The Canadian Investor - Is Canada Miscounting Its Population? Plus the Fed, Rising Yields, and Big Tech Capex

Episode Date: August 1, 2026

In this episode of The Canadian Macro Investor Podcast, Simon and Dan break down the latest Fed decision and why the bond market may be starting to challenge Kevin Warsh’s inflation message. They discuss the split reaction across the yield curve, with short-term yields moving differently than longer-term yields, and what that could mean for inflation, recession risk and future rate hikes. They also look at Canada’s population data problem and why undercounting temporary residents could distort unemployment, mortgage delinquency trends and the broader read on the Canadian economy. From there, they dig into big tech earnings, including Microsoft and Meta, and why investors are paying closer attention to AI capex, free cash flow, depreciation, and credit default swaps across the hyperscalers. They also discuss Anthropic, open-weight AI models, data privacy concerns, tariffs, copper demand, and what the AI infrastructure build-out could mean for energy and markets. Tickers discussed: MSFT, META, GOOG, GOOGL, AMZN, NVDA, ORCL, AAPL, SKM   Watch the full video on Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

If you're a DIY investor ready to take control of your portfolio, BMO all-in-one ETFs simplify the process. Whether you're new to investing or looking to streamline your existing holdings, these all-in-one solutions are designed to help you invest smarter. With management fees on popular portfolios now reduced to 0.15%, you get professional diversification at a lower cost. Check out the asset allocation ETFs at BMO ETFs at BMO, investing is simple but don't confuse that with thinking it's easy a stock is not just a ticker

at the end of the day you have to remember that it's a business just my reminder to people who own cyclicals don't be surprised when there's a cycle if there's uncertainty in the markets there's going to be some great opportunities for investors this has to be one of the biggest quarters I've seen from this company in quite some time welcome back the Canadian macro investor podcast, Daniel Foch here from the Canadian real estate investor podcast and Simone Belanger joined from the Canadian investor podcast on which this recording appears on your stream. We're live once a week. Today's Thursday, we're usually going to go on Fridays, but summer, a long weekend, et cetera. I'm going to see if Thursdays people are more,

or this Thursday people are more available. Anyway, what are we talking about today, Simone? I mean, there's a lot of stuff going on. Glad I'm not leveraged. long, one of the one of the one in 10 people in South Korea that's levered long, the cost beat right now. Yeah, the one index that's essentially dominated by two stocks. I think, I haven't looked recently, but just based on memory, I think Samsung and SKINX are like 50% plus of the whole market cap over there. Like, it's pretty crazy, something like that. Yeah. Yeah. So that ended poorly. I mean, maybe a smaller percentage today than they were yesterday. And the day before that, it was like two, was it two back-to-back circuit breaker days?

I don't think we've seen like volatility like that since COVID, right? Yeah, exactly. I mean, there's been like so many like in South Korea that I think too many to count in the last month or so it's actually up to the SkaInix 17%. So it's been super volatile. I think semiconductors in general. But we'll get back to that. We'll talk about quite a few things. So we'll go over population growth that may have happened.

has been potentially undercounted. So statistic Canada coming out with some information there. I know you've been reading on that, so you'll go over that. Some interesting news about Anthropic using some of its clients' data potentially to build competitive products. So something about them looking into developing drugs, which is pretty interesting. Obviously, the FOMC, so what happened with the Fed yesterday? Really interesting.

A big reason I think that the markets have been volatile yesterday today as well. And then really, I think the bond markets are reacting. And, you know, they're almost challenging Kevin Warsh. So we'll look at that a little bit more. And then obviously we'll also talk about big tech, Microsoft and meta. Releasing earnings, Microsoft was up earlier that I checked. You never know in these markets. Because like every time we do one of these streams, somebody mentions in the comments,

like still in Microsoft, still in Microsoft. And then it does. But I guess it's still down. I mean, if you zoom out on the two year, it's like still pretty far down. But I mean, yeah, it was a big jump. Like their earnings were good, I guess, or positive. And then meta dropped. I think I had one of the biggest drops ever.

Yeah, meta is down 9%. And meta has been like in the gutter for a little bit like not doing all that well this year, year today that's down 20%. But down 10% today. Microsoft doing well. So we'll go over that as well. So let's do the population to start with. And then we can shift into maybe.

to maybe the FOMC and then look at big tech and tropic and look a bit more at AI since we've been talking quite a bit about it on this show. Yeah, so on the population side, I mean, CIBC has been beating this drum for a while, to be honest, which is basically that they feel that Canada is not properly reporting population data due to us not knowing whether or not people have exited. now, the person in charge of this sort of department of the government has come out and sort of said, like, we are aware that this is a problem and we have sort of announced our intention to fix it or to do something about it, but, you know, that we haven't really seen any meaningful progress towards

them actually doing that. And I'll pull up some information on that as well as we talk a little bit about it. But this CIBC report, I got to find the report actually. The parliamentary budget officer has also observed this as well, which, and it's kind of, funny, the parliamentary budget officer, I feel like is, I mean, not, not partisan, but definitely not super in agreement of sort of some of the accounting tricks and, you know, CAPX OPEX and some other things. Like, they've definitely called out some pretty significant events and it, that are happening kind of on the finance side of the Canadian government right now. So I found that to be a little bit interesting. But basically the summary of what CIBEC is arguing here is that

the, we don't properly measure how many people are leaving. So if somebody's visa expires in the data, we assume that they've left, right? You give them the benefit of the data. And that is probably not true. There are a lot of overstayers. Like CIBC has been observing this overstayer phenomena. Actually, I'll see if I can find the original overstayer thing report. But basically, I think he said it was like in the millions, right?

Like one point, I think it was like a million, potentially a million people that had overstayed their visas or could be as high as. And so if your population is being reported low, that's your denominator. And that would skew your unemployment numbers up. And this is what they're arguing is actually taking place that basically the government is not intentionally cooking the books, but sort of, I mean, some people might argue that that's the case that they're intentionally cooking the books. But more that they're sort of cooking the books and skewing some data points very much in favor of, you know, positive gains and unemployment. etc. I'll pull up the report as a yeah so the argument being that you know jobs are likely somewhat accurate but then the denominator is not accurate it's being understated right yeah that's essentially what it is okay yeah so I don't know what your thoughts are on that because I know you know

you used to work a lot in like these more institutional grade investor spaces et cetera and like what seems to be the read that that these groups have on on what that looks like I mean it's it's hard to say like at this point like we've seen government data whether we look at jobs data as a whole like there's constant revisions happening so I think it's not I have a hard time thinking it was done maliciously

yeah some people yeah some people might you know push back on that saying that they want to make it look better than it is like at the end of the day there's no election anytime soon so it just seems like the incentives to make it look better or probably

just all not there as well and they said they're going to what They're going to revisit the numbers. Is it in the next month or two, they warn Statistics Canada? So we should have a better idea. And it's something I had read about maybe a year or two ago when they started talking about really tighten up requirements and slowing immigration down, that it was hard to really count the numbers and figure out who was actually leaving when they, you know, they're asked to leave the country, whether it's visas or whatnot, right? so the temporary residence.

Yeah, so the government basically did, like the immigration minister wanted to start tracking exits of temporary residents and they announced this intention. And so this would be part of what's going to end up with the revisions. And their expectation is that this would cause a kind of significant jump in the way that things are reading from employment levels, which, you know, I mean, currently are probably more bullish than bearish because like as it stands, like our unemployment numbers and even employment numbers and even employment levels. level seem to be sort of flatlining, which, you know, you would assume eventually means that they'll roll over. And I talk a lot about like the CBA mortgage delinquencies chart that comes out pretty often. I'll pull this one up because it's one of my favorite charts. But basically, you know, mortgage delinquencies track unemployment very, very reliably. And, you know, Tiff Macklin even said this. Like, I don't know, you know, if you remember when he was kind of

being grilled by Pierre about how many people could withstand a rate increase. And we've sort of learned the answer to that question because we're on the back end of the renewal wall now, it seems like more people than you might expect can withstand a rate increase. So then the next question becomes how many people can withstand a job loss. And that was Tiff's comment in that. He said, you know, the biggest reason for people not being able to pay their mortgage is that they lost their job. And this chart sort of illustrates that as well. So if your unemployment rate starts to roll over, then you would assume your mortgage relinquency rate starts to roll over. And then that's when you stop getting forced selling and excess supply and the housing market could normalize.

