The Canadian Investor - The 2nd Richest Person on Earth and Canadian Housing Drops

Episode Date: September 22, 2022

In this episode, we talk about some recent changes to the Toronto Stock Exchange Index. We look at which Canadian Real Estate markets have been impacted the most by the recent housing correction. We also discuss the recent acquisition by Adobe, August inflation numbers, the 2nd richest person in the world and more! Tickers of stocks discussed: FDX, TOU.TO, BHC.TO, ASTL.TO, BLU.TO, UNS.TO, ACB.TO, ARE.TO, D-UN.TO, NGD.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Today is September 20th, 2022. My name is Brayden Dennis. As always, joined by the legend, Simon Belanger. Today we are talking news. We're talking the CPI numbers hot off the press, Canadian housing year to date, and some big acquisitions, some huge acquisitions. And then we're going to talk about

the newly second richest man in the world. Simone, how are you doing, buddy? It's an odd time for us recording, but we're making it work. Yeah, making it work. I mean, I'm a little tired, but you know, we're making it work. Yeah, making it work. I mean, I'm a little tired, but nothing a bit of caffeine can fix. Baby didn't sleep all that well last night. And I'm sure all the parents can relate with that. Yeah, I'm sure they can. And many people listening to this podcast have ran that race, so they know exactly what you're dealing with.

So, Mont, we are like just an hour or two hot off the press with these CPI numbers. Give us the scoop. Yeah. And thankfully, Stats Canada actually added the breakdown because usually when they release it, it takes like an hour or two, I think, for all the more detailed data to be there. So I was able to research that. So the CPI numbers for August 2022, those who are new to the podcast, CPI is just the consumer price index. It's the official measure from the government in terms of inflation. Now, overall prices were up 7%, which came in lower than most experts predicted and was lower than in July. On a sequential basis, there was a 0.3% decline, which is great news

because the US saw an increase of 0.1% on that same sequential basis. So that is definitely these first two lines are good, but the rest are not so great. So the next one, food prices remain really elevated. They're up 9.8%. I'm sure, you know, I'm not breaking this to anyone. If you've done been to grocery store, if you've been to restaurants, prices are generally up. Shelter is also up at 6.6%, which again, it impacts everyone. So that's one of the other big ones. The price of gas was up 22% year over year, but it was down 9.6% compared to July. Again, good news, which probably helped bringing down the overall CPI measures. Energy was up 19% year over year, but it was also down on a sequential basis compared to July, down 6.5%. Now, energy for those wondering, gas, energy.

Energy is simply a wider ranging metric than gasoline. So it does include other things like electricity and natural gas, for example. And then the last one here that I like to look at, and it remains very low, is clothing and footwear. 1.4% year over year. Increased slightly month over month, but it's always interesting to see that. This one impacts a bit less people because obviously, you know, you have clothes already. You don't necessarily have to buy any. And if you do, you can look for sales. You can even go to kind of thrift stores to get cheaper clothing. So there's a bit more flexibility, not as impactful on people's budget as food and shelter,

for example. I'm just glad that I don't have to take out a mortgage every time I fill up my SUV, like earlier in June. Yeah. Like, holy smokes. Still high relatively, but when you compare it to what I was paying a couple months ago, it's a little nicer on the wallet for sure. Yeah, exactly.

Now, the really important metric for those trying to project where the Bank of Canada will be going with interest rate hikes, for example, in the next foreseeable future. First of all, it's very difficult to predict if you're looking at Canada's big banks. They're usually pretty good at predicting it when you're looking at, you know, a month ahead, something like that, because usually, you know, it's all but priced in by the markets. But looking more like three, six months or a year ahead, it becomes a bit more difficult. But the Bank of Canada focuses on core CPI, which strips out some volatile elements of CPI like gas and food prices. You know, I'm not going to get into the debate whether it's a good or not metric. The reality is they look at this one a whole lot.

