The Canadian Investor - Tesla Layoffs, Canadian CPI and Jamie Dimon’s Warning

Episode Date: April 18, 2024

In this episode, Simon and Dan start by discussing the recent CPI data from both Canada and the US and explain why the Bank of Canada will have a tough decision to make at its next June meeting. They then discuss the announcement that Tesla will be laying off at least 10% of its global workforce and why New York Community Bank might still be in trouble despite getting a 1B cash infusion a month ago. Simon and Dan also discuss the earnings of MTY Food Group and JP Morgan. Stocks discussed in this episode: MTY.TO, JPM, TSLA, NYCB Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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 Bélanger. Welcome back to the Canadian Investor Podcast. I'm here with Dan Kent. We're back for a regular earnings and news episode released on Thursdays.

It's actually a special episode today because we are both not sick, which is pretty amazing. I can't remember the last time. Both not sick, which is pretty amazing. I can't remember the last time. It must have been 2023 that we recorded without one of us losing their voice, coughing, runny nose, you name it. Yeah, probably a variation of a virus. It definitely hasn't been any time in 2024, that's for sure. Yeah, exactly. So we won't chit-chat too much just because we do have a whole lot on the slate today. The most freshest news is Canadian CPI coming out this morning. We also have the budget coming out later today at 4pm. So the federal government budget, we're recording before that, but I think it'll be interesting just to keep an eye on what's happening there. But probably next week, we'll touch on it a little bit for the next Thursday episode. But do you want to get us started for

the Canadian CPI? Yeah, so Canadian CPI was released this morning, it rose 2.9% on a year over year basis, it looks as though most estimates were predicting it was anywhere from 2.9 to 3.1. So for the most part, it came in below targets. When we take out gasoline prices, which they typically like to do just because they're so volatile, CPI actually declined on a month over month basis coming in at 2.8%, whereas in February, it was 2.9%. So sounds like a broken record, but shelter and rent costs are driving a huge chunk of the inflation here in Canada. So shelter prices increased by 6.5% year over year. And the mortgage interest cost index, which we had discussed this, I'm pretty certain this would be just total mortgage costs.

Yeah, it's the increase in mortgage costs for homeowners. Yeah, I couldn't find an actual definition on it, but 25.4%. So that is a huge, huge increase. When you factor in the amount of pandemic mortgages that are coming up for renewal and are being re-signed, it really isn't a huge surprise though. Rates are way higher than they were three years ago. I think the only thing that would slow this down at this point is like a material decline in interest rates. I mean, even if they lower it by, you know, say 100 or 150 basis points, a lot of mortgages over the last, you know, that have had to come to say three,

four year fixed term mortgages, they would still be quite a bit higher, because I believe most of the variable rate costs would be well absorbed by now. I mean, there hasn't been a hike for quite some time. Yeah. Yeah. And I mean, people also don't realize that even if the Bank of Canada reduces rates, there's no guarantee that the five-year bond or the shorter end bonds, even anywhere in between that and the five-year, there's no guarantee that it'll actually be reduced

because those are decided by the bond market. Obviously, I know the Bank of Canada could intervene and, you know, start quantitative easing again to try and level out the prices of those bonds. But at this point, there's no guarantee if they cut rates that it will result in the five year bond to get lower. And if the five year bond doesn't get lower. And if the five-year bond doesn't get lower, it means that five-year fixed rates will remain elevated despite the BOC cutting rates. Yeah, because it's ultimately what they lend at in reality, like when you could get a guaranteed

return like that on a bond. But rent prices continue to accelerate. So they're up 8.5% year over year. So this is a 0.3% increase from February. Alberta, where I'm at, is witnessing some absolutely crazy increases in rent prices. So 20% plus increases in rental prices. So this is more than double the average, two and a half X, what rent prices increased. And I was going to a story. I can't remember the exact figures, but I was listening to the news. I believe it was yesterday or this weekend. And they had one lady in Calgary. She was up for renewal on a fixed term lease with her rent. And we don't have a rent cap here in Alberta. So you can do whatever you want. And her landlord gave her notice of a $900 increase in monthly rent. So, I mean, this is probably why we're seeing the,

you know, fastest rental increases in the country. I mean, does like, is there caps? Well, there's also a lot of interprovincial migration happening going towards Alberta. So I think that's probably a big cause. So there, I would assume and Dan and Nick on the Canadian real estate investor podcasts are better, are better versed than I am on that. But I know there's been migration towards Alberta. And obviously, that's going to put price, you know, pressures with prices upwards. And then you add in the fact that some landlords are probably seeing their costs spike. So they're using that as an opportunity to probably oftentimes just break even, right? Yeah, pretty much. I mean, $1,300 rent seems

pretty low for anything these days. But yeah, the real estate market over overall here is just bonkers. I had a friend who just purchased a house probably a week ago and within 24 hours there was he had to offer over list there was six offers i think it was in like 24 hours which is unheard of here like typically you would see that like you know in ontario and stuff but alberta yeah it's pretty interesting our market here but it's the new ontario yeah exactly interestingly enough, the prairie provinces were actually the only ones to report month over month declines in inflation. So Manitoba went from 0.9% to 0.8%, which is crazy low. I haven't really paid much attention to Manitoba and how they're doing, but Saskatchewan was 1.7 to 1.5 and Alberta was 4.2 to 3.5.

