The Canadian Investor - Investing in Global Companies & The Flywheel of Growth

Episode Date: February 28, 2022

In this episode of the Canadian Investor Podcast we discuss the following topics: The flywheel concept applied to investing The evolution of investing in emerging market stocks What net debt is and what it means   Simon finishes the episode by interviewing Elizabeth Robinson from ABC Life Literacy Canada to discuss financial literacy in Canada. Tickers of stocks discussed: AMZN, VEE.TO, VEQT.TO, BABA, JD, BNS.TO, AAPL, PBR, IBN, TTM, GOOG https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Morning star article on emerging markets: https://www.morningstar.com/articles/1018645/the-dramatic-evolution-of-emerging-markets  ABC Life Literacy Canada: https://abcmoneymatters.ca/ Stratosphere 🚀 https://www.stratosphereinvesting.com/See omnystudio.com/listener for privacy information.

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

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My name is Brayden Dennis, as always joined by Simon Belanger. Simon, I sent you a link last night of a post I got a hold of that my buddy sent me on Reddit about people talking about our podcast. Now, the feedback was just kind of awesome to watch because people were like, oh, I never miss an episode. However, more than half of the commentary was about how after two years now, I still suck miserably at saying your name. And I wholeheartedly agree with that. And so I formally apologize to you and the people. Yeah, I mean, I don't think you're too bad. You've definitely improved over the time. And I know I've been getting some tweets, some tweets about it, too. But I've had my name butchered especially my first name where people try to mix the english

pronunciation with the french and it just ends up like simone is one of the most common one like there's no e at the end but uh you've improved but one thing that i saw in those comments is the intro the guy in the intro that we took definitely butchers my name. So I think that's something we might look into just getting a new intro and maybe involving our listeners on Twitter with a poll with what you guys actually want or prefer in terms of the options we have. Yeah, that's a phenomenal idea because it feels like there's some switching costs changing our intro. But the guy I paid $30 on Fiverr, we can't assume he knows how to say your French

Canadian name. I can't even say it. So what we'll have to do is we'll have to, you know, maybe we'll pay a few guys on Fiverr and then we'll run a poll on Twitter. So if you want to be a part of that, follow us at CDN underscore investing, and perhaps that's a good idea. We'll get something new in there. I know you guys will miss the line from the great white North, that guy, but Hey, if I can get better than the intro can get better for today on the slate. We've got a fun episode. As always, we're talking investment concepts for this release, Thursday morning release. We talk earnings and news today, I'm going to talk about

something called the flywheel. You're going to talk about emerging markets. I'm going to have a little section on a little balance sheet talk. And then you did an interview with Elizabeth from ABC Life Literacy Canada. So we got lots on the slate here and something for everyone. Okay. Feel free to chime in. We both have long segments today. So pop in at any moment. So the flywheel, I think this is interesting. So oftentimes in nature and the laws of our physical world have some awesome connections to business and investing. And they resonate well with me as an engineer, math nerd. So the flywheel is a perfect one I think of as an example. Let's start with an excerpt. It's very long, but I think it's

entertaining. An excerpt from the book Good to Great by Jim Collins. It helps paint a picture of the flywheel and then we'll put some pieces together with an example. So here's a quote from the book. Picture a huge heavy flywheel, a massive metal disc mounted horizontally on an axle about 30 feet in diameter, two feet thick, and weighs about 5,000 pounds. Now imagine that your task is to get this flywheel rotating on the axle as fast and as long as possible. You push with great effort. You get the flywheel to inch forward, moving almost imperceptibly at first. Is that even a word? I don't even know if I said that right. precipitably at first. Is that even a word? I don't even know if I said that right.

You keep pushing, and after two or three more hours of persistent effort, you get the flywheel to complete one entire turn. You keep pushing. The flywheel begins to move a bit faster, and with continued great effort, you move it around a second rotation. Three turns, four, five, six, the flywheel builds up speed. Keep pushing, nine, 10. It builds momentum, moving faster with every turn. 20, 30, 50, 100. And at some point, a breakthrough. The moment when the thing kicks in your favor, hurling that flywheel forward, turn after turn, its own heavy weight working for you. You're pushing now no harder than your first rotation, but the flywheel keeps going faster and faster. Now, this is a quote from the book. Do I have a career in audiobook reading at some point,

Simon? You let me know. This is what happens when a business is taking advantage of a positive feedback loop. And the better your product or service becomes, the more customers you attract. And the more customers you attract, the better your product comes. And the better your product becomes, the more customers you attract. You see how this is this compounding effect. And so as we know, compounding works in wonderful ways, not only in your investment portfolio, but also for inside of the businesses in acquiring customers. We see this a lot with marketplace businesses. And I'm interested to hear if you have any network effect examples

as well. Let's look at one obvious example, and then perhaps you can chime in here. And I have more after that. One that's used a lot is Amazon's flywheel. And it's used as like this perfect flywheel. It's this feedback loop that keeps working back on itself. And it also helps that they kind of made their own graphic. And this graphic has become very famous for Amazon investors. And so I think that that's a reason why the example gets used so much is there's this fun doodle they include on all their presentations. So if we look at Amazon, they get more traffic to the website. This is the retail business, by the way.

