The Canadian Investor - Scotiabank Sets Aside Over a Billion for Credit Losses

Episode Date: November 30, 2023

In this episode, Simon and Dan start the episode by talking about Scotiabank’s bad earnings results and if it is a sign of things to come for Canadian banks. We then talk about Binance settlement with the department of justice, Biosteel assets being sold out of bankruptcy, Black Friday sales numbers and Wealthsimple new private equity offering. Tickers of stocks discussed: BNS.TO 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 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.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. Welcome back to the Canadian Investor Podcast. I'm here for our Thursday episode with Dan Kent. Dan, how are you today? And I have to specify Kent because there's Dan Foch and I feel like everyone I meet, there's like some kind of Dan. So how's it going? How's the kind of,

how are you feeling? I know you were having a bit of a cold recently. Yeah, I had a bit of a cold last week, getting over it now, just kind of hanging out here for a bit, going to Arizona on the weekend. It's been 25 degrees there pretty much all the time until we get there and it's going to go down to 13. So it's not going to be much nicer there than it is here, which is pretty sad. But no, I'm just kind of waiting for bank earnings mostly this morning, just from Scotiabank. That was a pretty anticipated release this morning and it had a lot in it. Yeah, I know. It was really, it's like Fintwit was blowing up with the Scotiabank earnings. And

do you want to go over a little bit i'll give my take as well we've been kind of going back and forth all morning looking at different areas of the earnings released uh you know the bad the really bad and the ugly i would say is a good way to sum it up for scotia bank and so you want to go over and explain to people how it looks and what kind of fire tire or tire fire we're dealing with. Yeah. So, I mean, there's a lot to talk about. I kind of summarize it all kind of in sections. I mean, for the most part, Scotia usually kicks off the beginning of bank earnings. They're typically the first to report and it wasn't the most promising start for bank earnings. In fact, it was actually a really, it was a really poor quarter from Scotiabank, mostly due to provisions, but total revenue came in at 8.3 billion, which is pretty

large increase. It's an increase of around 14%. However, that was pretty much the only bright spot on the quarter. Earnings per share came in at $1.26, which is down pretty sharply from the $2.06 it reported in Q3 of 2022. And just to give an indication on these earnings, Scotiabank pays about $1.06 a quarter. So in this quarter, the dividend, you're looking at a pretty high payout ratio, just comparing it to the quarterly dividend. But the capital markets continue to struggle. I think they were down quite a bit, which is kind of, it kind of highlights how tight a lot of Canadians are financially and not a lot are investing. This isn't going to be unique to Scotiabank. I don't think you're going to see declines in the capital markets pretty much across the board,

I think. And provisions for credit losses as a percent of total net loans came in at 0.65 on the quarter. So through the first nine months of the year, it sits at 0.44. And this ratio has more than doubled compared to last year. So total provisions, which are essentially loans, I guess I should say, which are essentially loans that the bank expects will go unpaid they're not loans that are going unpaid like are fully unpaid it's just what the bank kind of predicts in the future so you can get a lot of these banks that will say cautiously over report these numbers or you can get some banks that will say be a bit aggressive, which in a sec we'll talk about Scotiabank again during the pandemic. But total PCLs on the quarter came in at 1.256 billion, which was way higher than the 850 million that was expected. And through the

first nine months of the year compared to nine months last year, PCLs have launched from 1.38 billion to 3.4 billion. And one of the most alarming things is the increase in PCLs on performing loans. So if you don't know what a performing loan is, it's a loan that is still being paid by the borrower, but the bank expects again that it could, not necessarily that it will, but it could go unpaid so the bank reported a 460 increase in quarter over quarter i believe that was yeah i can't remember i didn't know i actually have it on the shared screen for the uh join tci listeners so yeah that was it jumped out right when we were chatting i'm like oh man look at this like this is crazy. And you're like, is this year over year? I'm like, no, no, this is from Q3, 2023 to Q4 went from 81 million for those performing loans to 454 million, which

is, that's just wild. Like, I don't think you see that very often or at all. No, and it's kind of the same situation. I guess I'll explain the pandemic thing was Scotiabank during COVID did this too. They kind of underestimated their provisions and these come out of net income, right? So they impact earnings per share. So a company could, a bank could realistically underestimate these, which could make their earnings seem higher at that time. And then if they have to play catch up in the future, you'll see it really hit earnings. And like a big increase like this kind of makes me feel that they might've been underestimating it before, or they're just being super cautious. But the most shocking number on this regard was the ones that had virtually all came from Canada.

the ones that had virtually all came from Canada. So they reported a, I think it was like a 9x increase quarter over quarter just on loans in Canada. Yeah. Yeah. 91% of that like performing loans that are now part of their provisions for credit losses or PCLs. So 91% are actually from Canada and Scotiabank has some pretty extensive operations outside of Canada too. So that's really interesting. It makes me like I'm interested in hearing what you have to say because I see this number and I have kind of two things. Either, like you said, like they were underreporting, but the underreporting, like I have a question is, okay, were they doing purposely or were they not fully aware of the credit risk in their portfolio, which is equally alarming because it's one or the other, right?

