The Canadian Investor - Our 2024 Bold Predictions

Episode Date: January 1, 2024

In this episode, Simon Dan and Braden look at their 2023 bold predictions and which one came through. Then they give their fresh bold prediction for the upcoming year! 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  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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setup. Simone and I are going to go over last year's bold predictions, our hits and misses, mostly misses. They are bold after all. And then we're going to step into our 2024 bold predictions. We have two each. We'll go around the horn round table, mastermind style and deliver them. Simone, We'll go around the horn round table mastermind style and deliver them. Simone, with your idea, you're going to read my bold predictions of last year, and I'm going to read your bold predictions of the previous year. What did my silly brain predict this time last year for the year that was 2023? Yeah, so the first one, so I'll kind of, I'll say it already.

You had one correctly, but it's not the first one that you did so the first one was an ai bubble forms on the ts adventure you did mention that phase drive or um well what is it steer now their new name oh so the fraud that is yeah would get into ai barely they're all like they renamed oh i didn't even know that. I thought they went belly up. Well, they're there. I look at it every little, every once in a while. Look, I think it's trading at $0.66 a share. Yeah, it's almost that. $0.06, not even $0.60.

Yeah, exactly. And so it was kind of hard to check because I don't know that many TSX venture kind of AI or AI hyped stocks. I mean, I Googled a little bit and I found five that seemed to have some kind of AI connection. And most of them did not do that well. So I'm going to say it's probably a fail from Braden in terms of that. And I can share with the Join TCI viewers here in terms of like I did a little charts with the names I found. So the tickers, they're all on the venture. So PVT, OSS, FOBI, AI that I know. There's DOC, which is CloudMD.

And then ENEO. You can look up the names if you want. They're all TSX Venture name. There's Doc, which is CloudMD, and then E-N-E-O. You can look up the names if you want. They're all TSX Venture name. I just Googled a few things, and I found that they were selling a little bit of AI in terms of what they're doing and how they're seeing their business forward. So it's not looking that great for those stocks. I mean, AI stocks in general or AI related stocks, I think in the major markets have done quite well, but you did make it bold. You wanted it to be on the TSX

venture. So I'm going to say it was a no go for this one. Well, the TSX venture, all the shit codes that be are stock promoters. So they're just hopping on whatever the hot thing is. It turns out most of them are junkie and didn't do very well. And that's what happens. Bad companies always report bad results and eventually have bad returns. In the short term, it looks like a bunch of them did get really bubbly. I remember in Q1, we were chalking this one up into a win because this was in the like extreme AI, AI, AI, you know, every conversation, every LinkedIn bro, every, you know, every earnings call was all about this. It peaked in Q2 and Q1 there with AI being mentioned on earnings calls. It did get pretty bubbly with some of these names there in February and March. So the points are made up and they don't matter. It looks like you're scoring

me on this one, but maybe I got one quarter. Maybe I got one quarter right. Yeah. And these financial result companies getting into the business of AI too. Yeah, exactly. I mean, I think cloud md is like a telehealth like a digital health company yeah yeah you're right and phobia uh god what did phobia used to be named something else and they they like rebranded because like oh i can't even remember they were trading i'm pretty sure they were they were trading at like a thousand times sales or something stupid at one point because they pretty much generated no revenue it started with an m face drive was a five billion cad tsx

venture stock and they took advantage of every single hype like i'm pretty sure they were into like ride sharing i'm pretty sure they did some stuff with food delivery and all that kind of stuff. Like they were just a complete. Let's rephrase. They didn't actually, but their investor slides. Yeah, exactly. Yeah. They got into the rental of EV vehicles. So they would, I think, rent cars from Tesla and then re-rent them at a higher rate that you could actually rent them directly from Tesla.

It's like a grade seven civics and career. You have to come up with a business idea. It's that as a public company. That's how bad these ideas are. They slobber them all together and put it on a slide. Your first uh your first bold prediction uh last year was average home prices in canada fall 20 percent yeah yeah and so i i didn't look at the data this is probably wrong uh it's wrong yeah canadian home prices don't fall when there's uh yeah what was it uh what did we bring in close Close to 2 million residents. And it was almost 2 million, I think, in 2022 calendar year. Yeah, I mean, definitely it's pushed prices up for rents.

That's for sure. And I think, I mean, at the end of the day, I think it's people hanging on for dear life, right? It's the last payment they're not going to make is their mortgage payment. But we're definitely starting to see a lot of cracks happening in the mortgage market and a lot of people having no choice. I mean, people can just go on House Sigma, right? It's not, I don't think it's available for Quebec, but most provinces it is. And it's kind of sad to see. I mean, you can see all the history of the price. And in Ottawa, I know it's pretty evident, like from the peak, we're down about 20, 25% in home prices. But that's around March of 2022.