If that data point, the unemployment data point, is less reliable, we don't necessarily know if you can use it to forecast whether or not the housing market may actually roll over as a result of delinquencies or even if it will continue to track delinquencies reliably if the denominator is kind of breaking the reliability of that data point. I don't know if that makes sense. Yeah, no, it makes sense. I guess too, the other thing I'd mention is remember that Bank of Canada monetary report that, where it was an article, I don't think it was a monetary report that you had sent me, where I was showing the link between, you know, defaulting on other credit products like credit card. Consumers have a leading agency.

Yeah, exactly, being that leading indicator. So where I kind of push back a little bit on this is like, okay, maybe some household are not managing the rate increase all that well. We're just not seeing it just yet because what was it, right? 25 and 26 are the two biggest years. So if you're thinking the two biggest years, I mean, can someone kind of make it work, even though they can't really afford the payment for a better part of a year until it starts showing up? So if that's the case, then we probably won't have a great idea until most likely Q1, 2027 or first half of 2027 when those consumers that are having really a hard time have no more, they really have no more options, right? They have to sell the home or basically default. Yeah, 100%.

And you can see that playing out in real time in the Equifax data, which I cover on a quarterly basis, but like, you know, consumers are already going to link one on other credit products or if balances are increasing because that's also illustrated in the Bank of Canada paper. So like if you just examine, okay, like if I'm going to go, if I'm in trouble and I'm going to start going to link one on my mortgage in two years, how is that going to play out? Okay, well, first I'm going to lever up all my credit cards and start, you know, being able to afford things, life, you know, inflation, whatever.

and I'm not realizing it maybe as a consumer, but all of that money that I'm that I'm borrowing is is freeing up capital from my, you know, my employment or whatever to pay my mortgage. I'm functionally paying my, you know, servicing other debt with more expensive debt. And, you know, then, okay, I've borrowed, I've maxed out how much I can actually draw from my lines of credit and then my credit cards, et cetera. Now I'm trapped because I can't go get more debt, right? My credit score is probably starting to get impacted. I can't go ask my bank to give me a he lock or whatever to try and maybe.

You can always sprinkle it with some buy now pay later. Yeah. Yeah. Just so let's sprinkle it a little bit. Yeah. Yeah, exactly. And then, okay, so I have all of these factors. And now I am eventually run out.

And maybe I'm assuming that, you know, the economy will get better or whatever. Something in my subconscious is telling me that, you know, I wouldn't be doing this if I didn't think that there was a path out of it, right? or maybe people don't, I'm giving people too much credit. Then all of a sudden, okay, now I can't pay the credit card bill.

I go delinquent on the first thing. They know, probably the most expensive credit product first. And then I go delinquent on the auto loan or the line of credit. And then eventually I go delinquent on. And you can see how quickly that, that rise happens towards the end, right?

The minus, they have like T minus. So starts 36 months prior, kind of slowly ramps up. And this is literally a chart version of that Hemingway quote, right? Oh, how did you go bankrupt?

Well, Slowly and then all at once. Slowly then suddenly, right? Yeah. I wanted to mention that because that came to mind because now if we're looking at that, it could actually be as much as, what, 36 months? Yeah, I guess it takes about two years for somebody to really start using debt maybe incorrectly or irresponsibly to solve financial problems

before they actually end up defaulting on the best credit product that they have, which is the mortgage, right? So we might not know until 2028 then like that. That's a realistic outcome because the renewal wall was the math. Most of it was 2526, right? For those mortgages that were issued in 2020, 2020, those five years low rate fixed mortgages.

So I just thought like it's an interesting thing to keep in mind that I think a lot of people right now are saying, oh, you know, it was just a big deal, especially those are super bullish for the banks. Like, oh, you see like people were making a big deal out of it. well, we actually might not know for sure.

Like, it's not because it's fine halfway through 2026. That'll be fine in a year and a half, two years from now. Like, we might, you know, it might take some times until we see that. Yeah. Yeah. The Bank of Canada did a whole staff working paper on like the mortgage renewal wall as well. And I think they're less worried about it now. Like I do think that we're past the peak, like jump up in pain, right?

Like the moment in time pain. So like last year when you had most of your like really cheap mortgages, renewing at higher rates than they are today, although the bond yield is probably going to be pushing fixed rates a little bit higher over the next little bit. So you could end up getting back into that territory of bigger jumps. But people renewing, you know, from a 2% mortgage to a 4% mortgage, they're going to see a 50% increase in their monthly capital cost. It's like a 20% to 30% increase in their monthly mortgage payment that, you know, like that's not as bad as what we had original models of a renewal

or 50, 60%. Yeah. And so, you know, the bank can is, yeah, the bank of Canada is kind of softened that blow. But the thing that they observe in that consumer's path of mortgage delinquency thing is also that,

I mean, the blow isn't instant, right? Like, it's a shot clock. And maybe it resets or it speeds up the shot clock because now they're spending 20% more on, on their mortgage payment.

And that's 20% that can't go to groceries or things, you know, and then they have to start using other debt to square up. And so a consumer or a cash flow negative real estate investor or whatever, they don't, it doesn't crush them right at once. It's month by month that they, you know, they cannot figure out how to shore up that extra couple hundred dollars or thousand dollars a month. Eventually they run out. And that to me is, you know, when that two year or 36 month process that the Bank of Canada observes in that paper actually starts is when the real hits. Yeah. And so. No, that's a good

point plus you have zero flexibility, right? If you're in that situation and you get hit with a big bill, big repair bill, big house maintenance bill, whatever you name it, these are probably none of the people that have a strong emergency fund. So I think that's worth getting there to you keeping in mind, too. Yeah. And I also think that, you know, the exit liquidity is an issue for the most at-risk borrowers. So like if you go to the Equifax data, I'll see if I can find the Equifax report. They're very hidden, but I think have them downloaded somewhere. But basically, you know, they have a mortgage vintage chart that shows mortgages. So they have mortgage delinquencies by vintage and mortgage delinquencies by size.

And the mortgage, the mortgages taken in 21, 22, 23 are going delinquent faster than any mortgages ever, you know. So any of those buyers that took those brand new mortgages in 21, 22, they paid peak pricing. So they don't have equity, you know, if they're going to have, if they're going to try and race for the exits to say, okay, yeah, before I make the irresponsible path outlined in consumers' path to mortgage delinquency by the Bank of Canada, I'm just going to sell. Well, I don't have that option, right? Am I going to absorb a $200,000 loss or pay the bank out equity that I don't have to get out of this?

Or am I just going to, you know, white knuckle it through and say a prayer and hope that, you know, the losses that I accrue over that period of time aren't as bad. And most people are choosing the, you know, the lose money slowly path, then the lose money fast path. The thousand cuts path versus, yeah, the big wound. But no, that's a good overview. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience too, until we switched to the new EQBank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance.

You also get free everyday transactions like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up quick and fully online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at EQBank.ca slash business. There is an old saying in investing. It's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom.

They're the ones who spend the most time in the market. I've been a quest trade user for over five years, and the reason I stick with them is that they remove the friction of regular investing, With no commissions on stock and ETF trades, you don't have to wait until you have thousands of dollars saved up to make a move. You can contribute small amounts regularly and keep your portfolio growing consistently, removing the stress of trying to time the market. And they keep making it easier to build a well-rounded portfolio. Soon, you'll be able to trade precious metals through Questrade, giving you even more ways to diversify. Questrade makes the whole process seamless, allow you. you to focus on what really matters your investment strategy, not trying to avoid fees.