Either they were purposely underreporting or they weren't fully aware of the kind of risk that they could potentially be exposed to. Yeah, I don't necessarily know what it could be. I would say maybe a combination of both. Like if you remember last week when I was speaking on just the overall mortgage exposure and Scotiabank was pretty much one of the higher, I think CIBC was slightly worse, but Scotiabank was, you know, 15% of mortgages outstanding or coming due in the next year and like 90 some percent of them are fixed rate. So like maybe this is the bank kind of realizing that maybe rates aren't going to be coming down and they're taking those more higher risk mortgages that are going to renew at significantly higher rates and saying, you know, you know, some of these might be in danger.

But I think the key thing here is going to be, is the company kind of being overly cautious right now, kind of learning its lesson from the pandemic because it kind of underreported, whereas all the other banks kind of reported in line, like steady numbers. They were all pretty close together. And then you just saw like Scotiabank be such an outlier. And you're going to get a little bit more insight on this when all the banks report. And if you see one company that's like really out of left field in terms of like reporting way too much or reporting way too little, you can kind of get a sense of whether or not like if they're doing this being overly cautious or maybe just a bit too aggressive.

In this regard, it kind of looks overly cautious. I don't know. It's just such a large scale increase on a quarter over quarter basis. Yeah. No, it's pretty crazy. And I found as you were talking, I found something else in terms of because you got me interested for the Canadian residential mortgages. So according to Scotiabank, so this is straight out of their investor presentation, is that the maturity, so they have a maturity schedule for all their mortgages broken down between fixed and variable. And they have $32.8 billion in mortgages coming due a fixed mortgage in, sorry, coming due in 2024 and $58.6 billion coming due in 2025. And I think it's safe to

assume that a lot of these will see significant increase in interest rates. Obviously, we don't know what interest rates will be next year in 2025. But these are mostly mortgages that probably saw rates in the mid twos to low threes. So you can, you know, you can really figure that there's going to be some significant jump in payments for these holders. Yeah. It's, I mean, it's pretty much a guarantee unless you figure that, you know, rates are going to get cut in the next, like you would need in order for some of these fiscal year 2024 is you need them to come down quite a bit. You probably need them to start cutting this year, late this year, or maybe really early next year. And they would need to cut aggressively, which I would say

is almost impossible. I just don't see them doing it. You could see them maybe staying flat or maybe cutting maybe 25 basis points at a time. But in order to offset these large scale increases, they need to go a lot more than that. In terms of just overall outlook, so the company expects modest growth in profits next year relative to this year's earnings. And some people might be reading that and be like, okay, they're going to get back to profitability, get back to growing earnings next year. But the thing here is earnings. And a lot of this is due to higher provisions. Like it's not actually, which I mean, provisions can be losses, right? But they can also be added back later if they overestimate. So this is kind of not like fully accurate,

but their earnings per share with the provisions have fallen back to 2017 levels. So in just a little over the year, in just a little over a year, Scotiabank has gone from reporting all-time highs in terms of earnings per share to just wiping out six years worth of earnings. And even if we assume that modest growth, I would say would mean maybe low to single digits. So I think they're trailing 12-month like in the low $6 range. So if it posts earnings, you know, in the mid to high $6 range, that their dividend is significantly higher in terms of pay ratio than what they would typically pay out. So this is a company that pays out anywhere historically, except for crisis situations like COVID great financial crisis, they pay out around 45% to 50% of their

earnings, maybe 55% on the high end, even if they got earnings to $7 per share, which I mean, even according to them is probably really unlikely. The payout ratio would still come in above 60%. The more likely result is they do grow in the low single digit range and then you have payout ratios above 65%. So to me, it just seems like if there's going to be a dividend increase, which they typically do increase next quarter, I think it's just kind of going to be an increase to maybe keep their annual streak alive. I wouldn't expect much of anything if there is one. Yeah. Just to say like, oh, we increased the dividend it was one percent increase but we still increased it or whatever it is and i think the way i would see it for all the banks not just bank of nova scotia but when you

look at what their you know their forecast is for the results for next year their guidance i mean i would say okay you want to use maybe their guidance as maybe a kind of base case but you also want to assign probabilities to things getting worse and things getting potentially better yeah i would say you know i'd probably personally give like 50 chance that things could get worse and maybe, you know, 50% that things are, as they say, are slightly better. That's how I would kind of view it for because I don't know what's going to happen with the economy, which will have a big impact on how their loans perform. And obviously the loan loss provisions, whether they increase them or potentially release some back into their earnings and helps earnings. So there's really there's just a lot of different outcomes that we could see for Bank of Nova Scotia, but banks in general just in this upcoming year, just because we don't really know what will happen.

