The Canadian Investor - Six 2021 takeaways and CPP

Episode Date: July 12, 2021

In this episode of the Canadian Investor Podcast, we talk about: Six takeaways from the first half of 2021 including China’s big tech crackdown, the rise of commodities and meme stocks Why optionality is important when analyzing a business How the Canadian Pension Plan (CPP) works  Decision paralysis   Getstockmarket.com Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital https://www.canada.ca/en/services/benefits/publicpensions/cpp.html How to calculate your CPP pension: https://retirehappy.ca/how-to-calculate-your-cpp-retirement-pension/See omnystudio.com/listener for privacy information.

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

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We're going to talk about our takeaways from the year so far as we do enter Q3 now. We've passed that halfway mark in July here. We're going to talk about things like optionality and CPP and potentially decision paralysis later this episode. Simon, what's going on? How are you feeling? Because the Stanley Cup playoff run that deserves a lot of credit has come to an end last night. Feeling disappointed but happy with their run. It was a fun ride. Definitely unexpected. Didn't even think they would get through at Toronto on the first round so anything beyond that was great

and yeah they I'm sure they're disappointed too but they they should be proud. Oh, it was a hell of a run. They should be very proud. And they gave their fans some hockey to watch, which Leafs fans can't say the same thing. All right, let's talk about takeaways. I can't believe it's already July 8th. It feels like so much yet so little has happened so far this year. I don't know how to eloquently put that into words, but that's how I'm feeling right now.

And we talked about some of the things that we've been surprised about, some things we didn't see coming. So let's get right into that. I'm going to kick this off with my one takeaway of the year so far, and that the IPO market is red hot. There have been, as of yesterday, July 7th, 589 IPOs on the U.S. stock market. There's 589 IPOs on the U.S. stock market. This time last year, the IPO market, there have been 102 listings in the U.S. I'm kind of coupling this with another takeaway, in that in this hot IPO market, it is a good time to be an investment bank. Let's be honest. I'm tying this into my second takeaway, it is a good time to be an investment bank. Let's be honest. And I'm tying this into

my second takeaway, which is Wall Street banks are reporting outrageously good numbers. They're doubling their dividends. You can just see how well the big banks, both in Canada and the US, have performed financially during the pandemic and through the recovery. I find that very surprising, especially because the market kind of discounted them so hot out of the gate because they are so sensitive to the macro environment. And we've seen banks here in Canada and in the US record some pretty stellar numbers. And now they're just doubling the dividend, which is pretty insane and seeing some good growth. And I'm wondering in the second half of this year, that all of a sudden,

And I'm wondering in the second half of this year that all of a sudden big banks become kind of in favor from that growth at a reasonable price crowd. Because it seems to me like that could be very feasible. Yeah, yeah. And that's definitely a good point. Banks have been doing quite well, probably surprisingly well, especially given the low interest rates and ipos have been through the roof and that expands to spacks right we've talked about that a few episodes back i think it was at the time around 400 spacks that were looking for acquisitions and if you're not sure what a spac is a special acquisition purpose company um look uh look back at our past episodes. I kind of break them down, how they actually work and the inner workings of them,

but it just kind of adds on to what you said about IPO. There's a lot of movement in that space. There sure is. So my first takeaway, so we've talked about oil before. So I did a bit of research before the podcast. I wanted to see how well oil has performed since the beginning of the year. I knew it performed pretty well. So it's actually outperforming the S&P 500.

Just for context, West Texas Intermediate went from $50 a barrel to $70 plus a barrel. The Western Canada Select Group has gone from $32 a barrel to above $60 a barrel. And please keep in mind that I did my notes a couple days ago, so it's very possible it moved a little bit since then. This should benefit companies in Canada like Suncor, which is up 35 plus percent year to date. Canovas, Synovus, I always mess up that name. Synovus. Synovus. They're up 55 plus percent year to date as well.

Obviously, they made a big acquisition last year with Husky Energy. And Imperial Oil is up 60 percent plus year to date. So we've talked about oil. We don't really invest in that ourselves for different reasons. But we've said it before a few times where it seemed like there was a lot of value in oil. And I don't think it's going to be going away anytime soon. I think very long term, several decades out, it's going to be trending now. But for now, for people interested in that sector, it's definitely performed quite well.