Ready to invest, head over to questray.com, open and fund your account with code TCI and receive $50. Conditions apply. We've been talking about doing a trip to Halifax, and honestly, it feels like the perfect kind of Canadian summer getaway, walks along the waterfront, taking our daughter to the public gardens, finding a few good local spots to eat, and make a few good local spots to eat, and be making our way out to Peggy's Cove for one of those classic East Coast days. And while we're away doing that, our home in Ottawa would just be sitting empty. Summer is a great time for people to visit the city.

Ottawa gets a reputation for being a little boring, but between the hot air balloon festival, patios in neighborhoods like the Glebe or Westboro, family-friendly museums, and the nature to explore just across the river in Gatno Park, there's a lot more going on than people might Link. Listing our home on Airbnb could let another family experience our beautiful city while we're away and bring in some extra income to put towards our own trip. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Do you want to move on to the FOMC here? Yeah. What came out? Yeah. So it was a really interesting meeting. I encourage anyone to hasn't watched it who's interesting. kind of stuff to watch a meeting. Really interesting because Kevin Warsh is, he's pretty charismatic. I'll give that to him.

He's definitely a really good speaker, good at conveying his points. And they obviously people probably know they left rate unchanged, which was the expected outcome. I think it was a 30% chance that there be a rate cut. But in the end, the market was pricing mostly unchanged. A vote was 9 to 3. Warsh and Powell actually supported the whole.

and there were three descendants and the markets are still pricing a rate hike. Have you looked, I can share here. I share it, but yeah, no, I did look at that when I was reviewing the comments. And yeah, it's interesting. I mean, the bond yield, like the bond yield as well. It did blow off pretty significantly,

like the, you know, but it ran up like crazy yesterday and then it dropped pretty significantly today, I believe. I don't know where it's settled because I'd just been on the road most of the day, but it does seem like the, market wants to believe that the whole macro story is still upside rather than downside and rates. Yeah, exactly. So we're still, it's interesting because we talked about the prediction markets or polymarket or cal sheet that we're pricing in like more of a 50-50 chance the last

time we'd look, maybe a couple weeks ago. Now it's not quite as high as the CME Fed Watch tool, which is pricing in a 100% probability still by December 9th that there is going to be. be at least one rate hike. So 75% chance for one, 25% chance for two. Where the, just looking at polymarket, it's around 66% chance. So it's still getting a bit closer because before it was basically 100% CME and then you had 50% polymarket. So the divergence pretty interesting. And then really what bond yields, I find this one the most fascinating. So you had bond yield. So the two year actually dropped. So I'm trying to show here around the time of the meeting.

So yesterday. So it's around here. So you can tell the two-year drop. So essentially the bond market is saying, okay, maybe rates will stay a bit lower. So the Fed's fund rate might actually stay lower. There might not be as high of a chance of an increase, at least in the short term, because typically the two-year will be seen a little bit as a precursor of what will happen with the Fed's fund rate. And then when you start looking at the 10-year, so you see the 10-year reacted quite differently here.

So the 10 years are just showing my cursor right around the time of the FOMC press conference. So it actually jumped. It's up about two, three basis point from that point, I guess depending on when you're looking at. But when you start looking at the 30-year, the 30-year is the one with the biggest increase. So what's happening is you're seeing a steepening of the curve where the short hand is the short end of the is much lower and then as you get onto the duration it's much higher so you can make the case that markets are starting to I don't know if it's calling the bluff of Kevin Warsh I don't know how you're interpreting it I think I don't know if I don't know if I

wouldn't give it like confidence that it's a call but more that they're they're starting to entertain the possibility that it's wrong right yeah and yeah and and and I think I mean everybody's timid man because like we are really in uncharted waters like you know it's funny we always use the word unprecedented with you know the pandemic but like the you know who would have ever thought that that this is like what the outcome thereafter i mean maybe the guys from the fourth turning because they talked a lot about like destabilization as a result of things like that and pretty much called every single line item in the in the rollout of all of these crazy things that we've seen in the last 10 years but you know to go to like trade war geopold two active war

and that, you know, and then the AI CapEx. I mean, there's a lot of, there's too many variables in the equation for anybody to really get this call right directionally, I think, which is, you know, which is why it's so fun to talk about. Like, you know, it's just guesswork really that we're, that we're doing here. Yeah. Yeah. And what's the most interesting is, I don't know if you heard this soundbite from the press conference, but he addressed what we actually talked about on on this stream. I can't remember when, but then maybe the last three or four streams where it starts feeling where the Fed, they won't say it, but there is like maybe a different inflation target, a higher inflation target, because ultimately the only way out for the U.S. government is

to inflate the debt away. And they might not explicitly say it that it's maybe three, three and a half, four percent, whatever it is. He actually made a point to say, I can't remember the exact one, said, look, there's no soft or implicit target. The target is 2% full stop. And I think this is where now you start looking at 2, 10, and 30 year bond yields and you start, you know, getting to that mindset of like, okay, maybe the bond market is calling his bluff because you're saying your target is 2%. You're leaving the Fed's fund rate unchanged. You're not reducing your balance sheet anymore so that they're definitely not doing any quantity tightening. I actually saw a press release saying that they're essentially just rolling over whatever comes due in terms of their

treasury holdings. So they're not, they're doing it for ample liquidity in the system. So if you were really serious about inflation, like why are you not using some of the tools you have? And granted, you can make an argument that they can't do much about the price of oil going up that will feed into inflation. That's fine. But it does give you the impression. that the market is trying to basically say, you know what, show us that you're actually willing to do it. But I think the Fed is still stuck between a rock and a hard place because at the end of the day, they start raising rates, financing costs go up for the U.S. government because they're financing so much from those treasury bills.

Yeah. And I think the other issue is that he's kind of trying to battle the same thing that we've debated a couple of times here, which is what is the actual outcome? We don't know whether or not the U.S. consumer can absorb high oil rates. And I don't know if I put these up last time on the last time we discussed this, but China has a big buy coming up to replenish their strategic petroleum reserves. The U.S. the same thing. Basically, they're almost at that kind of like break the level where they would have to start buying

rather than dumping oil into the market. So the question becomes, okay, like gas prices are already pretty reflective of the, you know, of the sort of market, but further up the supply, or the geopolitics, but further up the supply chain, if producers have to also continue doing that and then prices rise even further, how much can consumers really absorb? And I think that they're really doing the guesswork of, I mean, I think that, you know, it's a pretty binary outcome. Like, I don't think there is a middle of the road outcome. The outcome is either consumers can find a way to absorb these costs and it and it becomes cost push inflation very quickly.

And that's an inflationary situation that the central banks will unfortunately just have to play with other areas of inflation using monetary policy. So maybe trying to slow down this AI CAPEX insanity or, you know, again, debt becomes more expensive so that they're cooling the economy and they're not playing with that oil curve at all or the impact of oil or cost push inflation, but they're exacerbating the economic pain and slowing things elsewhere, or door number two is kind of the bare case, and this is sort of the one that I think is,