So it's still pretty high here in Alberta. I would imagine it's that impact of shelter and mortgage, things like that. Gasoline was up 4.5% in March, whereas it only rose around 0.8% in February. This kind of makes sense. Like crude oil has kind of been on a pretty big rip since the start of the year it's up quite a bit i mean the global tensions right now all that type like can't see crude going down anytime soon but who knows on the food side of things prices went up three percent year over year with the cost of food purchase from grocery stores increasing by 1.9 i'm not exactly

sure what they mean by that like overall food up three but grocery stores one point nine maybe just yeah they're probably in the u.s so they're probably doing something similar to the u.s where there's like food at home and food away from home so basically food that you purchase at restaurants and then versus okay actually purchase at the grocery store that would be my educate my uneducated guess on it. It makes sense. Meat prices were up 3.4%, bakery products 1.3%, and vegetables up 2.5%. So it kind of seems like food is slowing down, whereas kind of the narrative last year was, what was it? It was like at 8% or 9%, I think. It was just crazy. It was definitely high single digits for sure.

Which is pretty much the one area of inflation. I mean, shelter costs as well, but it impacts absolutely everybody pretty much. The markets are now pricing in a 70% chance of rate cuts coming from the Bank of Canada in June. This is up from 50% in March, but it has been fluctuating quite a bit. I pulled this from an article. I'm not exactly sure where the data is coming from, but I can imagine it's from just currency or interest rate swaps, which are pretty much... Yeah, probably the Bloomberg terminal getting some data based on those right there. Yeah.

But overall, it seems like most things have settled down, but higher rates pretty much continue to pour gas on the fire just due to our mortgage structure, especially relative to the United States. Although the Bank of Canada could mitigate some of this with interest rate cuts, I think they need a lot of cuts pretty fast to put a ton of relief in terms of shelter and rent. But I mean, that brings on a whole other element with how well the US is doing despite higher rates. So yeah. Your thoughts? Yeah, I mean, I don't have too much to share aside from what you said but a couple things i noticed the first one is cpi so core cpi so you have cpi common cpi median

cpi trim they're just essentially they're the measures that the bank of canada uses the most i believe median if i remember correctly that one is essentially you look more at the middle increases. So you kind of remove the extremities. So the most volatile stuff on both ends of the spectrum, and then the trim, I'm not quite sure I'd have to go back. But essentially, there are just variations of CPI data used by the Bank of Canada, and they really focus on that. So in terms of those, they actually have declined. So from 3.1 to 2.9% on a year over year basis for the CPI common, the CPI median from 3 to 2.8 and then the CPI trim from 3.2 to 3.1. And on a future episode, I can probably go over each of them. I'd have to do a refresher

myself because i looked at those definitions probably a year or so ago it just it's not super complex but i know they just remove certain things for each of them and they will have different readings based on that so those are trending lower definitely some good news there for the bank of canada for inflation as a whole. But then on the part that's not as good in terms of news is the services. So services remain really sticky at four and a half percent year over year and 0.7% month over month. Month over month is especially concerning here because that would be, you know, without going into a lot of complicated math, 0.7 times 12. So you'd have around 8.4% in terms of the annualized rate. And then services is really proven to be sticky,

not only here in the US as well. So that's something that I'm sure they're keeping a close eye on. It's going to be interesting what they decide to do at their next meeting. There's a lot of competing forces here involved. Whatever they decide to do, whether they decide to do at their next meeting. There's a lot of competing forces here involved. Whatever they decide to do, whether they decide to cut or stand still, I think at the end of the day, you're trading off, right? So you're probably, you know, if you stand still, you're probably gonna put the brakes even more so on the economy. If you cut rates, you really risk having a bigger divergence between Canada and the U.S. Possibility, if you cut too much, that you weaken the Canadian dollar, and then you start importing inflation because cost of goods with major trading partners, including the U.S., starts rising over

time. I was looking at some data, too, from the 1990s because there was a pretty big diversion back then between the BOC and the Fed rate. I think it was above 200 basis points. And the Canadian dollar didn't suffer too much back then, but the economy was very different. So the Canadian economy, first of all, the federal budget was actually in a surplus position during that period of time, which is not the case now. There was also Canadian businesses that were very competitive compared to their peers, including the US. So that encouraged money flowing into Canada and therefore supported the Canadian dollar despite having pretty wide gaps. So I think there's a lot of elements that are not in place right now that were back then that would make it a lot trickier for the Bank of Canada if they decided to widen that interest rate gap with the US. The one thing that could be beneficial is obviously natural resources, so commodities, including oil.

