The Canadian Investor - Paypal Impodes, Iphone Sales Soar & What the Next Fed Chair Means for Your Portfolio

Episode Date: February 6, 2026

In this bonus episode of The Canadian Investor Podcast, Simon Belanger and Dan Kent break down the market turbulence driving major moves in gold and silver, and discuss why the Fed is “trapped” regardless of who replaces Jerome Powell—using the Kevin Warsh chatter as a jumping-off point for fiscal dominance, bond demand, and what it all means for risk assets. They also run through earnings and capital allocation decisions from Canada’s rail giants, dig into PayPal’s latest stumble, and close with a surprisingly strong quarter from Apple. Tickers of stocks discussed: CP.TO, CNR.TO, PYPL, AAPL 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-EET. 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 to the Canadian investor podcast. My name is Simon Berger. I'm here with Dan Kent. We are back for a bonus episode normally. If you've been listening to the podcast for a while, you would know that we actually have two episodes per week. We have a bonus one.

Not sure when it's going to be released. You're either listening to this on Friday, February 6th or on Saturday, February 7th. If you're listening to it on the date came out, but we are recording this on February 4th, just for a context in case. something happens that we're not covering because things are happening very quickly. It seems like we're a month into the year and it feels like we've had a few years go by in that month. Yeah. Like I've been doing this like since 2009 and I can think like post pandemic like more stuff has happened then than the entirety of like previous. It's just crazy. We've had like rapid inflation, gold going through the roof like silver, all this like the pan.

pandemic, obviously. Yeah, the meme stocks. Yeah, interest rates going way up. Now you have Trump, just opening his mouth every other day saying something crazy. So it's just we're not lacking any content. So let's just get started. I think it's going to be a jam-packed episode here. Mostly earnings today. Again, on Monday, we'll have to see how like how quickly we can get through the remaining earnings that we're looking to do. We do have some extra content as well for more of the concept and some investing ideas that we'll be talking about. Now, the big news that we didn't cover on Thursday with the Thursday release is Kevin Warsh. So I talked about it.

I alluded to it when I talked about the silver and gold crash and that the market was seeing him as a bit less easy money than some of the potential other successors to Powell. At terms of the nomination, let's be clear, this would be the nomination from Trump. There's no guarantee that it will be approved by the Senate, especially as you're starting to see some senators that are Republicans saying that they will not approve the nomination until the investigation into Powell is resolved because they believe it's political like a lot of people believe here. So Kevin Warr's the background. He served as Fed Governor, the youngest ever actually from 2006 to 2011. And the key move here is that he resigned in 2011 specifically to protest QE2. so quantitative easing two, and essentially he thought the Federal Reserve was printing too much money

to support the economy and the U.S. government. The reputation here is that he's a bit more of a hawk, meaning he prioritizes killing inflation over short-term growth. The philosophy is that he believes in sound money and is willing to injure economic to protect the dollar. Sound money, you may be familiar with this term or not if you're into gold or Bitcoin, you probably have heard that. Essentially sound money is money that, like believe in money that shouldn't be manipulated

or the money supply shouldn't be manipulated or increase. It should be relatively stable and that it just keeps inflation low typically. That's kind of the general idea behind it. And the strategy that the market is thinking here is that he will likely give the market the rate cut it wants, but try to balance that by aggressively or at least try to try. to aggressively reduce the Fed's balance sheet. And obviously the balance sheet just means that the Fed has a quite large balance sheet. I don't know the amount.

It's in the, I believe it's in the trillions of dollars. I'm pretty sure here. And what they do, yeah, for sure, because it's in the billions in Canada. So essentially what they do is they will lack a better word print money and they will go out and buy asset and they'll use that printed money to buy those assets. Usually it will be bonds, mortgage-backed securities, and then it will put those on their balance sheet. And what that does is actually provides more liquidity in the market. And it also oftentimes stabilizes interest rate because there is someone, there is a buyer.