And there might still be some upside there as well. The oil co's have produced some pretty solid results this year. And it's that mix of the rising oil price, improving unit economics, and they were just so cheap. So you just needed some catalyst, like a recovery, like an oil price increase on something that's so beaten up that the market has just really had no interest in for quite some time. And you get some pretty solid performance across the board. So not surprising one bit. And that does lead into my takeaway for the beginning of this year, which is commodity

prices and this commodity boom. Commodity prices have been just absolutely wild. They've been affecting supply chains across the board. And you have this perfect storm type of scenario. You're being disrupted by shortages across various things like semiconductors to begin with. And you have this inflationary environment. So is it inflationary? Yeah, sure. I think so. Is it a strong demand as we recover out of a pandemic?

Yes, definitely. So it's this perfect storm of rising prices, inflationary environment, and the entire economy and almost every asset really rising across the board. And I think this is the just start of a trend, really. Now, before I get into some DMs on Twitter that are going to be like, Braden, I thought you don't invest in commodities. Look how well my Suncor energy stock has done. I thought you said they're bad investments. I know it's coming. I know these DMs are coming. Now, you might be right, but how on earth do you predict commodity prices reliably? Now, maybe in the short term, these kind of predictions pay off.

But Simon and I here are trying to execute a strategy that works for decades that is profitable and repeatable. The key word there is repeatable. Predicting commodity prices is not repeatable. If you've found a way to do it repeatably, let me know. That's a DM I'll accept. I'll field that one because we can become billionaires together. So in this same light, I'm actually surprised that both Bitcoin and gold have basically flatlined performance year to day. Gold actually is down about $1,000 an ounce, which I find surprising. And gold and Bitcoin have had very different paths through the years

as Bitcoin's crazy volatile as to be expected. It's at like 77,000 Canadian. It's like 77,000 Canadian. It sits around 42,000 Canadian. It just seems like the assets you'd expect to be on fire in this environment. So I'm tacking that on as kind of a 2.1 to surprising commodities and assets. Yeah, I know. It's a great point for commodities and people can probably relate to have been trying to do renovations or building anything with wood

right now it's extremely expensive um we're doing our fence at our our place in ottawa and we decided to go with a chain link fence because it was just crazy uh to go with the wood fans but it's just to show yeah commodities in general has done have done quite well it'll be interesting whether this keeps going or it's just kind of transitory like the fed likes to say i laugh when i hear that word these days yeah same for me um so my second one it's a bit longer point and i know you'll probably have some you'll want to chime in a little bit here so there's been a lot of news this week about China and its crackdown on big tech more specifically Didi which is the ride-sharing company I'll get back to Didi in a second so China's been intervening more and more into companies that it sees that's monopolistic and not in line with government. The new rules are fast emerging, and China's wealthiest tycoons,

they have to not publicly criticize the party. They have to keep a low profile. They have to give workers a fair shake and make state priorities your priorities as a business owner in China. So that's really important. And that's where it really diverges from Western world, the US, Canada. So those are things to really keep in in mind when you're investing in China. And I'll give a bit more examples of this. So DD, like I mentioned, the ride sharing company, which is the Uber of China, if you'd like. They have close to half a billion subscribers.

Earlier this week, their stock plunged in pre-market trading after Chinese regulators ordered the removal of the company's platform from app stores days after a $4.4 billion U.S. initial public offering. US initial public offering. Shares of the China-based tech firm fell as much as 30% on the news to $10.90 a share. They wiped out about $22 billion in market value and they actually traded below the $14 IPO price. The Cyberspace Administration of China barred new users from Didi's app, so new users cannot sign up, citing security risks and tightening its grip on sensitive online data. Didi, which has an American depository receipt, began trading on New York on June 30th, and they said that the move may have an adverse impact on its revenues in China. So I think that's a bit of an understatement right there.