If prices keep going up, there is going to be more demand for the canadian dollar so that could offset it a little bit but that has traditionally been something that has offset kind of created additional command demand for the canadian dollar yeah i think we especially saw that like after the financial crisis too because canada rates were higher than the u.s plus oil just went on a huge run that was back when like you could get par money i remember when i uh turned 21 we went down to ve run. That was back when you could get par money. I remember when I turned 21, we went down to Vegas and it was... It was a good time. I think we actually got more US, which was crazy, but it would take quite a bit to get back to that. The one thing about services inflation is I imagine wages would have a big impact on that. I mean, overall, because that,

which I mean, there's a lot of like getting labor right now is pretty difficult, especially at like good prices. Like people are just commanding more money just because of the cost of living. So that creates, I could see services remaining sticky for quite a while. Yeah. And we have a service heavy economy as well, right? So I think if I remember correctly, it's around 50% of CPI, that's actually services. Obviously, there's different types of services, like they always categorize right in different groupings. So there are, you know, if you take energy, and then you compare it to gasoline, obviously, energy includes gasoline, gasoline is a subcategory of that so I

think it's just important for people to remember when they look at the more granular data there are these big categories then there are subcategories if you want to isolate them a bit more 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 Money Cents. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning

customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY, do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really

vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics

tools. So go ahead, blossom social in the app store and I'll see you there. While we're on the CPI, might as well talk about US CPI that came in last week. So in the US, CPI actually rose 3.5% year over year. The increase was more than expected. So we're starting to see the diversions here between, like you just said, Canada, where it came in cooler than expected, and the US hotter than expected. Rose 0.4% versus February.

So that brings us to about 4.8% on an annualized basis. Services rose 5.7%. Again, aligns with what we're seeing in Canada. Services are being pretty sticky there as well. Food came in at 2.2% year over year. Energy was up 2.1% year over year. So this is the one that I think could really put a wrench into the headline US CPI and Canada as well, like you mentioned, right? If energy prices keep going up, that will put upwards pressure on inflation, at least the headline number, obviously not the core number, which strips it out. If the prices keep trending up, it would really put that pressure upwards. And we'll have to see, obviously, with the developments happening in the Middle east you know i think everyone's hoping that there is you know some kind of positive

development where you know things kind of settle down a bit more i think that's what i'm hoping i think everyone is probably hoping that as well so we'll have to see obviously with the escalation we saw on the weekend who knows what will happen there and if there is more escalation we saw on the weekend. Who knows what will happen there. And if there is more escalation, then I think there's a good case to be made that it will put some pressure on oil prices. Core inflation in the US came in at 0.4% on a month over a month basis. So again, that would be 4.8% annualized. So core is similar to the ones in Canada. They essentially strip out food and energy because they consider that more volatile. But it does give them a better picture, I guess, of where the inflation is actually trending with removing those volatile elements. And no doubt that they'll be considering that and a bunch of other factors at their next rate to hike decision.

Following the print, the CME FedWatch tool went from 60% chance of a rate cut in June to 20%. That's something I mentioned quite a bit. And again, like you referenced, you know, the odds of a rate cut in Canada following the print. Similar thing for the CME FedWatch tool. I don't know what goes into all of it to determine the percentages, but they are essentially, you know, based on derivatives that the CME has in terms of what the market is trading. And based on that, they kind of put some expectations. What I do find interesting is there's a 0% chance hike. I don't want to scare people here, but I don't think it's a 0% chance. It's probably a small probability, but in the US, Jerome Powell, I think it's well documented that he wants to almost be the Paul Volcker of nowadays.

Paul Volcker was the head of the Federal Reserve back in I think in the late 1970s and 1980s and he's the one who really got inflation under control during that period of time but he definitely cranked up interest rate extremely high to get that so I think I think the market personally is a bit off here because I don't think it's accurate to put a 0% chance, even if you pace it at 1% in coming meetings. But all that to say that, you know, the hotter than expected CPI print in the US really flipped the odds. I mean, now even in the July meeting, which I think is probably the last meeting that they'd be able to cut rates before the election because the September meeting, that one, if they started cutting, then it would not be a good look. It would kind of raise questions about the independence of the Fed, at least that's how

Republicans I'm sure would spin it. So for the July meeting, there's a 53% chance of no change and 46% chance of some kind of cut. So that has changed dramatically. And if we remember basically going back to last year, there was almost a certainty that they would like start cutting in June. And now we're seeing that the odds are against that, massively against that. So it kind of shows how things have changed. Yeah, and it doesn't really like none of the data really supports a cut, I guess, in a way. I mean, in Canada, it does

like definitely more so. But here, the US is actually doing quite well, all things considered. I did look up, as you were talking, I looked up that FedWatch tool. So they use FedFund futures contracts to pretty much calculate out these percent changes. So probably just the pricing changes in those contracts, things like that. But yeah, the US is looking pretty good. I would imagine the same thing maybe in Canada that the services, the 5.7% increase, I mean, it's probably due to wage growth. And actually, when we go over a Canadian company reporting earnings later that operates in the US, like the California, I think they've raised minimum wage.

It was pretty high. I think it's like $20 an hour or something like that. But that's actually impacting the company we'll speak of. So wage growth is definitely coming into play. Yeah, exactly. So I mean, it's definitely something to keep an eye on. You know, there was also the Bank of Canada rate announcement. And to no surprise, they stood path at 5% with the overnight rate.