And this one has been still pretty high. So year over year, in May it was 5.6%, June 5.8%, July 6%, and then August 5.7%. I think it won't affect the Bank of Canada until you see a few months of at the very least, you know, below five and trending closer to four. I mean, we'll have to see what they do. But this is the one if people are looking to get some insight on what they might be doing. That's the one you should be paying attention to. Oh, this is good data. And it's that food one coming in hot as per usual. Yeah. So let's talk about Canadian housing. We do have the best Canadian housing podcast in the world

hosted by Dan and Nick called the Canadian Real Estate Investor. So listen there. But we cover that stuff here on the show every once in a while here as well. Can you give us an update on what's happened this year? Yeah. I mean, Canadian house prices have dropped by more than 20% on average since the peaks in early 2022. And I actually- Oof. Yeah, I know. I was told that Canadian housing only goes up, Simone. What's going on? No, I know.

I was told that. housing only goes up, Simone. What's going on? No, I know. I was told that. I mean, come on. Yeah, well, your realtor is definitely not Dan because he's not the kind of guy. Yeah, Dan is not my realtor, so that's why, yeah. Yeah, so house prices, and I invite, like you just said, anyone to listen to their most recent episode on the CREA update. They actually dive into these numbers and look at the markets that have been doing the best, the worst recently. Really interesting listen to this morning. Now, house prices, it's really depending on where you're looking at. So I found a list here, seasonally adjusted. So that just

adjusts in terms of the volume comes obviously home sales will be higher in certain periods of the year than others. Now, the biggest drop in this list from the peak is Kitchener-Waterloo at close to 21%, and all the way down to Montreal and Quebec City that are only dropping 4.1% and 3.1% for Montreal, 4.1 for Quebec City. And then you have a bunch of cities in between. Ottawa is at 7% down, Greater Vancouver 7.4%. And you have Edmonton, Calgary in there as well. So it's just interesting to see whether it'll keep going down. I really don't know. I don't think anyone really knows. Now keep in mind, this is the monthly activity was 25% lower in August this year compared to a year ago in Canada. There may be several reasons for this but I think one of the reason and I may be wrong here but it's probably a disconnect between sellers and buyers. What

sellers are expecting to get, buyers are willing to pay with buyers being more cautious because of obviously interest rate hikes that may push prices downwards even more in the future. While some sellers may be reluctant to sell because they may be selling at a loss, for example. So I think there's going to be still a few months, if not more, of some price discovery because, you know, you get sellers, for example, that may have to sell. They become really desperate. And then some buyers that start buying. discovery because, you know, you get sellers, for example, that may have to sell, they become really desperate. And then some buyers that start buying, you have some new prices that are being discovered. Right now, I think it's a bit too early to say whether the market has stopped going down or will keep going down. I think we'll have to definitely give it a few more months, if not more. I'm looking at some of these like outskirt cities of the GTA.

And those ones are getting hit pretty hard. Like you see Kitchener, Waterloo, Hamilton, Burlington. And a lot of folks were thinking, I can just live way out here. And then all of a sudden, they say they work at the bank and the bank's like, no, you're coming back. And they're like, oh no. They do like two months back to work situation downtown would look like. So it was hot, man. It was so hot and everything's got to correct. I mean, still hasn't corrected as bad as the NASDAQ, so.

Yeah. And I guess people got addicted to those low interest rates too, right? And I mean, we saw it even in the stock market or crypto, people were really leveraging themselves. Oh, yeah. The risk spectrum was out of control is what it was. Yeah, exactly. I mean, I think there's probably a case to be made. There's a lot less leverage investing in the stock market than there is in real estate,

clearly because of how mortgages work. But whenever you introduce leverage, you can really supersize your gains, but it goes the other way around. And when you're constantly told that real estate just goes up, it's a dangerous spot to be in. Liquor, ladies, and leverage. Yeah. Is that Buffett or Munger? It's Munger. Okay. Yeah. Or is it Buffett? It's them. How about them? I knew it was them. It's those guys. Yeah,

that's their famous thing about how anyone can go broke. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com.

Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb,

but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. All right. Let's talk about some changes to the S&P TSX. Standard & Poor's is a company administered by a public company called S&P Global, ticker SPGI. They control the S&P TSX-60 index and the S&P TSX composite index. These are the two most commonly referred to indices tracking the Canadian market, the TSX-60 being the larger cap names, the only being 60, and the composite being mid 200s usually, right? Yeah, I think so.