person back on its revenues in China. So I think that's a bit of an understatement right there. And I've seen quite a few articles saying that Didi actually knew this was coming, and they rushed to do their IPO because they wanted to allow their VC investor to take profits off the table. So take that as you may right there. Some other examples of what's been happening in China in the past couple years. Everyone's heard of the anti-IPO and Jack Ma. If you haven't, the brief of that is Jack Ma went missing for a couple of months when he criticized the Chinese government in October 2020. A few days after that, the anti-IPO, so their financial arm of Alibaba, that, the anti-IPO, so their financial arm of Alibaba, the IPO got cancelled and Jackma, like I said, wasn't heard or seen for several months. In addition to that, the digital yuan, which is a CBDC,

a CBDC is a central bank digital currency, is currently being tested in China, has been testing it for several months now. It's suspected that it will allow Chinese government to monitor even more closely the financial activities of its citizen. It could also pose a competition to some of the big fintechs in China like Alipay and WeChat, which currently account for about 98% of the mobile payment in China. It's also possible that they will integrate the digital yuan to those platforms so that's something to keep an eye on. Another example of China crackdown recently was Meituan, their large online shopping platform. There's been several different municipality

regulators in China that have fined Meituan so far this year and it might be a sign for bigger intervention from the Chinese government to in the near future Even Apple was eventually forced into having their data for their application and what people Correspond on their iPhones and so on iCloud stored in China and easily accessible by the Chinese government It's a bit opaque what happened here, but all signs point to Google basically agreeing to do what the Chinese government wanted over there. Apple, you mean, right? Yeah, Apple.

Yeah. No, you said Google. Oh, sorry. Yeah, Google's not. I think several years ago, they took the decision not to be in China for similar reasons, I guess. And Apple has also been removing apps on their App Store as required by the Chinese government. So we're really seeing a trend here with the Chinese government. And another thing recently that came out is recent regulation in China forced about 90% of Bitcoin mining operation to shut down.

So not to go into detail about the impacts on Bitcoin and so on. It's just another example of the control that the Chinese government really wants to have. And forcing companies to basically being in line with state priorities like I mentioned earlier. And this has really been emerging since Xi Jinping has come into power in 2012. So he's really shown his desire for the Chinese government to stay in control even more than its predecessor. And if you research this a bit more, you'll see other examples, not necessarily in fintech, but in other industries in China, dating back to 2015, 2016. And, you know, in the past six, seven years, examples like that, where China's really kind of puts an imprint on the different businesses and

making sure they fall in line with the government. So whether you see all of this as a an opportunity to invest in chinese companies or big tech in china that's up to you to decide one of the things i would recommend people think about is that they may look very good value compared to u.s big tech but keep in mind that there is a discount because of all these risks with doing business in China. And what you really have to ask yourself is, will the multiple expansion really happen in the future or not? Or will this always be a factor in terms of the big Chinese companies, especially the tech companies? There's a big discount applied to them, and that's just the way it is. It will continue in the future, and you a big discount applied to them. And that's just the way it is. It will continue in the future.

And you should not necessarily be comparing them to their U.S. counterparts. I believe that to be a good take. And I guess the way that I'm looking at this is these risks exist. You need to be aware of them. When you invest in Chinese companies, you have to realize that regulation, the way they look at business and the way that the CCP controls a lot of what goes on around there is something that you need to be aware of and that is a risk that is out there. If I'm right, and when I say if I'm right, is that I mean, I think right now, I am comfortable with the risks that exist out there in investing in a company like Tencent. The ADR delisting is a factor. You know, their crackdown on big tech is if that narrative act you don't believe to be true because they go out of their way to make Tencent more monopolistic for better or for worse. I don't know if they have good or bad intentions around that, but I'm telling you, they go out of their way to make Tencent and WeChat monopolistic as hell. Maybe it's just one data set for them to look at when they look at their citizens. I don't have any particular hot takes there.

But at this valuation, big tech like Tencent and BABA feels like a fat pitch across the plate. Now, you're right. The multiple expansion may never come because these risks exist. Or things go really south for the US listings or the ADRs. I don't even know how all of that really plays out. That being said, I'm comfortable with them right now. And a company like Tencent that is the super app and ingrained in every single Chinese citizen's life. Like they have 1.2 billion daily users. If you do the population on China, that's almost everyone. They're the largest gaming company in the world. They own over 700 businesses around the world. They own major stakes in businesses like Spotify, Snapchat, Tesla. And it is an absolute behemoth.

I'm comfortable with the risks. I'm getting all kinds of questions about this. Tencent is a big position for me. I'm comfortable all kinds of questions about this. Tencent is a big position for me. I'm comfortable with the risks. And at this valuation, if I'm right, I'll remind you when Tencent traded at $68. I'll be the first to remind people on this podcast that Tencent traded at $68. And maybe shit hits the fan.