They're still looking to see continued downward momentum in core inflation, which we just saw with the CPI print. So I guess that's a checkbox at least a semi checkbox i guess we'll have to see what happens for this month when it's released in may they want to see inflation expectation moderate as well as wage growth and corporate pricing behavior tiff got a question about cutting rates in june and said that it was within the realm of possibility although i think it's important to just note here a lot of people you know a lot of headlines about cutting rates in June and said that it was within the realm of possibility. Although I think it's important to just note here, a lot of people, you know, a lot of headlines were showing like, you know, all possible rate cuts in June and so on. But the way was I watched the whole press

conference and the way that he was talking and Carolyn Rogers, the I think senior deputy chief of the Bank of Canada, is they have a lot of outs if they don't want to cut. Like, it's no certainty in my mind. They are, I think they're weighing everything. Obviously, they're keeping an eye on the housing market. Clearly, I think if prices start going up pretty significantly, I think that would lessen the chance of rate cuts in June. I think that's something they're keeping an eye on. They don't want it to get out of hand, especially if they cut rates. And he was also asked about the US CPI data, if that impacted their decision making. He said that he didn't have the chance to look at the data that was released a few hours earlier

that morning because they are focused on domestic developments i think that's pure bs because they are absolutely weighing uscpi data they would be stupid and you know not doing their jobs if they weren't i think they just it was really just a few hours before maybe they had access a bit earlier with uh you know back channels channels, I don't know, maybe they just wanted to take a step back and really look at the US CPI data. But there's no chance that they're, you know, they're not aware of it 100%. They are aware of that. If the BOC rate is much lower, obviously, than the Fed, like we mentioned, like I talked about earlier, it could weaken the Canadian dollar. And I think that is something that they are keenly

aware of and they are weighing in their interest rate decision for i think june is the next one if i remember correctly right yeah yeah it would be june uh the one thing just before we move on to uh tesla but so yeah california april 1st went from $16 an hour to 20. So that's a huge jump in minimum wage, like in like a state that is pretty much bigger than the entire country of Canada. So that's definitely going to have it's going to have an impact. Yeah. People may think it's like automatically a good thing. I'm not saying that it's bad or good, but I think it's important to remember if you're a business owner and your costs go up, what, like 25% roughly?

Yeah, like that would be it. Pretty much overnight. Yeah. Yeah. Overnight, 25%. Maybe you'll start investing in certain things that will help you limit the amount of employees that you have, or maybe you'll start limit the amount of employees that you have, or maybe you'll start reducing the amount of hours and finding other efficiencies. So

I'm just mentioning this because, you know, businesses are there to make money. And if, you know, there's a big shock like that, or a big increase to their costs, they will probably start looking at ways to reduce those costs. So I think we always have to be careful. I think minimum wage, obviously, there's a reason they're there. But I think, I don't know, 20 bucks is pretty steep. Yeah. Yeah, like when you think of that on a Canadian, that's almost 28 bucks an hour, I think.

27, 28 bucks an hour. So on my calculation, it's like 55. But yeah, like that's fast's fast food places, too. Like you imagine like a like a fast food joint here in Canada paying somebody 28 bucks an hour. Well, your food away from home is going to rise. I can say that. Exactly. But yeah, you want to move on to Tesla?

Yeah, let's do it. So Tesla, the important news mostly was layoffs. So they ended up laying off over 10% of its global workforce yesterday morning. So when I was reading estimates, I think I had messaged you maybe the night before, but they figured that it could be as high as 18 to 25%. And I think that would have been like alarmingly high. I mean, 10% is definitely way below what was expected. And actually- Didn't you say like at least 10% that there might be more cuts to come or something like that? Yeah. The estimates ranged anywhere from like mostly 18% on the low end to

25% on the high end. And I think they have 140,000 employees. So like 25% would just be a huge layoff. And I can't remember where I heard this data from, but there was, I believe it was a podcast. I'm not going to mention any names because I don't know who it was from, but they dug in a bit and suggested that the first wave of layoffs is typically never the last. There's typically always a second smaller wave of layoffs so maybe that would get tesla to this you know 18 percent uh mark that is projected but i mean that's never a guarantee another interesting element is the fact they're going to be scaling back hours at their cyber truck facilities and this seems pretty odd because i'm pretty sure musk was talking about how the cyber truck was more of like a production constraint rather than

a demand so scaling back the hours kind of seems a bit puzzling yeah that was uh one of the shows that we one of the first shows we did together i think you were talking about that is and i remember listening to uh to musk as well where it was really i think the logistic behind it was a big challenge too yeah he said something about the cyber truck being like the death of something i can't remember what it was but he wasn't he wasn't very uh i think he also talked about that on joe rogan's podcast when because they were doing like shooting arrows i think to the cyber truck to show how like borderline bulletproof it was and one of the

things he said is like designing a truck is not the hard part the production is the hard part oh yeah i uh i was actually reading up on that cyber truck they you it's something like a 400 mile radius or a 400 mile distance or whatever but you can buy like a battery extension but it takes up like a third of the box so i mean you take away like oh it's just it seems like i'm gonna get a 2002 ford ranger that's what i want yeah i want it a little bit of rust not too much rust that's the kind of truck i want yeah oh it's uh yeah tesla's i, it's in a pretty rough spot right now. I mean, sometimes you'll see the market react positive to layoffs, like a lot of the time, you know, cost cutting, things like that. But I think like Tesla is still very much priced as a high growth company. So the layoffs are coming as certainly a sign of it slowing down. The stock took quite

a hit. I think it was down 5% maybe yesterday. And as we're filming this, it's down about another 4.5% today. So another near 10% dip. Back in 2022, Musk said that he had a bad feeling about the economy and the job cuts were coming. So fast forward a couple of years later, and here we are. The stock is down 55% since the start of 2022. years later and here we are the stock is down 55 since the start of 2022 the s&p 500 on the other hand is up seven percent the company's senior vice president drew baglino resigned as well so he's been with the company for nearly two decades i think it was 18 or 19 years and i mean see it really seems like it's going from bad to worse for tesla they're facing some pretty intense competition in china it's continually from bad to worse for Tesla. They're facing some pretty intense competition in China. It's continually cutting prices, you know, yet deliveries are still sinking.