And you can see people that bought around this time, a lot of people who bought at 1.2 million, and then they put it up for sale about a year later, and then four or five reductions, and it's still not selling now it's like 20 percent lower than what they paid for it and that's not a one-off that's actually unfortunately pretty common but since the start of 2023 i think overall i was looking at korea stats and it's been relatively flat for canada i mean calgary i think has been crushing it, but yeah, Calgary has been on fire, but most markets it's been slightly down or slightly up compared to this time last year. Yeah. So I'm going to whip through your two last ones here because we have lots of bold

predictions to get to today. You said large financial services buys Coinbase. It looks like they're kind of a last man standing here with crypto exchanges. So that didn't come true. Hexo will file for bankruptcy and be delisted. That's the cannabis company that you've been banging the drum on. Yeah. I think you've been right on that one. Yeah.

Yeah, it's pretty close. We'll give this a yellow light. I feel like you're right. Maybe just a year early here. And you also had the DraftKings would get purchased, which didn't happen. But there's been a lot of competition in the sports gambling space, like immense competition. Yeah. And ridiculously high customer acquisition costs because of that competition. Yeah.

And X still got bought by Tilbury. So when it looked like they were going to get pretty much youisted everywhere, Tilbury came in and bought them on the cheap. So that's why I'm like, it's like a semi-winges there in DraftKings. I mean, the stock has performed. I think it's up 200%, but it's still, you know, burning a whole lot of cash as you can and people can see that are watching here. So we'll have to see whether it kind of lives on or not i'll go with your last two here so on the heels of the hbo warner media merger that happened in 2022 you said that there would be consolidation the video streaming space and one of the big players at netflix disney apple or amazon would buy Paramount or HBO Max. That has not happened, although there's been some cost-cutting in this space, though.

So I think, you know, it's not a win, but you definitely, I would give you some props because there's been a lot of movement in that space for sure. This was a something's got to give bold prediction. You know, these were not as bad as I thought they were. A lot of them were like kind of is true, but maybe that's being too generous. Last one here. Yeah. The last one, I would say your least bold prediction, but it came true. So QQQ, so the NASDAQ power shares outperform SPY, which is the S&P 500 by more than 5%. Well, yeah, it crushed it. Let me just add a zero on the end of that to make it a little bit more bold. Yeah. So this one, the returns when I pulled this,

the QQQ actually had returned 49% year to date. I pulled this a few days ago, whereas the S&P 500, Whereas the S&P 500, again, had done 22%. So pretty impressive returns. Definitely, ding, ding, ding, you got one. But I think we're going to have to make them a little bit bolder this year. People will probably not have heard this while Dan was coughing a lung, but it's okay. Are you okay? Oh, yeah, I'm fine.

My lungs, they're on the floor, but I am totally fine. No, I think that that's right. I mean, I should have probably said 50% there. Of course, of course these $3 trillion market cap companies are gonna go up 60% in one year. Of course, what am I thinking here? 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, 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. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free.

You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you, go on there and follow me. Search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the app store and I'll see you there. All right, let's move on to 2024. Let's get Dan in the mix here. We'll go Dan, Simon, Braden through the gauntlet here for our bold predictions of 2024.

Mr. Kent, what's first? All right, so this one to a lot of people might not seem that bold just because of the situation that they're going to be heading into. But I believe that Canadian banks will break a long trend and continue to underperform in 2024. And the reason why I think a lot of people might not think this is going to be bold is just because of the situation in 2024 with the mortgages and all the kind of economic hardships. But, 24 with the mortgages and all the kind of economic hardships. And I did pull this data from Hamilton. They ended up giving me this data. When banks go through tough times for multiple years in history over the last 20 some years, it's pretty much been a guarantee that they rebound in

quite a big way. So over the last 21 years, there has been 22 times where the Canadian bank index had negative rolling two-year returns, which pretty much means, like, let's say you compare till the end of March, 2023, you would go back to the end of March, 2021. And that would give you like a rolling two-year return where you judge the returns during that time period. So 22 times over the last 21 years, they've had negative rolling two-year returns. And 21 out of those 22 times, they've provided positive returns over the next 12 months. So you're talking like over what, 95% chance historically that the banks would go on to provide positive returns.