There's an extra buyer in the Fed. And the market, I think the market is just wrong here. I honestly just think the market is wrong. So my, I guess I'll talk like my theory there was, yeah, because obviously, I mean, gold is going through the roof because, I mean, you think like Trump is pressuring interest rate cuts, obviously, you know, inflation could spike. But if this guy's like prioritizes killing inflation over, you know, short-term growth, then he's probably not going to decrease rates.

So that's probably what that's why precious metals fell, would it not be? Because they. Yeah. Well, they view him as awkish. And I think the problem is the market is just thinking too short-term here. Yeah. The, if you start looking at macro data, it's essentially the Fed is track. regardless of who is the chair of the Fed.

They will not have a choice to take a certain course of action because the market is looking at this thinking, Warsh will be a hog because that's how he's always been. But the reality, the U.S. spends over a trillion dollars a year just on interest payments. With midterms coming, let's be honest, do you think Trump will spend less or more? He's going to spend more to try and keep Congress,

like to keep the Senate and the House. He's going to try everything he can because if he doesn't, it's going to make it even more difficult for him to continue his agenda. So Trump will try to do whatever he can, and that likely means a whole lot more spending. So the deficit and the debt is not shrinking anytime soon. And foreign buyers are stepping back from U.S. bonds because of fear that the U.S. will weaponize the U.S. dollar as it did with Russia, or simply as a way to push back against the U.S. We saw the Danes do this over Greenland. They said they would be selling U.S. treasuries that they had with one of their pension funds. So I think Warsh might hold the line, tried to be a bit more awkish for a year or two.

But keep in mind, he's probably going to be getting a whole lot of pressure from Trump publicly if he doesn't. That's the first thing. But deficit leads higher deficit leads to higher debt, which leads to higher interest payment, which leads to more debt insured. With a buyer pool that will likely be shrinking. Who knows, it might not be, but I think my base case it will be, at least on the foreign front, the Fed will be forced to intervene. Because if there's less buyer and you're issuing the same or more amount of debt, it means that the price has to drop in order to entice more buyers because by the price of the bond dropping, interest rates actually go up because they're inverted. But if interest rates go up, it means that the cost of the debt starts being more and more and more. expensive for the U.S. government.

So in short, they can't keep rates high because doing so will make the interest payments even larger. So they'll be forced to print more money to keep longer duration rates lower because the Fed has very limited control over the short-term rate. So when we hear the Fed cut rates, you can look at when the Fed started cutting rates. I think it was last year. I can't remember exactly when. But it's not like the 10-year bond yield actually has gone down all that much, if anything,

it's gone up. So the only way they can try to control the longer term bond yield, it would be for the markets to for it to be more demand, whether it's the actual markets or it's them intervening. So I think they'll be trapped. And in the end, the Fed will likely be forced to monetize a deficit and turn the money printer back on, regardless of harsh, awkish views. And there's a term for that. It's called fiscal dominance.

It's really when the central bank actions are no longer. good dependent, not because of political pressure, not because of the man in power telling them to do so, because their action are dictated by the government massive and increasing, lack of better words, credit card bill. And even if they have an independent mandate, and we are trending towards that direction in Canada too, like let's not kid ourselves. And even if you have like a officially independent, they are not independent because the fiscal situation simply dictates what they have to do. They don't have a choice. And I think that's what's going to happen. I think maybe in the short term, it will not. But at the end of the day, I think it's just the,

it's just the math. And in terms of what it means, did you want to add something? Yeah. No, no. Keep going. Yeah. In terms of what it means for assets, I think it just, it remains really bullish for assets. So stocks, precious metals, Bitcoin, real estate. The math is the mat when it comes to government's pending. Geopolitical tensions are not going anywhere soon. So if anything, I think it's safe to assume it will increase in the next few years. I think we are in a time of change. The fort turning like Neil Howe as written books on it. I think we are a chain like we're, it's a changing world order. And I think it's happening in front of our eyes right now. And that will increase demand for neutral assets, especially for things like gold, silver, Bitcoin and other commodities,