It kind of seems like everybody had the money to spend, you know, on expensive EVs back in the pandemic. But now that financing costs and overall cost of living are up, that demand or vehicles are falling. And I think Musk, he actually spoke about this outright too. He's like, you know, when, you know, in the pandemic, when the actual financing portion of the vehicle makes up, you know, $100 out of $1,000 payment, it's not too bad. But when it starts to, you know, make up half the payment, like, or a big chunk of the payment, like people just can't afford it. And I think in general, like, I think i think you know investors are starting to lose a

bit of confidence in musk as well he's running you know six companies at what point do they maybe consider you know bringing in somebody who can dedicate their entire efforts to tesla i don't i'm not sure yeah yeah i mean i think it also shows there's yeah demand like you said is just slowing down it's still still, you know, growing on a year-over-year basis as a whole. I know in Canada, and I'm pretty sure in the US as well for EVs, but I think it's slower than a lot of analysts was expecting. A lot of people were projecting, you know, a few years ago. So I think that's a big issue. I mean, I think it's well-documented. The infrastructure, although it's improved a lot over

the last few years is just not it's just not there like it's not i mean you you don't have to look very far just look at how easy it is to fill your car with gasoline and you know how common gas stations are and you don't have to wait it It's convenient. And then think about an EV, which is fine if you're just kind of doing city stuff where you can always, you know, charge it back home. But as soon as you, you know, start traveling, you know, longer distances on a relatively frequent basis, that's where it becomes an issue. Yeah. And I think there's an element of like the, the infrastructure for charging too. Like I remember back in January here in Alberta, when we had like that minus 60 something spell, like they pretty much sent out a warning of

potential rolling blackouts because like they couldn't, they were telling you like unplug your cars, things like that. It's actually pretty like I i'm in a in a newer neighborhood with not a lot of developed houses and almost everybody around me owns a tesla oh we're like we're in alberta like we got like i know we got like a 2013 escape and a volkswagen jetta on the driveway and everybody else is teslas like it's crazy how many are around i got a jetta too and it's perfect it's 2017 i can guarantee you it's not on the list of the most stolen cars which is perfect because the insurance premium is lower that that's how you solve it you just get cars that they don't want yeah to steal exactly or evs right because i think a lot of those cars end up in africa so i'm i'm gonna go on a limb and say

they don't have a lot of EV charging stations. So that's another option there. Yeah. Yeah. I don't know what's going to happen with Tesla. It's the one thing that will be key. I imagine we'll talk about it. Actually, I would almost guarantee we'll talk about the earnings, which I think are April 23rd. I think somewhere around there, which would be the Tuesday, but I believe it would be the Tuesday. Hopefully it's pre-market. I'm not sure. Yeah, it's OK.

Well, we'll talk about it the next week if it's to if it's after hours. But we'll we'll keep going here. I think you did a great overview of what's going on with Tesla. And obviously some of the at least near term troubles are having. And speaking of troubles, we have NYC. So New York Community Bank. There's an article on CNBC last week that came up saying that my banking direct, the online only banking subsidiary of New York Community Bank was offering 5.5% on their high yield savings account. So the rate is

available on normal savings account and only requires $500 deposit. The money is not locked in for a period of time like a CD. A CD is just the equivalent of GIC, the U.S. has thousands of banks, most of them being regional banks, not the massive, you know, JP Morgan, Citi, Bank of America. And I decided to pull up the holdings of the KRE regional bank ETF. And I went on the website and I went on the website of seven regional banks that have similar allocation to the KRE ETF than NYCB. It doesn't mean that they aren't necessarily that close to NYCB in terms of asset, but they'll be closer to them, obviously, than JP Morgan. And they were all regional banks. So I looked at First Horizons, MNT Bank, Cadence Bank, Synovus, Valley National, Pinnacle, Axos. So Axos was the only bank among the group that I could find posted a yield that was relatively close to that of NYCB's offering with their MyBankingDirect online. And that yield was 3.3%.

All of the other banks were below 1.5% or just didn't post a yield. So you had to contact them. So clearly, to me, what that means is pretty simple the question would be why would a bank offer so much more in terms of yield than its competitors without a substantial amount of minimum deposit required because this is a minimum 500 so you don't need to have 10 like i don't know 100 grand or, which sometimes will be the prerequisite for those higher yield offers that the banks will do. I think, I mean, the answer is pretty straightforward. And let me know if you agree or not with that.