That sounds about right. I don't really keep track, but that sounds about right. Well, it's a relative. Yeah, it's not that big of a deal. A couple hundred companies in there. So what got in and out? They do their review every once in a while. It's basically a board that decides what goes in and out of these indexes. And I don't think it

matters that much. I mean, in the long term, the share performance of these companies is going to move if they execute well or not. But in the short term, this has implications on fund flows, right? Because we've seen how much passive investing can move markets and fund flows with these ETFs are a big deal. So I guess it matters. And I think it's interesting to see what they're sitting around in their boardroom having these discussions on which one should be in and out. Let's start with the TSX composite index, the bigger one. Deleted from the list. I see you're grinning. Yeah, for two reasons here. They're added and deleted. Remember last week when I talked about? Yep. Yep. Well, are you talking about the composite or the TSX-60 here?

Oh, TSX-60. We'll get to that one because you did talk about that i jumped the gun my bad no no because you're going to be grinning on this one too yeah deleted from the composite aurora cannabis number one bye-bye acon group the construction and engineering group not sure why but i don't follow the name. That's a little surprising. I don't follow either, but I always thought Akon was a good kind of barometer for kind of infrastructure and construction in Canada. Maybe they've been struggling a bit. Their stock's been smoked. Yeah, remember a few years ago, they got an offer to be purchased by a Chinese company and then that

got blocked by the federal government? Did they lose a big contract or something? I know Ellis Dawn has been dominating winning big government infrastructure contracts. Could be, yeah. So, you know, these guys are competing for work and Ellis Dawn has on several occasions come to save the day with a lot of these like subway infrastructure projects, for instance. So I wouldn't be surprised if that is definitely hurting them. Stock's down 50% since September of last year, which is surprising for a company like this. It's not some high-flying tech name. The dividend yield is almost 7%. Holy smokes. I know that they had a ton.

It's not a name I follow particularly much. Me neither. It's less than a billion in market cap. But I looked at their balance sheet one day and I ran away. Dream Office REIT, which is an office real estate investment trust, a name that I actually think is quite attractive, very unloved office reet name. And the fundamentals look pretty good. Again, this is very surface level.

So do your own research like everything on this show. But that one's starting to look pretty cheap just on first glance. And New Gold Inc. So those four were removed. Added was Algoma Steel. I think that company had been dominating. Bellis, not to be confused with Tellus Health, but Bellis Health, which is a biotech name. So very interesting. Okay. And Uni Select Inc., which provides aftermarket auto parts. So interesting name there. For the TS660, these are the bigger large cap names.

Added was Termaline Oil Corp, a name you brought up last week. Yeah. I mean, these companies have been doing extremely well. Let's not kid ourselves. Oh, and damn, like, it's been pretty crazy. If you just look at the chart, like, it's insane. The poor performance. Yeah, it's revenues and also free cash flow just kind of gone off the charts.

And I mean, I don't know enough about it still to make any comments on it, whether it's just projects coming online or things like that. But definitely has grown really quickly. One of the best performing oil and gas stocks for sure. And deleted Bosch health companies. Don't ask me about the pronunciation. Inside joke between us. Oh yeah, I know. Don't ask them how to pronounce the company name. You guys won't get this inside joke,

but that's okay. You'll just have to trust Simone and I have a deep history with this company. Okay, so that one's in, that one's out. But buy Aurora Cannabis from the composite index. Farewell. Yeah, no, it's interesting. It's also interesting that they didn't necessarily kind of one for one actually replace the same industries too. So that's something I was looking at as you were talking at because they removed that right and they didn't replace it with another REIT. Yeah, not like a like for like swap. Yeah, which is fine. I mean, you know, obviously the S&P 500, for example, is a lot more tech heavy than it was 20 years ago. So it does make sense that sometimes some industries will be favored over the other.