If no other way to put this. That could happen. You know, I'm not perfect. I no other way to put this. That could happen. You know, I'm not perfect. I'm never going to get everything right. But I don't know, man. This feels way too cheap. Yeah, I mean, that's a really good argument. For me, it's more being aware of those risks.

I'm definitely seeing some trends in the direction that I don't love from the CCP. And that's what I really wanted to highlight here. I own Tencent. I own also K-Web ETF, which has pretty much all the big tech Chinese companies in there. It's not a huge portion of my portfolio. I may add a tiny bit, but I will probably keep it a decent but know, decent, but not a big portion of my portfolio because of some of the risk I see in China. And the biggest thing for me is just the Chinese government can really act unilaterally for certain, well, if they want to change something or impose regulation, whereas in the States, for example, or Canada, if you want to impose regulation, let's say in the States, you'll have to need you'll need to have

Collaboration between both parties and we know how that can be difficult in the States Especially right now and if there's an investigation it will go to court There might be some it might take several years So there they're really very two different playing fields and I think that's probably the biggest risk in my mind. And look, it may end up being a great value play. But there's definitely some, some more risk. And you just need to be aware of that. Yeah, there is there is like, the price deserves to be trading lower because the risks have massively increased. Let's not kid ourselves. 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. Okay, my third takeaway, kind of surprise on the year, is the good old meme stocks and trading volumes. And

we haven't talked about them on this podcast that much because it's just really not our style. I mean, if you want news about these meme stocks, you don't have to look very far on the internet. But I am surprised. I am honestly very surprised that meme stocks and trading volumes are still so high i mean during the height of the everyone stay at home order sure but the u.s is like fully back to normal now and when i say i'm surprised meme stocks are so high. I mean, I'm surprised that the same meme stocks are so high. I did expect, you know, the same crowd chasing bubbles to pile into new names, you know, whatever that new hot Wall Street bets pick of the day. But it's still AMC and GME. It's still AMC and GameStop. AMC is up over 2,141% year-to-date, and GameStop is well over 1,000% year-to-date performance. So I expected folks holding the bag on these to be absolutely

wiped out. And it turns out if you just went to sleep you actually keep making money um this is very surprising to me i don't i don't know when does it end right like i think amc trades for like eight times sales or something it's a big business for yeah yeah like for a business that's in structural decline terrible unit economics uh capital intensive like it's not a great business suffering from people you know switching to streaming uh you know an eight-time sales multiple i better be seeing like 50 year-over-year sales growth or like a super wide moat high margin cloud stock this is this is on this is unbelievable man yeah you can even add like a doge coin to that as well right that's just yeah it makes no sense at all we'll see where it ends

i mean i just don't want to be held holding the bag when it starts going down so i'm surprised that the people holding the bag aren't completely wiped yet. They keep making money. I'm just saying names. It's entertaining, at least from looking at the sidelines, and I'm more than happy just looking at that. Even if GME goes 3, 4, 5x from here, who knows? I'm just interested in seeing what happens there. So my last one, my last takeaway for the first six months of the year, I've talked about this before, Canadian infrastructure movement. So there's been some activity in that space. BIP, Brookfield Infrastructure Partners, they offered to acquire Interpipeline. They're competing with Pembina Pipeline. So it started with Pembina.

Pipeline. It started with BIP offering a hostile takeover. Pembina came along and then offered a mostly stock offer to Interpipeline. Then BIP came back with a better offer and had a significant component of cash. Then they made that all cash recently or however the shareholders want to decide so it'll be interesting um you know to see if there's more coming up this year there's a couple others of notes so cnr and cp competing for kansas city southern it looks like there's more and more support for canadian national rail for to make this acquisition. They've had letters of support from the Kansas City Business Association. They had tons of other support as well.

I mean, ultimately, it will be up to the U.S. regulators to decide whether they allow that to go through or not. I certainly hope they do allow it because there is a pretty salty breakup fee, which CNR has taken a lot of flack for. The last one of note is TC Energy cancelling the Keystone XL pipeline after years of legal battles and obstacles for the pipeline. That came out recently. They're also initiating a claim for $15 billion under NAFTA against the U.S. government because of their decision to cancel it in the U.S. And the last thing with infrastructure that will be interesting to see is if we'll see new pipelines being built in the next, let's say, five years.