But I just think because of the situation in Canada, especially in regards to real estate, we'll have them bucking this trend in 2024. And this is coming from somebody who has a decent size position in Canadian banks. I mean, I own equal weight positions in Royal, BMO, TD, and Equitable. So I wouldn't necessarily say I would expect the banks to post large negative returns or anything. And this is also on an index level and not necessarily an individual bank level. So the index, the Canadian Bank Index, just contains the big six. So it'll be National, BMOTD, Royal, CIBC, and Scotia. So I just think, overall, I haven't been a huge fan of Scotia or CIBC. And I think,

particularly with their results moving forward, they might drag the index down. Whereas I think banks like Royal, who are really well diversified internationally and not so heavily exposed to Canada, it might help them out a little bit. So I don't necessarily mean all banks, but I think just as the index overall, it might struggle. And I think a string of rate cuts will end up helping companies like utilities, telecom pipelines, which is a huge chunk of the TSX. So that's also why I think, you know, it'll, it'll probably cause the banks to underperform the index as well. And again, I mean, I own quite a bit of Canadian banks. I'm not like a doomsday or anything. I just think it's, uh, it's going to be a pretty tough environment moving forward. And, uh, I don't know if, if anyone thinks that's actually bold or not,

but I mean, historically, it's been crazy how well they've rebounded. I mean, I like it, but you're going to be canceled for being bearish on Canadian banks. That's how much Canadians love their banks. Oh, I know. It's crazy. Bank stocks, right? Yeah, you can't take the bearish side. Don't bark up the dividend investor tree.

It's a place that validity of argument and math don't exist. No, but I like it. So, you know, we'll come back next year and see if it came true or not. For me, I mean, the tradition is I always do kind of a crypto slash Bitcoin bold prediction. So I'm going to go ahead and do one here relating to Bitcoin ETF. So JP Morgan will launch a Bitcoin ETF in 2024. I didn't say specifically whether it'll be a spot Bitcoin ETF. I'm going to give myself a little bit of leeway there. Most people are predicting that the SEC, so the Securities Exchange Commission, will be

approving a slew of spot Bitcoin ETFs in 2024. There are already in the US some futures one, but not some spot. The reason why it's really bold is because Jamie Dimon really hates Bitcoin and crypto. And I mean, that is not an understatement. I mean, this guy really hates crypto and he's been on that for years. I mean, recently he was in front of Congress and he said that the only true use case is criminal drug traffickers, money laundering, tax avoidance.

And if I was the government, i would shut it down so i think tell us how you really feel jamie yeah that's well good thing it's criminals drug traffickers money launderers favorite bank jamie yeah i mean exactly and i i went at uh there's this site what good called good jobs which does violation tracker and j And JP Morgan has been fined 272 times, totaling $39 billion since 2000. So, you know, maybe Jamie should, you know, just mince his word a little or choose his words a little bit better because pick your violation. JP Morgan has been fined on it, whether it's mortgage abuse market manipulation anti-money laundering they've been fine on that so i always find that uh pretty funny when he goes off i mean

you know jamie diamond sometimes he's well regarded i mean he does something you know he's a banker right and to me that's just a reflection he's a banker's banker too yeah exactly he's the banker of all bankers yeah and at the end of the day look i think he's looking for his business and uh he's done quite well for himself since he's been the ceo of jp morgan as wealth has increased quite significantly and you can only conclude that they see some kind of threat from crypto if he's being that, you know, forward against it for so long, despite Larry Fink and BlackRock coming out pretty favorably with Bitcoin, right? So, you know, I think it's very bold. I don't think it's, I probably give it less than a couple percent chance to happening

that JP Morgan will launch a spot Bitcoin ETF because they do have some ETFs for people that are not familiar. They're typically more actively managed ETFs, higher fees, but they do have some ETFs. So it's not out of the realm of possibility. My point is that they're going to get investor pressure to offer this service. They're going to get pressure from their wealth clients to offer some kind of exposure. And that would be the only way that I would see them offering that, but I'm, you know, got to make it bold. So I think that's as bold as it gets here. I like it. I think it's great. I mean,

I think it's just bold enough and it's just possible enough too. Yeah. Yeah, but it's not impossible. Highly unlikely, which I mean, I guess, yeah, it's bold. It's bold. The 200, how many fines have they got from the regulators? 272 for 39 billion since 2000. You know, this is the time where people get upset with how the world treats white-collar crime. This is why, right? Like, you see $40 billion worth of fines, 272 violations against the law.

It's a revenue source for the government it's not actually it's a speed it's not much yeah yeah it has nothing yeah it's it's a revenue source it's a meter made type of type of revenue source it's outrageous to be fair he's been ceo only since 2006 so you know the pre-2006 experience oh man j jp diamond I can't call him anything else after that. So it's your turn, Brito. All right, here we go. My bold prediction is a stock we've talked about maybe only once or twice on the history of this podcast. this podcast. Softchoice gets acquired in 2024. Softchoice is a Canadian-based IT services company. I think it's around 600 billion in market cap. The IPO did around a billion in market cap in 2021. They sell hardware, software, cloud migration services, and consultancy around the implementation of them.

