanted to mention on a macro side here. Russia is actually a very big exporter of commodities. They don't export that many finished products overall, but they do export a lot of commodities.

So here are some examples. 40% of Europe's natural gas comes from Russia. Russia is the world's largest exporter of wheat. Russia is the world's largest exporter of two of the three key types of fertilizer. So we talked about that and when we talked about nutrient i know you remember that and i mentioned the sanctions that were starting to be imposed would probably be a tailwind for a company like nutrient and i think this is a great example right here russia is also the world's largest exporter of semi-finished iron and raw nickels so that's

the way to put this here if you're like what the hell does that mean is basically it's used to make things like stainless steel so very important in our economy russia is also the second largest export of crude oil the u.s actually imports half a million barrels of russian oil and Europe also imports significant amounts. Russia also exports significant quantity of other natural resources. And keep in mind, they may be the largest exporter for certain things. They may not be the largest producer, but they still export the most. And to continue on the macro here, Russia's GDP is big, but it's not extremely significant on a global basis. So they ranked 11th in their

gross domestic product. And that's actually right behind Canada and South Korea. So Canada is nine, South Korea is 10. Did you have anything to add to what I just said before I give a few more things here? This is not something that I typically would look up before this happened, which is what is the GDP of Russia? What is the significance on a global scale of them being basically closed off from the world in terms of connected to the global economy? And I was surprised to see that Canada had a higher GDP than Russia, just because they have four times the population of Canada. And Canada has four and a half times the GDP per capita. You can get an idea of just

Russia, economically, economically, has not been a great place to be. And this is literally going to shatter their markets. it already has we're seeing their their currency fall off a cliff i'm going to get more into detail on that but when you brought up these notes about where they are just in gdp i was shocked because just something i haven't looked up in so long yeah i wasn't sure like before i looked up, I thought they'd be maybe like a bit in front of Canada. I didn't think Canada would be in front. I'll be very honest. It's not like you. It's not something I would look up normally. Plus, we're not like big macro guys anyways. I have the econ knowledge of someone who's never owned a portfolio. Like seriously, it's not my strong suit. I'm definitely more in tune with it than you for sure. But I'm not like a macro expert by any stretch of the imagination.

But I do get interested. It just intrigues me, this kind of stuff. But all that to say, I think it's important to remember is Russia just exports a lot of commodities here. And you might think, well, you know, I own a company like I'll just pick randomly here. Apple, it comes to mind. I own Apple, so I won't be impacted by that. Apple may not be impacted overly by this, but they could be indirectly impacted if some

of the materials that they use to make their components, for example, come from exports from Russia. I have no idea if they do, but the ripple effect here could be pretty big for a wide variety of businesses. So I think it's important to keep in mind that it doesn't mean that at first glance, a business you own won't be impacted, that it won't be. And it's also a reminder to say you have to keep in mind, even if it is impacted in the short term, it may also not be the end of the world long term. So I think it's important to keep a good balance and level headed here. Trying to predict global macro events on the impact of the broader stock market is a game I refuse to play because you're always wrong.

Yeah, you're guessing. And even when, yeah, it's a complete guess. Yeah, you're guessing. And even when, yeah, it's a complete guess. Last March of 2020, if you're like, oh, the economy will probably fall apart because of this global pandemic and stocks hit all-time highs in June. It's impossible to predict. And even today as a recording, like stocks are basically flat on the S&P. I think they started red and then

I think they're finishing down like 10 basis points. So it is impossible to predict. So what do you do? You stay invested, you own good companies and you hang on for the long term. What else is there to do? There's no other actionable move. I think the only thing to predict that I can feel confident predicting here is that it's going to be volatile. I think that's the only thing. I don't know which way. I know it's going to be volatile.