And there's a lot of uncertainty and there's a lot of kind of new things that we have rarely seen in the past. And it's hard to gauge where it's going to go. Yeah. I mean, a lot of... I discuss these banks quite a bit with a lot of just Canadian investors overall. And the attitude for most was that they're overstating these, they're being cautious. But the thing is, what if they aren't? You know what I mean? There's a bear case. There's probably, like you said, a base case. And then there's, there's probably a case where they are being cautious and earnings improve next year. But like if, if you do think of the case where things get even, even slightly worse and they start reporting earnings in the, in the $5 per share mark in that range, like the dividend starts to get really, really tight. mark in that range, like the dividend starts to get really, really tight. And the, like these banks, you know, they're not set up to pay out, you know, 80 plus percent of their earnings towards a dividend. That's why you typically see all of them paying out. You know, some of them are super conservative, but typically 40, 50%. And, um, you know, a lot of people were looking

at, at Scotiabank for, for the yield. And like, it's even more, I think the company's yielding like nearly 7.5% right now. So there's definitely a lot of negative sentiment priced into the stock right now. But there's also like, I think there should be an acknowledgement that it could possibly get worse. Yeah, no, and I think, and I mean, a lot of the replies that I've seen, you know, we've been pretty active on Twitter this morning. And I think it's a mix of a lot of, you know, people being bearish. And then a lot of people say, like, basically saying, well, banks have performed well, you know, look at their history, they'll be fine. And, you know, history tends to rhyme, but history is a good gauge until it doesn't work. So I think you have to really be careful to extrapolate what has happened in

the past going forward. It could very well happen, but I think it's really important for people to start thinking and just probabilities and then make your investment decisions that way. That's, I mean, that's the way I see it. Yeah. Yeah. And I mean, even, you know, a lot of people were comparing, say the provisions during the pandemic, but that was a much different situation. Like you had government, governments injecting a ton of money into the economies. You had pretty much free money stimulating the economy like if you're thinking like oh you know they they booked all these loan loss provisions in the pandemic and you know they didn't have to use a lot of them like i it's not i think that's pretty dangerous comparing this

period until then and i mean a lot of people like just mentioning this stuff like canadians i think are so passionate about can Canadian bank stocks that a lot of the times, even when you bring some of this stuff up, people get really, really defensive. And I own Canadian banks. I own quite a bit, Royal, TD, and BMO. But I think it's important to at least acknowledge that these difficulties could exist. 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going

to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Do you think a lot of the issue, and I get a sense that people get overly optimistic about Canadian banks because of how they fared during the great financial crisis and how poorly the American banks did. And I think people tend to rely on that period of time and say, look, it can't be worse than what happened then. And look at how Canadian banks were resilient.

Well, you know, Canada's economy was hit way less than the U.S. was exactly during that period of time. So you have to keep that in mind. If we're seeing anything right now, it's actually the opposite. The U.S. economy is faring much better than the Canadian economy. So I think, I don't know, do you have the same sense? I have a sense that people kind of look at that time period, see that Canadian banks dropped, but they were resilient and offered like massive returns within like, let's say a five, seven year period afterwards that they tend to kind of anchor on that and just say, well, you know, worst case was that and look at how they did. Yeah, I think so. They compare that to back then. And I think you're bang on in the fact that it's kind of the reverse right now. Canada is the one kind of in the sticky situation just because of our mortgage structure in relation to the United States.

They won't see as much pressure on housing prices mostly because if you have a 2% mortgage that you locked in during the pandemic in the United States, you're never listing your house right now unless you absolutely have to, which I think will keep supply low, keep prices relatively maintained. Whereas here, there's a lot of the big markets who are seeing a lot of drops in prices and now people got to start renewing their mortgages at much higher rates. So I don't think it's the same situation. I think using past events is kind of useful, but it's just like you can never really... A lot of people kind of point to the fact that these companies have paid dividends for 100 years or whatever it is, 150 years. like the dividend is one element of, you know, of total return. It doesn't necessarily mean that some of these banks can't get in a bit of trouble over the next few years. And I think just overall, when you mentioned this, you know, as I said, like there's so many people in Canada,