I mean, not that inflation or stagflation is a bull case at all. I think neither path is good, unfortunately. But, you know, the case that consumers can't absorb these costs at all, which is, I don't know, based on the consumer data that I'm seeing, I mean, you're starting, you know, I think groceries, you know, et cetera, like airfare is another one that, to me, like, stands out because that was instantly priced into airline. it and people are spending immediately less on those things. But if your consumer starts spending

less, then you have demand destruction and then the more likely path is actually the, you know, kind of recession, right? And then that would give us, okay, rates are lower. I think they're just probably just going to hold until something breaks in either direction to tell you the truth, which, you know, most central banks tend to be reactionary. Canada, especially because we sort of have the currency protection, et cetera, which I think we mentioned last episode that they observed in the monetary policy report is a risk that they're paying attention to. But I feel like it's just like it's a stalemate right now until they have some data. And so it's, it's fun because you can watch the data of like, okay, this is, this is, this feels like it's steering me more down the

recession path. Okay, this one feels like it's steering me more down the stagflation path. Yeah. No, and the other thing I wanted to mention is a US dollar definitely went down following the FMAC. MC you can see it. If you're watching, watching the live here, you can definitely see the drop. And the Canadian dollar did strengthen a little bit compared to the U.S. dollar. But I think you're right. I mean, I think we're seeing at some point the consumer will be tapped out. Airlines is a great, great example where they started adding those fuel surcharges when that happened. I mean, we talked about Walmart some weeks back, but you're hearing it. And that's something I do with the Canadian investor podcast,

just listening to earnings calls. You're seeing more and more businesses that are essentially saying like, look, we just cannot increase prices as much as we'd like. And one of the easiest example I keep giving is if you start looking at Pepsi that homes Frito-Lays division, so Lays chips, I'm not a big eater of chips. I don't know if you are then, but when sometimes Yeah, yeah, like, I mean, I try to be healthy, but we'll buy chips once in a while. And I kid you not, I have not considered buying brand name chips in a very long time because the price is ridiculous. It's twice the price as the store brand and I can't really tell the difference. And I think FritoA is as or Pepsi has essentially said they have to discount some of their

products because they're essentially like not selling because consumers are starting when they have, you know, when you're starting to pinch for money, you're going to look for a cheaper option. you're going to look for a substitute. And when you can get pretty much the exact same thing at half the price, I mean, like, at the end of the day, like, I don't really care whether it's Lays or the no-name brand or the Metro brand, whichever one, it stays the exact same. So I'm going to pay half of it and keep the rest and spend it elsewhere.

Yeah. Yeah, I guess so the question becomes like what indicators, what industries do you pay the most attention to to determine if that's the direction that we're heading? And I guess like groceries is an interesting one because usually that's one of the lot. I mean, they're pretty inelastic, right? Like, yeah, I don't, I can't eat less. Maybe Ozempic, like, you know, and actually Ron Butler gave me an interesting take on that yesterday. I mean, like they did mention like OZempic, you know, there was a New York Times thing. It could,

it could save airlines like $580 million a year in fuel costs or something. But apparently like grocers are actually in, you know, your Pepsi, et cetera, are actually like concerned that this could be quantifiable decrease in demand. But, you know, Like, food is usually one of the last things, right? And we've already seen Walmart and et cetera. So it is interesting to see the distribution of where people are scaling back some of those more discretionary things. It's the most interesting with the large retailers I find because they'll have big store brands. So they can usually tell you whether the store brands are actually picking up the slack or not.

So I think Law is a good example with their no-name president choice. brands. Walmart has their like what value, true value? Great value. It's so funny. Like something's mentioning this in the comments right now. It's Walmart chips for the win. Um, you know, it's true though, man. Like I'm obsessed with great value, dude. Like there's like there's some, some goods that they, is like completely irrelevant to the conversation. But, you know, they've, uh, their pickled jalapinos are like better than any of the other pickled alpinos on the market. And, uh, and their burgers, dude, randomly are like actually like, decent. If you're not going to, if you're not going to like shell out the big bucks for like,

you know, high quality burgers, if you're just buying kind of like a crappier burger, their burgers are pretty good too. So go nuts, HFX. I agree with you. Like great about, I'm big, great value change guy. Yeah, exactly. I think I don't go to Walmart as often. I go to their discount grocers, but same kind of thing. And I'll probably be going this weekend because we'll have some people out sitting for a dog here while we go and visit some family in the U.S. So we'll be checking out some of those U.S. goods that are not available in Canada. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees

while paying little to no interest on the cash you need for day-to-day operations. That was our experience too, until we switched to the new EQBank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance. You also get free everyday transactions like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey

transfers. And to sign up, quick and fully online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business, and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at eCubank.ca slash business. There is an old saying in investing. It's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom.

They're the ones who spend the most time in the market. I've been a quest trade user for over five years, and the reason I stick with them is that they remove the friction of regular investing. With no commissions on stock and ETF trades, you don't have to wait until you have thousands of dollars saved up to make a move. You can contribute small amounts regularly and keep your portfolio growing consistently, removing the stress of trying to time the market. And they keep making it easier to build a well-rounded portfolio. Soon, you'll be able to trade precious metals through Questrade,

giving you even more ways to diversify. Questrade makes the whole process seamless, allow you to focus on what really matters your investment strategy, not trying to avoid fees. Ready to invest, head over to questray.com, open and fund your account with code TCI and receive $50. Conditions apply. We've been talking about doing a trip to Halifax, and honestly, it feels like the perfect kind of Canadian summer getaway, walks along the waterfront, taking our daughter to the public gardens, finding a few good local spots to eat,

and maybe making our way out to Peggy's Cove for one of those classic East Coast days. we're away doing that, our home in Ottawa would just be sitting empty. Summer is a great time for people to visit this city. Ottawa gets a reputation for being a little boring, but between the hot air balloon festival, patios in neighborhoods like the Glebe or Westboro, family-friendly museums, and the nature to explore just across the river in Gatno Park, there's a lot more going on than people might think. Listing our home on Airbnb could let another family experience our beautiful city while we're away and bring in some extra income to put towards our own trip. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host.

You want to move on to big tech a little bit? People are loving the great value. So it's going to be at Walmart commercial this podcast. Yeah, we're trying to get that stock back up. We're giving it a meaningful effort. Yeah, let's talk about big tech. I mean, like I know, I think it's, I don't remember who. Oh, it's Stuart Sulfor, which, by the way,

Stuart, I apologize. I was trying to respond to your comment and I accidentally gave you a time out on YouTube. I think it's should be, you should be a... The buttons are like so close together, man. This is like, this is the first problem I've run into with re-stream so far. So the I just, I hit the wrong button, but you should be able to comment again within five

minutes, apparently, which I think you were five minutes ago, so hopefully you're still here. But yeah, the oh yeah, he is. He, you know, the Microsoft thing. And so, and then also I think it was like Microsoft, Meta, and Braden and I were even talking about this on Twitter earlier. It's like, why are these companies even playing in the model space as that is becoming increasingly

commoditized? What's happening here? I don't, like, I'm, you know, as the real estate, resident real estate guy. Yeah, no, I mean, it's been really interesting. So Microsoft and Meta reported yesterday. We had Google last week that we talked about. And if you haven't caught the podcast this morning for the Canadian investor, Dan and I did Dan and I did a deeper dive on what's going on with Google.

and some of the reason why it's on the drop. But essentially really good quarter from Microsoft revenues or up big, 18% for a company as big as Microsoft. Cloud up 27% and Azure up 43%. When it really, the focus is starting to be really CAPEX, so capital expenditure. So they're saying for this calendar year, it's supposed to be $175 billion, just a bit weird with Microsoft just because their fiscal year just ended. So they're starting now fiscal year 2027, but they did talk about. about calendar year for CAPEX, so we'll keep it at that. If we remember, Google's around $200 billion, the range they were giving and they keep increasing

it. They expect CAPEX to be higher next year as well. And what's really interesting is the chart I'm showing here is essentially it's free cash flow, but I really, I like to show it like this because sometimes free cash flow gets, you know, oversimplified. So you have cash from operating activities and then the downward one is the capital. expenditure, so CAP-X. So when you just subtract cash from operating activities or you subtract capital expenditure from cash from operating activities, you get free cash flow. And this

is just a really good visual because you can see, okay, Microsoft's actually doing pretty well. They're still free cashful positive. So what it means is just they're generating enough cash to pay for those massive investments that they're doing. Contrised that with meta, it's a pretty good contrast that you start seeing with meta here is that meta, you can probably see the writing on the wall that free cash flow has gone to a crawl, basically. So I wouldn't be surprised that next quarter falls negative, just like Google. And this is what I think the market is really starting to focus on is like, okay, you're spending a whole lot of money. And, you know, we kind of get it to some extent, although every single company so far, whether Google, Microsoft meta, has dodged questions

on return on investments here. They've completely dodged a question. There was one analyst that I'm pretty sure was the one on the Google call for the Microsoft call. I kind of recalled the name. I think it was a Brian something. And he asked, like, do you have like concrete numbers for return on invested capital? And they just couldn't give him an answer. I think it was on the Microsoft calls. So it is, something, you know, it is something of no, because they're investing all that money and you're still trying to figure out whether it's actually going to be a good investment or not. And rightfully so, I mean, when you're investing $175 billion a year, $200 billion a year, you'd want that capital to, you know, to provide some return on investment. And it really comes down to two

things either they don't know or either they have a range but it's not great and they don't want to share it, which both things are not really great when you're an investor in trying to wrap your head around all this spending. And then if we get back to meta to compare it to Microsoft, because Microsoft is up big on the day, I think 15% the last I check and meta is down 10% or so. What's really interesting is that Microsoft's actually like, do. doing pretty well and again they're able to fund it. Where meta, things are slowing down a little bit. They're still increasing in terms of revenue, but there's a bit of the deceleration.