If you're a company looking to move to the cloud, build a hybrid cloud setup, ramp up your security posture, buy a bunch of boomer laptops, and get migrated to Office 365, hey, SoftChoice has got you covered, all right? I should repeat that sales i never heard of this company i've never heard of it either from dad's reaction i'm like okay he hasn't heard

of it either wow okay well i mean the ipo in 2021 are almost a billion in market cap uh they employ a lot of people employ a ton ton of salespeople. It's a sales business, right? That's what it is. You're selling commoditized products and solutions from Amazon Web Services, Microsoft, and IT hardware providers. US in sales. And they went public in the spring of 2021. And it has not been great. Since then, total return, the stock's down around 20% since that timeframe. The stock went haywire upon IPO. It was a hot time for the market, a hot time for tech. Everything that IPO during that time had a similar quick double and then fall from grace. The company did around 872 million in sales on the trailing 12 months and around 93 million in free cashflow in the last four quarters. Here's why I think they're going to get acquired. The professional services part of the business, so the less commoditized part of the business is actually

growing. Now it is not a large part of the business. If you look at their Q3, 2023, it was only 8 million in sales, or sorry, 8 million in gross profit of around close to 85, 90 billion, just based on some quick math. So it's a small part of the business, but it is growing and it makes up a significant part of the margin profile. The margin profile is pretty bad selling software that is commoditized, that everyone's selling, selling Office 365 subscriptions and stuff like that, is only around 13% gross margins. and stuff like that is only around 13% gross margins. The services business is close to 30% margins, however, and they're leaning more and more into it. It's actually been a pretty steady grower over time and it makes a lot better gross profit and free cashflow. So this strategy appears

to make some sense. I think they've seen this public markets movie long enough. I think that they are a pretty good public takeout target for a mature services rollup like Accenture or CGI, which is a Canadian-based IT services company. I've been pretty good at predicting public market takeout targets on the TSX with these bold prediction episodes. I've just generally been a year or two early on them. I believe that's probably what's going to happen here.

I don't think SoftChoice will be a public company in five years from now. I just don't think it makes sense for them to be. And ultimately, I'm sure they could spin out lots of free cash flow if they just kind of tightened up the efficiency, kept learning into the service, leaning into the service businesses and keep going with their aggressive sales tactics. It's not a big business, but it's not a growing business right now. And the public markets have not been super kind to them. Sounds like a perfect target for private equity if you ask me this leverage buyout

you know just some bring some efficiencies uh oh yeah private forgot about that aka uh carl icon fire fire floor seven and up no i i think a censure and uh a censure and CGI have probably already had these combos with a soft choice type name. I mean, it's a big acquisition for them. What's it? 600 million in market cap right now. 900. 900. Okay.

917 million. Okay. So I was off by a little bit. So close to a billion. So it would be a bigger takeout. But if I had to bet, if they were going to be publicly traded in 2030, I would say no.

So this is my bold prediction. I like it. I like it. That's your bread and butter acquisition targets. Yes, I've been lucky so far. Freshie was right, but that was a couple of years early. There was another one that I got right, but I like to do one a year. And so this is my takeout target.

Perfect. Dan, what's your second bold prediction? So I had small caps will pretty much break out of a very long drought here and outperform large caps as a result of rate cuts. I think they will end up cutting rates in 2024. I know, Simone, you have the next prediction on rate cuts, but I think they might actually go further than that, like 150, 200 basis point cuts. And typically, if that were to happen, I think they might actually go further than that, like 150, 200 basis point cuts. And typically, if that were to happen, I think we would go more into a risk on market for sure, even though it seems like we're in one right now with the NASDAQ up 40% and the S&P up 20%. But that's pretty much all large and mega caps. So historically, small caps,

they've been more expensive on a forward price to earnings basis than mega caps. So historically small caps, they've been more expensive on a forward price to earnings basis than large caps. But since the market corrected in late 2021 and the bubble kind of burst, I guess you could say in the markets and they went on that huge drawdown, large caps have taken over and the valuation gap between small and large caps is the largest it's been in 20 years, I think. So you're going back to almost just post.com bubble there, 2003, 2004. It's going to require pretty prudent selection when it comes to small caps, I think. I mean, there's very little, especially in Canada, I think they have one small cap ETF and it's full full of material and junior minors. Like it hasn't done very well. So you definitely need to, to understand what you're buying. But I do have a

pretty big soft spot for small cap companies. I own, I own quite a bit. I try to keep pretty small allocations to most of these companies. I don't really go above 2% for each position, but I mean, a lot of people listening to the podcast might know, like I own Well Health, Park Lawn Corporation. What's another one I have? Alaris Equity Partners, just companies like that, sub 2 billion. Even Aritzia, I would almost say is like a borderline small cap. I think they're above 2 billion now. But I think when they start cutting rates, it's really going to be bullish for the small cap companies who historically actually end up outperforming once a recession starts.