So just talking about the retail business. They get more traffic on Amazon.com. And then because there's more traffic, it attracts more sellers. More sellers come on the platform. More sellers means more selection and lower prices. This gives a better customer experience because the prices are low, there's more selection. And since there's a better customer experience, there's more traffic. Here we started at the top of the funnel again, and it keeps going around and around. That was one full turn, more traffic,

more selection, lower prices, more customers, better experience, more traffic. You're seeing how this goes round and round. You get the idea. Another very obvious example in the retail space is Costco. More members is better prices for the members. They get better pricing power from suppliers, and this attracts more members. And boom, the loop starts again. So in retail, it works well you have economies

of scale there and some two-sided network effects at play there for amazon do you have any other retail type things at mind and then i got some more after maybe not retail specifically but one that came to mind is a game like world of warcraft so world of warcraft which has been i don't know since 2004 maybe around there 2005 forever staying yeah it has forever staying power if i i've been i played it a little bit about like 12 years ago and you had to get like a monthly membership to be able to play it and i think that's a perfect example of a game where the more players you get that play the more players join and the more players joins and pay the more you incentivize the game because those open world games suck if there's no one playing exactly and

if there's no users paying for the membership then there would not be any reason for activision blizzard or i think it was just Blizzard back then, but now Activision Blizzard or Microsoft to actually invest back in the game. Exactly. So you get this continual loop. So I kind of see it a bit as that, like you just mentioned for these retail businesses, but a completely different business. Yeah. Gaming's a classic example here. Again, we're talking mostly about network effects, right? Mostly. And this is why network effects are so powerful is because that positive feedback loop and what some people call their flywheel of growth. Because the faster they grow,

the better their product comes, makes them grow even faster. Now moving forward to close out my segment here on the fly wheel, moving forward, the businesses that are going to have like borderline scary, good feedback loops and incredibly great flywheels are businesses that are utilizing artificial intelligence. Google search has benefited from this right it's the more people that continue to search gives the algorithm better results making it even better and it's like they have this huge head start and their algorithm for giving you results is just so much better than anything else right and so good luck competing on. But how about we look at something like CrowdStrike, the cybersecurity business, right? More users is more intelligence, more artificial intelligence on threats that exist in cybersecurity, which makes the platform better

at doing its job. If the platform is better at doing its job, there's going to be more users and more users makes it better at doing its job. This is this artificial intelligence, huge data sets that have wonderful flywheels. And I think that is going to be huge moat builders in the future for some of these businesses that are on the forefront of artificial intelligence and kind of innovating in that space. Yeah, yeah. And speaking of AI, we should do a segment at some point about machine learning and how it's really changed the evolution of AI because machine learning really came into force, what, about three, four years ago, I think it really had a breakthrough and then has really dramatically improved AI compared to any level

it was ever before that. I remember one of my first year engineering courses, it was like a structural mechanics course, which is unrelated to what the prof was because he had his PhD in machine learning. And that was the first time I had ever even heard, I'm like, I don't even know what that is. I still don't really, to be honest, think I know what that is. So maybe we'll do some research. Maybe you know more about it. I think I know what it is, but I'm not sure it's right. So we'll definitely do some research. Let's revisit. Yeah, yeah. I think we know enough. It's machines learning, right? Yeah, exactly. Yeah, no, I remember listening to podcasts and they were giving some

good examples, but I think it'll be just a fun little research to do because we talk about AI a lot, but I think there's been a big evolution over the past decade, just even decade for AI. So I think it would be fun because now most businesses use AI on one level or another. fun because now most businesses use ai on one level or another that's why i love doing this podcast is because sometimes it forces us to hyper scale learn like knowledge because if it's something i want to be able to talk about i have to learn i have to get to a proficiency level to be able to speak about it on the podcast. And that's such a good mechanism for us to keep learning. And I think that's my favorite part about running this podcast. Yeah.

Same for me. I, my personality is that I hate talking about something that I don't understand. Well, it bugs me so much. Like I have to understand. And it makes for shit content too, right?

Like, yeah, exactly. And if I'm learning something and then I'm like, you know, I'm not sure what this is and I would not be able to explain it if someone asked me a question specifically to say one item I will make sure I research it and understand exactly what it is so

if I do get a question I can answer it I don't know I know I think you're like that too it just like it bugs me until I know for sure. Yeah. I think that we're both very aligned on that. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. and with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions

along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. That is questrade.com. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust

suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products.

Please check out the link in the description of today's episode for full disclaimers and more information. Okay, so now we'll move on to our next segment. Like you referenced, I want to talk about the evolution of investing in emerging markets. I came across this really good article from Morningstar. The article was based on data up to the end of 2020. So early 2021 is when it came out. And it was a really good article by Morningstar. And I can actually add the link into the show notes if people want to have a look at it. But I wanted to go over that because we do not talk about emerging markets all that often. I mean, we do, but usually it tends to be

more China. And there is more than China in terms of emerging markets. So before I get started, I think it's just important for everyone to get diversification outside of Canada and the US. We talk a lot about Canadian US stocks. And clearly, there are some companies that you can get exposures outside of America that are listed in Canada or the US, but you can also limit your reach. So we've talked about Apple before. Apple will give you some worldwide diversification, but they are also concentrated in terms of their revenue in some countries. The US and China, for example, will represent a big portion of their revenues. I'll be referencing MSCI quite a bit here. So for those not familiar to MSCI, it's a publicly listed company and they offer a slew of investing