I just don't know which way it's going to go. And volatility is the only normal thing. I think I keep starting my like stratosphere member newsletter with that. I think eight, 16 months in a row at this point, because it's helpful to remember that it's the only thing you should actually come to expect is volatility, right? That's the only thing that you know for a fact over time is going to happen in the stock market. When you keep score every day, there's going to be volatility, right? We keep score mark to mark of the stock market. When you keep score every day, there's going to be volatility, right? Like we keep score mark to mark of the stock market every single day or every, at least

almost every business day. So it's something to consider. The way I'm thinking about this is a few things. So the first one being that the world is very connected and it's the most connected it's ever been in history. I mean, that's going to continue to happen with the advancements in technology. Russia I'm talking about, their economy and markets are getting slammed because we are capable of removing that interconnectivity that I've just talked about. SWIFT is short for the Society for Worldwide Interbank Financial Telecommunication. Okay, so I'm just going to call it SWIFT because that's a mouthful. I stole this from your notes, by the way. It connects 11,000 banks and 200 countries in the world. So this is a huge move, right? SWIFT is the rails for sending money internationally and connecting banks. That's the language they speak. Right now we're talking and we're communicating in English.

Banks communicate in SWIF Swift. That's how they actually move money to each other. When we invoice an international client for advertising on this podcast, we send them our Swift details. That's how we get paid. Now the sanctions against the Russian Central Bank that have just come out, this is a huge move as well. So the Russian Central Bank has about 650 billion in reserves. They can use this to buy the ruble. Is it the ruble? Ruble. The ruble. They can buy rubles and prop up the value of their currency. Now, an estimated half of that is tied up in sanctions that would restrict Russia

from accessing it if the EU and US make this move. And I believe they are as we speak. There's still a lot of clarity to be figured out on how it's all going to work. But this just goes back to my point about modern warfare and connectivity. So much power today is held by just flicking a switch. I think it's a good and bad thing philosophically, but in this case, you can see how the global community can really threaten Russia without presenting a single traditional military threat. Not to mention, you know, cyber warfare also being introduced here. Now, the Russian ruble, their currency, has shed close to 30% of its value against the USD since the conflict started.

The funny thing is, when I did these notes this morning, it was only 20%. So this shows how fast things are changing on the fly. If the Russian Fed is not able to get these funds, it could literally lead to currency collapse. I see heavy inflation for them coming ASAP. And this just shows you that this invasion, this move from Vladimir Putin is really bad for Russia. heavily impacted. Their economy is quite literally collapsing as we speak. Loss of innocent civilian life in Ukraine, the Russian and Ukrainian military casualties. One man's search for glory to solidify his psychopathic aspirations in the history books is coming at a huge cost economically for the people of his country. is coming at a huge cost economically for the people of this country. ERIS, which is the NASDAQ-listed ETF from iShares BlackRock,

has lost more than half of its value since the last 10 trading days. And international, this is, the reason I bring this one up is because the NASDAQ-listed one that tracks Russian stocks, and Russia's stock market is closed today. This shows you international investors are sprinting for the exit. And that's why I wanted to bring up this ETF. So today the US stock market's closed. I think early last week, they said you couldn't short Russian stocks. And then later in the week, international investors were banned from selling Russian stocks. And then later in the week, international investors were banned from selling Russian stocks. And then today, just the market's closed. So you can see the destruction and them doing everything they can to try to dampen the fallout from this.

Yeah, and to incentivize people in Russia to keep buying the ruble, one thing that they did today was to double the interest rate from 9.5, well, essentially double from 9.5 to 20% in a single day. So we're talking in North America about these increases of 25 basis point, 50 basis point, if they're really aggressive. If they really feel it. So that shows the reasoning behind them doubling it so the reason is that the higher interest you give the more you incentivize people to keep their money in banks and save so that's why they did it but again this just shows that to me it's a very desperate move

by the russian central bank obviously they must have been pressured by putin to do so because i'm sure he controls essentially what they do. Tends to be a lot of what happens over there. But like you mentioned, it's very it's sad for the Russian people because this does not look good. I think their currency will be going down the drain. I mean, like you said, the domain index in Russia was just being crushed last week. But again, now it's not open. So we don't exactly know what's going on. But you have to imagine if it was open today, you'd still see kind of a big

moon downwards. Yeah, things like Gazprom are absolutely taken to the woodshed. And if it was open today, it would be even more so. Yeah, exactly. And the main index, if people are looking to have a look, it's the MOEX index. So M-O-E-X, it's the Russian main index. And you can have a look, you can see it. I think it dropped like 50% last week when the war was announced. But the other thing I wanted to mention here is, so what impacts will it have on stocks broadly? Well, my answer to this is, I don't know. I just don't know. And that's the right answer, by the way. And people will tell you they know. They don't.