But yeah, that's kind of my take on it. Yeah, at one point, the biggest name in the S&P 500 was Exxon, no? Yeah, yeah, exactly. And the last thing I'll say about fund flows, I would argue there's probably less of an impact in Canada because I know some people do index investing in Canada. I'm sure we'll have a little bump, but I think for the most part, the S&P 500 is a much bigger deal because you have people around the world dollar cost averaging.

Investing in that. And you have massive, whether it's pension funds or other institutional investor using that strategy too. Like SPY, the ETF by Spider. Yeah. SPY alone has around anywhere between 350 and 450 billion in market cap just in that ETF of holding. So that's not insignificant. And that's just one ETF. That doesn't even count for all of the BlackRock, all of the Vanguard, all of the banks that have their own products, all the robo advisors,

all the mutual funds that hold versions of those indices and pensions and the whole nine yards. It's going to make a bigger difference on fund flows than the S&P TSX. But it's still interesting to see which ones they are picking to go in and out. Still doesn't hurt. I'll just say that. Yeah. Now, some big news. I'm sure most people have heard about this. I thought I was going to be able to take this one and you just snatched it up. Well, I mean, I'm sure you'll give your take on this.

Yeah. And this one, obviously, Adobe came out with their earnings. And I mean, the earnings were pretty good, I think, but that stock got crushed because they said that they would acquire Figma, which is a competitor. I would say so. I wasn't super familiar with their offerings. I kind of started looking at a few videos and it really feels like it's direct competition to some of Adobe's products. So before I go on, what's your first reaction with this acquisition? I had a couple of reactions. My first reaction was, of course, $20 billion is expensive. It's about 50 times ARR on Figma. So 50 times their recurring sales revenue from today. So of course, expensive given valuations have compressed from that level quite a

bit. But the market's reaction since September 12th, eight days ago, the shares are down more than 26%. Adobe shares are down almost 35% since mid-August to $136 billion in market cap, almost 25 times EV to EBITDA now. And if you look at the threat that Figma posed on some of the creative cloud, so Adobe's creative cloud is their bread and butter to their business, the subscription business. They've transformed their business into this ridiculously high margin SaaS company. You get subscription to the creative cloud, you get Illustrator, you get the video one, you get Photoshop, you get the whole nine yards. Now, Figma, a fairly low friction, freemium type web application for designers to design websites, to do digital graphic design. It has become the powerhouse for designers doing digital designs. If you're designing a new website, you're doing it in Figma. If you're getting a professional

firm to design your website, they're doing it in Figma. If you get a freelancer to design your website, they're doing it in Figma. And I said to Adrian, like one of the analysts at Stratosphere, I said to him about six to eight months ago, I said, Adobe's starting to look really interesting, but I can't buy shares because I don't know what the future looks like with them and Figma competing for a lot of these creatives. And that's not to say Adobe was screwed. There's still Photoshop's irreplaceable in some scenarios, and the video software is still the best in class. But they're getting their lunch eaten on a very specific, important segment of the market that Figma has completely taken over. So my reaction was, sure, is it worth 50 billion? Maybe not. Is it worth 50 times ARR to Adobe? I think so. And so I'm going to take the other side of the market's reaction here. And especially with this price action, Adobe has flown up my watch list. Yeah, I have a mixed reaction because my

first reaction is that they get the memo that we're not in 2021 anymore. And that is why the market has sent has had a reaction. It has had Yes, like clearly, you know, whoever was negotiating for Figma did a really good job and really used, you know what they're doing against Adobe, because their valuation last year, privately, their last round was 10 billion. And that was at the peak of, you know, growth stocks. So you can make a case that the valuation this year, at the very least, should not be more than 10 billion. I think you can make a pretty strong case. I know they're growing quickly. But I think that's where the market really had a tough time.

And I think the other take I've read about this not being great is Adobe being more on the defensive side. And that's not typically been their strategy when they've made acquisitions. So that's the other kind of critique that I've seen people say is that- They don't have a great track record of M&A. No, and they've usually, I think, made smaller acquisitions. I'm not super familiar with their acquisitions, but I think it's never been that big of a move. I think that's, you know, for the most part, it'll probably, you know, if it keeps going down, and I agree with you, it may become a really attractive company because it's half stock and half cash. So it's going to dilute.