related services. One of the services they have are indices that follow various sectors, countries, or trends. So a little bit like S&P will do. That's another example. I think they offer different investing services overall, but they do indices as well. And I came across this article, and essentially they started looking at emerging markets since 1988. So according to the MSCI Emerging Market Index, the stocks from emerging markets now make 13% of all investable stocks worldwide, and that compared to 1% in 1988. So that's a really big increase. Clearly, it's still a relatively small portion, but much bigger than it was in 1988. And the current MSCI Emerging Market Index was launched in January 1st of 2001. Its annualized

returns from 2001 to the end of 2020 was 9.59% versus 6% for the same period for the MSCI World Index. So the MSCI World Index on the other end captures mid and large caps that are companies from 23 developed countries. So there's big differences between the two. One is emerging markets and the other one are developed countries like the US, Canada, Western Europe, for example. And looking at a period from 2010 to 2020, the world index actually outperformed by more than 6% on an annualized basis

its emerging markets counterpart. So it's kind of interesting to see the big differences in decades. Do you have anything to add before I talk about kind of volatility and a few other things? Just looking at what you pointed out about 13% of the world investable market being emerging markets. Is that in terms of listing? Do you know, did it say or is that like market cap or is that like actual listings? My understanding, it was the total amount of companies that are investable. The MSCI Emerging Market Index is market cap weighted, but I think their study for the 13%, they were just talking about investable companies, so publicly listed companies. So public listings. Okay. Yeah,

no, I think that clears it up. I'm just listening here. I'm just a sponge right now. So one of the things that they highlight is volatility. So investing in emerging markets has provided some very good returns over the last two decades. I don't think we can argue that. Clearly, if you compare with the S&P 500, it's a bit behind just going on memory. I think the S&P 500 is probably in the low double digit, just going on memory here, right? Yeah, that sounds right. Yeah, and keep in mind, though, that the S&P 500, a lot of those gains are some of its largest holdings because it is also market cap weighted.

So I think you have to just keep that in mind. But I do like that they compared emerging markets with industrialized or Western nations. So I think that gives a good contrast. But the good returns from emerging markets came with increased volatility. Emerging market stocks have a much higher standard deviation than their developed market counterparts. Standard deviation just means that over a short period of time, the range in returns can be very wide. So either on the positive or the negative side.

And emerging markets also experience higher drawdowns than developed market stocks, which makes sense and drawdowns will clearly have an impact on the price of an asset class. What's really interesting is they provided two tables in that article. The first one that they provide is a country membership for that emerging market index and really the evolution over time and I do encourage anyone listening to this to just go and look at the article you'll be able to you can just scroll down if you want to this table and what you see the first thing here that you see is Chinese stocks have clearly become a very large component of this index. So they went from single digits in early 2000s to just shy of 40% of the index in 2021.

All the other countries have either maintained their percentage or have gone down. Clearly, the reason for going down in terms of percentages is because China has become such a big part of the index. But after China, the other prominent countries are Brazil, India, Taiwan, and South Korea in terms of percentages. And keep in mind here that the index, like I said, is market cap weighted. So it's not surprising that you see China becoming such a big part of that index because you just have to think about these mega cap tech companies like Alibaba, like Tencent, like JD.com, maybe not JD.com and mega cap, but still a large company. It's no surprise in my mind that you see them as the biggest constituent now in terms of

country or geography. that you see them as the biggest constituent now in terms of country or geography? If you look at this country membership graph and you see the market share from some of these emerging market countries, it tells pretty much a GDP story, right? Like in a way, there's a ton of correlation there. Now, since it is market cap weighted, that's where you're having some of these mega caps, as you mentioned in China. And them being a huge market makes sense. You see after 07, 08, look at the huge jump there, right? That is a significant, significant jump. The one thing that surprises me is I thought the Indian public market would make up a larger share these days, but the multiples have been so compressed. So that's probably got to do with it quite a bit as

well. Yeah, no, that's the same reaction I got as India was still relatively small. It has increased in the past two decades. I think we can clearly just with the colors clearly tell that. But India is definitely one country that I'm keeping in mind when I'm making investments. It's definitely one country I think that there's going to be a lot of growth. I think you've been hearing that probably for a while, that India should be growing kind of the new China in terms of just the sheer amount of population that they have. But I still think it's a matter of time. It may not be this decade, might take a couple of decades. But considering that there's still a relatively small portion of this index, and they have such a large

population, I think there's a lot of room to grow for India. There's a lot of room to grow, especially in core infrastructure there. So like, you're seeing the Brookfields of the world really focus on, on those emerging markets, and especially India, because they have this huge population, fairly sprawling geography, and could be a place ripe for innovation, but just lacking a lot of core infrastructure in some of the country. Of course, in city centers, there's core infrastructure,