Run away. Exactly. Run away. Stop listening. The reason for that, first of all, there's not been an armed conflict in Europe to this scale since the Second World War. There have been conflicts, I'm well aware, since the Second World War in Europe. But this is the first conventional conflict in Europe of that scale.

And the economies, like Brayden mentioned, are more connected than ever. So it's vastly different than what we could compare, even if there was something to compare two to three decades ago. Two, three decades ago, the Internet was just in its infancy, for example. And I think some companies will benefit from it so i mentioned that russia exports a lot of fertilizer and a company like nutrient could definitely benefit from that because chances are if there are these sanctions on russia there's going to be a lot less exports of these fertilizer therefore you'll probably see the price increase because we've mentioned it before, people have to eat. This is a key ingredient in growing food. So it's going to have to come from

somewhere else. Prices will most likely go up for these fertilizer, making it more profitable for a company like Nutrien. It may not happen, but that's something I could see. I would also say the same for North American oil and gas companies, being they're not being impacted from a production standpoint like europe so they may benefit from that specifically with potential higher prices and like i mentioned the stock market will be volatile and And I had some notes here. So when the news came out Thursday, the NASDAQ was down 2.5%, started trading, and then finished the day up 3.34%. So that's a 5% variance in one day. And the S&P 500 increased another 2.5% on Friday.

And the NASDAQ was up 1.64% on Friday. So I don't know what will happen. But again, that's just to getting back to this volatility and this high variance. You'll see that quite a bit. So the market, it really means that the market is really not sure where this is going. And I think that's a perfect reflection of that. What do you do as an investor? I mean, personally, for me, I don't like I'm not panicking or anything.

It's something that you definitely have to consider like you have to pay attention to i think that's probably the the best way to put it here you definitely have to pay attention to if you own emerging market etf so that's something we actually talked about i was released this Monday. It's a segment that we talked about before knowing that Russia would start invading Ukraine. But one of the things in that segment that I mentioned is Russia was not a big component of these emerging markets ETFs. So keep that in mind. If you do own these ETFs, usually Russia will be in the low single digits in terms of percentage of the ETF. So it shouldn't have too much of an impact. But again, it could indirectly for other reasons, but that's something to keep in mind here. As do it yourself investors,

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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. From a macro angle and looking at the commodities across the world, there are definitely implications,

just based on those bullet points you brought up about what they export. They export wheat, they export gas. Now, I believe that they are still able to export natural gas via Gazprom, state-owned company, to Europe, because that sanction, I believe was excluded, given that countries like Germany, how much gas they buy from Gazprom, for instance. So I believe that that is still flowing. And ironically, it all flows through Ukraine, in terms of pipeline. So that is something to consider. But when it comes to a macro perspective and commodities, it's definitely something to consider. You know, my portfolio, I know your portfolio, not a whole lot of implications there from a commodity perspective, just given our

investors investing style, we buy like the typical compound or names that have pricing power. But I know a lot of Canadians own tons of commodities just based on the nature of our index composition. So it's a good thing to bring up. Now, let's talk about the crypto implications. And this has been definitely a hot topic on a couple of fronts, right? Like, this is kind of a test, right? This is a real test for the implications of decentralized currency. Ukraine verified Ukraine Twitter. So the country's Twitter account tweeted this stand with the people of Ukraine now accepting cryptocurrency donations, Bitcoin, Ethereum, and USDT, and dropped their Bitcoin and Ethereum addresses. They have apparently been sent several million in crypto

in USD terms. And so this is a very interesting development. And one that I think my kind of blanket statement for all crypto is pay attention to this because it's important. Yeah, yeah, definitely. And you're right for the natural gas and oil that was not part of the sanctions just yet. I think one of the big things is like you just mentioned, Europe is so reliant, but also the US. They export, I think, was half a million barrel per day to the US. So that's another part of it. It'll be interesting whether it gets to a point if that's actually cut off or not, because then it could have some pretty serious repercussions on the economies over there. Not to mention this invasion's in February. So when it comes to natural gas,