They did have a decent amount of cash on the balance sheet. I'm not sure how they'll fund everything cash-wise. I'm assuming they'll probably issue some debt. But it's interesting, something to keep an eye on. I know some people, when I tweeted last week, what are you buying? A few people said they were buying Adobe because they think it's an overreaction of the market. I do think it's a slight overreaction. And I get the vibe that Wall Street has no idea what Figma is. And so being in tech and knowing personally how important Figma has become, I tend to stay on the side that I think it's probably a good idea that Adobe does this. The correct answer here is that Adobe should have done this two years ago before they really started to get to a point where Adobe can't wait any

longer, right? Like can Adobe risk waiting any longer on this and really have the risk of affecting their creative cloud business? Because the creative cloud business is everything, right? If you look at the mix, it's the business, right? Like there's the document cloud as well, which is like, you know, I think around 15% of revenues, but the core of the business is the Adobe creative cloud. Now, if I take the devil's advocate view on here if you look at figma's run rate you're paying around 50 times arr for next year i think right for next year for 50 well i think it's 50 times today's run rate no no they they actually had it on their

adobe side but the run rate the arr run rate is going to be different than on the though okay on the one year basis from right now you're saying right yeah like for instance like so for stratosphere our trailing 12 months revenue is going to be a lot lower than our recurring revenue moving forward arr run rate yeah yeah i was thinking of this year's sales that's why yes yeah so it's like 100 times this year's sales, 50 times the current run rate of ARR, annual recurring revenue. Now, what does that look like next year? And then what does it look like with Adobe's distribution? That is the question. And Figma has been under earning because that's their whole thing, right? Take market share, land grab, make it super low friction.

Like I use Figma all the time to check up on our designs for our app. And I don't have a subscription. I don't pay. Would I pay? Probably. And so I think that they're under-earning. What does the earnings power of a Figma look like in Adobe's distribution and the fact that they kind of just maintained their monopoly?

I am pro overpaying to maintain monopolies, generally speaking. I know that's an oversimplification, but generally speaking, I am okay with overpaying to maintain monopolies. Yeah, yeah. No, I think those are good points. I mean, there's always, you know, the possibility that they're also projecting way too much in terms of Figma's potential too, right? So Totally, that's a risk. Yeah, that's a risk. But I think, you know, we've probably gone over the pros and cons here. So it's not without any risk, and it's not without any upside either.

But in terms of their earnings release, it was actually pretty good. Revenues were up 13% to 4.43 billion for Q3 of 2022. Earnings per share down 4% to $2.42. Gross margins were up 50 basis points to 87.6%. Operating margins, one that we've seen a lot of companies have gone down. Same for Adobe here, down 280 basis points to 33.4%. And free cash flow for the period was up 20% to $1.6 billion. So to get back to the acquisition, obviously I think they'll be able to pay for it on a cash flow basis pretty quickly, even if they do need on short term basis, maybe to get a bit of debt or some kind of other

financing. They're also guiding for an increase of 10 to 13% for all their segments in Q4. So it looks like they will finish a year pretty strong. But I think what's weighing on the stock is definitely that acquisition, probably not something that we'll know for sure how it's panning out. Probably it's going to be like three, four years until we know whether it was a good purchase or not. Yeah, time will tell. I want to believe and I understand the market's reaction. If the market keeps doing this, I mean, what do they say? Figma for free? Get Figma for free? As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online

broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized,

hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at Airbnb.ca forward slash host. forward slash host. That is airbnb.ca forward slash host. All right, let's switch gears to Reddit r slash over employed. Have you heard of this? Yeah, I've actually read some. Sorry, I don't want to swear, but I think it's really crazy. Like I don't get it. I don't know why

like you're burning the candle by both hands. I'll just say that. Yeah. This is some of the most wild stuff ever. And of course, it's the internet. It's an anonymous playground on Reddit for the most part. How much of it is true? I don't know. Probably not all of it, but I think most of it is true. Like, I don't know, probably not all of it, but I think most of it is true. Like some of the stories seem too real to not be true. And so I'm sure that there's some people that are full of it, but I'm sure there's lots of people that are telling the truth. And so the gist of Reddit are slash overemployed for those who are not familiar with Reddit. I'm like, I'm like falling down the Reddit thing. Cause I'm trying because I'm trying to see what the market wants