they're passionate about Canadian banks. When you talk about stuff like this, they tend to get a bit defensive and they kind of think like I'm a super bear on Canadian banks. But like I said, I think it's important that you acknowledge that they could face some difficulties in the future for sure. So you heard it here first, go buy JPM according to Dan. No, I'm just kidding. No, I'm just kidding around. But no no i think we did a good overview here and obviously we'll talk about the rest of the earnings i think most of them are coming up this week if i remember correctly yeah i mean i guess this is a bit different but equitable reports

i think next week but they're i don't think they're they're more of like a deposit-based bank. I think all the big banks report this week. Okay, so we'll definitely have a couple. I don't have the exact schedule either in front of me, but we'll definitely have a couple next Thursday. So make sure people tune in if you're interested in Canadian banks, which I'm sure we have a lot of people here. We'll move on to our next segment here because I feel like we've done already half of the

episode on Bank of Nova Scotia. But I think it was fitting because of, you know, bank earnings kicking in and we'll see whether it's kind of a sign of things to come or the other banks, like you said, are going to report completely different results. Now, completely different here. So Changpeng Zhao, also known as CZ, is out as Binance CEO. So Binance is the largest crypto exchange in the world. CZ, his founder, was born in China, but he does have a Canadian connection because he moved to Canada with his family when he was 12

years old. And CZ was at the center of the whole FTX downfall. Last year, his infamous tweet was what really started the air quote run on the bank for FTX customer. And I say air quote because it should not have been a run on the bank. They should have had assets one for one with what customer deposited, but obviously they didn't. And then the tweet from CZ, who has millions of followers, really sparked people starting the withdrawal and the downfall of FTX. Now, as part of the settlement with the DOJ, so the Department of Justice in the US, Binance agreed to pay $4.3 billion in fines, which is one of the largest fines ever. Binance was accused of not maintaining a proper anti-money laundering program, also known as AML, operating an unlicensed money transmitting business and violating sanctions laws.

And documents revealed that Binance had an approach of just going ahead with their plans rather than asking for permission from regulators because they saw that as holding back their business and they were really trying to do a land grab and they figured that they would deal with that later. And of course, that later is coming in now. Attorney General Merrick Garland said that Binance employees knew that it was serving users in sanctioned countries. CZ, who flew from the UAE to Seattle to appear in court, agreed to step down as CEO and pay a $50 million fine. He will also not be allowed to be involved in Binance management for three years. And there's also been some recent developments on that where the U.S. has not allowed him just yet to return back to the UAE. So we'll have to see whether he's allowed to go back or not until

his sentencing, which is set to be done in early 2024, February of next year. He also waived his right to appeal the sentence if it is 18 months or less. So 18 months or less of prison time, he would not be able to appeal the sentence. He'll be replaced by Richard Tang, the head of Binance Regional Markets. And Binance also agreed to appoint an independent compliance officer to monitor who will be monitoring its reporting and compliance efforts to the US government. So in terms of what's next for Binance, there's definitely some questions that have come up about their ability to pay the $4.3 billion fine. They do post proof of reserves in terms of showing what they have versus the overall

ratio compared to customer assets. However, there's been criticism with that because you don't know what the corresponding liabilities are. Because when you're looking for a bank, deposits are actually liabilities are because when you're looking like for a bank deposits are actually liabilities and the same thing would apply for an exchange because you know if users have assets you know these are liabilities that are owed by users so it'll be really interesting the other thing is you know how will the business be affected increase regulation an independent compliance officer,

the news of the settlement. There's also a question as to what impact this will have just on some of their customers, because clearly they were doing business with customers they shouldn't have. So what will that mean? Will revenues drop as a result of this? Will Binance be able to keep its number one spot as the world's largest crypto exchange? So there's a whole lot of questions here, but probably one of the last big dominoes in the crypto exchange kind of centralized world. I think I don't know what you think. I know you're not as into crypto as I am, but I know a lot of people in the crypto world were kind of happy to see this because now they're able to move forward and kind of leave the whole kind of FTX, Binance, Celsius, all those exchanges or yield centralized exchange, I would say, kind of in the rear view.

Yeah, I mean, I pay a little bit of attention, especially like Matt, the other guy over at StockTrades. He pays a lot of attention to this. And it was, I still remember this whole fiasco from 2022. And it's kind of like, it seems like this situation, at least, is like, like you said, it's kind of like, it's better to ask for forgiveness than it is to ask for permission. So they kind of just, maybe they kind of felt that, you know, kind of disregarding this and just going ahead would end up ultimately allowing

them to capture more market share. And in the end, even like they had to have thought that this would eventually come to fruition. So ultimately maybe they thought that it's still, you know, capturing that market share, getting that client base would be more beneficial, even now in the event that they're facing all these fines. But I'd be interested as to why he waived his... What did he get for waiving his right to appeal if the sentence is less than 18 months? Maybe you're... I don't know. Yeah, I'm sure it was part of the negotiation so he may maybe it was a smaller fine maybe he was guaranteed a certain amount you know i think the max he can get is 10 years from what i read in prison but if it's more than 18 months obviously you'll be able to appeal the sentence so i'm sure it was part of the negotiations and probably just figured, you know, we'll take care of it now and then we'll be done with it.