Not to mention this invasions in February. So when it comes to natural gas, Russia's natural gas exports to the rest of Europe is needed. Those European countries need that natural gas. It's literally winter. So I don't see them flexing a sanction there. If anything, it could be the reverse. Yeah, exactly. So now, like you mentioned, there's definitely a big crypto angle and one that I've seen quite a few times. Like you mentioned, you gave a description of what the SWIFT system is.

And just as a general idea, about 90% of all worldwide cross-border payments are made through the SWIFT system. And on Saturday, it was announced that the US, Canada, France, Germany, Italy, and the UK were imposing sanctions that would limit Russian banks' access to the SWIFT system. What that means is essentially they were referring this to as the nuclear options of sanction because it really limits their ability to transact with the outside world. So you may ask yourself, so what the hell does that have to do with crypto? Well, one of the things to keep in mind here is essentially the SWIFT system is controlled by the US and its Western allies. And that's been a big issue with Russia for several decades. It's also been a big issue with China because they don't like that the U.S. has the power over that system. And yes, it's not just the U.S., but let's be honest here, the U.S. has a lot of influence on

it. If they want to do something, it's most likely going to happen. So when it comes to Russia and the Russian government, they essentially have two options here. So one that's emerging is the Chinese government, more specifically what we call central bank digital currency, CBDCs, and it's called the Chinese Yuan. So essentially it's a cryptocurrency controlled by the Chinese government and they're really trying to establish it as an alternative to the US-led SWIFT system. The Russian government has obviously gotten closer over the years to the Chinese, but they may not love the fact

that it's still controlled by China. So the other option would be something like Bitcoin. That could be interesting to the Russian government. So people might say, well, I thought you said in the past it can't be controlled. No, it cannot be controlled. And that's probably why it's attractive to the Russian government, because the other alternative is the SWIFT system or the Chinese system, which are controlled by two superpowers in their own right. That are not named Russia.

Exactly. So what if Russia opted for something that cannot be controlled? They can control, however, the rails that lead to Bitcoin. So, for example, they could control someone wanting to purchase Bitcoin through their Russian bank account. They can't control the protocol itself. So it would give them some form of control without controlling the protocol. Because if you have it in cold storage you control your own bitcoin there's nothing the russian government would be able to do aside from i guess that's not outside

of the realm of possibility but outside of torturing you and trying to get it out of you there's nothing really they could do electronically to be able to control that so it really gives you a good question whether that's something that Russia would look into adopting. They have become recently more friendly to crypto in general. So originally they were talking a few months ago about banning it. Now they're really talking about just legalizing it with some regulations around it. And the other aspect of this is if Russia becomes increasingly friendly to something like Bitcoin, well, how will the U.S. and Western nations see that? Will they see that as a threat? I think for the most part,

I think the U.S. is well aware that they cannot control Bitcoin. I think most people are aware that it cannot be controlled after China essentially banned people from owning it. I mean, people could still technically get access to it in some ways in China, but it's very difficult. But they realized in China that they couldn't control it, so they decided to ban it. So if China cannot achieve that, then I mean, I think it's safe to say that it cannot be controlled by any one government. Safe to say that it cannot be controlled by any one government. Yeah, I would say that that's probably safe to say. Again, it's one of these mechanisms that people can use. And the technology, in some cases, can be used for good and bad.

That's what I'll say. And Bitcoin is a prime example of a technology that can be used for good and bad. And I think we know that and we recognize it. What I will say is that any tool or technology can be used in malicious ways or in good ways. Think of a knife. I could make dinner with a knife tonight. I'm going to cut my chicken breast with it. I'm going to cut the veggies. And I could also do something terrible with that knife. Does that mean that the knife is bad? No.