So JP Morgan reported that US small cap value stocks are trading 14% off their 20-year averages. And the Russell 2000, which is pretty much a small cap index in the US, is trailing the Russell 1000, which is the thousand largest companies in the US by 20% since late 2021. So this is a massive variance in returns. It's usually never this wide. And as I mentioned, there's been a lot of back tests to prove that small cap stocks will typically outperform their large cap counterparts coming out of a recession. The difficulty here, obviously, and why this is a bit bold is we technically haven't hit a recession. So the question would be whether these small cap stocks have bottomed yet, or if they have room to go downwards more. But I read a report on Barron's that suggests that

over the last 11 recessions, small cap stocks have outperformed large caps once an official recession starts by an average of 16% for the forward year. So I mean, the difficulty in executing this and actually taking advantage of this is you have to be buying companies that are currently pretty deep in the dumps right now. Like I'm, I'm buying park lawn pretty aggressively right now. And it's down, like it's down quite a bit, at least 50, 60% off highs, mostly actually primarily due to rates. So a lot of what I, like I said, a lot of what I would believe would be small cap companies are trading like way off high. So it does take a lot of conviction and just a lot of belief in your overall thesis to be, buying these companies when the small caps have been in a bear market since 2021. Meanwhile,

the S&P and the NASDAQ are just ripping, but that's my bold prediction for 2024. I think they start cutting rates a lot quicker than most would expect just because i think economically it's going to get a bit worse here and as a result i think these stocks are going to do really well so if you have to put a number behind this bold prediction what would it be like how much small caps would outperform large yeah yeah because you know we have something to measure it with so we can't go't go. We have to put a number next to it. Okay, I'll say the Russell 2000 doubles the S&P in 2024. Okay.

That's a bold prediction. Sold. There's a huge gap now, but yeah. It's a massive gap. Small caps have been absolutely thrashed the last while they have and mega caps have dominated yeah it's it's such a giant disparity right now i guess that i guess my counter my counter pushback is actually not on the companies in the Russell 2000. And more so that the companies today in that mega cap world are materially so much better than any other period in my view of

large cap dominance. Like if you look back on top 20 by market cap in the S&P through decades previously, they were not nearly as dominant and as profitable and growing like a Apple, Microsoft, Amazon type name. Like I think that there's fundamentally different from a growth trajectory, distribution intertwined with our lives and margins. It's like, how much cash, free cash is Apple gonna generate like next year? It's like, it's out of control.

It's unbelievable. That being said, I see what you're talking about with the discrepancy. It's also one of the. It's unbelievable. That being said, I see what you're talking about with the discrepancy. It's also one of the largest it's ever been. It is a very valid point, though, especially when they're comparing. Typically, people go to small cap stocks because they're growing faster when now you have these trillion dollar companies that are still growing 20%, 25%. What is Microsoft growing? They're like 27, 28%. So, I mean, a lot of people might not see the need to go into small cap

markets anymore, but I mean, it's got to close at least a bit. I think, I mean, a lot of, a lot of these companies, there's some pretty high quality companies. I mean, obviously most of the ones that I own, I think are pretty high quality, but I mean, they've just, they've been completely ignored since that, you know, that bubble burst, like those market off market peaks in 2021. And there's really has not been a lot of money going back into them. No, I I'm, I'm with you for sure. It's just such a big discrepancy. I was just, I was just curious because I was looking on Apple. If you ever want like large numbers on your screen, go to Apple's financial statements and the segments and KPIs on FinChat.

Apple's did in their most recent fiscal year, which is September 23 ending, did $40 billion in wearables, home, and accessories. So like selling AirPods, essentially. Probably watches too, Apple watches, AirPods. Yeah, watches and AirPods. The services business did nearly 90 billion. And that's high margin recurring.

Yeah. So I have slight pushback, but I definitely see where you're coming from. The numbers don't lie there from that perspective. I think big tech is going to come up with AGI and a Terminator to terminate all small cap businesses. Yeah. All small caps are done. They're done. That's my theme with these episodes. Throw that in as your next bold prediction. Yeah. 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. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing

up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there.

I encourage you go on there and follow me. Search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the app store and I'll see you there. Simo, you got one here on the dock. Yeah, exactly. So I have to, I've been messing around here. So I have to go back to my notes,

but I'll get there. So my second bold prediction here, like Dan alluded to it, it's regarding interest rates. So I will say two things have to happen. The Bank of Canada will cut rates by 150 basis points in 2024. And the TSX will be up by more than 20% in terms of total returns. So it's going to be just crushing it in 2024. Simone, one of us cannot be right based on my next prediction. That's what I was going to say, yeah.