Because I don't think we'll see a lot of them being constructed personally we may see some existing one that are deteriorating and that would be I have in mind the line three from Enbridge here that needs to be replaced because it's causing environmental issues so we might see that but I don't think we'll see a lot of new pipelines get built. That's just my quick take on that. Yeah, it's unfortunate, which you might be like, why is that unfortunate? Well, folks, I'm an environmental engineer. I worked in energy for several years. And the unfortunate part of environmental control is the thing that governments decide to do to limit environmental impact usually result in actually more emissions. and actually more emissions. So when we think about pipelines, they are a net reduction in greenhouse gases. If we were to move all of this via rail and truck, and you know, rails like full capacity, if you were to take this excess capacity and move it via truck,

move it via truck, you end up with more greenhouse gas emissions. And so, you know, I get really salty when I see in financial markets, poor ESG, like, you know, I see these funds that are ESG and it's just Facebook and Google's their number one holdings. It's just like, okay, here's an S&P 500 with a higher management fee that we're saying is environmental sustainable for you folks. So I think of this in the same light where it's just like, yeah, it's the fluffy, oh yeah, look, we're doing good for the world, but really scientifically is not backed by any real science or real metrics or someone with a background that can poke holes in this stuff all day. I digress. Those are our six takeaways so far of the year. Okay, I have a section on optionality if you read my top picks reports for members

on stratosphere you'll see i talk about this word optionality a lot like like a lot a lot i pretty much talk about in every business that we discuss now optionality is by definition, is a quality or description of being available to be chosen, but not obligatory. Now, as investors, we have lots of optionality in our portfolios. We have tons of investment opportunities, specific stocks, different stocks different investment strategies asset allocation the list goes on however oftentimes this leads to decision paralysis which i hope we can talk later about on this podcast but first i want to discuss what i mean 99 of the time when i'm referring to optionality is when i'm talking about optionality within a business. Optionality for a company is their ability to expand their total addressable market

by introducing new products, new services to new or existing markets. optionality within a business has been a very common characteristic in stocks that win very big. Okay, so I think this is well understood with some examples. So let's give some of those. The business we all know and love very well has had tremendous optionality through their rise to this $2 trillion in market cap behemoth. And they've had optionality to monetize customers in new and more creative ways. Let's think of the service side of the business now, which makes up a significant portion of revenue and a lot of the margin, iCloud, App Store, Apple Music, Apple TV, and lots, lots more. Now, these high margin services they introduced didn't exist at one point. And think of how much the business has changed, but they've had

optionality of entering new verticals, new features, expanding their overall market opportunity. That's how they've gotten so big. They don't just do the personal computer anymore. The personal computer is a huge market, but think of all the optionality in expanding their total addressable market over time has become. All right. Now there's tons of technology examples of companies entering new markets to their existing customers and winning in a major way. The most classic example, Amazon with Amazon Web Services. AWS is doing $50 billion in revenue right now. Now the 10x sales cloud multiple, which, by the way, is very normal in the stock market,

maybe even on the low end, AWS is a $500 billion business on its own. That's absolutely absurd. Google, Google Maps, Google Cloud, Google Suite, the million other things they do, that wasn't part of the core search business. Look how they've entered those markets. Microsoft, you know, Microsoft Teams has taken, you know,

the workplace environment by storm. Azure, their cloud business is an absolute behemoth. Those didn't exist. Azure, their cloud business is an absolute behemoth. Those didn't exist. Now, these are dominant products in their category. They're not just like a constituent. They are the leaders in these products. And they didn't exist in the core business not so long ago.

Now, let's think of some other examples. Spotify. The upside for Spotify is that they have optionality in concert distribution, live audio streaming, podcasting, exclusive content, both on podcasting and new music, to name a few. You know, those didn't exist when they decided in Sweden that we're going to make a streaming app. Let's use a non-tech example. Coca-Cola.