things that cannot be printed out of thin air. And I think that it's, it's, It's as obvious of a trade as I think I've ever seen it. It might not happen in short term, but I think if you tell me in the next five years, I think it's almost, I would not put a guarantee into anything, but I think it's a high probability that gold and silver, for example, will be much higher in a few years from now. And I think at the end of the day for stocks, I think it becomes a bit trickier because there are some pressures,

and I'm looking to do a segment with that with foreign buyers. So there are different pressures here that some countries may try to put incentives for the domestic investors to not invest in the U.S. So I think you could see some pressures over there. But in the end of the day, I think it's really bullish for assets in general. I think whatever even with Warsh's history, I think just a math will force him to start putting the money printers on and making sure that interest rates don't go up too high. which will likely lead to inflation and then will be good for having assets. Yeah, I guess, like, I don't pay a ton of attention to this, but I was just kind of curious as to why he wouldn't nominate somebody that's a bit more

doveish because, I mean, he's been quite vocal for a very long time that he wants to rate slower. I think it's simple. I think Scott Besson told him. So, yeah, the secretary, sorry, the Treasury secretary is Scott Besson. I'm lacking sleep, so do apologize for sometimes looking for my words. But I think Scott Besson told them that he needed to put someone that will appear independent. Yeah. And I think Scott Besson is smart enough to know that doesn't matter who they put there,

they'll be forced to do what their force is based on the math. It doesn't matter. It honestly doesn't matter. Yeah. Yeah. Yeah. I mean, it's actually don't know. I've seen this on X.

I don't know if it was you who had mentioned like the Canadian, like policies in place where Canadians could sell. US equities. Yeah, and if they buy Canadian equities with it, they don't pay capital games. Exactly. So Korea actually did something like that. I think Piaapoliev for the conservative campaign was proposing something similar, which I would not be surprised if Carney took a page out of the book and actually put him in place, right?

He had, uh, Pauliev had the, if you invested in Canadian equities, you got extra TFSA. Oh yeah. That was his. But I think he added something else later on. I think with this platform. But anyways, regardless, so what Korea did is, what they do is they, they said it was foreign stocks, but let's be honest, the U.S. stock market is the largest in the world. So it's going to impact U.S. stocks the most, but they essentially, for foreign stocks,

for Korean investors, domestic investors, if they sell those stocks at a profit, they will not get taxed on those profits provided they have, I think, a one-year period that they invest in domestic equities. And I'm sure there is a time frame like you have to invest and probably keep the money invested for a certain period of time. Like I'm sure there's some check and balances here so you don't game the system. But it's a strong incentive to, you know, bring your money back, especially if you're looking, you know, you've been in the NASDAQ or whatever it is, right, in the US and you're looking at some really big gains in a taxable account. And you're saying, you know what, I'll bring my money back. I won't pay any taxes. Sure, maybe I would

like to, I prefer holding U.S. equities just because there's more diversity and more companies that I prefer. But if I'm going to save that much on taxes, I can probably find some decent investments in Canada. So it is something that I really would not be surprised if you start seeing more and more countries do that because the U.S., let's be honest, they've been a bully on the international state with Donald Trump being there. And countries that have been allies traditionally to the U.S. I've essentially been bullied as well. And I think a lot of countries are being fed up and they're also seeing the U.S. being more protectionist. You're looking U.S. first. So this actually goes a bit as a double whammy to be like, okay, let's support our economy, encourage people to

invest in our domestic economy. And at the same time, we'll give it to the U.S. a little bit because that's going to hurt their stock market. And what does Trump love more than a high stock market? You tell me. Yeah. Yeah. As soon as I read it, I was like, that's, that's kind of genius because, I mean, just thinking off the top of my head, there'd probably be a lot of U.S. companies. I, I mean, I hold a lot of my U.S. and my RSP.

So it wouldn't, it wouldn't affect me. But if I had them in a tax sheltered account and you're up like two, three, four, 500 percent on these companies and you can book the gains tax free and buy. You mean a taxable account. Yeah. Or sorry. Yeah. In a taxable account?