Because he's a complete reverse, yeah. Yeah, so we'll see. Yeah, so Canada, so the context here is obviously Canada's economy is already showing significant signs of slowing down. Canadian Tire has been saying this since June. We talked about it on the podcast,

that consumers shifted from non-essential to essentials. Q3 GDP came out recently and fell 1.1% on an annualized basis. I've been pretty vocal, I think, since the summer and since listening to earnings from companies that I thought we were probably already in a recession. And I think the numbers are starting to show that it looks like what I was thinking was right. Just because I'm not trying to do any macroeconomic predictions. I'm just listening to what companies are saying. And companies, especially like a Canadian tire with such a big financial division with their credit cards.

I mean, they see what people are doing. And I do think I do wonder sometimes if central banks are actually looking at that or not. I mean, I would assume they are, but sometimes I have some doubts. And Canadian households are facing historic levels of debt. Financial data shows also that credit card balances are increasing. And according to the CHMC in 2024 and 2025, there is an estimated 2.2 million mortgages that will be renewing and facing significantly higher rates. That's 45% of all mortgages in Canada. So that means that Discord of households, which unfortunately I'm in, will have much less money to spend when they renew their mortgage.

will have much less money to spend when they renew their mortgage. And my view is that the Bank of Canada will try to help that because the economy is going to be struggling and they will want to avoid more people renewing at significantly higher rates. There will be higher rates, of course, but not as high as they could be, therefore giving them more money to spend and hopefully helping the economy. So obviously we've seen the inflation come down as well so far this year has always been reluctant because I think historically if you look at a month by month basis it's never going to be a straight line down so I was always reluctant to make any predictions when it came to inflation

until we really saw it trending down for a while. But I think now it's safe to say that obviously there are some things leading it, like, for example, oil prices that have gone down significantly. But I think overall, even core prices have been trending down. And although the Bank of Canada is supposed to be independent, there will be mounting pressure from financial sectors, so the banks, households, politicians, businesses, to get the Bank of Canada to cut rates. And because of all of this, I think the BOC will not have a choice. They'll do multiple cuts in 2024, and the rate will come from 5% to 3.5%. Obviously, it's not going to go to pre-COVID or COVID levels.

point five percent. Obviously, it's not going to go to a pre-COVID or COVID levels. And because Canada and the TSX is heavy in stocks that are dependent on rates, I'm thinking financial stocks here, banks and insurers, utility REITs and most, you know, there's a lot of high levered company. And I think they will be benefiting from these rate cuts and, the market will push them significantly higher and will lead to the TSX being up 20% total. So that's my bold prediction. Both of them have, would have to happen. So if one or one happens,

the other one doesn't, it's a no go. Well, I'll save my comment for my bold prediction. Any thoughts there from you, Dan? I, I actually would tend to agree with this. I mean, go well i'll save my comment for my bull prediction any thoughts there from you dan i i actually would tend to agree with this i mean the the one thing about inflation i think what is it like the the majority of it now for them to get back to their two percent target is mortgages

and rent so i mean you would think a rate drop could possibly get them to that target sooner unless they're like seeing something that, you know, everybody else isn't seeing. But again, like it's been pretty obvious that, you know, a ton of Canadians are scaling back when it comes to like discretionary purchases. We saw with Costco, saw with Canadian Tire. I mean, you saw with Aritzia, everybody's reporting, you know, big slowdowns. And I would not be surprised if this happens. I mean, I kind of claim 200 basis points in that small cap bold prediction. So we'll see what happens. 20% returns on the TSX would be huge.

Yeah, that's why I think there's the two component there. But I agree with you. I mean, even Brayden, he's switching back to dirt and ramen. So times are tough, right, Brayden? I will say, though, both of your predictions can come true. That's true. It just needs to be, yeah. It's just got to be another monster year for the U.S. All right.

Well, with that, I will round us off here with my last bold prediction. The US market more than doubles the TSX again. And so year to date, the SPY total return has done 22.66%. And the TSX composite index has done around 7.5%. So essentially tripled. Yeah. And I suspect that next year looks like more of the same. And you're going to see how my way of thinking about this compares to Simone's and the fact that I'm going super micro and you're going super macro. And I think both data inputs are fine to use. You'll just see the difference in how I think versus maybe how you're approaching the same

thing. This graph, fellas, that you have on, I have have here on the screen that blue line and the red line going back to 1990 does anyone have any guess what this is i i purposely didn't include a legend so i could i could see if you guys have any guesses i mean no i don't think uh i would say for those listening on the podcast it is a blue line and a orange line and both lines keep crossing each other and going back and forth. And you know, one time there's some spread where the blue lines are, sometimes it's spread where the orange line is higher, but for the most part, would you say fellas, this trend has a high degree of correlation. Yes or no?