in the investing space. And there's different subreddits, like different little communities, and this one's called Are Overemployed. So it is a collection of people who are sharing their stories of working remote jobs, full-time jobs, full-time professional career type jobs that will be doing two, three, sometimes four or more full-time high-paying generally tech jobs from home and their employers have no idea. Or maybe they don't care as long as they're getting the job done somehow. But I would say for the most part, their employers do not know that they are quad triple dipping, you know, double dipping, sometimes triple dipping. I've seen some ridiculous stories of quadruple plus dipping. Now I'm seeing lots of computer engineer types who are like DevOps. They're like basically monitoring and fixing stuff as needed. they know they'll be like they'll be monitoring servers for three or four big fang companies

making 250k plus stock comp per year like over a million dollars a year and i guess they can pull it off because there's just some days where nothing's needed like they're basically firefighters like they're only needed when there's problems so because there's just some days where nothing's needed. Like they're basically firefighters. Like they're only needed when there's problems. So hopefully there's not problems at the companies multiple times in the same day. But we're talking about people making 800K plus, plus stock comp, you know, with three high paying jobs. This is insane. It seems very risky and super stressful to me.

And I guess you can just kind of hide in these big companies and get away with it, especially if it's remote. Not my cup of tea. I don't know how this is rewarding at all, but you know what is rewarding? All that cash coming in. So, I mean- Can't even enjoy it. Like literally, you're always working. You hear some of the stories though and they're working. So, they're working. Okay, let's go with just two because I think that's probably the most common.

They're working two nine to fives and getting away with it. So, it's not like they're working extra hours. Yeah, a lot of them do say though they oftentimes have to work at nights, longer hours to make sure they get the job done. So, I think, you know, they may not be working. And then they probably look like some all-star employee because they're like figuring stuff out at like 8 p.m. Yeah. So they probably don't necessarily work like 80 hours a week, which would be 240 hour jobs, but maybe they like work 60, 65, which I know there's good paychecks, but especially for tech companies. I mean, if the companies find out, you know, a lot of the information that oftentimes they would have access to, I don't think they would see that very well for them working in another company and potentially being a liability for them.

Right. So I think that's for sure. Yeah, that's and I've seen some of them where they say as soon as they're asked to return to work in the office, they're quitting the job. They just quit right away. Yeah, they just quit right away, like no question. So it's kind of funny because it's the opposite of something else that's been happening, which is quiet quitting. I don't know if you've seen that. I've seen it, but I don't really get it.

It's basically like I don't want to work hard, basically. No, well, not really. It's basically people saying that they work the amount of hours they're supposed to be working, but not more. Okay. So it's kind of people saying, okay, you have 40 hours a week. I'll, you know, I think some people may be slacking, but for the most part, the actual term is for people working just their hours, nothing more, because they want a good work-life balance. So that's what I find like quite quitting a bit more head scratcher because, you know, if you're a good employee, you're working your hours, technically you may be into that instead of working 50 hours a week, but still getting paid for 40. You're still working your hours. You just want a good work-life balance. I don't see,

it's just a term is kind of weird. The term comes off, they need to rebrand because that term comes off to me as like, okay. Yeah, it's like you're just trying to come up with an excuse for the fact that you're kind of lazy. That's how I read that as. I know that's not what it is, but that's how I read it as. Simone, we've seen FedEx stock get kind of deleted. Destroyed. Another one.

What is going on here? I feel for you if you were owning FedEx and Adobe last week because you got destroyed. Oh, God. Margin call. Yeah, exactly. No. So FedEx is just one of those stocks that the market looks at to just get a pulse on how the pretty much the world economy is doing. Bit of a barometer, them and UPS.