And so I think that that's kind of how I think about some of these things. I don't know if that's the right way to think about some of these things, but like I'll keep saying, not paying attention to these developments is putting your head in the sand for no reason all right let's talk about big tech because you got your crypto chat you know i'm going to talk about big tech big tech in russia this is a predicament yeah simone oh yeah i think that there's a lot of again back to the last conversation which is what is morally correct to do? And what are the impacts of some of these decisions that I'm going to get into, which are, it's not as simple as the people on Twitter tell you to just ban Facebook in Russia. I think that that's actually a terrible idea. And I'm going to get into why. So according to the New York Times, Russian authorities warned

Google, meta aka Facebook, Apple, Twitter, TikTok, which is a Chinese company, and others that they had until the end of this month, and we're recording today on the 28th, to comply with a new law that requires them to set up legal entities in the country. The so-called landing law makes the companies and their employees more vulnerable to Russia's legal system and demands of government censors, legal experts, and civil society groups. That was said by government censors, legal experts, and civil society groups. Then from Reuters, on Friday, Russia said it would partially restrict Facebook, a move Meta said came after it refused a government request to stop the independent fact-checking of several Russia state media outlets. By Saturday, Twitter also said its

service was being restricted for some Russian users. Now, if we look at what has actually happened, Meta has blocked state media from advertising on Facebook and Instagram. Google has restricted Russia's state media outlets from earning money on AdSense for their websites. And Twitter has banned Russian state media years ago. So they already did that years ago. has banned Russian state media years ago. So they already did that years ago. It's very, sounds like a real Jack Dorsey move. So I like him. I know a lot of people say he's a bit of a goof and a little bit of a nerd. I like him for some stuff that he does. And they just recently banned all Ukraine and Russian sponsored content. And so why do you say, well, why would you ban Ukrainian as well? And they said, well,

they want to prevent propaganda and prevent the truth in those two countries, no matter what comes out, what is being presented there needs to just be the truth. The vice prime minister of Ukraine said on Twitter on Sunday, quote, Mark Zuckerberg, while you create the metaverse, Russia ruins real life in Ukraine. We ask that you ban access to Facebook and Instagram from Russia for as long as tanks and missiles attack our kindergartens and hospitals. Now, maybe I'm missing something. Maybe I'm not seeing something here, but I don't see how this helps. In fact, I have a completely counter view. Now, the feds over in Ukraine have been awesome. Dude, the one video that Zelensky made with all of his people, with all his main cabinet people behind him, it was

like a gangster movie type clip where he's doing the selfie video he's like we're here we're here in kiev you've seen it right no i haven't seen that one i i really sending you yeah i'll have a look no i've obviously heard the speech he gave to try and reach russian the nine minute one yeah yeah that was yeah that was so good anyways this like back alley late at night video he made with his him and his squad is so badass by the way you got to look it up now okay so back to what i was saying about them saying okay shut down facebook and instagram in russia it's kind of so easy to say hey mark zuckerberg you evil villain why won't you stop making money in russia but i personally think only allowing state media to

control the narrative inside of Russia is a huge mistake. The people need to be talking to each other and spread information about what is really happening. For example, Alexander Ovechkin, Russian hockey phenom, future walk-on hall of famer, best one-timer ever, posting and doing press about, hey, we need peace and heavily anti-war in his statements. You think Russian state media is showing that in Russia? Hell no. But you can find it on Instagram. You can find it on TikTok. You can find it on Facebook. So I think big tech is in a weird place here. And I think that they're going to have to continue to make some really hard decisions around censorship and the truth. I don't have all the answers and I don't think anyone does.

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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. The last thing I think, I didn't have this to the notes, but I've been obviously following the developments of everything that's going on. And the biggest wildcard here is China. They're the biggest wildcard in all of this because everyone knows that Putin has been trying to get closer to to China. He was one, if not the only one, to actually visit China during the Olympic Games.