Yeah, I'm pretty curious to see if he goes to jail for this. I mean, it seems pretty shady overall, especially for like an exchange this big. Like, I don't know. I mean, the space is still pretty young. It's got long ways to go, but. ways to go but well yeah it always is funny because and people will say i know there's a lot of people that are pro or anti-crypto that listen to podcasts and that's fine but this is really important because you know whether you're into it or not this is a major exchange and people can say what they want but you can just google for banks large banks bypassing anti-money laundering laws or controls and you will not have

a hard time finding banks doing so for billions of dollars so to say this is a crypto specific thing i think people just i'm just saying that's it was correct what he did or was right i'm that's not what i'm saying at all i'm just saying that you know correct what he did or was right. That's not what I'm saying at all. I'm just saying that, you know, this is not specific to the crypto space. I remember, I think there was HSBC a while back. So I think the bank had a list of sanctioned individuals. And when they knew an individual that was sanctioned, apparently they would put a dot in his name or her name. So the system wouldn't see it and they could still do business with that individual and that's just an example you don't have to look very far to you

don't even have to look back a few months like td is expects penalties from a probe on money laundering and that was what like that was yeah that was like two months ago yeah yeah and that was part of wasn't that one of the reasons why their acquisition fell through? Was it Bank of the West or something like that? Bank of the West was Bank of Montreal. First Horizon. Yeah. Yeah.

So yeah, it's not just the crypto space. I mean, like I said, two months ago you go back and there's what the second biggest Canadian bank by assets is doing it. So, or is at least getting probed and expects penalties based on it, which pretty much means they've done something. So yeah. 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire. Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. Now we'll move on to some more Canadian news here. So BioSteel assets are finally sold. So it was a busy couple of weeks with earnings. I'm sure people kind of noticed. I mean, we're in the thick of earnings season.

So we hadn't had the chance to talk about this. Happened a couple of weeks ago. So the sale of BioSteel Canada assets will be, was concluded. Well, I mean, it was agreed by the courts, the bankruptcy courts. So the sale of BioSteel Canada assets are going to go to dc holdings which includes all of intangible assets and intellectual property biosteel canada formulas and recipes all inventory of biosteel canada and dc holding is apparently does business as coachwood group which is led by canadian entrepreneur dan crosby So it's, I mean, he's a bit of an interesting individual. I'll put it that way. Yeah. Oh, yeah. You agree with me on

that? Yes. I looked him up. Apparently, he's into real estate as a bunch of also kind of nutrition supplement companies. But one thing that really stood out to me, and I'm, you know, I'm not implying anything, but you look at his LinkedIn, you also looked at his Twitter, and it makes me think of like 2021 or 2020, all these like, trading bros that were like, essentially like, multi millionaire from trading, but they still had to sell you the $200 course to show you how to trade. And all these expensive Lamborghinis on their profiles and stuff like that, which is what he has.

But, you know, one would assume that he probably has a decent amount of money if he was able to purchase those assets. Clearly, they probably got a good discount for them because they were in bankruptcy court. But you know, that is looking like it's going to be resolved. And the second part of this is the sale of BioSteel manufacturing assets will be going to Gregory Packaging, which is a New Jersey based company in the US. So it looks like finally Canopy growth.

Canopy will actually be, you know, kind of rid of those assets that were clearly a money drag on the business. It'll be curious to see, like, how much this guy paid for them. Because, I mean, I guess that'll come out eventually. There was no price, was there? No, it wasn't disclosed yeah maybe i should reach out to

him on twitter but i he had posted something about the sales for one of his business and how they were like real quick and i was like well what are your probably and he was like ama when you ask me anything so i responded i said well what's your your margins looking like because sales are all nice but if you're you know you're not making any money with it oh yeah if you're losing money yeah and he gave me a non-answer so i would i would assume that he would probably give me a non-answer if i asked him for oh yeah i wouldn't doubt it that was another strategy among a lot of those uh a lot of those guys is you know post revenue and don't mention anything

else we talk about how you can just push out all these sales but it's uh yeah i don't know this he's he runs i mean i don't know how successful they are but he runs a bunch of like companies that would probably make you feel like he could kind of do something with this like so he started canadian protein which is one of the largest protein websites in canada for like online ordering of protein and then he's he's got a whole bunch of other nutrition companies a lot of them i i kind of looked up and it doesn't seem like they do too much but again i i don't really have any idea and then he even owns a golf course i think that's fairly recent he bought a golf

course in like in windsor a few years ago and uh so he runs that yeah it's i don't know how my curiosity was eventually what canopy would sell this for but you might never yeah might never find out so yeah no i mean i i say that I just find it funny that the background with the cars but apparently he's a car enthusiast that's what he calls himself he's an enthusiast but it is weird on your LinkedIn profile to have that