They've had the optionality to enter new drinks, new markets organically and through acquisitions. Now, Coca-Cola kind of wraps up this whole concept here that we've seen in tech as well. What is the common theme to optionality here? It's distribution. Coca-Cola can serve drinks all over the world immediately after acquiring some brand because they have this insanely powerful distribution channel. They probably have the most impressive distribution channel of any physical product in the world. And they have this supply chain and distribution competitive advantage. So distribution is everything. And this is also why big tech has been this winner take all scenario.

If Google launches a new product, they are the gatekeepers of the internet in the Western world and can get it in front of eyeballs overnight. Think of how big of an advantage that is for them to enter new markets and have this optionality when they have this distribution. And not to mention the amount of cash and capital they are producing producing day in day out to actually execute on some of these ideas um optionality is something that i look at intensely and is a very common characteristics in in companies that go hundredfold in the old hundred beggars book yeah yeah we'll put i mean i'm just thinking when you mention apple the good old uh apple um what was it the the music player my god i had the ipod the ipod there you go the ipod i remember the first one i had was so huge you could only like

download a certain amount yeah like limited storage i think it was a couple of thousand songs thousand songs and then i would just get uh you know too lazy so i would just listen to the same songs over and over oh yeah yeah so i think my ipod had like 85 songs for like many years yeah there you go and it's like one day you're feeling an artist and you just re-listen to their uh to their high school braden can only listen to so much Linkin Park. Yeah, for me it was probably Jay-Z over and over quite a few times. Oh yeah, that's good. That's good stuff.

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. money visit questrade.com for details that is questrade.com now let's talk about cpp i've been getting some questions about that so people asking a bit more how it works what uh you know just to understand a bit more what it is because it's thrown out there quite a bit so cpp the canada pension plan was, was designed to offer Canadians a portion of their income when they retire with a cap. So there is a cap to the amount that you can receive. It is a government-sponsored defined benefit pension plan that is indexed to the CPI.

CPP is taxable income when you start receiving it. So in terms of contribution rates, so the contribution rates in 2021 were 10.9%, 2022, 11.4%, 2023, 11.9%. Bear in mind that this is shared between yourself and your employer. If you're employed, if you're self-employed, then there is a tax deductible portion. So you're responsible for the whole rate if you're self-employed, but you can tax deduct the other portion. So how do payment works? Payments are dependent on the following factor, the age you decide to start your pension, how much and for how long you contributed to CPP, your average earnings throughout your working life, and payments are capped for higher

earners like I mentioned. The formula is based on the number of contributory months NCM since you turn 18 and will automatically remove up to eight years of what they call dropout years where you had the lowest salary during those contributing years. So obviously, people tend to have higher earning years. And sorry, I'm missing my words a little bit. We're recording quite early this morning. So people can tend to have their highest earning years later in life. We're getting you all the words that are hard to pronounce with your... Exactly. At 8.30 a.m. recording, it's not easy. So those highest earning years will tend to come when people are older in their 30s, 40s, 50s, even 60s. So you're removing the ones where you may have been working that minimum wage job when you were younger, for example. So they'll automatically remove those eight years. This maximum someone can receive in 2021 age 65. So if you're starting at the base age is $1,203.75.

However, the average monthly amount in 2021 was $619.44. So roughly half that. So what happens if you start payments before age 65? So you can actually start the payments as early as age 60. So your payments will be reduced by 0.6% for each month in which you start collecting CPP before age 65. So that means if you wanted to start at age 60, the minimum age requirement, your reduction will be 5 times 12. So 60 months times 0.6. So that's a 36% reduction to your benefit. The reasoning is very simple, very similar to defined benefit pension plan. If you have one with your employer, for example, the earlier you start to collect, the longer you'll typically

start, you'll collect the pension. So the pension plan, in order to make sure they're properly funded, they put a reduction on that to essentially reduce the risk. So the pension plan in order to make sure they're properly funded, they put a reduction on that to essentially reduce the risk. So that's the reason there's a reduction. So now the opposite of that, if you start your payments after age 65, then your payments actually will increase by 0.7% for each month that you delay taking CPP. The latest you can start is age 70 and this means that if you start at age 68 for example you'll get 36 months so 36 months later three years obviously times 0.7% so that's a 25.2% increase. So that can be pretty significant. If people are wondering how can they know what their benefits will be, so I will put a link that describes how the actual formula works. It's a quite a long article to figure that out. But the good news is you don't have to do the calculations