Barometer stock, UPS kind of falls in that category. One other that you'll hear a lot is Caterpillar because it's a good barometer for worldwide construction and infrastructure projects. for worldwide construction and infrastructure projects. I'm sure people have seen those big cat, you know, massive equipment digging for construction projects. So obviously those sales will be a good indicator whether, you know, companies and governments are doing these large construction projects. Now, for FedEx, clearly one of the big winners of the pandemic with its stocks more than doubling from the March lows of 2020 to the highs in spring of last year. What happened is FedEx came out saying that there was weakness in Asia and Europe. They also pulled their prior guidance and they

were not going to give further guidance for this year. They still haven't come out with their full earnings for Q1 2023, but they did release some preliminary results and those results felt short of expectation. So if you add all of that together, you get I think it was down about 20%. They are doing some cost cutting measures by parking some aircraft, reducing workforce hours and closing more than 4% of their FedEx office locations. Now, in my mind, the economy is heading towards a recession and we are potentially already in one. But remember, results are lagging. So we probably won't know that for another couple quarters or at the very least a few months for sure. Employment may look strong right now, but it's also a lagging indicator. So in terms of

the expected earnings, it usually comes first. And then when the companies are earning less than they were expecting, they end up cutting costs, which tends to lead to lower employment. Now, keep in mind, recessions are not all bad. I'm not trying to make light of a recession by any stretch of the imagination. And, you know, there's a good chance we might be right now in a recession. But, you know, and I know it's not easy for a lot of people because a lot of people will get affected really badly financially, whether they lose their job or end up being on tough economic times. But I did a thread on that on Twitter. If you are lucky enough to keep your job and have not been too severely impacted by inflation, then you're actually able to invest. And the way I see that, especially right now, which were,

I would say we're in an extended bear market. I know it's kind of been pretty close to the bear market threshold. But, you know, keep in mind, if you buy great company or index funds, you're buying them at a cheaper price. So my tip for everyone is just think of those as units. You get more units for the same dollar investment that you did even like just six months ago or a year ago. You get a higher dividend yield if you're investing in dividend payers. And again, there are good and great companies. If you're staying away from bad companies, you should be okay. And then it really allows management to buy more stock at a cheaper price as well if they are doing stock buyback. I would just say be careful of zeroing in on value traps, especially during

bear markets. Because if you're looking at, you know, companies that you're hoping will turn around, if the economy is doing really badly, there's a good chance they will really struggle coming out of it or potentially go to zero. So stick to quality would be my tip to everyone here. go to zero. So stick to quality would be my tip to everyone here. And of course, it's not investment advice. Of course. Well, of course. If you look at shares outstanding here, I just pulled up shares outstanding for FedEx here since 2013 because I got 10 years of data on stratosphere.io. Not recently. They haven't really turned on the buyback machine much since 2017-ish. But during that stretch, shares have gone from 317 to 266. And so they have been cannibals of buying back their own stock, and maybe they'll do a bunch more of that now.

They've typically done that opportunistically, not recently. So maybe they didn't think that their shares were super undervalued, but maybe they will now. They've typically done that opportunistically, not recently. So maybe they didn't think that their shares were super undervalued, but maybe they will now. So I mean, this is FedEx, UPS, these companies are obviously backbones of infrastructure for the global economy. And they got a little hot with last mile delivery really accelerating their growth during the pandemic. And so, you know, when you see e-commerce volumes come back down to life, that's going to make a difference on those comps, right? And so, I'm not really super surprised to see this. No, and we've seen it with Amazon, right? So, if you're seeing it with Amazon, I think most investors, if they were just paying attention,