Twitter you know that's one thing but a LinkedIn profile but anyways best of luck to him I do hope that it works out clearly I mean he's clearly doing something right hopefully he does good with him. I do hope that it works out clearly. I mean, he's clearly doing something. Oh, yeah. Right. Hopefully he does good with bio steel.

I do like it. Yeah. Yeah. I don't mind it. I mean, I'm not like I don't mind their products, but I'm not like I'm pretty agnostic in terms of brands when it comes to that stuff. So I could easily switch to something else or go with that. I'm kind of very much price-based.

And typically for me, it's more for kind of electrolytes, BCA kind of stuff. Protein, I kind of stick with vegan protein because I don't digest a whey protein very well. Yeah, I find with BioSteel, they either taste pretty good or they taste like cough medicine. There's a few of them that are just gross. Yeah, eh? But yeah, hopefully he does well with it. No, exactly. So do you want to tell us kind of an overview of Black Friday sales?

I know there was a lot of data that came out. It's crazy how quickly it comes out right after Black Friday. It would be nice to get Amazon's numbers, but they didn't have anything. Shopify, on the other hand, and MasterCard pretty much report like it's like the day after. I think even MasterCard was like kind of the evening of. But Shopify reported $4.1 billion in Black Friday sales. You'd think that was so many Canadians feeling the pinch that spending would slow, but it's a 22% increase from last year's black

friday and i'm not exactly sure if this is same i guess you could say same store sales because uh with the addition of shopify merchants with how fast it's growing in combination with just overall inflation like this might not actually be as big of an increase as you'd think, but I don't know how Shopify reports that data, if it's total or if it's just, you know, if they're looking year over year, if it's existing versus existing, there was a clear shift to online shopping just quoted by MasterCard. So they reported in-store sales were up only 1.1% while online increased 8.5%. And Shopify had said at one point, the platform during the peak earnings time of the platform, it was generating over $4.2 million in sales every minute. So obviously this isn't profit for Shopify. This is solely just a revenue from the

merchants, but those numbers are still pretty crazy. What will be interesting is holiday spend. And I think the company kind of has the same viewpoint as me. They stated that same, that more sales are shifting online, but they also said that more sales are becoming upfront at this point in time, maybe indicating that a lot of people are doing more of their Christmas shopping right now, or just even possibly, you know, sales that are brought in from earlier Black Fridays. And like, this makes sense because like the constant reinvention of like promotions these days, like Black Friday is always like, you know, pushed a week forward, you know, some companies then will do, you know, all of November is Black

Friday sales. Like I was kind of joking around that eventually Black Friday is going to be in July because every single retailer is just going to try and jump the gun on the other ones. So I mean, from what I've read, there's no online platform capturing market share in this space faster than Shopify. And the company is ripping in 2023, it's up over 105%. And the crazy thing is it's still down over 50% from its 2021 highs. And I mean, for me, I don't really buy too much into the Black Friday. I think a lot of deals are kind of fabricated. They're not as good as you're kind of led on to believe.

I mean, I was actually looking at, I don't know how legit it was, but I was actually looking at, it was a Tik TOK video of that, of that girl that was pulling the, the signs out the black Friday signs. And they were the exact same price.

Yeah. I don't know how real that is. Like you can't guarantee if it's true, but I mean, I would not be surprised, but I do do a lot of Christmas shopping around this time of year and not so much in the holidays. So I could definitely see if prices are good now, like holiday spending might not be as high. But yeah, I don't know your thoughts on it.

Yeah. Yeah. I mean, the way I see it, I tend to like keep an eye on what I'm looking to buy. So I do have a good gauge on whether like it's an actual sell or not. And they're not just not trying to get you. And one good example is, and I think for people to a reminder. So we bought a new snowblower kind of a full, you know, electric, but battery. Oh yeah.