Like at what point, like even. if you expect, say, the TSX to return, you know, 2%, 3% annually less than, say, the S&P, like, from a certain, from people's certain tax perspective. It really, yeah. You're going to need good returns from the S&P 500 to, like, make up for what you're saving in taxes. Now, the only other thing is what can the U.S. do, like, if Canada was do that, what could the U.S. do to kind of hit back?

You frame it as foreign equities, right? You just frame it as foreign equity. You just don't say, just like Korea did, they didn't say it was U.S. equities. They just said foreign equities. So you apply it to all countries aside, but you know in reality is going to affect the U.S. the most. Yeah. Yeah. So that's how you frame it.

With Trump, it's all about framing, right? And if he complains like, no, no, it's not just, you know, we're looking after Canadians. Like we are looking after economy. It's not just U.S. when, let's be honest, the majority of people invest in foreign equities in Canada, I would say, I don't have data, but let's assume it's at least. 80, 90% of those investments are probably in U.S. equity. Yes.

Oh, yeah, without question. So, yeah, that's it for, yeah, the new Fed chair. We'll have to see if the nomination gets through, but obviously it's been, I think, in part, a reason of all the turbulence we've been seeing. 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.

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So let's go through a Canadian company here, CPREL. Definitely a bellwether. We're doing CP and Canadian National REL. We'll do them relatively quickly so we can jump to some more juicy earnings in the US after that. Yeah, so revenue was pretty bleak for CP, but it's really. not all that surprising. I mean, the macro environment is terrible. It increased 1% year over year on the quarter, 4% on the year. Earnings grew by 3% on the quarter, 8% on the year. And this is primarily due to Kansas City Southern like acquisition kind of synergies, things like that. But one of the

highlights and one of the things that really surprised me was the operating ratio. So this is the reverse of the operating margin. I don't really know why they do this. Lower is better. Lower is better, whereas, yeah, operating margin you want higher. I don't know why they use that. I don't know. Just use operating margin. But it came in at 55.9%, which effectively it means to generate a dollar worth of revenue, the company is spending 55.9% or 15.5.9 cents.

So this is the best operating ratio out of any class one railway in North America. It improved, I think it was 150 basis points year over year. So I mean, I think CN, I guess who go over? They might be in the 60s. Yeah, low 60s. Yeah. So like that's, that was. It just, it didn't prove the little bit, but I remember it.

So in the low 60s. Yeah. It was this, that was the biggest takeaway on the quarter grain, massive tailwind for the company. It blew through record shipments. So 85 million metric tons versus previous record of 78. And one of the main reasons for a good operating ratio is the network has just become so much more efficient. It's just to the point where we haven't had like a positive, a shred of

positive macro environment for these for these railways to benefit. The trains are 3% heavier. They're traveling 4% faster. They're getting 7% more miles than a day all while, you know, the cost to operate them are going down. So eventually you would think that this will benefit them. They just need a bit more positive environment. Forestry, they're kind of getting killed there, tariffs, tariffs on forestry and automobiles. And the, Outlook is bullish, more bullish than CNRail. So they expect double digit earnings growth. They're going to scale back spending, double digit returns on invested capital.

And they are going to continue. They figure they'll be able to continue to decline the operating ratio. So railways have lagged the TSX for three straight years. This is pretty much never happened or at least has not happened in the 2000s. It just seems like they're kind of getting hit with headwind after headwind. But I mean, it kind of just. seems like it's just a matter of time before they kind of rebound. And it's been good results from CP, all things considered. Yeah, yeah, exactly. So it's been, no, CP has done, perform very

well. So I don't think there's, there's nothing really to, uh, to complain about when it comes to CP. Canadian National Rail, definitely a different over here. Revenues were up two And I've been pretty critical about them just because I used to own them and I got frustrated with this management team. And I'll talk a bit more about that towards the end here. The operating ratio improved slightly on a year-over-year basis. I think it was around 60, 61% right around there. Again, like you said, this is the inverse of the operating margin. Earnings were up 9% for the quarter.

Most of the operating metrics were slightly better than they were last year, which is definitely a good sign. So that's a positive revenue ton miles. A key metric was up. 1% and overall volumes helped up well, especially in grain and intermodal, so similar to CP there. However, they did face substantial headwinds from terrorist pressure and trade uncertainty, which increased in the second half of the year and impacted sectors like forest products and metals.