High degree. Yeah, yeah, yeah. I mean, there's definitely something financial because it dropped heavily in 2008, 2009. That's right. All right, so the blue line is the price of the S&P 500. And the orange line that you can tell has less readings because it's just quarterly and it's more like a stairs up and down is earnings. Earnings per share of the constituents market cap weighted to match the S&P index. The rationale for showing this is back to 1990. And as we've talked about many, many times on this podcast, is stocks follow earnings,

or we like to say, you know, the 2.0 version of this is stocks follow free cash flow per share. In aggregate, stocks follow business results. The US market is expecting 11.8% earnings growth next year. It is even higher for those magnificent seven and mega tech cap names. Let's look at two market constituents of the S&P versus the TSX. Let's look at RBC versus Microsoft. Two blue chip stalwarts, very different businesses. Of course, one's a tech company, one's a bank. But they're what I think of when I think of each of those indexes. Of course, Apple is bigger, but what's a $250 billion in market cap between friends here when we're talking about $3 trillion

in market cap? Microsoft is expecting 15.7% earnings per share growth next year in 2024, 15.14% in 2025, and 18.01% in 2026 based on 30 analysts covering the name. Let's look at RBC. You have 2.67%, 5.6%, and 5.3% respectively. Now, of course, valuation matters, total returns matter, so on and so forth. And this is not actually a comment on RBC or Microsoft stocks. It's a comment on the market constituents between the US and Canada, between those indices that we're comparing. And there are great businesses on both markets. I own both. I own many on both, just like the two of you do as well. But when you have a market cap weighted index. And in this world, I personally wouldn't touch a TSX composite market cap weighted basket with my own money. I wouldn't even think about it. And this is a comment on performance follows business results. And it's what I call gravity.

Eventually, gravity sucks you back into reality amidst the noise of markets. And gravity is a universal law of the universe. And stock markets are made up of the constituents inside of them. and seven are completely overvalued, you are getting a much higher quality businesses inside of those names than on the TSX and a much more diversified basket as well. Because I don't really want to just own banks and energy and Shopify going into 2024. And so if both of us are right, into 2024. And so if both of us are right, Simon, that means that the US market has another monster year like we had this year, which of course is not outside of the world of possibilities here. I mean, I hope you're both right, for sure. It'd be amazing. Yeah. That would be good if we were.

Yeah. I think it's a good one. I mean, hopefully, between all of us, we'll get at least one or two right. But I think we put enough of whether you put two variables that have to come true or some pretty big gaps that have to come true. I think they're pretty bold. I mean, we always get some feedback from people. I think we just have fun with this. I mean, the amount of conviction that we have in these bold predictions, I think will vary. You know, my conviction in the Bitcoin ETF with JP Morgan is not very high.

That's definitely quite bold. But I think, Brayden, you probably have a decent i would say higher conviction than me with that prediction than the one you just did with the u.s market yeah i i mean of course like you mentioned it's it's it's just for fun and us you know throwing out uh you know shots and on on goal that maybe come right but i think fundamentally like our predictions come from a lot of stats and statistics and what we truly think about. Maybe it's almost just like an exaggerated way for us to go full meme, you know, go full degenerate gambling mode on what might happen in the future. And, you know, the truth is probably somewhere in the middle.

And, you know, it's a useful thought exercise, I think. Yeah. Yeah, no, I agree. It shows our different perspective, even in our bold prediction, the way we kind of look at things. And how we get to that answer too, right? You started from macro. I started from, hmm, what are the constituents in the index I'm comparing, right?

Yeah, I mean, I would have went the macro end too, just rate cuts and how beneficial it would be to a lot of the Canadian companies that have just gotten thumped the last while, like telecoms, utilities. I think even with rate cuts, I mean, the only way the bank would maybe cut severely is in the event of a recession or it gets pretty tough here. So I don't necessarily think that banks would ultimately benefit a ton. They would, you know, down the road, but I think if they end up cutting rates, there's a chance that the TSX could, could perform quite well, but you are right in the fact of like the, the TSX index funds,

like there's way, like they're so heavily weighted towards like i even look up the tsx 60 it's 30 financials 20 energy like it's just so focused on you know pretty sensitive areas that um i i wouldn't really own a basket like an index basket of the tsx either but i could see it returning 20 next year it's probably it's possible yeah i. Yeah. And I think there's two important takeaways there, right? It's like, go with what you know. Like for me, for both of you guys, you guys are really smart with this stuff. Like much, much smarter than I am when it comes to macro and commentary on it. That's why I like listening to you guys talk on the Thursday episodes. And that's not how my brain works. I come to a different way.