but I've seen some pretty shocking stats about percentage of population that lives without some core infrastructure, right? And so I think that that might have to fall in place first before we see some really hyper growth and innovation as well. Yeah, you're definitely on point there. And now the other graphic that was really interesting was sector composition for emerging markets. So you won't be surprised that sector composition has evolved over time. This is the same thing that we've seen, for example, in the S&P 500. Tech is now a much bigger portion than it was 10, 15, 20 years ago. In June of 2008 for emerging markets,

energy and materials accounted for 40% of the index. At the end of 2020, it had declined to 12.5%. Technology doubled from 2008 to the end of 2020, going from 10% to 20% of the index. So that to me is a little surprising. I knew technology obviously would be higher, but with technology being so dominant in the US, for example, and China for Chinese, obviously for the Chinese market, I didn't expect technology to have such a big bounce in emerging markets. But I guess it shows that technology is taking over wherever you do business. Yeah. If you look at some of these large companies, some of the outlier type companies, look at a Tencent, for example, they have global scale,

especially in some of their investment arm. You can have a company out of reach global scale and billions of potential customers. And that's really what makes technology investing so fascinating. And it doesn't really matter where the startup is from. There's no barrier really in terms of innovation and finding global scale. And that's what I think is so interesting about this and why investing in tech and owning tech is probably something that everyone should be thinking about. Yeah, definitely well put. And again, what I find interesting of these charts is that you can really see the ebbs and flows when it comes to the various countries, but also the various sectors that are represented over time. So it's not a straight line. Whatever you look at,

even China has increased a lot in terms of constituents there as a portion of the index. But you see the ebbs and flows. I just really find it interesting. The other major sector that you see in emerging markets, which is no surprise, is financial services and consumer defensive are the other big sectors here. And well, the last one is communications as well. So not surprising, kind of some of the similar things that we'll see in our markets. In terms of exposure to emerging markets, I think for me, diversification is very important. You don't want to be home country bias. We've talked about that a lot,

about just investing in Canadian stocks, for example, because you're really concentrating in some specific sectors. Yes, you can get some exposure to tech with like a Shopify, for example, and a Lightspeed, you'd be able to get that as well. But you really limit your diversification if you don't have some exposure in my mind to emerging markets. It doesn't have to be huge, but just for reference, for me, it represents about 5% of my portfolio. I have an index fund through my DC pension that is specific to emerging markets. I can't remember what index it tracks, but I think it might actually be MSCI, the one I've been talking about. And that doesn't include exposure for me that I have through some businesses like an Apple, for example. Obviously, this is not investment advice, but I think personally that it's a mistake if you don't have any exposure to emerging markets. to emerging markets. Yeah, let me put it this way. From my opinion, home country bias of investing in just Canadian Co. is a huge red flag and should be avoided at all costs. Now,

there are some ways to own basically just US listings and get global exposure. I think that that's, you can't really argue with that. Look at these global businesses that do business on every continent on the planet and maybe just listed on the NASDAQ, for instance. So you can get global exposure. If you do want to own some of these emerging market listings, you're going to talk about some ETFs that are a good option. I personally don't. However, the US companies I own, let's look at Google, has global exposure. And the only country that they don't really have global exposure to is in a major way is China. And I own Tencent there. Now, do you know what I mean? There's a way to own a lot of US names and get global exposure. I will say, and I see it all the time from our listeners and on forums,

is a lot of Canadians own just exposure to inside of these borders. And I look at that as extremely risky in a lot of ways. Not that there's anything wrong with Canadian Co's. It's just like they have to have scale. Like Canada has 38 million people living here. Like it's not a huge market. And you're also overexposing you oftentimes to financials and energy. If you stick to Canada, we talked about that before. And like you said, I don't know if you scroll down, but I do mention some companies that

can help you to get some international exposure as well. So I think there's two ways. Personally, I do have, like I said, an index fund that follows the emerging market because when you have a DC pension, you can only select funds. So that was an easy way for me to actually get that exposure. So the first one, if you're looking at an ETF option, ticker VE on the Toronto Stock Exchange, it's the FTSE Emerging Markets All Cap Index ETF.

The other one, this is a kind of one ETF you can all have on and basically that's it. It's VEQT, that's an all equity ETF portfolio. It's basically a fund of funds from Vanguard with exposure to VE that I just mentioned. And another name that you could easily name this fund is basically an all world equity fund. So you honestly, you can just have that fund and you'll have instant diversification worldwide. That includes pretty much everything. And BlackRock has some comparable options and actually one tracking the MSCI Emerging Market Index, which I referenced a lot today.

The reason why I didn't mention the iShares one from BlackRock is because the MER, so the management expense ratio, is much higher than Vanguard. So Vanguard has a MER of 0.24%, whereas BlackRock is 0.68% for the US listed one and 0.79% for the Canadian listed one. And keep in mind that they are tracking different indices here, but they are pretty similar in terms of overall exposure that you get whether it's the FTSE or the MSCI and just the fact that there's a difference of 50 basis points between the two that makes me lean towards the Vanguard one just based on that alone because if if it was, you know, 10 basis points, it's not that much. You can make an argument potentially that the BlackRock will

perform better or something like that. But 50 basis point is a decent amount. The top 10 holdings are probably identical and very similar in weight. So I agree with you that it's not worth 50 basis points on fees. I am surprised that it's that big of a spread. Usually they compete on like a few basis points on these types of types of indices. Yeah, I was surprised. Yeah, I was actually going to add the BlackRock ones. And then when I started looking at the MERS, I'm like, you know what? It's just it would not make sense from a management expense ratio. Exactly. And now, like you mentioned, there's ways to gain exposure to emerging markets through companies. So first, I'm not saying that these companies are necessarily worth investing in.