It's not surprising with U.S. tariffs being increased on those specific sectors in the past year, so not surprising to see that. And for 2026, Revenue Ton Miles is expected to remain. flat, assuming that terrorist level remain the same. But this management team, I mean, they just continue like, they really, they are really looking to just be like one of the worst management teams that the companies have ever seen. Like it just, it just keeps like, I just do not understand some of the stupid decisions that they take. So on the call, they said they would increase leverage. Yes, increased leverage. So increased leverage. So,

increase debt temporarily to buy back more shares. It looks smarter now, I'll give them that, than what they did back in 2022, 2024, but if you look, if you're on joint TCI, but if you look up their metrics here, you'll see that their debt ever since this management team came into place. So Stacey Robinson, I believe, is the CEO. She came into place in early 2022. The debt went up from about $13 billion to $16 billion in 2020. $19 billion. I'm just rounding it up here in 2023, $21,000, $204, and then has been around $21 billion since.

And you see their interest expense since she took over. It went from around $550 million per year, and now it's creeped up to $913 million. So they took on more debt. They were purchasing. They spent in 2021, 2022, they spent close to $5 billion in share repurchases. It slowed down in 23, 2024 to 2.7 and 2.1 respectively. And then this last year, I don't, or I guess, yeah, that would be 2025. I don't have the exact stats here, but I think it was probably around the same level. But now they're saying they'll increase that again. You mean for buybacks? Yeah, for buybacks, yeah.

Yeah, well, I mean, they're buying back shares at the lowest level they have been since, like, COVID. is lower. Yeah. And the share price is lower. So, yeah, like they, they blew all their money in 2022 and 2023 at like crazy high, you know, prices, valuations. And now like when prices are low, they're telling you. They're doubling. Yeah, now they're doubling down on leverage. So which, look, the share price is lower. So I can kind of understand the logic. But the idea of leveraging up has not been smart for them so far. Like, they are essentially. like probably pay an extra like 300 million in interest expense if you remove the impact of interest rates going up every single year that they could have used on share buyback alone

right now that they would not have to take on extra debt like I'm fine with buying back shares just do it with your free castle like this they generate a lot of free castle but they've always they've been just buying back more shares than they have in free castle to give back to shareholder in the form of dividend and share buybacks. And right now, the macro environment is as uncertain as ever. And they think it's smart to leverage up again, which may end up working out. I'm not denying it won't because maybe it is a low and the share price will go up. But you're also adding on more leverage when the trade environment is as uncertain as it's

ever been. Is that really the smartest thing to do? Like they like they sometimes I feel like they I don't know they kind of look like degenerate gamblers sometimes this management company. Yeah. And I mean, I know we had some conversations on on X. I won't get into that. But I mean, you can say like hindsight is 2020 like back during COVID. But we were in like a period of global lockdowns.

Freight demand was absolutely through the roof. Exactly. And then I think what ended. up happening is the Kansas City Southern acquisition fell through on their end. They had this money and they're like, what are we going to do? And they spent all of it on share buybacks. And then some. And then some. Yeah. It's one thing to spend with money that you have with free cash. So if you want to spend all your free cash, we'll have at it. Go for it. It still wouldn't have looked that good, but at least you didn't tack on debt at historically low interest rate that you'll have to refinance and then your

expense interest expense will be even higher. It's just, I don't know. I don't, I don't understand how they have a job still. And I mean, it's the worst performing Class 1 railway in North America over the last five years. And Tracy Robinson and that team have been at the head essentially for four plus years here. So even the first year, you can give them a pass, but it's been the worst performing railway. So clearly that strategy is not worked out. Yeah. I mean, if you look to, I guess to say as well, we kind of both put our money where our mouth is. We both dump the company because of all of this. So we're not just kind of ripping on them looking in hindsight.

But the CP has not done this. Like they cut back. They didn't buy back a single share for three years. They didn't raise the dividend at all for those three years. A lot would say maybe they got a bit lucky because they hit the Kansas City Southern acquisition. So they needed to pay down debt. But they've all. always had a bit of a different strategy than CNRail in regards to this.