And I think that that's a good kind of takeaway. It's like, stick to the circle of competence in a way that you actually enjoy. I find no joy in studying the economy and macro, but I find immense joy in studying individual businesses. That's where I get intellectually curious. And I think that that's an important takeaway is whatever you find stimulating is what you're going to continue to do and get better at versus trying to force yourself to learn stuff that you don't love. It makes no sense. Exactly.

Yeah, I've always been fascinated with macro. And the reason for banks that I mentioned that was more from pressure from their loan portfolio. That could be slightly eased. Yeah, exactly. And then the market doing that from a good way. And the other thing I didn't mention is that especially if the U.S., the Fed cuts rates, you could also make a case that that would help oil prices because it would potentially stimulate demand as well, which has been a dot under pressure. And obviously,

oil prices go higher. Canada is also very dominant in the oil sector as well in terms of the TSX. So that would be another potential effect. But I mean, it's going to be a fascinating year. I don't think anyone could have predicted all that much what happened this year. And then 2024. I mean, it's going to be a fascinating year. I don't think anyone could have predicted all that much what happened this year. And then 2024, I mean, I feel like we could just take a dart, throw it out of board with different outcomes and probably have better luck than our both predictions. Yeah, that's right. I'm sitting on too much cash. So I hope we get like some massive drawdown.

I mean, if you think about it, like I can finally buy Costco stock. Yeah. But until then. Can buy a share. Yeah. One share. Yeah. All that cash I'm sitting on. I got one share, fellas. If in your 2023 bold predictions, you would have said, oh, I predict the NASDAQ could go up by 40%. That would have been pretty bold. And it did. So. Yeah. Yeah. That's right. Yeah know it would have would have been exceptionally bored bold and that uh there's going to be potentially massive bank failures collapses i was thinking just just now was was ftx collapsed last year or was that this year 2022 uh november november early i think early mid-november of 2022 yeah Okay, so kind of in the back half there.

Yeah, yeah. Basically, I think he got convicted as BF, I think to the year with that infamous tweet from CZ basically saying he would be selling off all these FTT tokens. So it was like to the year, yeah, when he got convicted. And then obviously it took like a week or a week and a half after that and it just imploded, yeah. Jeez. Yeah, well, you know, the drama always goes on.

Apparently he's trading some, what, fish of the sea or chicken of the sea cans in jail. Apparently that's the new currency that they use instead of cigarettes. Oh yeah. I'm not even making that up. Like, uh, look it up. So apparently the, yeah, the jail currency is no longer cigarettes. It's these like, kind of like fish cans.

Sardines? Uh, well, yeah, something like that. I think chicken of the sea is one of them. Yeah. Yeah. Look it up. You'll see. Chicken of the sea is a sardine Yeah, yeah. Look it up. You'll see. Chicken of the sea is a sardine, I think.

Is it? Yeah. It's like those little like gold cans and you peel them back and they'd have those gross little fish on the inside. Yeah. That's what they trade in prison. Yeah. It looks like a tuna can.

Or is it? Yeah, pretty much. Yeah. I think it is tuna. Hey, hard currency. Or maybe chicken of the sea is tuna. I don't know. That's weird.

Yeah, yeah. It's a weird Yeah, it's a weird name. That's a brilliant name is what it is. I love it. Thanks for listening, folks. We appreciate you tuning in. We are here Mondays and Thursdays with any combination of the three of us. I guess Mainstay. Mainstay Simone.

Yeah, no, I'm always here. Check it out. Go check it Simone. Yeah, no, I'm always here. Check it out there. Go check it. Yeah. What's that, sir? I would say happy new year to our listeners. We're recording this a couple of weeks in advance, but I believe this will be released on New Year's Day.

Yeah. There you go. Well, here it is, 2024. We'll be here Mondays and Thursdays with you all year long. And if you haven't given the show a rating or review on your podcast player, up on there, if you have an iPhone, say even if you're, how about this? Even if you're a Spotify listener, if you have an iPhone, can you go on Apple Podcasts?

It's called Podcast App. If you're using it, you'll know what I'm talking about, but if you're not, this is the instructions. It's a purple button. Go on there, smash review, and then we're able to read these ones from this app. So if you give us something nice, we'll give some shout outs in the new year on some nice reviews that come in. It does a lot of things for the podcast, including making more people seeing it. And of course, making us feel good more importantly than anything. So go on to Apple Podcasts and leave us a review. If you want to support the show on Patreon, you can at join TCI.com.

See you in a few days. Bye bye. The Canadian Investor podcast should not be taken as investment or financial advice brayden and simone may own securities or assets mentioned on this podcast always make sure to do your own research and due diligence before making investment or financial decisions