These are simply ideas. There's some companies that I just know a little bit. So definitely make sure you do your due diligence before investing in any them you did mention google yes google has exposure pretty much worldwide except china any of the chinese big tech companies if you want exposure to china whether it's alibaba jd.com tencent like you mentioned mercato libre for south america that's an easy one that's listed on the U.S. stock market. It gets you exposure to e-commerce in South America. Scotiabank is a Canadian bank, but they do have a pretty big presence in South America in terms of banking, South and Central America. Apple, that's worldwide exposure. They have a big presence in China. Petroleo Brasileiro.

Oh, my God. Sorry if we have any Portuguese speaker here. I completely butchered that. But it's Petrobras Brazil. So it's oil and gas play that is obviously concentrated in South America. ICICI Bank, that's a fairly prominent bank in India. Tata Motors is a motor company in India. And then if you're looking for exposure, for example, in Africa, but more specifically, well, I guess Middle East. Yeah, Middle East is Saudi Aramco from Saudi Arabia. So it's their state-owned oil and gas company. Aramco from Saudi Arabia. So it's their state-owned oil and gas company. I think it's one of the largest, at least in the top five in terms of largest companies in the world for market cap. It's a massive company. Obviously, you may have some reservation in terms of ethical concerns, whether it's something that's owned by the Saudi government, but also oil and gas. But it just goes

to show that there are ways to invest in companies. And there's probably another 50 or 100 that we could mention and talk about here, but just some ideas. Yeah, we could rifle off hundreds of large international businesses for sure. Now, I think going the ETF route is probably a good way to go if that's the route you wish to go and get some emerging markets exposure. MercadoLibre reported some excellent results yesterday. And like the rest of fast-growing high multiple tech, it's getting smashed. So that might be an interesting, it's up six percent on the news but i guarantee if those results came out three months ago it'd be up a lot more than six percent on the

news i'll tell you that for free but i think that the way the markets are going right now it'll probably be down ten percent tomorrow for sure up six percent in the market right now is like uh you know up 30 weeks ago now that's an interesting one to look at. It's like, it's the Shopify, the Amazon, the PayPal of South America, it covers everything in their logistics mode that they're building right now is absolutely wonderful. So this is not supposed to be some segment about MercadoLibre. But ticker Melly does get some wonderful exposure to South America, which I think is an important and growing market. Anything else on emerging markets or we can move on here? No, I think that was long enough.

And I think it just offers more context of how they perform over time. Something that we don't talk a lot about. So I thought it would be a good segment to do on the podcast. Yeah. If you just own Canadian Co's and other people out there doing that, I'm not hating, just know that owning just purely Canadian companies, typically, I don't know what you own, but typically you are underweight pricing power and scale. And that's not a portfolio I really want to own for the next 20 years is something that's underweight pricing power and scale. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated

online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com.

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. All right, let's talk about something called net debt. Net debt on your balance sheet is a calculation of your short-term debt plus your long-term debt minus your cash or

cash equivalents. Now, short-term debt is just debt that's due within the next 12 months or less to current liabilities. Long-term debt is longer than that. And then cash and cash equivalents is straight up cash or liquid instruments that can easily be converted to cash, typically within 12 months. Now, companies that have negative net debt, meaning in that formula, they have more cash than short-term debt and long-term debt combined. cash than short-term debt and long-term debt combined. This is often referred to being in a net cash position, although that's typically actually only referred to using current liabilities and cash equivalents. But for the sake of my little discussion here, I like looking at net debt

and we calculate it for every single company covered on the Stratosphere Reports list. So you can go on the site, you can export it to a spreadsheet, you can see net debt for all of the companies we cover on the balance sheet section. But companies just in my list on that spreadsheet, for fun, I ran through and I sorted it by net debt. And companies that have negative net debt, meaning they have more cash and more cash equivalents than short-term debt, lease payments, accounts payable, bonds, term loans, and notes payable all combined, aka they are in excellent shape on the balance sheet, assuming all else is equal.

The list on the US side, Facebook, Accenture, Google, Costco, ASML, S&P Global, Moody's Corporation, Spotify, Intuitive Surgical, CrowdStrike, Twilio, MercadoLibre, The Trade Desk, Etsy, and Autodesk. On the Canadian side, smaller list of Toromont, Topicus, barely. It's like minus 1 million. But hey, that's a great balance sheet. Toromont, Topicus, Descartes Systems, Lightspeed, and Shopify are in net cash positions. Now, that's it for this segment, but it's one that I look at. I know it's one that you look at. It provides some extra safety because at the end of the day, companies that have huge debt payments, you're not going to find any utilities on here. It really depends on the type of business. It

doesn't mean that it's not a good business if they don't have net debt. It's just like a little added plus, little safeties, knowing that their balance sheet is well equipped to weather storms. And that's something that I like to look at. Yeah, yeah. It's definitely just a good metric to look at. It's not, you know, don't invest in a company just based solely on that because it only provides one small part of the whole picture. But definitely to keep in mind, like just a light speed, for example.