They haven't been, you know, heavy dividend growth. They haven't been heavy buyback. What's the strategy? Not not being stupid. Yeah. Yeah. And like, you know, obviously now they have, you know, they've de-leveraged a bit. They haven't raised the dividend.

They have a lot more cash flow. And now you see buybacks from CP like ramping up massively. And they're going to be able to, I mean, you're talking like C-N-Rash-N-Rash-Rash-Massively. I mean, you're talking like C-N-Rae-N-N. rail was like $10 billion spent on buybacks during like peak prices during the during the pandemic whereas CP rail they might have $10 billion to spend now at like double digit discounts to historical valuations for railways so just goes to show you how important the management team of a company is especially with capital allocation yeah exactly like I just anyways

I'm not going to rail on them for forever it just doesn't make much sense here and they were generating $4 billion in free cash flow during the pandemic. So they still could have done quite a bit of buybacks just by you know, they could have done about $2 billion worth of buybacks every year and that would have been covered by free

cash flow on top of the dividend. So both the dividend and the buybacks would have been covered and would look so much better in hindsight here instead of levering up. For me it's really the part of levering up and not creating enough margin of safety for harder times. think that's the fireball offense in my view. It's just you saw airlines do this kind of stuff

before the pandemic and it's just like did you not see what happened to the airlines company? And I know it's a much better business than airlines. Don't get me wrong. But anyways, I'll give you one more example of absolutely. And then we'll move on. I think we've riled enough on CNR. Yeah. Birchcliffs. During so during the energy boom like in 2023, they raised the dividend by 900% in one go, which it was one of the most mind-boggling things I've ever seen because it didn't even take them a year before they had to cut it by 50% and then they cut it an additional 70% in 24. So you want to talk about, yeah. If you look for a while, you can find some worse management

teams than this one. So that's that's the moral of this story. You might go over another one next. 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 switch 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. Speaking of bad management team. Let's talk about PayPal. Yeah, so pain pal, as they call it, a lot on X. I mean, it's, this was a company we covered for a while. I ended up removing it. I used to own it. Yeah. A bit before the pandemic. And then at some point, I sold glad I sold. I, I think I still made some money, if I remember correctly, it's been so long. Yeah. It had a huge run during COVID. I mean, I imagine it would have peaked in 2021 or 2022, but it was ugly quarter. Not only the

results, but just like from a PR standpoint as well, Alex Chris is getting punted effectively. And I think I got like conflicting timelines for how long he had been in. Some say less than two years, some say two and a half years. But it like, and result, he has not been in place very long. They're putting Enrique Lores, who is the former CEO of HP in place March 1st. And this isn't kind of like a letting Alex Chris like finish out his time either. Like he's gone immediately. They're going to have an interim in place for like a month. So like they're getting like the former CEO of a hardware company to kind of run a payment processing.

So I mean, they're still generating good free cash flow. I'll give them that though. They are, but I'll go over that in a bit. They pretty much, I mean, if you think about it, they pretty much punted at all. Yeah.

On the earnings front, so revenue increased by 4%. earnings increased by 14%. Total payment volume was up 6% on the year. The only thing here is a sizable chunk of the earnings growth. is coming from share buybacks. So you strip those out and it's a company pretty much growing at the pace of a mature blue chip company. So when you look specifically to this quarter, payment volume increased 7%, but payment transactions increased only 2%. And payment transactions per active account

actually decreased and the number of new PayPal accounts only increased by 1.1%. So the buyback narrative for a long time has been like the business is deeply undervalued. However, I think like at this point, it just seems like they have all this free cash flow, because they're a relatively high margin business, but they just don't really know where to spend it. They can't find any meaningful way to invest back into the business. I mean, obviously, in hindsight, they probably just should have paid a dividend. Like the buybacks have not worked out well, obviously.