yourself. You can just go to your MyServiceCanada account and get an estimate of your CPP retirement benefits. I would mention to anyone that's not close to retiring to be very careful. For example, say you're 45 years old, you go and you want an estimate. It won't be accurate because it will not have some of your best earning years. It'll be very misleading. So I would, you know, take it with a grain of salt if you're going to do that. And you're, let's say, 5, 10, 15 years away from actually retiring. The main question that I can see people sending in me DMs or reaching out to me is should should I take CPP early? Should I take it at age 65? Or should I delay it? So there's not really an answer that I can give you for that. But here are some things that you can think about that are very dependent on your own personal

situation. What does your health look like when you retire? So are you healthy? And what are your typical health risk factors, longevity, your, you know, your parents, parents your family how long have they lived and so on so do you think you'll still be healthy well into your 70s 80s that can have an impact on when to start to collect cpp how much other retirement income do you have do you have a defined benefit pension do you have rsps or a defined contribution pensions, for example, maybe you can afford delaying a few years your CPP and getting that extra income because you get the increased benefits because you have other sources of those income. But if you don't have a significant RRSP, DC pension, TFSA, obviously, DP pension, then maybe it makes more sense starting a bit early. It really depends on your own personal financial situation

and ultimately what you intend on doing on your retirement. Because a lot of people, when they're younger, they'll, for example, travel more, maybe play more golf, like I'm sure Braden will do when he's retired. I don't know how I can play more golf. That's the problem. Yeah, but they're just things, right? If you're well into your late 70s and 80s, you may still be healthy, but you might not be able to do some of those things just because of certain physical limitations, for example.

So these are all things to keep in mind when you're looking to decide to start cpp i know it's uh it's not it's just a general overview i could have gone way more into detail with cpp but this just a good way for you to to wrap your head around if you're you're looking into that yeah well put so maybe if simon's correct i can start golfing twice per day upon retirement. If your body can handle it. Oh, I'll be fit. Don't worry. Don't worry.

All right. Last segment of today's show. I'm going to do something on decision paralysis. So when we go back to the thing I was talking about earlier, which is optionality, we also ourselves as investors have optionality when managing your own portfolio. I guess the problem is perhaps too much optionality. Decision paralysis occurs when we select from options that are difficult to compare. Simply stated, decision paralysis can be described as having a tough time choosing between action A or B,

and we end up picking action C or doing nothing at all. So in investing, there are so many options, so many different stocks, so many different allocation strategies, so many different assets. How do I pick them? So it's a difficult problem out of the gate. So if you're struggling with this, it's a difficult problem. This is what makes investing nuanced and difficult. But overall, it's a good problem to have. Options are good. Now, the next fact of the matter is that we can't own every stock. And if you want to just own every stock, buy an index ETF, call it a day, sleep just fine at night. But if you want to pick great businesses, you're going to be presented with all kinds of opportunities. You can take some of them when they come across your plate,

you know, that fat pitch analogy, but you don't have to take all of them. As Warren Buffett said, there are no called strikes in investing, so you don't always have to be making moves. You can dollar-cost average the companies you know well, you have high conviction for their success in the future. So I was speaking with my newest employee at Stratosphere, Adrian, who is absolutely killing it, by the way. He's a great analyst

for Stratosphere members. He writes some awesome reports. He's doing one on Amazon right now. And we're discussing the business over a Slack discussion, and we were just thinking about Amazon Web Services. And it's like, wow, Amazon Web Services this decade, like mid-decade, can easily hit $100 billion in revenue. Now, at that 10x high-margin cloud SaaS business we were talking about, you're talking about 10x revs, and have a trillion dollar company this decade, like quite easily, which is like mind boggling to think about

Amazon and sum of parts when you have a company with a segment that is probably going to hit a hundred billion dollars this decade. Whoa, it's actually crazy to think about that some of parts, that one segment could be worth a trillion dollars. So I'm thinking, okay, I'm probably an idiot. Like I'm typing this on Slack. I'm like, I'm an idiot. I don't own it.