Yes, they may be in that position, but they're also burning a lot of cash. So you have to look at the whole picture, right? So make sure I know when we talk about metrics, it's just one of a lot of things that you can look at for a given company. It doesn't mean that you have great businesses that are not in a net cash position because they have, for example, they may have a lot of debt, but they also have very stable businesses like utilities, for example. So it doesn't mean that if they're not in this situation, it's a bad business, but it's a good, it's still a good metric to look at just to get a quick sense of what, where they stand in terms of cash on hand. Yeah, that's well put. It's one piece of the pie, right? Like you can't take a snapshot of any metric and make assumptions of, oh, it's a, you know, they all have to be with all else

being equal, being in a net cash position, of course, is a wonderful thing. But if the company is burning cash every single quarter, they get light speed, then you got to throw that into consideration. I hear your dog scampering in the back. So this is probably a good time to go over to the interview that you did with ABC Life Literacy Canada. I have not heard it yet, so I'll hear it with the rest of the folks listening. So I'm excited to hear the conversation. Yeah, before I hand that off, go to our website, thecanadianinvestorpodcast.com. And if you haven't followed us on twitter at cdn underscore investing we're gonna do that little poll find i don't know what i'm gonna do but let's let's hop on five or simone and get a new intro for the boys you know the boys need a new intro i think i. I think it's time. Yeah, I think so. I don't think it'll affect our listenership.

I think I've listened to enough podcasts where they changed it, and I don't think it affected all that much. I think it will just give us a little fresh take and hopefully someone who knows some French. Some French, or can at least do better than me, hopefully. All right, Thanks so much for listening. Let's tune into this interview that you did, Simone, and take it away from here. Welcome back to the Canadian Investor Podcast. I'm here with Elizabeth Robinson,

Director of Programs at ABC Life Literacy Canada. Elizabeth, welcome to the podcast. How are you today? I'm doing great. Thank you so much for having me. It's our pleasure. So before we get started, can you tell us a bit about you, your experience in education, your background, and just give us a little overview as well as for ABC Life Literacy and what you guys do as an organization? Sure. So I've been working in the adult education sector for more than 15 years now. I actually started out as a university professor, but I realized that I was more passionate about working with a broader segment of the population and on topics that really impacted people's day-to-day lives than was really possible in the job that I had at the time.

So what I've really loved about working at ABC is that we're dedicated as an organization to thinking about literacy in the broadest possible terms for really the broadest possible audience. So if you're an adult who wants to learn new things, who wants to improve your essential skills, get better at reading, writing, numeracy, better at understanding your finances, we're excited to help you with that.

One of the great programs that we offer is called Money Matters. It's a free introductory financial literacy program aimed at adult learners. And it's really about helping people to build confidence and reduce anxiety when thinking about managing your money. Yeah, that's great. And I'm going to pick your brain on a few things, just because obviously you have a wealth of experience and you're the director of programs there. So obviously, I'm sure you've seen the headlines about inflation picking up. I think it's everywhere we read in the news and it's making life expensive for everyone. Let's not hide it. It is, you know, we're seeing it on our day to day lives. And I can't even

imagine the impact it might have on people with little to no financial literacy skills. And I can't even imagine the impact it might have on people with little to no financial literacy skills. And I noticed that you have some workbooks on spending plans, ways to save, and smart shopping. So can you share a few tips with our listeners to help them weather the inflation storm, if you'd like, that's happening right now? Yeah, I think that's a great topic to talk about because one of the things that can be difficult about budgeting or putting together a spending plan is that it can feel like an activity that you need to do once and then it's done and then you don't have to think about it. But our lives change, our day-to-day expenses change, our income changes. And so budgeting has actually become something that you need to revisit on a regular basis. So if all of a sudden, you

know, what used to be, you know, the 50 or $60 you were spending weekly at the grocery store is a hundred or $150. Suddenly your financial picture looks really different. And that's why it's important to sort of take the time to sort of write down, keep track of the money that you're spending, what's coming in, what's going out, and just having it on paper and having that information in front of you can make what can be a really anxiety-inducing experience a lot easier to manage. Yeah, that's great, especially writing it down. I think that's important. That's something that people do not do very often. I think it's not an exercise. How often would you say people should try and do that? Like every month,

every other month? Like do you have a kind of rule of thumb? I think there's different methods work for different people. I mean, I know people who've had really great experiences taking as a daily practice. So like every day I'm going to write down, you know, what money came in and what money I spent. I think if you have been doing this for a long time and you keep a good eye on things, you know, maybe once every month or once every three months might be good enough for you to track sort of major changes that are happening. But especially if you're just getting started out, or if you're just getting started trying to involve other members of your family in budgeting process or financial conversations,

setting like a milestone that's like once a day, once a week, once every two weeks can be really helpful for normalizing those conversations and making it less stress inducing. Okay. And do you have any like kind of tips? I've heard some people saying, you know, you want to maybe look at certain vegetables and fruits that may be cheaper over certain periods. And then, you know, it might not be the one that you're really looking to eat. But right now, it makes more sense. Like, is that something that you preach to people that to be a bit more selective in the items that they choose, especially food, I would say. So we have a workbook, it's our newest workbook on smart shopping. And one of the things that we do talk about there is sort of making comparisons, you know, knowing that oftentimes the money that