Yeah. So kind of a pretty big. Yeah. Like, so I'm just cause they less maintenance and, you know, just easier to operate, don't have the gas and all that stuff. And we ended up, there was one with a Black Friday deal and one without. And the one with the Black Friday deal was essentially the same thing, but just slightly larger batteries. But it was $300 off. But then when you kind of looked at the price of

the batteries and everything it wasn't that great of a deal so we ended up buying the one that was cheaper but not on a black friday sale if you'd like so that's why like i do agree with you sometimes it's a bit misleading and just just have a sense of what you're actually buying because i think a lot of people will say oh you know i know, I was going to get this, but this one's not on sale, but, you know, I can pay, you know, 10% more and this, you know, fancier version is 25% off, but you're still paying more and oftentimes it's stuff you don't really need anyways. So, the extra thousand whistles, right? Oh yeah, for sure. And that's what, I can't remember what the data, I was reading into the data, but they pretty much said that it was like you know a lot of that stuff was seeing

a decrease whereas like kind of more essential items were seeing like a pretty good like no uptick but again i think like you know the headlines will read 22 growth but as i said like with inflation being up what is it up over the last year like the cost of goods have gone up quite a bit and then you know shopify's added a lot of merchants as well so i think you know that 22 take it with a grain of salt i mean it's i mean i know last year amazon reported some pretty crazy numbers it'll be it'll be interesting what they report this year yeah really when we in february we'll really know that's when we'll start seeing the numbers from all of q like the calendar q4 i know some businesses report in different financial years but we'll really see the full picture on whether

you know it ended up being that a lot of stuff like you were saying was pulled forward into Black Friday and then sales will be very slow for the next month or so, or it was a sign for things to come and sales were actually quite good throughout the quarter. So I agree with you. I think right now it's a bit anecdotal. We won't know the full picture until usually that's about it, right? Companies start reporting in February, I would say. Yeah. Yeah. No, that's good it, right? Companies start reporting in February, I would say.

Yeah, yeah. No, that's good. A good overview. The last thing I think we'll talk about today is, did you see this? That Wealthsimple will now offer private equity investment to some of their clients. I actually am with Wealthsimple. So I got this notice.

It seems pretty interesting. I mean, I haven't had a lot of time to look into it. So you must be a premium or a generational investor i get free u.s dollar accounts yeah oh okay there you go so before we joke too much on it i'll just explain to people how it's supposed to work so so wealth simple unveils that it will have a new private equity option. For those not aware, private equity, it's essentially a way to invest in typically used by institutional managers. So think about like pension funds, endowments, you know, there's all different kinds of institutional manager and they'll invest in private equity because private equity will be investing in businesses that are not publicly traded. So typically you have kind of the private

equity, which tends to be a lot of leverage buyouts, which they tend to use a lot of debt to buy out companies, whether they're public or not, but essentially buy it out as a whole. You might also have venture capital would be kind of a type of private equity. And then there's another one I kind of escapes me, but real estate, you can have private real estate that is just essentially private equity for real estate. So long story short, it's not really accessible generally for retail investors, according to them. And I don't have any reason to say that's not true or anything, but typically it requires an investment of at least $100,000 to be able to have access to private equity. So here, what Wealthsimple will do is that

clients that are part in their premium kind of type of accounts with at least $100,000 in assets or generation accounts or those with $500,000 in assets or more, they will have access to this. It's a 10K minimum investment, and so it's relatively accessible compared to the $100,000. It can be held in an RSP or TFSA non-registered account. It's offered through LGT Capital Partners, which according to the site has returned 18% returns since 1998. However, these are gross returns and do not include fees. So for me overall, I mean, I'm very critical of private equity, typically, generally, and I'm actually listening right now to the myth of private equity. It's an audio book. And so the myth of private equity, an inside look at Wall Street transformative investments. And what really started being a bit suspicious when it came to private equity is that last year I was doing preparing for an episode with Dan Foch from our real estate investment. And I started

researching, came across this piece from the National Real Estate Association of Real Estate Investment Trust in the US, so NARREIT. And one of the research was kind of a recap of 2022, what to look forward in 2023. And they compare the returns of publicly traded REITs with private real estate returns which is like I mentioned private equity for real estate and the discrepancy was absolutely massive it was it was insane so they compared a publicly traded REIT index and a private real estate fund. And the former had losses of 28 percent and the latter had seen gains of 13.1 percent with a spread the difference of 40 percent in returns. And that's one of the big criticism of private equity is because it's private, there's a lot less deals that are done compared to, you know, when you're publicly listed. I mean, the value is

there traded daily and there's a high volume. So clearly you see where the market is at. Private equity or private real estate, sometimes like especially commercial real estate right now in the private area, there's not a lot of deals being done. So it's very difficult to establish the value. And from what I've read so far, is that these private equity fund managers tend to be on the more optimistic side of the valuation of their assets, whether our businesses or actual real estate. And there's some real questions in terms of, you know, what the actual returns are, are some real questions in terms of, you know, what the actual returns are, how they're calculated, because they essentially, you know, their returns are based on the exit strategy that they have for these private equity investment. And if those don't come through, then, you know, their estimated returns are just smoke and mirrors. So I'm going to be researching more private equity. I'm sure

