The Canadian Investor - The Best Performing Assets of 2025 and Couche-Tard Pulls the Plug on 7-Eleven

Episode Date: July 24, 2025

In this episode, we start by breaking down the year-to-date performance of major asset classes, including equities, gold, Bitcoin, and bonds. We then dive into why Couche-Tard’s $47B bid for Seven & i ultimately fell apart after nearly a year of back-and-forth. Lastly, we cover the latest earnings from BlackRock and American Express. Tickers of stocks discussed: BLK, AXP Get your TSX Meetup tickets here! Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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that it's a business. Just my reminder to people who own safe Google's, don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome back to the Canadian Investor Podcast.

I'm here with Dan Kent. We are back for an episode of News and Earnings, mixing it up a little bit today because it's still a bit dead on the Canadian front in terms of earnings. There is some news. We'll be talking about the big news that Alimentation Couchon is withdrawing the bid to purchase 7&9, which is the assets for 7-Eleven, the convenience store. But we'll also be talking about some year-to-date returns by asset classes, what has been performing well and what has not.

And then we'll be talking about some earnings as well, BlackRock and American Express to wrap things up. So yeah, before we get started, Dan, how are things on your end? Ready to go over this episode? Yeah, it's been pretty busy on my end, but I mean, the deal that has been going on for what? It's got to be close to a year now. Looks to be finally, finally dead. But who knows? I mean, they've kind of resurrected this thing numerous times. So yeah, it's going to be an interesting episode. The TSX is finally, finally one of the better performing indexes, but it's also largely skewed to one particular sector. So yeah, it'll be a good episode.

Yeah, exactly. So I thought it was fun because again, it's a bit dead on the Canadian front when it comes to earnings. So I wanted to still add a decent chunk of Canadian content. Of course we'll be talking about Kushdar after this. And looking at the return, so if we look at stocks and I'll be talking about other assets too, about bonds, gold and Bitcoin, how those have done as well. But if we look at stocks, the TSX 60 has returned 10.7% which for those who have not been keeping track It's actually much better than the 8% in terms of total returns that the S&P 500 has returned in the US And what's really been leading the charge in the TSSX and when I say the returns here I took the TSSX 60, but it's a good representation of the SP TSX. Obviously it's market cap weighted so that's going to over weight a lot of the rest.

But the best performing sectors of the TSX, the first one is probably not a surprise materials with I think being lead of course I'll be talking about gold but a lot of precious metals that are mined in Canada. There's other types of materials that fall into there in terms of the companies that extract those, but they've been doing well. It's up 27%. And again, these are total returns, so they do include dividends for these, I guess, six months in change, so the first half of this year. Financials at 11.3%. Financials includes not only banks, but also insurance companies would be in that financials group

Utilities at 10.2% so pretty much right in line for the index So if you've been utilities liking those dividends for Canadian utilities, you've done pretty well with probably pretty low Volatility haven't checked that specifically but they typically are And then you have real estate at 8.9% and then energy at 0.3%. And surprisingly tech is down 1.3%. So the worst performing sector, but granted it is heavily weighted towards Shopify, Constellation software and I think CGI is the third one, right? CGI and probably, I mean, OpenText and maybe Celestica a bit but yeah it's I actually looked up the returns of just the TSX the TSX overall and it's actually up 12.5%

and I would imagine this is probably because of the the gold element I mean there's probably a lot of smaller miners or just like precious metals period that aren't included on the 60. I mean obviously the TSX 60 and the S and P 500 is going to be the best comparison rather than, you know, a total market. But yeah, I was looking up, uh, the best companies on the TSX this year. And you have to dig deep into this list to find a non metal play pretty much. I mean,

I think the biggest one I could find that was not material play was like Kits Eyecare which is like a glasses company. I think they're up like a hundred percent on the year but other than that like it's it's been just dominated by just you know gold companies. So I mean if you're if you have a portfolio that you know consists of a lot of Canadian companies you might not be up this much unless you own a lot of Canadian companies, you might not be up this much unless you own a lot of exposure to gold and just metals in general. Yeah, and I guess financials, right?

Financials, yeah. Financials have done pretty decent. I mean, they've returned pretty much. The banks are doing well. Yeah, in line with the index. And then if we looked at the US, so the S&P 500, you'll see here for those on joint TCI might be a bit lower than what I mentioned because what I looked At was total return. So this is just regular returns. So it excludes dividends, but nonetheless

Sectors speedy ours calm It's a really good and interesting site to look at if you want to break down by sector pretty similar in the u.s The biggest difference I would say in terms of returns would be technology, of course, with some of the big names. And you do have a lot of the big names, including Google and communication services. So technology is up 12%, communication services up 9.69%. But for the rest, it's pretty similar.

Energy, essentially flat, similar to Canada. If you're looking to real estate, it's actually doing much worse than Canada. That one is actually a bit of a divergence too. So it's up about 3% in the US, whereas the Canadian one, what was I saying earlier, it was up close to 9%. But again, the REIT sector is much smaller in Canada, so it could be just because it's more diversified in the US, includes other sectors. I know in the REITs sector is much smaller in Canada, so it could be just because it's more diversified in the US, includes other sectors. I know in the REITs in the US, they have some government property REITs as well that could have been obviously negatively impacted by the whole dodge thing that we're talking about. That, of course, Elon and Trump led by Elon, and we know they were looking for about two trillion savings and then it's a pocket change compared to that.