we have isn't enough to cover every expense that we'd want. And so how do we make good choices and pick and choose, you know, what are the priorities that really matter for us? And at the grocery store, you know, it might mean, you know, I know vegetables are important. It's something I want to incorporate in my diet. So like, what are the ones I can afford? What are the ones that are the best price or having them on sale? You know, are there things that the grocery store is discounting because they're slightly bruised or because they're the, what do they call them? The ugly vegetables? Yeah, I've seen that. Yeah. Sometimes that can be a way to sort of find some savings and still manage to eat the things that

you're excited about eating. I think a workbook or workshop about, you know, how to deal with high level of debt. Do you have like some tips for people who might be feeling really anxious about having a lot of debt and some of like some easiest things they can do? I don't know if you, you know, maybe looking at different options so you can reduce your debt, reduce the interest, or I don't know, even meditating if it helps them at some, something that, you know, can help people out in those situations or friends and family that might be. Yeah. I think an important thing to remember is that when you're thinking about debt, there's often two problems that people are facing. So one is stress and

anxiety related to debt. It can be really hard to sort of think about what you owe and what it will take to get out from under it. And if that's something that you're worried about, then, you know, I would recommend some of the things you said, you know, meditation can help talking to a friend or family or a loved one can help breathing exercises or just sort of informing yourself and gathering more information, all of those things that are, can be helpful for reducing anxiety. Yeah, that's great. Yeah, go ahead. There's also been sort of the problem of the debt itself and what do we do there.

And I think an important thing to remember is, you know, you're not alone, both in the sense that you're not the only person struggling with debt. It's so common. So many people have debt that they're worried about. And also you're not alone in that there are lots of resources out there to help you. So, I mean, there are nonprofit credit counselors that you can find if you feel like this is a problem that you can't tackle on your own. You can find the person in your life that you think is the most knowledgeable about finances,

ask them for help. And then I think the important thing is to find a plan and stick to it. And for some people, that's going to be a plan that builds motivation. You might want to use what some people call like a snowball plan where you take whichever debt is the lowest and you pay that off. And then you get the sort of the high, the excitement of paying it off. And that'll motivate you to continue going with your other debts. Or you might look at a sort of interest-based plan where you're like, okay, which is the debt with the highest interest rate? That's the one I need to start paying down first. And you can sort of devote your extra

dollars, whatever you have to debt to that one, because it'll make the biggest dent long-term. That's a really good tip, the snowball one. I always kind of approached it with tackling the highest interest debt first because I'm really math driven and that's how my brain works. But it's true that, you know, tackling this, the one with the smallest amount, whether it's high interest or not, it could make sense as being a really motivating factor. And I think it's also good to know is, you know, you might see people driving luxury cars and things like that. But I always remind myself, you know, how many people can actually afford those things. And I think I don't know the actual

numbers, but I think I'd be surprised with probably a significant portion should not be driving those kind of cars, for example. Yeah, it's one of the fascinating things about debt is that you find that across the income spectrum, people are struggling with it. So the very low ends of the income spectrum, people have debt issues, but you look at the very high ends as well, and often people have debt.

It's really easy to sort of let your spending and your expenses get sort of out of line with your income. No, that's great. And now my next question for you is, I'm sure we have some listeners that have friends or family struggling financially or with your income. No, that's great. And now my next question for you is I'm sure we have some listeners that have friends or family struggling financially or with money management. If you have someone in your life that you know is struggling, do you have some tips on how to approach that person? Because I know people could, and I'm sure people can be very defensive about it

when someone tries to help them. So I don't know if you have just some simple tips on how to approach someone to just offer them help and resources. I think that's a great question because lots of people struggle with money management. And lots of people struggle with numeracy and the sort of math skills that you need to manage your money well. So if you know people, there's a good chance that the people that you know among them is someone or multiple people who are struggling with their finances. And to have the concern and the compassion and empathy to want to reach out and to help is a great place to start from. Know that people respond well to care, to concern, to the idea that you want to help them grow and learn. And I think people like it when you want to grow and learn, live them. So I think a good way to approach it as a sort of

joint exercise and sort of how can we discuss this? How can we learn together? You know, what are the things that we're both curious about that would be helpful to learn more? And if you can tie the sort of financial aspect to something that, you know, if that's something that causes them stress and anxiety and something that they're nervous about, can you tie it to something that is an area of interest in theirs? You know, there's a lot of, you know, people who are excited about computers, computer games, you know, online technology. There's lots of great budgeting apps out there, websites and online classes where you can learn about finances. ABC offers some money management courses through our ABC Skills Hub site. If you have people who are excited about sports, there's amazing financial aspects to sports and there's ways to sort of tie in the interest in

sports and statistics and these kinds of things to essential skills that will help with money management down the line. So I think that angle of thinking about what's relevant and what's exciting for the person that you're hoping to help is a great one. No, that's great. And speaking of helping people learn, for those who have young children, do you have a few ideas on how they can actually make their kids excited about learning about financial literacy, some tips? You know, I sometimes I'm thinking about how I learned was kind of the value of money was doing chores and stuff for my parents. But I don't know if you have kids yourself, but you have some tips for our listeners just so they kind of get their kids slowly at a young-ish age used to money concept and money management. I think that, like you said about chores and if you're able to sort of in a financial position to pay your children an allowance or to offer them compensation for getting chores.