But I think they're just looking to attract and retain deposits, which is the live blood of a bank. So because a bank is fractional reserve, so they use a big portion of those deposit to loan out and they'll typically be levered at least on a 10 to 1 basis. So meaning for each dollar of deposit, they'll have 10 cents on hand or in liquid assets. What are your thoughts on that? You think it's probably what I'm guessing here? Yeah, it seems to be the only way you would offer a rate like this would be to try to attract more deposits i mean i wonder this would i wonder if this is on new accounts or all accounts like i can't imagine they're given that to existing but maybe i'm not i mean i'm sure if people are saying well i'm gonna leave if you don't give it to me they'll

give it to you yeah they have almost no leverage in that position i mean you see you see a lot of canadian banks they offer these rates but they're promotional like they they only you only get that rate for like i know there was some that were offering like six percent but he only got it for like three months or something this by the looks of it seems to just be there's no promotional rate here like this is a rate you get which i mean the promotional rates would kind of be an incentive for just client acquisition and then you cut them back and kind of hope that they don't go elsewhere but this is like this seems like this isn't promotional no obviously there's always that foot like you know that small print saying that rates are subject to change anytime but it's not like you said sometimes banks will offer like 5% for like

three months or something like that. That wasn't the case. And then to bring things into more context here, when we last talked about NYCB, they had just received a cash infusion of 1 billion from private funds, including a fund led by Steve Mnuchin, which was the former treasury secretary under President Trump. And it had shown that they had lost 7% of their deposit in the month period from early February to March 1st. And that $1 billion in infusion was to shore up the liquidity, but was still a fraction, obviously, of the deposit, which stood at $77 billion at the time. When we talked about it, we both were a bit perplexed as to the viability of NYCB despite the cash infusion. And all I can say right now is there's definitely

smoke around this bank when you start seeing stuff like that. We just need to know if the fire can be put out or not. I think that's the real question. And the last thing I'll mention here, the stock went up when the deal was announced. So that cash infusion on early March, I think it was March 5th or March 4th, but it's now down 16% since. So it's not fared well at all, despite having that $1 billion infusion in it. Yeah. I mean, all I'll say is like, even with them offering 5.55%, I would never deposit money there. It just seems like a potential nightmare waiting to happen. But yeah, that's all I have to say about NYCB.

As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed

with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY, do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building and people share their portfolios, their trades or investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then

once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the App Store and join the community today. I'm on there. I encourage you go on there and follow me. Search me up. Some of the YouTubers and influencers and podcasters that you might know. I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. You want to go on to MTY? Yeah, go ahead. So yeah, MTY, it's relatively unknown, I guess, but it's actually like a huge franchising company here in Canada. So I think they own like something like 7,200 plus franchises, stores that is. So it has like a borderline overwhelming amount of brands. I went on their website, they got like

57 brands just in Canada. And then there's more in the US. I mean, off the top of my head, it's like brands like Mr. Sub, Papa Murphy's, a lot of their brands are, especially on the just like food end and maybe not like the frozen treat end, are in shopping malls. So I believe this company has quite a bit of exposure to shopping centers, food courts, like retail, commercial strip malls, things like that. food courts, like retail, commercial strip malls, things like that. So the company has struggled over the last while. So since 2017, the stock has total returns with reinvested dividends of a loss of three and a half percent. So it was a solid post-pandemic option. And I think this is likely due to how badly shopping malls and things like that were impacted during the

pandemic. And then when lockdowns eased and people started to come back, they started to see sales recover. It does have some franchises that are not mall slash retail focused though. So one of their largest brands would be Papa Murphy's. I mean, I don't know if you have a ton there, but they're like few and far between here. I think there's- Yeah. I have no idea what that is. Yeah. Probably just just if i were to guess kind of maybe just a run-of-the-mill pizza joint but um same store sales are dropping pretty much everywhere so year-over-year basis they dip by 2.7 percent in canada 3.6 percent in the u.s

and 7.4 percent internationally overall system sales decreased by 2% company-wide. Revenue on a year-over-year basis has declined by 2.7% and earnings per share by 5.33%. The company opened 75 stores, but closed 79 down. So this is not really something you'd ever want to see in a franchisee is the fact that the store counts are shrinking. But the one interesting thing I found is the company has quite a bit of exposure to frozen treats in the United States. So the results in January, like over the winter months are going to be weaker. And I'll talk about this more in a bit in regards to the frozen treats, but it seems to be repaying debt pretty aggressively over the last while it's utilizing a big chunk of its cash flow towards debt reduction so it paid back about 34.6 million on the quarter and over 100 million on the year so their debt is now at 736 million so they're using free cash flow to pay out that uh are you

listening bce yeah exactly yeah they're actually oh and they cat the other thing you'll like too is they cap their distributions. They only pay out a particular amount of distributions and after that they'll pay down debt. So that might be useful as well. I hope BCE management is listening because I'll have a segment when I'm recording with Brayden. So for everyone next Monday where I'm not that flattering on management for bc i'll just yeah i just like i said i just filmed a massive video on it too going over the same things it's the outlook is not pretty but in terms of mty and and this is kind of going back to what i said about the about the california uh situation is there was a lot of chatter on the conference call about higher minimum wages in

California and the impact on the company. So obviously, this company, I would say for the most part, pretty much primarily hires minimum wage workers. I mean, food services, they're all food services, things like that. But another interesting element on the conference call was the question of the Canadian versus the US consumer consumer it was talked about quite a bit so they responded at this point that they're seeing almost no difference in the two in regards to their spending at quick service restaurants and if i were to have guessed i would have said the canadian consumer would be weaker so it was a pretty interesting comment but again like a lot of these brands are cheaper food they're still i was gonna say yeah maybe it's an alternative for people right like maybe they would prefer to go to more expensive plays but now that they're getting a squeeze they have less money to