And one of the big thing is they don't seem to have a plan on how they'll monetize all the compute that they have. So Zuckerberg seems to be like not sure whether they should be selling a little bit of that capacity, make some money right now, or keep that capacity so they can actually build their own AI development over at their own tools. and they're also kind of building their own model, but why are they also building their models? So that comes into question as well.

Yeah. And I think the easy answer on the models, like from a logic perspective, is they like these businesses, as they want to eventually have like the best and most reliable model, they would rely on user inputs and inference data. So like to make their models better. But they shouldn't be developing their own models from scratch,

now that Kimmy K3 has come out and it's fully open weight and you know that you should build on that because it's about as good as you know the frontier model is like Opus 5 and I'm sure that they will like I think we're just early in the cycle to probably have training on those weights now if it's comparable to it's so fully open weight so you can go and basically download you know the ability to create that model you need a massive amount I think you need 500k worth of of Blackwells to run it and they would be using millions of dollars worth to run it. it harder. But so now let's say they just got a head start on actually building the base of comparable models to GPT 5.6 and Opus 5 and Fable and whatever because of Kimmy. Then the question becomes,

okay, well, if we hand this model to our users, it's going to cost us the same to run it as our own in-house model anyway. And now we get these inputs. What are users asking it for and their satisfaction levels with the outputs? We can start, you know, so they did kind of just jump to step 50 because like meta especially. Mew Spark was good and it's really good for Agentic. Mues MetaMewSpark 1.1. And I always just use the real estate industry because we build the AI tools for the real estate industry with the homies AI products. And it's good at that. It actually is pretty fairly affordable, but we're not sophisticated, right? Like it's, you know, write an offer, move paperwork from A to B, blah, blah, whatever. But what are consumers, you know, where meta really stands out? And this is

where Google stands out to me as well as potential winners in that space. And we were talking about this via text as well, like with iOS, like the harness, right? It's, it's they, you know, if they can manipulate their, their user experience for Google and, and meta platforms into a proper harness that is feeding inputs to these AIs, then they could actually race ahead of the Anthropics and chat GPs of the world with the right inputs. The challenge, I think, that they would have to really do an excellent job at that is there not AI companies to start. And so they might not know how to use those inputs as well as, you know, a Dario or Sam Altman or Elon Musk might, I don't know you thought. I mean, and Elon kind of has the same thing in SpaceX AI with X, you know,

people using GROC in chat threads, which was a brilliant way to integrate a model, even though it wasn't really all that good to start. It's getting a lot better. And their cursor acquisition seems to be paying off pretty quickly. I think that's their play, right, is pushing more for inference and use in hopes that that actually makes the models better, more accurate, more reliable over time, but like it's a bit of a role that dies, I think. Yeah. Yeah. Yeah. Yeah. I mean, it also makes Sappel look pretty good, to be honest, for just taking a bit more of a wait-and-see approach and not spending gobs of money, even though, you know, Siri tends to be a laughing stuff when it comes to how good it is. So I think that that to me is always, is always an

interesting take just to see the different approaches. And one other thing, so that I wanted to share in terms of the earnings is this over here. I know you're aware of this. So depreciation and amortization. So the depreciation schedule for these chips GPUs is probably, I think it's six years that they have to depreciate them. And there is a couple of things that could impact earnings going forward. First of all, as they're spending more on CAPEX for the buildout, the depreciation is going to keep increasing. It's going to reduce earnings going forward. So this. will pull the earnings downwards, of course. It's not necessarily an issue if revenues are growing faster than that and earnings end up

still growing at a faster clip. But I think it's worth noting. And especially if you start seeing the useful life of these chips being three to four years instead of six years. What that ends up doing is that the Cappex cycle is probably going to have to basically continue to per like in the foreseeable future i wasn't going to say i was going to say indefinitely but yeah that that's if mackleham taught us the lesson on that one yeah exactly yeah forever but that is something to keep in mind is that depreciation that is going to hit and i mean the chart i'm showing is pretty pretty telling right like it's for meta google and microsoft it just essentially it's a straight lineup

so it is increasing it will continue increasing whether it's an issue or not again it really really depends how they monetize all that investment and how quickly they have to replace the equipment. That will be the other big question. But these are all kind of the major questions happening right now. And I think why the market is so jittery when they're seeing these massive capex numbers. And I know the other thing we were talking about this week was the credit default swap. So did you have that? You have some charts for that? Or I do have some. Yeah, I do have the ones that I sent you in the chat. Let me. Yeah, the Bloomberg. Before we jump over to that, because there was a question in the threads here from Mr. What to Do Today that says, you know, asked if we were talking

about tariffs. And there is a couple of developments on the tariff stuff like the bridge deal. Yeah. You know, the wildfire beef. And the wildfire tariffs. What's that? Let's get some wildfire tariffs. Yeah. But, you know, I think it is worth noting because we're kind of back to this. Like it did go away. It was kind of status quo for a little bit. And I'm of the opinion that like it will stay status quo on a technical basis, probably until the midterms at which point I expect it to probably get, you know, like they start to lose control and how much they can really actually use that they being the U.S. administration, lose a little bit of control and how much they can actually use these things. But I think that the threats like in Trump, you know, when Trump goes on one of his big Twitter rampages on this stuff, those are real. The market does react to them. It prices them in.

You do see businesses start to think about making changes. And there was some articles that came out that a lot of businesses have thought about moving to the U.S. and stuff like that. And I think that those things matter to the conversation. And so I'm curious to get your thoughts. Do you think that it's all just kind of political theater and not like and functionally irrelevant? Or is this actually like, you know, I don't know if it's a real risk long term, but I think that it's a short-term risk and just that it introduces more turbulence

to the market and businesses do respond. Even if they, even if like, you know, nobody's necessarily taking it seriously, but they still kind of do adapt their business decisions as if like, oh, one, or makes you like look at your business pro forma or whatever you call it in your industry and say, would we actually be able to survive that?

And if not, let's maybe take the necessary steps to do so, if that means moving some, operations to the states or whatever, you know, in case mercantilism becomes a long-term theme. Yeah, yeah, I think it's hard to not think businesses are not taking notice. I think, was it the business consumer or the business survey that the most recent monetary report, they had some information on that. I think it had improved a little bit, if I remember correctly, right?

Am I wrong on that? Yeah, yeah, a little bit. Yeah, and I would say like I think a lot of businesses seem to be behaving as if, like they're sort of called they were calling the bluff but like that could have been because it went away for a little bit and Trump was very focused on Iran and and we kind of stopped doing you know playing with the light switch of tariffs against Canada at least specifically and now we're kind of switching it on and off again and like regardless of whether or not these things end up happening you still as a business have to adapt right like you know we saw a huge volatility in the GDP curve in Canada as a

result of this where businesses were like oh well I got to shore up a bunch of or I have to take in a bunch of inventory and then you see a huge boost in GDP. And then, you know, now, now we have sitting inventory and now you see a big drop in GDP. Like, like most of your massive jumps or decreases in GDP last year in 2025, we saw, I think it was Q1 was up, Q2 was down, Q3 was up, Q4 was down. I mean, that's not a normal economic trajectory, right? And so that happened probably like as a result of businesses actually doing these necessary things to adapt to And so I think that this stuff is more relevant than we want to give it credit for. Even if it stays status quo, that's my kind of, yeah, I don't know your thought.