It's almost surprising to me how young an age at where kids start to realize how exciting it is to earn your own money. Yeah, that's true. And if you can make that happen, I think it really sparks in them the sort of the interest and the sort of the value of the dollar. and the sort of the value of the dollar and you start to sort of connect these kinds of concepts in ways that make, that really can shift your spending from an early age because you start to associate the money and the costs and the things that you want with the work that you've done.

And that can be helpful for sort of how we have to interact with adult life. I think that's great. If you're not in a position to offer that kind of incentive to your kids, I would say the more you can involve them in an age appropriate way in household finances, I think it's great.

Whether that's, you know, talking about the price of items as you're making a grocery list together, talking about some math skills as you're sort of cooking or working on chores together in the home, and being as honest as you can with your children. You know, when they come to you and they're like, you know, I want a new thing, sort of talk to them about like, well, you know, here's what it costs, you know, here's what it means if we buy it, here's the kind of sacrifices we might have to make if we spend the money this way. You know, what do you think is more important? You know, do you want the new shoes or do you want the trip to the amusement park later in the summer? You know, these kinds of helping people understand the costs and benefits and weighing their options, I think is something that we can

all sort of relate to even at an early age. And it's knowledge that will stick with you as you grow. Yeah, no, I think I can really relate to that. Because, you know, I grew up and I had great parents. But there were periods where, you know, it was pretty lean years, my dad had his own business, and it wasn't, you know, always going very well. And my parents were always pretty straightforward with me. So I understood, you know, a couple of Christmases, I didn't have that many gifts. And I mean, I understood it, you know, a couple of Christmases, I didn't have that many gifts. And I mean, I understood it. You know, it's not when you're a kid, you want to have a few more gifts, but you still, you know, realize that you're smart enough to realize that your

parents are doing a lot of sacrifices for you. And I think that means a lot. I think that's great advice there. And my last question for you before we wrap up here. So I was just doing a little bit of research and I found this research or I guess article from the Conference Board of Canada saying that about 48% of Canadians have inadequate literacy skills. So not financial literacy, just literacy skill. Obviously inadequate. I think a majority of those can still function but they also said about 15 of the population was either at a level one or below out of five so that was significantly you know impair their ability to function in everyday lives and i was wondering if abc life literacy has some programs targeted to that for, you know, in mind that people, some people

just don't have the basic literacy skills to, you know, even get started in financial literacy in the traditional way, I would say, right? Yeah, absolutely. And to be honest, when you look at the statistics for numeracy and basic math skills, they're very similar. About 55% of Canadians don't have the numeracy skills they need to sort of do the kind of math-related tasks and budgeting that are necessary for day-to-day life. So it's really what drives us as an organization. We're interested in, one, sort of reducing the stigma around people who have challenges with numeracy and literacy, one, by drawing attention to the fact that it's very common. You're not alone if you're having these struggles. And two, by providing resources that are a good

entryway. So if you're looking for, you know, what's a starting point, or I'm not sure how to begin, you know, improving my skills and learning and growing, we want to, one, like stress that absolutely it's never too late to learn. There's always new things and there's resources out there. And two, that whatever steps you're going to take, like that's fantastic. Like even small things can have a big difference. You know, taking 15 minutes a day to work on your numeracy skills or to work on your literacy skills can be great. One of the things that we offer through the Money Matters program is sort of free set

of workshops that you can offer sort of with a group. And that group could be, you know, a group that you know from your sports team, from your church, or maybe just a group of friends who all are committed to learning together. We'll provide you with workbooks that are ready-made, designed to be go to, that you go through together. You know, you don't have to develop your own curriculum or come up with your own concepts. And in partnership actually with TD Bank, we can even find a facilitator who can come and sort of work through the content with you, help you learn and grow, answer some of the questions that you might have about banking or some of these more complicated financial concepts. And all of that is really designed to be an entry point to sort of having these conversations

and discussions, getting together with people that you know, people that you trust, and just opening up conversations about things that can be difficult to talk about. No, those are really great things. I think you guys are doing something really great at ABC Life Literacy. If people want to learn more about your organization, are they interested in volunteering or just accessing some of your resources? Can you let our listeners know how they can do that? Absolutely. So for more information about ABC, you can check out our website. It's abclifeliteracy.ca. If you're interested in the Money Matters program in particular, abcmoneymatters.ca,

and you can go and download our resources there and see what we have to offer. And if you're ready to start learning just immediately right away, we have an online learning portal, the ABC Skills Hub at abcskillshub.ca. And there's classes there to help you sort of start thinking about spending plans, saving money, budgeting, borrowing, all of those kinds of things. Well, that's great. Well, thank you for coming on the podcast today, Elizabeth. It was great talking to you, picking your brain on a few things. They're not really subjects we've talked about a lot on the podcast before. So hopefully it'll be helpful for our listeners.

It's so happy to speak with you. And yeah, I hope that this information is useful. Okay. Thanks a lot, Elizabeth. 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.