And he's like, man, you've been crushing it. You've been absolutely crushing the index for stuff I feel really stupid for not owning too. Like Constellation Software, for instance, probably the nicest looking chart on the history of the TSX. And I was like, man, you're right. You know what? You can't own everything. And decision paralysis will eat you alive because you got to just make the decisions on things you have high conviction in, make sense to you, match your personality, and dollar cost average them over years. not owning Amazon. And that opportunity arises, then I'll take it. But if you are looking at opportunities every single day, you're probably going to overtrade. You're going to suffer from decision paralysis. You're going to fall for shiny object syndrome. Next thing you know, you're going to have 50 stocks in your portfolio. When realistically, the best ideas you own, the best ideas out there might be things you already own. That's one of the best advice I was ever given to me. When I sat down with Barry

Schwartz, who's a chief investment officer in Toronto, I sat down with him, he said, the best idea you have is one you probably already own. And you know what? That's probably true. That's probably true. That's not to say there's not a stock out there that's going to 10x in the next five years and you should have owned it. That might be true. But that's really impossible to predict. And you can do exceptionally well following a strategy that you're going to be able to repeat year after year, decade after decade. However long your investment horizon is, there's a million ways to do well. You just got to do the one that you can sustainably repeat and keep going at. And that's going to be the one that works the best for you. So if you're having decision paralysis and you're like, what are the best stocks I should buy? Well, don't worry. I got you covered. We rank our best ideas in

Stratosphere. If you go to getstockmarket.com, you can find them there or go to stratosphereinvesting.com. It's free to sign up. No credit card. All these other find them there or go to stratosphereinvesting.com it's free to sign up no credit card all these other services they want you to launch your credit card in there pay a bunch of money just to see this stuff try it out for free see if you like it or not um okay simon this was uh our earliest morning recording yet yeah and we crushed it i just want you i just want everyone on this podcast to know we started this note segment probably what like a couple days ago last year oh yeah yeah the the whole document okay the document there is 137 pages of notes here that is pretty crazy yeah i never, we just keep adding to it.

I never keep track of what page we're on, but yeah. It's going to be like page 250 by the end of this year. Oh yeah, probably. The takeaway is that we are working hard for you. We appreciate you. You might be noticing, yeah, we're monetizing the podcast a little bit because we absolutely put in a lot of effort into this stuff. And we appreciate that

you guys recognize that and keep listening so thank you so much and go ahead simon yeah and i wanted to add so we finished our uh poll that we did a few weeks i think it was about a week ago so we have uh two winners i feel like i know which one i'll do and which one brayden will do so i think i'll probably be the one doing Algonquin Power and Braden probably Lightspeed. What do you think about that? Well, I guess let's clarify my text message disdain. Is that I'm like, okay, if you put Algonquin Power up there, these Canadians love their dividends and this thing pays a juicy yield. We're going to be doing it.

And Algonquin is, by the way, probably one of the best dividend growers on the tsx like it is a rock solid utility they pay a fat yield they raise it like 15 a year it's a it's a great business i guess what i was saying is it's just a utility it's so boring like it put everyone on the podcast to sleep. But that's why I put top two when I put the poll out. So that way we all have one. I knew we would have one that would be more of a growth company. So Lightspeed will be the other one. So in the upcoming episodes, it really depends on what comes out. If there's any, obviously, we'll mention news sometimes too.

But we'll be doing it. Just stay tuned. I'm not sure sometimes too but uh we'll be doing it uh just stay tuned i'm not sure which episode but we'll be doing both of them and thank you for everyone who voted and like brayden said everyone loves their uh canadians love their dividends oh yeah it's like a drug for them especially like i mean you know you could do a lot worse. Oh yeah, exactly. Like you do a lot worse. You know, there's so many, like I said, there's so many different investing strategies. You'll get decision paralysis thinking about all of them.

But I guess one main takeaway is just congratulate yourself for even managing your own portfolio. Like you are in the minority of people that are even thinking about this stuff, let alone managing their own portfolio. So give yourself a pat on the back. Think about, you know, yeah, you could have made some mistakes. Yeah, I might not be doing the best investment strategy. Yeah, I might be new, but you are in the minority. You should be proud of yourself for managing your own portfolio in the first place because most people aren't thinking about this stuff and most people aren't managing their own portfolio.

So congratulations. That does it for this week, guys. Thank you so much for listening. We will see you next week. Follow us on Twitter at CDN underscore investing. Peace. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.