He waited to do the invasion after the Olympic Games were done. So he's been really trying to buddy up with the Chinese government. But this, I think, creates a bit of a... Well, it's obvious that it creates an issue for China because I don't think they thought that Putin would actually go ahead with this. And China historically has always been on the side of don't mess with our internal affairs. We won't mess with yours, but don't mess with our internal affairs. And for them, it's always been the same tone when it came to Taiwan,

when it came to Hong Kong, when it came to certain minorities in their countries. And I know it's well documented that a lot of them are very badly treated or prosecuted, but still officially China does not really endorse getting into other countries' business. And what's happening right here is China's a major trading partner for Russia, but it's also a major trading partner to the US, to Canada, to Europe. And there's a reason why China didn't support the move of condemning Russia, but there's also a reason why they did not overtly support Russia in all of this. And it'll be very interesting because there's some political implications if they go one way or the other.

And I think they'll probably try to thread the needle as long as they can. But at some point, they might be forced by especially Western nations to say, OK, you have to take a stand here because this may impact our economic relationship with you. And to what extent the Western nations are actually serious about that i don't know but they there's a lot of implications for china here and i know it's also an author pretty much a dictatorship there as well or i was trying to say authoritarian i don't know authoritarian there you go thank you for the word yeah bailing me out here i know it's is that kind i don't even know if it's the right word either yeah well yeah the leadership there so it's not democratic obviously but from an investing perspective it'll be very interesting what china does from a macro standpoint but also from certain companies

that do business in china if there starts being other sanctions on china how does that affect potential business for us and can listed companies? So there's a lot of implications here of things that could happen in the future. And definitely, China is the wildcard here. And I think China is also probably the one country that Russia would listen to the most if they decided to take action one way or another i'm not sure to be honest like i don't know either i said probably right i'm not well versed in the situation at all what i will say is it's no secret that they have been having their eyes on taiwan yeah and this is one giant commercial for don't mess with other countries in 2022. It's one giant commercial for, hey, we can literally turn your economy off.

This wasn't possible before. When has this ever been a possibility? And it speaks to how connected the world is today via technology. And like anything, there's good and bad implications. This is one of the good ones. This is great. It's open communication. This is one of the best things.

The other good thing is, which could be used for good and bad, of course, is the ability to literally flick a switch and heavily punish war criminals because that's what he is that's what putin is yeah there's no like there's no argument about it it's wild yeah that's fascinating but it's sad too yeah the saddest thing about those sanctions though and we we touched on it before right it's you put those sanctions to try and punish putin but you know the adverse effect of all of this is you punish regular russian people right so and i think that's really important to remember is i think you have to put these things in perspective because yes it hurts the russian government and the regime in place, but most importantly, it's all fine and dandy if we just are able to fight back and really punish

Russia for what they're doing. And then you look at the situation, it's just like, last time I checked, Putin's not missing a meal. Last time I checked, his people are still invading. His military is still on the move. And last time time i checked rationalizing with someone like that doesn't make sense even if he knew how bad this backfire on him would be does that change anything i don't think he cares so that yeah and so that's the really tricky situation the world would be a lot better of a place if there wasn't a dictator conquerors over time. And history keeps repeating itself, man. And so I think everyone needs to recognize that this is a possibility and it happened. It's happening right now.

Yeah. Oh, yeah. And one thing, too, that just comes up to mind because I've been reading so much on it is one job I would not like to have right now, I'll be honest, is the head of a central bank in Canada, the US or even Europe, because a lot we were talking about, you know, potential raising the interest rates, inflation going up and then central banks in Canada, the Fed in the US having to raise those interest rates to curb inflation. Well, who the hell knows what way inflation will go? It just kind of puts another variable in all of this. You think rates are going up tomorrow? No. I don't know. Maybe they are. I don't, I really don't know.