I'll do some segments on that in the new year. But it's something I am, I'm a bit kind of reticent on and a bit reluctant because I, it almost feels a little bit like the mutual fund industry where they, they charge a lot of fees and, you know, people just kind of believe that, you know, they're giving good returns and don't ask too many questions and they pay those. Yeah, I mean, I think I can't remember the page I was on this morning, but it said something about like net gains of 10 and a half percent. So if you look at gross gains of 18 versus net, I mean, you're probably paying a lot of fees to invest in it. of fees to to invest in it and i mean in terms of that that reit index in 2022 like 2022 is like the worst year for reits in a long time like while you were talking i looked up the returns of of like zre and xre which are the they're kind of equal weighted reit indexes and yeah they lost

like they lost 20 25 in 2022 so for like a, they post gains of 13.1%. I mean, that's, I don't know. It's kind of strange. I mean, they sent me the email and I didn't really look at the structure of what they offer, what exactly this LGT Capital Partners exactly does. I mean, I guess the one thing like aside from the private equity is you kind of have to, you know, give Wellsimple, you know, an ovation for bringing in all this type of stuff. Like they bring in this private equity, which, you know, retail investors just really never had a chance to get exposure to prior to that. While not, I shouldn't say all retail investors, but you know but a lot of the people who are with Wealthsimple Trade, they've reduced a barrier in that regard. Fractional trading,

commission-free and fractional trading. What else did they do? I mean, the share lending. Yeah, they've done a lot of good things. Yeah. I mean, for me, I'm more critical. Yeah, the share lending, talked about that before. No, I think they've done a great thing to democratize investing in general. What I have issues with is just private equity in general. The more I read on it, the more I'm like, wow, this is this just seems like a way for fund managers to extract more and more fees like it doesn't. I mean, I'll read more and i'm more than happy to be proven wrong but the more i read on it the more i feel like the returns are not what they appear

to be in a lot of these cases i'll have to do a little bit of reading too like i dove into it this morning and i was looking at i had found like the structure of their returns and their fees and the fees seemed they seemed absolutely ridiculous like the amount of fees that they were taking so oh here it is so along with a standard 0.2 to 0.4 wealth simple management fee the investment will be subject to other fees on the underlying managers for example the investment with lgt will be subject to a 1.5 management fee and a 12.5 performance fee calculated and payable on a deal by deal basis, provided the deal earns at least 8% return. So like what I would be

interesting is, is that 12.5% on the gains? It would have to be. You know what I mean? That can't be 12.5%. It's got to be 12.5% of the profit. On the whole. You would think i hope so i mean but they still get that 1.5 regardless if they lose money or not so that's why and that's in line with what i've been you know that book i'm referring to i'm about a quarter of the way in and that's exactly in line with what they're criticizing private equity with is just these fees. And you have a lot of these pension investment boards where oftentimes, especially companies, you'll have union reps that are there that don't know much about investing. So clearly, like they they're there to supposedly, you know, be account like, you know, the investment manager supposedly accountable to them, but you have people that have little to no investment knowledge. So how can you

ask the right questions? And that's one of the big issues. But I feel like we've touched on something that we'll both be pretty passionate about. We'll probably have to do a segment on this. Maybe during the holidays, we can look back at private equity and have one of our kind of evergreen episodes while we're celebrating christmas with the rest yeah because this like even just reading this up like just the the cash redemption like the cash redemption uh they can suspend they can suspend redemptions in certain periods like it's a lot uh it's a lot higher risk i think than a lot of people than a lot of people think yeah think, than a lot of people think. Yeah.

Saw a lot of the cash redemption being halted during 2020. So private real estate fund, that was pretty widespread where people could not get their money out because the fund basically, there were so many people that could potentially take their money out that if they went ahead and did it, the fund would have had to sell assets at a loss. So they basically freeze a cash redemptions. So that's essentially it. But I think that's good for today. I mean, we had a couple more segments to do, but we can do those potentially next week after we've, of course, talked about the rest of the Canadian banks earnings. Before we let people go, make sure

you give us a review on Apple Podcasts, Spotify, chat with us on Twitter. I'm at fiat underscore iceberg. Dan, you want to give people a little sign off before we close this up? Thanks for listening, everybody. If you want to follow me on Twitter, I'm at stocktrades underscore CA. Our website is StockTrades.ca and we have a YouTube channel. You can just head there and look up StockTrades. We're looking to get back into YouTube over the next while here. And yeah, again, thanks for listening. Okay. Thanks a lot, everyone. And we'll be back on Monday. Well, I'll be back on Monday with Braden with one of our regular episodes.

Thanks for listening and have a great day. 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.