But we did see last year a lot of businesses trying to front run it. I think in the U.S., you saw that a whole lot with businesses trying to make buying purchases before tariffs actually hit. So definitely I think it has an impact. But at the end of the day, I think maybe as this goes on, the impact lessens a little bit. I think businesses may also have contingency plans now in place where before this all started, before Liberation Day, that was not the case where now they're trying to have different probably suppliers lined up depending on what happens. And so that's the way I kind of see it. I think the economy in general, if you're looking, not even just looking back at Liberation Day, but essentially since COVID, I think businesses in general have learned that it's not. just in time, right? Manufacturing, for example, where lowest price is always the one thing you look at.

Resiliency of your supply chain is extremely important. And I think what we're seeing with tariffs, I think it's just putting that to the forefront again. Like, tariffs is just another variable where it's making sure that your supply chains are resilient, but for a different reason, not that you wouldn't be able to get things. If there's a tariffs slapped on, you just need to be able to adapt. So I think that's probably what's happening with businesses. And yeah, they'll have some of them, I'm sure,

are probably trying to write out the next two years to see who comes in power and if the stance in the U.S. kind of changes. Because I don't feel like even if the Democrats take power, I don't think this stance will necessarily change all that much.

It may change towards Canada a little bit. That's what that's, yeah. Yeah. But yeah, you do like swifter towards Canada. Yeah. Because we've had it,

like we have a calm. Like, Yeah, it was a little bit less aggressive, but like we do have a comp of Trump starting trade war with China. And Biden did not get rid of those because why would he? Like, you know, somebody else had already owned the reputational damage of the issue. And it's still actually a long-term strategic move for them. So I agree. And I think that this is what the market is kind of saying is, yeah, maybe mercantilism,

I think that's the right term for this kind of type of economics, is maybe that's actually a, like it seems like Americans. kind of are behind this. And so what would our, what would our businesses and our market look like if that was, you know, if we're guessing that that was how things would kind of stay permanently? Yeah, I really don't know. I mean, I think it's easier to sell to Americans that, you know, it's harder to sell that Canada's a big bad Canada versus selling, you know, we have to confront China. I think that's much easier to sell because even though, sure, there might be some products that are produced in Canada that could be produced in the U.S. and on shoring and all that stuff. At the end of the

day, the Americans and, you know, the Rust Belt, it didn't really get affected by Canadians taking their job. It got affected by Chinese worker, Chinese companies or companies moving to China to produce these good. That's what affected them. So I think it's going to be interesting. I feel like a lot of companies are probably, at least in Canada and Mexico, are probably doing a wait and see approach to see that, to see if there's going to be a softening stance against, you know, the closer trading partner. Because at the end of the day, I don't think the Trump administration is stupid either. I think they just probably want a better deal, but they also realize that both Canada, Mexico are extremely important from a strategic standpoint to kind of create that block to, you know, fanned off at China. And then Europe, it's more like, we'll kind of wait and see for Europe.

I also think the idea that you can onshore like most of those industries and jobs without like a huge capex in the robotic space or basically like a massive inflow of entry level or like unskilled labor that's willing to work. You need a cheaper labor pool basically in Canada. I mean an example on that or like even the UK or much of Europe like how much political instability comes as that. And you sort of have like Trump saying, okay, well, less immigration or get rid of illegal immigration, which is sort of that, you know, that workforce and also onshoreing all of these things. It's like, well, I think businesses are realizing like, oh, yeah, well, let's try that, but it doesn't, that the economics of that don't make any sense. Okay. So now, now what? And so

it is a little, and you know, if the Democrats win, which, you know, I mean, I think that the, like, they have a lot of things to figure out to, in order to do that. But if they did, would they, would they keep the mercantilism theme and also be comfortable with immigration? And now you get that kind of that, it makes it potentially possible to do this. Like immigration, you know, that you get the workforce and you get the policy. Maybe. But I don't like so far out that it doesn't really even seem like a relevant part of the conversation yet. So I agree.

I think like Mexico, especially Canada a little bit, obviously from energy, et cetera, cheaper dollar, blah, blah, blah. But in certain services as well. Like I think a lot of Canadian tech and other service companies do have offices. culturally similar, same language, etc. Mexico really is like the closest affordable labor pool for U.S. businesses to be able to produce remotely competitive with China and still not even close, right? And just the amount of strategic resources available in both countries, right? So Mexico has a lot of silver mines, Canada, obviously oil, but also other critical minerals.

I mean, yeah, like somebody mentioned it here in the, I was actually Stuart Sulfur, who got his band lifted, it appears, which is great. We talked to YouTube and we got it lifted. Yeah, we pulled some strings. But he mentioned if, you know, if AI is real long term, that, you know, he said, which is probably, which it probably is after some BS. I kind of agree with this thesis.

He's like copper needs to triple in price. I don't like, I wouldn't know the actual upside call that I would make, but I, I totally agree. I think copper is one of the cleanest plays when you think about AI, like, you know, the infrastructure build out, but also, I mean, it has exposure to the electrification.

movement that we're seeing in the world right now. So electric cars and solar and all of these things. So I think like that's a really, really easy clean picks and shovels play on both industries. We were going to jump over to the CDS is. How much time do you got? Because I'm pretty free today. Yeah, we can do another 10, 15 minutes. I might need to go to the washroom quick, but that's okay. That's all right. I can go on a big, big rant. Well, I just want to just kind of post one thing before you go just to show that regarding the copper comment. Oh, yeah. So this is a really good chart. So what I'm sharing, if you're listening to this, to audio,

it's a chart showing U.S. versus China total electricity generation. And basically, you saw where they were almost pretty much even in 2010. And then you just saw China like go straight up hockey stick almost, right? Like right up into the right that the electricity in China. Now it's more like I think it's two and a half X what the U.S. is generating. So just to go to his point that if you want to increase that electricity generation is just not, it's not only building power plants, whether it's nuclear gas, whether it's other types of renewable energy. It's also building out the grid, right? And copper is required from that.

So I totally agree that if you want AI to really keep growing, you need the electrical infrastructure to grow. And I thought that chart was just a really good way to explore that. Yeah, I completely agree. Yeah, if you need to go pee, I'll do my rant on the anthropic kind of jumping into the drug space, which I sent you over. And I think we mentioned at the beginning and didn't really dive in. I think I derailed the conversation, like the question that you asked me on that. But basically, so this news came out. I'm going to pull up the proper thing here. Give me a sec. Where basically, Anthropic is kind of getting into the drug development space. And I thought this was kind of interesting to just see, like there was some very interesting commentary on it. on X from people who are more qualified than me to talk in this space, but I try and observe their viewpoint. So I think Shamath had a couple of comments on it. And basically, this sort of evolves as like a derivative of those companies using Claude and ChatGPT, like OpenAI. And I'm going to try and find his comments because like he summarizes it well. And he references back to

that like rant that the guy from Palantir went on about how these, AI companies are actually, you know, I mean, like, functionally, nobody really hides the fact that they're probably, like, they're basically like plagiarism engines, right? And it's kind of, it's funny from a, you know, a moral, whatever, you know, the moral dilemma question when you get Anthropic who's talking about how they want US models and they're upset that Kimmy just killed the fable down to, to create their model. It's like, well, you distilled the internet and all of this IP of other businesses down to get your, model, why are, why should people, you know, why should we be concerned that other businesses are doing the exact same thing that you did? Yeah. And so you, you know, you basically have this, you're starting to see it play out. And you and like the easiest way to look at this is they're just taking the highest bounty, you know, bounty being like what industries are most lucrative for us to start actually replacing. And they're moving down. So, you know, you saw a while ago, like open AI, I don't let me see if I can find the post, but open AI hired a bunch of like old Goldman Sachs,

juniors, right, to start, I got to find it here, but they basically, you know, they hired a bunch of like junior analysts from Goldman Sachs. So they're like, okay, well, we're going to attack investment banking because that's obviously lucrative place for us to deploy AI. So they're starting with like the most expensive industries. And then what's the next most expensive industry after investment banking where you would deploy AI? It's freaking drugs, man. It's healthcare. And arguably even more upside as the models get better at doing this. Well, even Apple not, was it a couple weeks ago, said it was suing open AI for stealing trade secrets. So you're seeing that more and more.