spend they still want to go out that's like an easy alternative to go out like still eat out without breaking the bank at uh taco time have a night out at papa what was it papa murphy's papa murphy's yeah mr sub i only know of one mr sub that still exists in calgary and it's been there forever but pretty much all of the other ones are gone but the one thing i didn't realize and again it's a frozen treat situation so apparently they have a ton of exposure to like ice creams and all that kind of stuff so the big you're getting me excited for a summer yeah but they the one big thing was the extreme cold spell in the united states they said that actually had a significant impact on their first quarter earnings. So they have such large exposure

to frozen treats in the US that because it got too cold, it had a big impact on their earnings. So I mean, they say it's going to be a one-off situation. We'll see. I mean, the one thing that's surprising to me, the company has gone pretty much nowhere for seven plus years. Like I said, I think it's lost something like three and a half percent, but it's grown free cashflow per share by 82% over that time period. And revenue is increased by 300% over that time period. So I'm not exactly sure like what's going on. If it's just like the future outlook that is so bleak in terms of valuation, it's trading at seven times it's free cash flows. So this is a 40% discount to what it would typically trade at on a historical basis. So, I mean, it seems like

there must be a ton of bearish outlook into this company. I don't follow it that much. Maybe it's just kind of flying under the radar, right? It's not a huge company. And that's what I have for our joint TCI listeners is the free cash flow per share over uh the last 10 years and it's literally like uh almost like up to the right i think it's yeah you don't that's pretty amazing you rarely see that yeah and if you like one percent total return since that time so yeah that would have been 17 percent yeah 16.95% compounded annually free cash flow per share. So they're doing something right. Yeah. And it just hasn't really been rewarded at all. I mean, don't get me wrong. I have not looked into them very much. So I don't know if this is a huge discount or whatever. I don't know enough about the company, but if you were to look at revenue and free cash flow, you would be like, how has this stock only increased by 1% over seven years?

But I thought it was interesting from just the element of the Canadian consumer and just the retail environment. They're still struggling a bit when it comes to shopping malls, things like that, just reduction in consumer spending overall. To summarize that up, Canadians love their ice cream anytime a year. The Americans need warm weather. That's a conclusion of all this. It's not ice cream weather for eight months out of the year or so, but we eat a lot of ice cream. I mean, I like ice cream even if it's cold outside once in a while.

Obviously, in the summer, it's better, but oftentimes oftentimes it's been sitting at the grocery store for three months and it is discounted anyways. So it's perfect. Yeah, exactly. No, that was a good overview. Definitely a company that we don't talk that often about. But I think it's definitely one I'll probably just keep an eye on. Like you, I was aware of them.

I just don't know them enough. The Freecast flow per share is impressive but there could be issues with the company that we i just don't know about so it's just i think it's important for people to know that's just one metric now we'll talk about a slightly bigger company you may have heard of it it's called jp morgan it's uh also the biggest bank in the world just in case people were wondering. So it's the largest of the systematically important banks in the world. So the GSIB, Globally Systematically Important, something like that. I always have trouble pronouncing that with my French accent.

Now, I won't do a deep dive in the results because obviously it's a U.S. company, but I think it's still worth noting just because how large they are how important they are in in the u.s but in the world as well so it was q1 20 2024 and i'll compare the numbers on a quarter over quarter basis i typically like to do that for banks because i think it shows a better picture of where they're at versus a year before, especially right now where things change so much. I mean, a year before in the quarter a year ago, they, I think, were on the verge of making the first Republic acquisition in the aftermath of

the regional bank crisis in the US. So, you know, things do change quite a bit. And that's a pretty big difference. And on top of that, I think the year over year, it's just, yeah, I know there's some seasonality to it, but I think it's just a better thing to look at quarter over quarter here if we're just doing a snapshot. So revenues were up 9% to $41.9 billion. Net income was up forty four percent to thirteen point four billion. In terms of segments, the net income for consumer banking was flat. Investment banking was up eighty eight percent. Not surprising because the markets have been, you know, doing pretty well to start the year. Commercial banking was up 13 percent and wealth management was

up six percent. So same thing with wealth management here with the markets being up. Not surprised to see that being up. Net interest income as a whole was down 4%. They now have $4.1 trillion in assets. And for comparison, Royal Bank and TD, which are the two largest Canadian banks, have about $2 trillion in assets. So it's double the size of our two largest banks, or let's just say it's our two largest banks together is equal JP Morgan. Oh, that's combined.

Yeah. Okay. Yeah. That's crazy. So TD and Royal is basically JP Morgan together. Oh, okay. Yeah, yeah. Yeah. Yeah. Just to give people an idea of how big they are. Deposits were up 1% to $2.4 trillion. Provisions for credit losses were 32% lower for the quarter and came in at $1.88 billion. This is obviously the additional amount that was set aside for credit losses.

It brings a total set aside for loan losses on the balance sheet because when you look at a quarter, it will be taken off. It's on the income statement. But then if you look at the balance sheet, you actually have the total that's been set aside, essentially bringing the previous quarters, the total amount of money set aside minus what they've basically used to write off the bad loans. And that total amount is $22.3 billion, which is flat from the last quarter. So clearly, you know, the last quarter they put more aside, but the total amount is kind of flat when you factor in everything. Now, Jamie Dimon has an annual letter as well. Jamie Dimon, the CEO of JP Morgan.