I think the company was down like 20% after this earnings report. When you buy back all those shares, like what are we talking about? Nah, there's 10 billion, 14 billion, like probably 20 billion in shares bought back over the last while. And the stock price is just in the gutter. They plan to buy another $6 billion worth in 2026. So this would be more than 16% of total shares outstanding. Now did they, did they talk to CNN management?

They're like, we're doubling down on this. Yeah, I mean, it's hard to say like, again, for a long time, the business looked cheap, but it's just, It's not growing anymore. And the other businesses are doing fine. Like Venmo grew 20% year over year, 100 million active accounts, like debit debit card volume was up 50%. But like the PayPal side of things just,

it sucks. Like the branded checkout volumes, like PayPal branded checkout volumes, it grew 1%, which is like, you know, it's kind of the bread and butter of the business. Guidance is terrible.

So mid single digit declines across the board. I think for next quarter, And the company now expects earnings to decline by low single digits this year at worst. Low single digit growth at best. So what are you doing spending $6 billion buying back your own stock when your earnings are going to decline? Like the market's going to hammer you. It's they're just like Apple Pay, Google Pay, all those like frictionless payments. They're just eating the company.

I feel like those some of these CEOs are just like market like buy bag. Let's do buy back. Like essentially that I feel like that's essentially. what goes in their mind is like those that little as rudimentary as it may have sounded when I said it I feel like it's essentially that that that's the reasoning yeah I mean it's a good headline yeah and they like they they pushed out a bunch of headlines all the time like partnerships with all these different types of companies like I mean people are just going to take the least amount of friction when it comes to paying yeah and PayPal is not it like we

have like for our stock trades like our website we have PayPal I would guess like 90 90% of transactions are just done Apple pay Google pay yeah all of that and like 10% strike maybe it's uh yeah they you mean stripe or PayPal PayPal yeah sorry yeah paypal one in 10 are probably through PayPal and that's like primarily only people who think they're giving us the credit card when in react like they think we're like they're like they're entering their credit card payment information on our website when in reality, you don't, we don't keep the information. So with PayPal, they view it as a more secure thing because the cards on PayPal.

But if this, you know, if people knew that they weren't giving us the information, I would say this might be closer to zero. But yeah, it's, I mean, it's, I don't know. I guess it's, it lost 20% yesterday. So, I mean, you could argue that maybe there's some value there, but like they're guiding to declines and earnings next year. Like, I, I don't know. I don't, I don't really see it.

It had, uh, Yeah. I don't know if no, I think it's a good point to to leave it for PayPal. You know what? I think we'll have time to do Apple quickly here. I think so yeah. We'll have enough stuff for a Monday episode anyway. So I think it'll be good to can probably do this under 40 minutes. So Apple Q1 2026 ending in December, they just have a little weird financial year here. Really surprising in the good way for Apple here. Revenues were up 16%. What really surprised was iPhone revenues. They were up a massive. of 23%, so definitely a lot more than the market expected. And if people remember, we've talked about it on this podcast quite a bit. And Apple, it was kind of stagnating in terms of revenue. Like nothing, it was not much happening in terms of revenue for Apple. Yes, they were growing earnings per share, but in big part due to, you guess, had buybacks. So that was a really surprising quarter. I was skeptical that they would do that well going forward. because I think they were putting just way too much on that upgrade cycle.

But 23% is nothing to sneeze at. And people looking here at Joint TCI, you'll see with a quarter, you'll see the December quarter compared to last year. It's pretty, you see kind of that big jump. Services were up 14%. iPad was also up. iPad sells 6%. But Mac and wearable were down 7% and 2% respectively.

Now, to be fair, iPad, Mac and wearables. They're kind of small parts of the business compared to really iPhone and services are really what make up the bulk of the business. I think all three iPad Mac wearables are probably equal to services. All three combined roughly. Just to give people an idea just going on memory here. In terms of geography, China was really the star here. It increased 38%. The America's 11%.

Europe 13%. Japan, 5%. The rest of Asia, 18%. free cash flow more than doubled for the quarter versus last year to $51 billion. Yes, free cash flow does fluctuate on a quarter to quarter basis, but Apple is a free cash flow machine and the fact that they were able to double it in one quarter. That's a quarter over quarter. That's pretty impressive. They reach an all-time high of installed base of over 2.5 million active devices.