I think this was just inevitable that FedEx would come out with this kind of warning. Have you seen how there's Gautam Adani, the guy from India who's now the second richest person on the planet? Have you seen this? No, I haven't. I mean, I've heard of him and I know he's been up there for quite some time, but I didn't realize he was a second richest guy. I guess the first one is still, is it still Elon? I think it's still Elon. I think this guy just passed Bezos. Bezos is spending all his money on

football broadcasting rights and Lord of the Rings, spending all his money on Lord of the Rings and football. So, the Adani Group is an Indian company and it is a collection of infrastructure companies in India started by Gautam Adani. I could be saying that horribly wrong, whatever. His stock has gone up like 20x in the past two years. And my short answer is I have no idea why. I don't know if I'm missing something, but this thing looks like it's gone full meme. It looks extremely overvalued to me. It is like the Brookfield of India. They say that their sectors they cover are energy and utilities, transportation, logistics, incubation. I don't know what that means, airports, materials, and then their companies, which are all publicly traded. You got Adani Enterprises. So think of

that as like, bam, the mothership. Adani Enterprises, and then you got Adani Ports, Adani Green Energy, Adani Total Gas, Adani Transmission, and Adani Power. So you're like a lot of core infrastructure, power assets, nat gas, renewables, and they're all publicly traded, similar to the Brookfield move. And some of them are worth like in USD 50 billion and stuff. So they're not small, utility ports, airports, core infrastructure, transportation infrastructure, but it is a bit of a head scratcher how the stock has gone absolutely parabolic. Either I'm missing something or it's a bubble ready to pop. The flagship Adani Enterprises, and I'm not sure how they're all connected, but it's not really growing. It's a big business,

don't get me wrong, but it's not growing the top line consistently. And profitability-wise, it's a roller coaster. And it's not like those other assets are absolutely growing extremely fast. I mean, I'm sure they're growing quite fast given the fact that so much of India does not have this core infrastructure yet, even still. So they still have a big runway for growth. But I think that this thing's due for a ridiculous correction. I didn't know they were growing that fast. I mean, obviously people, you know, I don't know, it could be a meme thing. I really don't know. I'm not familiar with their financials. So like, I'll take your word for it. But I guess people are just kind of betting on the Indian kind of growth being the next potential China in terms of where they're at right now.

So that would probably be the case for them. And there's so much runway still for them in terms of core infrastructure. I don't have the stat in front of me, but a very large portion of the Indian population still doesn't have core electricity in front of me, but a very large portion of the Indian population still doesn't have core electricity access and stuff like that. Yeah. And there's a Canadian play I had looked into like three, four years ago, never ended up kind of buying into it. But you're familiar with Prem Watsa, I'm assuming, from Fairfax.

Yeah. So they have one arm of Fairfax. It's Fairfax India Holdings Corporation. It's ticker F-I-H-U.T-E-L. It hasn't fared all that well, but if I remember correctly, they do have some infrastructure plays in India. So I'm not familiar with all the infrastructure plays that they're doing, all the investments that they're doing. But if someone's looking for some exposure to India, that could be one that you look into. Obviously, do your research, may or may not be a good play at the end of the day, but it is a potential play here. I'd like to correct what I just said.

I just fact-checked myself here. India electricity access per capita, it is up to 99% now. Oh my God. Look at the transformation of the infrastructure in this company. In 1993, less than half the population had access to electricity. Wow. That's crazy. So I was just reciting some old facts here. But around 2010, it was only 75%. So still, yeah, which was a very significant amount of the population did not. But it has transformed. Even just since 2015, there was over 15% of the population didn't have electricity access. And now we're up to, I mean, almost everyone now.

That's incredible. Yeah. And one thing that's still lagging a lot in India is hot water. I can't remember what it is, but I know it's still relatively low. I don't have the numbers in front of me. So there's definitely, you know, there's a lot of infrastructures left to be built over there. I'm sure internet access is definitely not anywhere near close to what it is in North America. So there's some interesting infrastructure plays. And then obviously as the Indian population becomes wealthier and wealthier, then you have things like airports that could also be very interesting because people become wealthier. We've seen this with Chinese people. They end up traveling more.

So there's definitely some interesting plays. Again, I haven't done enough research whether I'd be able to find one specifically for infrastructure that would make sense. I'm just kind of baffled by this data. It's weirdly linear since 1993 from 50% to 99%. It's not exponential. It is almost a perfect line straight across to them reaching that. You'd think it would have been somewhat exponential. It's very linear.

Every year, they just got more and more connectivity. So that's good. That's the episode. I think that's it. That's the episode, guys. That is it. Thanks for listening so much to the pod. This is the Canadian Investor Podcast.

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