Yeah. Yeah. And I think, you know, as it circles back very poetically to the inference conversation that we're having earlier, which is, you know, as these model company, like, you know, this is why meta and Google, like are developing their own models. Because if they're using Claude or chat GPT, they're not. the ones being able to gather the inference at the same level as those models. And that's the real value as they can start kind of encroaching on other industries from the intelligence that they've functionally. I don't want to say stolen because people willingly hand the information over. But again, they're not, I'm sure they have a long disclaimer saying that they can probably do

this kind of stuff. But they're getting into, I think, kind of tougher waters. Because if companies start seeing this. Like if I, you know, if I'm the CEO of a large company and I see this kind of stuff that's starting to happen, I'm starting to get some pretty strong incentives to not use these entropic open AI and just use these open weight model, I think they're called. So these open weight models and just build out my own infrastructure in-house. Sure, it's going to be a bit more of an upfront investment. But, you know, long term, it's probably the most, efficient thing to do and safest thing to do. So you have it all in-house. I can really see companies starting to shift and do that. Plus, they can really use those open weight model to

really tweak it to really what they need within their business. So that's the other advantage. Yeah. So I would say the like again, the easiest comp that I have is just the industry that I'm in and that I fortunately build AI tools for that I can kind of give some examples. But there's there's a couple of like of layers to that. So there's, there's what you usually just described, which is like, okay, let's take possession of the infrastructure, which is a, is not easy. And, you know, this, you know, you need people who are experienced in the space. You need computer scientists, et cetera. Or there's the, you know, the idea that you start to see the regulatory environment involved. So like you mentioned, their end user license agreements do say that they're

allowed to do this. So you agree to do this when you're at work and you fire up your clod and, you know, punch in a bunch of data from your work to ask it a question. And now it has that data. You can, both chat GPT and Anthropic check a box that just says, I do not give you permission to train on my data. And industries who are concerned about this stuff, and rightly so as a result of some of the things that we're seeing, need to be having that the, you know, be considered. Like my industry is a good example. Okay. So real estate professionals, we interact with client data every single day. And legally, I'm not supposed to put MLS data into a model. I'm not supposed to put client contracts into a model, lease applications, you know, financing applications,

all of your, you know, T4, whatever, you know, payment, whatever that you would use to apply for a lease or for a mortgage, you know, client contact information, et cetera. I am violating the act that governs my industry by doing that, by using AI, a personal AI account to do that. Yet 95 to 99% of the industry is doing it. So why can I go ask Claude for a home evaluation to, today. I'm just using my industry as an example because it's easy. And I think a lot of people understand it too. Why can I go ask Claude for a home evaluation? And it has up-to-date comps, up-to-the-minute comps, right? Like all of the data that it shouldn't have because of the real estate board. Well, because people are using it improperly. And the cat is so far out of

the bag that these industries, like the screenshot that I had up before was a white paper that we wrote to present to some real estate boards who are asking us about this stuff. How do you build retroactively a compliant system. And the reality is you have to make it. But, but it's like, so for us, it's because real estate boards are really, really feeling threatened by this as an example, because they, they, they, they, their business, their entire business is built on information asymmetry. Honestly. Like, I mean, yeah. Oh yeah. And so if they have access to data and now these models have better access to data, their customers and the consumers who pay their realtors for access to that information asymmetry, start valuing their business model less.

Huge risk, obviously. So how do you fix it? For my industry, it's not that hard because all you have to do is make it easier for professionals to use your infrastructure to call on that data in a safe way than their existing format, which is copy and paste a link to realtor.com or realtor.ca and say, go scan this and then give me the results. instead you would give them like an API or MCP where they can actually access their up to the minute board data and those calls are all protected not that hard but and then you know you can allow realtors

to build websites on top of that that coding agents can manipulate and this data is safer some industries I would imagine is probably a lot more difficult but but in mine it's not that hard the question is these are all archaic industries at best like most of the people that we present to at these organizations are, you know, have gray hair, they're older. They're, they're, you know, even their original systems and the medical systems, a good example, looks like they're running on Windows 3.1, right? So they're not going to jump to the, good thing I shave that. I'm not showing my gray hair, but keep going to.

Yeah, but, you know, they're not going to jump. They're not just going to willingly jump to the bleeding edge of technology on a whim because some guy told them that it's the only way to protect their business model. So this is where I think that you're, and, and, And I frankly think with respect to a lot of these industries that they are going to be very much nailing their own coffins as a result of doing this. I mean, to circle back to Google and then I'll leave it here. Google is already starting to encroach on my industry by starting, they've said we're

going to start presenting real estate listings on Google. So they're moving up the supply chain of, well, why are we giving this click to Zillow for their SEO and letting them sell the lead to a realtor? When we can just do that. I, there's, there's millions of examples of other industries that have the exact same phenomena. No, that's, I mean, that's a great way to put it. I love that you used an industry that you like, so put things into context.

And I think you'll probably see large corporations probably adopt a bit of a different approach because they'll have the resources to do something in house. And especially when you think about pharma, if we get back to that, you're, yeah, you're talking about massive companies and it may be too hard for them thinking they have thousands of employees that will use AI to try and gatekeep with a open AI or entropic model and it would just make more sense to just foot that upfront bill and just build something in the house and have their own computer engineers and scientists that are like working on that because for them the the increased cost will be much more valuable than a potentially kind of existential threat

of a competitor like Anthropic or Open AI. Yeah, for sure. The challenge is it's like is not just cost but agility I think. Yeah. Like to do everything like we build this stuff. We've been we train small language models and we've played around with our own hardware to make it more possible for us to own that part of the supply chain for our customers, which are real estate professionals using AI to do their jobs, right? Which, you know,

McKinsey estimates about like 45% of what a realtor does can actually just be completely automated away by agentic AI. The process of like set aside the hardware side, you know, because like we, okay, you could you could technically spend that away. You know, it's setting up the model properly and reallocating the weights to your, to be tailored to your industry, which, you know, I think there's a case to be made for small language models actually being a very compelling thing in the future as we start saying, okay, well, I'm not going to ask chat GPT because I have a, you know, I'm on the train on the way home from work and I don't want to, you know, go into my, my company's laptop infrastructure and blah, blah, blah, I just want to fire off this quick question.

But I'm not going to ask chat GPT because it actually doesn't answer the question as well, because it's not specifically trained. So that's one, but that takes time. Two is, is like, you need user interfaces. Like if you, if it's, if it's so hard for me to use it, to use our internal thing, am I just going to break the rules and go to the, easy solution? Probably. I don't know. I think like your average consumer is lazy and they're average worker is lazy and they're going to take the easy path. And if they get the same result, it easier on chat GPT or Claude, they're still going to do it even if the people build the, you're on mute. I don't know if you, uh, I don't know if your mic got unplugged. Oh yeah. Yeah, I got,

I didn't want the desk, uh, me, like, yeah, the standing sitting desk. But I've seen it happens. So I, I know people that work for like, it's the government, but still they have to use co-pilot and it's not that great. So they'll like you, they'll have like Chad GPT on their like personal phone. And instead of using the corporate approved one, they'll just use whatever's on their phone because it's better. So I've heard.