The iPhone 17 lineup has been extremely successful during the quarter. they announced that they would be collaborating with Google to power the future of Apple intelligence. I do hope so because it is not great. It's still not that good. So maybe it'll be better once they start, I guess, teaming up with Gemini to power that. And then they expect revenue to grow between 13 and 16% during the March quarter. So if they do achieve that, that's pretty impressive. So definitely really surprised by Apple the fact that they're returning to growth.

And honestly, with all the spending and the volatility, we've seen with the hyperscalers and the amount of money being spent on AI, Apple has taken a more conservative approach. I think early on they were being criticized. But maybe in hindsight now, it looks like it may have been a better move to kind of team up with a Google, for example, and start slowly ramping up their investment in AI versus throwing all that money at it. like the iperscalers were doing. Yeah, it's definitely a way more conservative approach. I mean, I contributed to this, this iPhone revenue. I ended up having to buy one for my wife or, oh, okay. She had like, I was like, you still have the green text message. Like, what's going on?

I am an Android person, which is why, like, but she had like a, it had to be like an iPhone nine. It was ancient. Okay, okay, yeah. So we had to upgrade. Like, I'm wondering if, like, what is driving a large amount of upgrades here is like, I don't know, I don't pay attention to Apple devices. Maybe there's some sort of AI driven on the new device.

So you needed, I think, the 15 Pro to be able to run Apple intelligence on your phone. And the full, I believe the full 16 lineup is able to. And then the 17. So I think what probably is just happening is probably a combination of people upgrading because they need to. And then people that maybe could have still used their old phones, maybe like a 13, 14, 15, non-pro. And they're like, oh, you know what?

Like, it's been a few years. I want to have Apple intelligence. I'll upgrade now. I could say, I mean, that's just my guess. I have a 13 and I'm not upgrading until the battery fails me. So that's how I use it. I mean, I have other AI apps anyways, LLMs on my phone. So it just, I couldn't care less.

And I have it on my MacBook and I find it pretty crappy, to be honest, currently. So, yeah. I haven't used it. I mean, yeah, like with Apple for a very long time, like people were buying new phones every single year until they started to realize like they're just slapping an extra megapixel on the camera and putting another version out. And then that kind of stopped. So, I mean, are we at the point right now where the functionality is increasing a bit to where people are going to upgrade? But yeah, it was, I mean, it hasn't had a quarter like this for a long time, I don't think. No.

No, I mean, like if you, when I was showing earlier when I was sharing my screen for. joint DCI here you were seeing like look you can just look at it if you look at all the December quarters it was essentially the biggest quarter since 2021 yeah by a long shot for iPhone sales yeah yeah exactly well 2023 was pretty close but essentially it had like essentially stagnated around 65 to 70 thousand for the better part of four years and now it jumped from 70 to 85. Yeah, it'll be interesting to see if it sticks or if this is just like an upgrade cycle that needed to happen and they go back to flat.

Yeah, I don't know. But, hey, with all that doom and gloom with tech, and there's actually Tim Apple came through. So, yeah, I'll take a page out of Donald Trump here. Good job, Tim Apple. But I think that's a good way to end it here. Hopefully you enjoyed this bonus episode. We are definitely trying to keep the episodes around like 40 minutes or less. We had feedback. A lot of people like the kind of shorter episode. So that's what we've been trying to do.

And because of that, you got an extra episode this week. We will be coming with our Monday episode. It'll be a mix of earnings. And I think something I'm looking in terms of investment possibilities right now. So make sure you join us on Monday for that. Thank you for listening. If you haven't done so, like we always say, if you can give us a five-star review, it does help people find, discover us. There's always join TCI if you're looking for additional content as well. And we will be doing a YouTube live soon, either next week or the week after, as we get that set up. Again, apologies with just what's going on in my personal live. Then do it this week. So make sure you subscribe to our YouTube channel. The link is in the description. Thank you for listening. We will see you on Monday.

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