So the annual letter was really interesting. I encourage anyone to read the annual letter from Jamie Dimon, especially the first three paragraphs where he talks about the current geopolitical climate, but also the state of the US economy. Here's a few takeaways that I found really interesting. The US consumer is still spending and the markets still expect a soft landing. He did say and I quote, it is important to know that the economy is being fueled by a large amount of government deficit spending and past stimulus. There is also a growing need to spend on restructuring the global supply chain to transition to a

greener economy, the military and the need to reduce healthcare costs. All of that may lead to stickier inflation and higher rates than market actually expect. And there is also the unknown of massive quantitative tightening that has been happening to the pace of $900 billion a year and what impacts it will have on the economy. And quantitative tightening, because I know we might have some listeners who are not quite sure what it is. So essentially it's when a central bank,

so it's the opposite of a quantitative easing. So when a central bank in terms of quantitative easing, what they'll do is they'll go in the market and they'll buy assets. So they will create money to go and buy those assets. Typically it'll be treasury bonds, so U.S. treasury bonds in the U.S. and they'll put those bonds so US Treasury bonds in the US and they'll put those bonds on their balance sheet while quantitative easing a quantitative tightening is the opposite of quantitative easing whereas the bank

when it has bonds on their balance sheet they won't sell them what they'll do is they'll just let them roll off so once they mature they just don't replace them and it reduces the size of the central bank's balance sheet So what he's saying is it's not the first time that quantitative tightening so QT has been happening But it's the first time that it's been happening to this extent and we just don't know what kind of repercussions This could have down the line the Ukraine Russia war as well as the Middle East down the line. The Ukraine-Russia war, as well as the Middle East conflict, had the potential to disrupt global markets on top of their dreadful human costs. There was an interesting section on the regional bank crisis that happened last year. He said that after they bought First Republic Bank,

they thought that the crisis was over. However, he said that if the long-end rates go over 6% and there is a recession there could be significant stress in the banking system and leverage companies such as real estate so the long hand is just means that the short end of the curve is basically the shortest and is the feds fund rate or the bank of canada rate so it's what they set the longer end. So it's the 510, even the 30 year in the US. So the longer end, if those rates keep going up, they impact a lot of things like financing. And this could have some pretty massive repercussions on the economy. He mentioned that an increase of the long term rate from four to 6%. so 200 basis point increase would reduce asset values by 20

i'll just finish on this i want to unpack this because people may wonder like why is i'm raising two an increase in two percent going to lead to a reduced asset value of 20 well first of all let's look at bonds so for example let's say you buy a 10-year bond that yields four percent and it has a per value of $1,000. So you pay $1,000, the coupon yields 4% when you buy it. Shortly after you buy those bonds, the yield goes up to 6%. So the markets demand 6% for these bonds, the new issuance of it. Well, this means that the bond that you hold would drop around a third in value to equal the yield that is now in effect and the yield that people can get by just buying new issuances of bonds. So if you need to sell the bond before maturity in this scenario, you're going to take a significant loss on it.

And for real estate, it's a similar thing for a potential buyer. Higher interest rate will increase the cost of service that debt. potential buyer, higher interest rate will increase the cost of service that debt. So in the interest costs, the loan amount will likely be smaller because the banks will want to underwrite a smaller amount because of, you know, the ability of the person who takes on or the company takes on to that to repay that. And obviously it's going to have a ripple effect if they're just able to offer less for a new property or property they're looking to buy. It also puts pressure on the existing owner of that real estate to sell the building since higher rates will make the building less profitable or not at all if they are on variable rates or when the loan is up for refinancing. is up for refinancing. So that's how just a change of a couple percentage point in the interest rates for longer term bonds can have a pretty big negative impact on the market. That's kind of the gist of it. Any comments on that before we wrap things up? I guess the one thing I would say,

and I can't remember the name of the bank now, what is the bank that bought all those treasuries? SVB. Yeah. Silicon Valley Bank. That would be a prime case of that. They bought a ton of treasuries at rock bottom rates. And then as rates rise, those treasuries, they pay the same coupon, but the price has to be adjusted down. So the yield is relatively comparable. And then if you have people who want their money out of the bank, you have to sell those treasuries at a loss, which pretty much is what toasted them, cooked them. So no, that's probably one of the best examples of this as of late, which how much pressure it can put in a situation like that.

Yeah, exactly. So I mean, I think he must have some kind of data showing that there's like kind of a stress point around the 6% mark for him to actually explicitly say the 6% in a shareholder letter that that's a kind of level that could really create trouble. We're not there yet, but we've been talking about that, you and I, when we were texting like U.S., you know, the 10 year U.S. Treasury, which tends to be a lot of the benchmark when people look at the longer term, there's also the 30 and I think there's a 20 as well. Nonetheless, you know, that one has been going up ever since the CPI came in hotter and it's pushing on, I think high fours right now, if I remember correctly for the 10 year, something like that. Yeah. And they're typically like these bond, you know, yields, they don't move that much, but they're crazy volatile, especially around periods

like this, especially around like inflation prints when, you know, they're so dependent on where rates are going to go. You're going to see huge fluctuations in those prices. Yeah. Yeah, exactly. So, um, no, that's about it. I thought it was interesting. Um, I think that wraps it up for today. Thanks everyone for listening. Like I always say, if you have time, give us a review on Apple Podcasts or Spotify. Five star, we do appreciate it.

You can both find us on Twitter. I'm at fiat underscore iceberg. And Dan is at stocktrades underscore CA. Anything else to add before we sign off? No, thanks for listening, everybody.