Yeah, I've heard that multiple times at being on. So I think you definitely have a point there. And then, but then I guess the bigger question becomes like, let's assume that our thesis here is correct that all of these businesses are going to have to do this to hedge against, uh,

open AI and anthropic, you know, and if anybody hasn't listened to, the rant from the guy from like everyone's like oh this guy's losing his mind you know from from Palantir like go listen to it because he perfectly illustrates what's happening right now which is basically that every business in the world is using some sort of AI now not all of them but like you know most and they're pumping data that will you know be able to make these labs replace them if they show so choose they're pumping that data into the into these models you know

if businesses all of a sudden, if regulation can't fix this and businesses all of a sudden say, okay, we have to solve this from an infrastructure perspective. This could actually be a bullcase for the AI industry outside of your major labs, bear case for the labs,

which whatever, who cares, nobody really is going to be upset if they fail. I don't think, you know, maybe Sam Altman and Dario, but bullcase for like the back end industry of like you think the Cappex boom is big now. Imagine like all of your biggest companies in the world

start building in-house AI. Yeah. No, definitely. I think, well, I think the one angle I think we're probably also underestimating is, you know, the big winners will be lawyers. Yeah. Well, it's true, right? You saw it. For sure. Yeah, Apple's not the most litigious company out there and they're suing open AI. Like, if companies start seeing Tropic, Open AI and like we focus on those two because they're kind of the two largest one. But even Google with Gemini, they start seeing. you know, products come out, even if maybe it is within the agreement or the right, like, I can see the legal fees starting to rack up for those companies because I think, yeah, litigation, or sorry, that litigation, there you go, I was having trouble with my friends there, but litigation will just go up through the roof. Like, companies are not stupid. Like, they'll start

seeing that. They'll be like, okay, they're clearly stealing our data. We just need to find a way to prove it. or we'll just make their life a living hell with litigation. And yeah, I think that's... We're settling on all these things. I would assume I don't understand how this, like these court proceedings work, but I'm assuming to keep it out of court,

one for probably optics, but two for precedent, right? So, like, Anthropics settled with a ton of these already. Yeah, but they might not, the, you know, if you might have some companies that will be like, we'll make your life a living hell. We want to prove a point here. You screwed us over.

We do not want to settle. And we want you to be like, we want this to come out that you're essentially doing what China has been doing for the tech industry for decades. You're doing it in the U.S. to other U.S. companies. And it's funny that Dario is like so upset about these Chinese models. Like he's the only one really who says that open, open weights are an existential threat or like that are this,

you know. And it's funny because he's arguing against his own business model, right? Like, you know, and he's upset that China has beat him at his own game. No, exactly. But I think anything else that we wanted to cover because I'm probably going to have to leave. No, I'll let you go. We didn't cover the credit default swaps on the AI companies, but that doesn't matter. Well, maybe we can just do that quickly.

Do you have that? I think it's really fascinating. So, and we can just explain really what credit default swaps are at the same time. Yeah, I don't have the original chart that I said. sent you for all of the businesses. I'll try and pull that one up of like meta, Google, et cetera, for their CDS's. But I have the NVIDIA one and this, this zero hedge tweet is pretty funny. It's like maybe cool it with the circular financing deals. You're blowing up the bond market. But yeah, you have your hyperscaler CDS is. Ah, they got the memes in front of the actual

chart. But this is like similar. There's a better version. Oh, there it is. Yeah. There you go. Yeah. So basically, I mean, yeah, if you look at like what is this Oracle, Google, Microsoft, Amazon, Meta, SpaceX, and CoreWeave, there, you know, I mean, they're all jumping up hitting all-time highs. This is the price of insuring their debt, right? Basically, I think is that the best way to... Yeah, ensuring the debt, essentially, what would not be recoverable. So if you have $100 worth a debt, the company defaults, and then you're able to recoup $60, then

the credit the fall squad would cover the remaining 40s. So it's essentially, yeah, it's like, it's an insurance play. The higher it rises, the more markets are saying, okay, there is starting to be more risk associated with that debt and the cost of entrance is rising. So it is really interesting because especially when you look at the bottom names on the chart here, so I'll try to kind of go with the cutlers. So meta, Amazon, Microsoft, Google, I guess would be the main ones here at the bottom of the list. They were always typically seen as the top of credit quality, right? They had so much cash on the balance sheet. They were generating so much free.

cash flow. I think Apple had a decent amount of debt on the balance sheet, but they essentially took on the dead like years ago because it was so cheap to take it on. It made more sense to use that for buybacks and returning money to shareholders than then, yeah, then essentially just keeping the cash on the balance sheet. So Apple's not in there for those who are listening, but what it shows is just these, the cost for insuring for all of them is going up. But the two that really stand out is SpaceX and Oracle, those are going through the roof in terms of. of ensuring the debt. And then you still have those hyperscalers that I mentioned, so Google, Microsoft, Amazon meta, that it is increasing. It's not an alarming levels yet, but it is a

noticeable increase where you had like a pretty, it's hard to say in amount of basis points, but probably like, you know, a good, depending on which one you're looking at, like 15, 20 basis points. Yeah. Yeah. Well, I mean, yeah, like if you look at the SpaceX, I mean, SpaceX, is obviously a big jump because they IPOed in kind of bad timing, but, you know, that's 100 bips, it looks like, or, you know, 70 bips. I'd say they IPOed at good timing, but that's just... Well, yeah, they did in the race to be, to not be the second or third. To get equity, yeah, from an equity perspective, for sure. For sure, yeah. And then Oracle, yeah, I mean, Oracle's what a jump of 50 bibs, right?

I mean, most of the other guys were kind of range bound. So it's, they're actually magnitude of jumps might actually be larger, but, yeah, I mean, it's interesting to see, right? The market's basically like starting to say, hey, I mean, maybe this is, maybe this is scarier than we thought. And they're starting to try and price in the risk, right? That's what insurance rates do. Like, that's what literally you're watching the actuary, the cost illustration of the actuary inputs that are going in here evolving in real time. So I think this one will be interesting to pay more attention to. But, you know, curious to see how it shapes up. Anyway, I know we we covered a lot here. So anything else you wanted to add before we wrap up? No, just the last thing

I'll show is just you can see the Oracle's debt. just kind of rising pretty significantly. Somebody's going to blow up, man. Like somebody, like I think that there will be like a Lehman Brothers moment from this. And I think we're still early. Like I actually really do think we're still early. Like, you know,

when we talk about the AI bubble, we saw all those big stock drops and like Twitter makes it feel like the, you know, this is a global financial crisis. But like the reality is, yeah, like, you know,

most of them all have come back, bounce back already. But there, I think there will be a Lehman Brothers moment at some point during this kind of like, this bubble. But I do think it's a lot. I think we're a lot earlier in this trade. than most people think.

I mean, you're just at the start of the KAPX cycle. Yeah. So. Yeah. Yeah. I think that's a good way to end it. But yeah, I think we'll keep an eye on those credit default swaps. I think it's worth watching, especially as KAPX continues,

and those hyperscalers are no longer able to just cover it with cash flow that they're generating. So they have to tap in the debt markets or the equity markets with more share issuance. It'll be interesting with the pricing for, those credit default swap actually is, I assume it won't get better because there's... I think that would be a fair assumption for sure. Yeah, they're saying they're spending more next year. They are all saying they're spending more. So unless things miraculously turn around and ROI just, you know, starts pumping in more cash into the business. You're going to see them issue more debt, issue more equity and probably those CDS go up in price. Yeah. Yeah, I think the other one is like,

at a certain point, they have to monetize this and, And, you know, it's like what, you know, I just certainly, I think when you get the IPOs, et cetera, SpaceX being a good example, like investors start to say, hey, we're, we're maybe hoping that this, or, you know, we maybe aren't as confident in the business model as we originally thought. Maybe can you guys go maybe try making some money? And that pressure could also kind of change things pretty materially. Because, you know, the demand curve for AI is, is very unclear. because it's being subsidized right now.

Yeah. So a good way to end it. As Jerry McGuire said, show me the money. And then your stock will go up. So thanks everyone for tuning in. Thanks, everybody. We'll get the next one scheduled ASAP. Thanks for keeping the comment thread.

Very, very active. Appreciate it. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.