No, what I'm saying, like this definitely pushes the conversation to less likely on rates. Yeah. I mean, it just throws another throws another variable right that they have to factor in and i mean they're between the rock and a hard place it's been a couple of years for the feds hey wow yeah so it's uh something to keep in mind i was having some discussion on twitter someone was saying that you know it may lead to some recessions and so on so that would put on the breaks they may put on the brakes for increasing rates. I don't know. I just don't know which way it's going to go. And what I've been reading for the most part is even all the experts out there on macro stuff, there's a lot of competing forces

and a lot of them just don't know. They're just guessing, trying to figure out what the Fed or the Canadian Central Bank, the Bank of Canada will do. So that's another one to keep in mind on more the macro side. But it's just, yeah, I would not want to be in their shoes. Experts and I roast economists so much and they don't deserve it. But experts and macro economists is kind of an oxymoron in my head because it's just so hard to predict. And the smart ones and the good ones will tell you that. They'll recognize that. So trying to guess interest rates, it's harder than guessing what the market's going to do tomorrow. It's just flip a coin, toss it up.

You can make predictions. You can kind of weigh probability metric on it. But betting the farm on one way or another is just a complete loser's game and something that I really try to avoid at all costs. Yeah, no, well, but I think, I don't know, was there anything else you wanted to bring up? I think that... No, I think that that's good. I mean, this is obviously nowhere near done, unfortunately.

We'll continue to cover it in some facet. We probably won't have an entire episode on it like we are right now, but also never say never. But we'll continue to cover it. Next week will be more regular on the earnings results. Later this week will be this episode. But then we'll keep touching on it. But I think we've set our piece. We've set our thoughts.

We've set our implications. And this our thoughts we set our implications and this is a point in time it's february 28th yeah this entire everything could be outdated soon however i think that the foundation for what has happened and the reactions from the global community have already happened in terms of the direction that we're going and so i think that those fallouts are big. Yeah, I think we did a good job of going over the potential implications. But again, some of the things that can be impacted, will they be to what extent, what direction?

That we don't know. We're just, you know, we said the things that we will have will be adversely impacted or even positively in some situations, but it'll be rapidly evolving. That's for sure. And like you said, if we, uh, I'm sure we'll be providing some updates on it in the upcoming weeks.

Any stocks you like right now, Simon? I'm pulling a fast one on you. Some stuff is getting, dude, high tech growth keeps getting pummeled. Yeah. Even after really good results,

it's very surprising. This factor rotation has gone on for longer than I was expecting. But there's some really good ideas out there right now. Yeah, definitely. I mean, one of the ones because we are we did not plan this discussion we're having right now. This is putting me on the spot a little bit. But I had part of our earnings call. I had done some research on Teladoc. And I'll be honest, a little preview of when we'll be talking about the earnings next week. Teladoc had a fantastic year, even if you factor in the Livongo acquisition and then their guidance for 2022. Considering the price of the stock, it's looking very attractive for me. I still own it quite a bit, but I had sold when it was around the highs because I needed to pad my emergency fund. But that's a company that I do have an eye on. They had a

really great year. I don't know why the market is being quite that harsh on them right now, but that's a company that I'm finding very attractive. And obviously, it's one that I own already, so I know it pretty well. It has been a round trip from late 2019 on the stock price. Yeah. Which is shocking. I've been through it. Yeah. You had a celebration in 2020 when you made several bags on your money and it's round tripped.

You said you sold some of it, so that's good. But again, here's a classic example of a business that has certainly gotten better over the pandemic. Certainly gotten much better. And the stock price has roundtripped. Now, you and I both said in late 2020 that the stock price traded at a stupid valuation. February 12th, it traded at close to 300 usd it's 75 usd today wow now you'll see when we do the earnings there uh they had a really good year and the guidance is solid 25 to 30 percent increase next year 12 billion in market cap isn't that like half okay isn't 12 billion market cap like half of what they paid for livongo yeah I think oh man I don't remember I'm not 19 billion yeah it could be it was I think it was an all stock deal if I remember or no stock

in cash but I I wow I'm going now it's been a while so I don't really remember but let me put you on the spot speaking what company do you find attractive right now dude MercadoLibre's results were I was gonna swear are so we're so good total trans total payment volumes up 73 revenues are up 74 gross merchandise volume up 30 and the stock's just been getting pommeled i mean sure it was it was overvalued but 50 50 billion in market cap feels right again we're we're cheating into next week's notes, but we have to talk about stocks somehow. We can't just talk about war the whole time. Yeah, no, that's really an interesting one from the Canadian side. GFL is still so cheap. Just among stuff that I'm seeing

that right now that seems a little mispriced. There's lots of stuff that I'm seeing that's mispriced that I haven't said that in a while. When's the last time I said that stocks feel a little mispriced? Probably before the pandemic. I would say right as the pandemic was hitting. Yeah. I don't think I've said that on this podcast for two years. Not that I'm like some hardcore value, deep value guy, but I mean it. I mean, like the wording that I'm talking about and the companies that have structurally won over the last two years did this like crazy run up through 2020, crazy run up through 2021, and then have just got absolutely shattered in the past four or five months. Yet, they were post good results and

good guidance. So this is when you get greedy, I think. And I'm not saying they're all stupid cheap, like some of these software SaaS companies, but hey, 12 times sales for something doing 90% gross margin growing the top line at over 50% a year. It's just like very common out there right now. Yeah. Is that a crazy price to pay? Maybe 50 times sales was crazy price to pay. Yeah. And I mean, it feels like the market is bucketing all these companies that benefited massively from the pandemic saying, okay, this was all pulled forward. Now it's going to be like slow growth going forward. You achieve all this growth within a year or two

because of the pandemic. And there are some companies that are like that for sure. I think Peloton, obviously we've talked about it, but that's the one that comes to mind right away. But then you have companies like MercadoLibre, you have a Shopify, you have, like I just mentioned, Teladog, that yeah, there was some pulled forward, but

they're actually continuing to grow quite well and their guidance is solid. Right. Like they have, it's like what I talked about with the flywheel. It's like pulled forward growth is good. Yeah. Like pulled forward growth should not have a negative connotation on it. If I was supposed to achieve that number in 2025, and I hit it in 2021, and now I'm going to hit my 2030 target by 2025. This is a good thing, right? Like, there are negative connotations on growth that I see that make no sense to my brain. And that's one of them pulled forward growth should not be a negative connotation, at least the way I see the world. Yeah, I think it's just putting it in context, right?

Is it pulled forward, but there's also some continued growth ahead? I think that's really important to differentiate, whereas some really got everything pulled forward and now it's almost like flat. Just make sure you look at those different types of businesses. I'd say the majority

of these companies that benefited are actually doing quite well post pandemic as well so that's something to keep in mind yeah i could go on and on about stocks that i think are actually trading i'll leave some for uh really really yeah no i won't i won't say but, but I haven't felt like that in a while. I actually don't think I have felt like that. I've been saying so much over the past two years that I think it's trading at a reasonable price. Yeah, well, start eating some Kraft dinner so you have more money to invest in stocks. I need more money, man. Start pumping these ads on the podcast, folks.

Come on. Seriously, though. Thanks so much for listening, guys. Really appreciate it. This has been a really human episode. We've tried to collect our thoughts on what's happening. We are no experts in the situation whatsoever. Absolutely not. However, this is the way that we're thinking about it. And we remain invested. We remain long-term focused. Volatility is the only normal thing. It's the only thing that's going to happen now. It's going to happen next week. It's going to happen next year. It's going to happen next decade. There's always something. However, there's some great businesses out there and some that the word that I haven't

used in so long, mispriced, I think is a great, great time to be an investor. That does it for this episode. Thank you so much for listening. We will see you in a few days. If you have not checked out stratosphere, go check out stratosphereinvesting.com 10 year financial statements. We're rolling out a feature next month that will blow your mind. You're going to be able to see every single metric that you care about graphed out on a 10-year basis. Simon, I can send you some screenshots. We have this thing in production already. We're ready to merge it. You're really going to like it. Anyways, that's stratosphereinvesting.com. See you in a few days.

Take care. Bye-bye. 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.