and we know they were looking for about two trillion savings and then it's a pocket change compared to that. But interesting to see what sectors are leading the way so far this year. And it's been, of course, very volatile. It would have looked very different if we looked at this in early April, after liberation day. And we'll have to see, maybe if we look back at this

in a couple of weeks, we'll see if the threats are real or not by the Trump administration and tariffs going into effect on August 1st on most trading partners it seems like at this point. So it'll be interesting to see whether it changes or not. But so far, I mean, it's been a pretty decent year, especially thinking about how strong 2024 was and 2023 before that. about how strong 2024 was and 2023 before that. Then you also think of what happened in April when the S&P, well, I mean, most all markets

just took a absolute nosedive and we've recovered quite a lot actually. I mean, when we look to the TSX, I actually just looked it up. So it's around 9.5% tech, whereas the S&P 500 is 32%. So that's gonna be like a huge driver of returns to the S&P relative to the TSX. We just don't have that tech exposure. So I mean, this is typically why the TSX is always lagged. We have a lot of cyclical, like we're a lot of

energy material financials, whereas the US has, the U S has just driven, you know, those big seven companies just driven a huge chunk of the returns. So the TSX is kind of, you know, I think even over the last year, it's the best performing index. So it's done quite well over the last year, but I wouldn't be comfortable saying it's going to do well over the long term. I still especially on an index level, but it's had a pretty good year. Yeah. And you know what's done really well this year?

Emerging markets. So for those who are invested in emerging markets, they've done very well. I just took an ETF that is a good representation. However, keep in mind that there will be some different allocation depending on what kind of emerging market ETFs or index it does follow at these ETFs.

So I just decided to take the EMXC which is emerging market excluding China. It's a BlackRock ETF. This one has just been crushing both the S&P TSX 60 or the S&P 500. They've returned 17% total returns and this one just to give people an idea of the allocation here Taiwan is about 28% India 24% I know India has done quite well South Korea is 15% then it drops down to Brazil at 6% Saudi Arabia at 5% South Africa 4.5% and then Mexico 2.7 and then it's much smaller allocations for the rest of the countries there.

But just to say that for those who are diversified away from North America, you've likely done pretty well depending where your exposure is. I haven't looked at China specifically, but I think China is probably doing decent as well for the year. So I just wanted to mention that because we are guilty of focusing a bit more on North America. And there is a lot of possible investment opportunities for equities outside of America. So just make sure that you keep that in mind when you invest. It's easy to get bogged down into the US, for example, because they've done so well in the last couple of years. But sometimes there's some really good opportunity outside of that. Yeah I think a lot of people avoid this just because they don't know it all

that well. I mean myself included I don't have any exposure outside of North America. I mean I guess you could say like asml to a certain degree but outside of that I don't own any of these funds. They've done they've struggled for quite a while but they're doing you know good thus far and I mean it does make it easier now with all these funds. And there's a ton to choose from, too. Like you have emerging developed a mix of both. I mean, there's a ton of fun. So if you are going to buy one of these as well, you really got to dig

into the allocations because there's a lot of them vary on like, you know, a standard S&P 500 TSX index fund. Like a lot of these funds can be vastly different than others. So, just dig into what countries you're getting exposure to, things like that, whether it's emerging, developed markets, all that type of stuff. Yeah, it would be a fun episode to do. So if people are interested,

we can do an episode focused more on investing outside of North America. So I think that would be a fun topic. And going in terms of other asset classes, so I wanted to look at gold, Bitcoin, and bonds like I said initially. So gold has just been, I mean, crushing it. It's been in a bit of a lull for the last, I would say, month or so. But now it's actually, I guess today it's been doing quite well but if we're looking at year to date so it is up 30 close to 30% year to date. So it's pretty much one of the best if not the best performing asset class since the

beginning of the year. Bitcoin is not that far behind so Bitcoin is looking at 27% year to date in terms of returns and then to close out the trifecta here with not as good returns probably the worst performing asset class when you're looking at the the major ones out there so bonds I took a couple of them to just give people an idea how it's performed so far this year so TLT which is the black rock longuration US Treasuries this one is down 0.6% for the year and that includes the interest payments or the coupon payments that you get on those bonds just because I guess long-term yields have just been fluctuating a whole lot so there's not been

that many returns there could get better could get worse really depends where that goes. ZTM which is the BMO five to ten year US Treasury bond ETF that one is up three percent which is actually pretty close to what you would get in terms of return if you just held US Treasury bill which is a 2.3 percent return year today. So it is interesting how that kind of safety of bonds has been underperforming quite a bit. I would push back to those who say that something like a TLT or ZTM is safe just because it is dependent on long-term yields and if yields rise then you'll see your returns go down and vice versa. If yields go down you'll see your returns up, but it doesn't mean that it's necessarily safe. So I think it's important for people to recognize that.

That's why I tend to stay myself in just the US Treasury bills because they don't fluctuate over with interest rates. The only thing that will happen is the short term. So if the Fed decides to lower rate, for example, then it'll just be yielding less, but it won't affect the par value just because they roll over so frequently. Yeah they're safe in the fact that you own U.S. treasuries but I mean they're not safe in the fact that they're they're guaranteed to to return anything. I mean they haven't for for quite some time. I mean bonds have struggled for for quite a while now but I mean I don't know I don But I mean, I don't know. I don't own any I don't

know own. I don't know a lot of people who do own a ton of bond funds in their portfolios, especially like over the last while now that all those cash ETFs have have yielded so much, especially like the even the shorter term US Treasury ETFs you can buy. Yeah, I think the issue is I think a lot of people don't realize they own bonds when they do. So those all in one ETFs usually have some bond exposure, whether it's 20, 25, 30% or

even sometimes a 60, 40. So I think some people don't realize that they own bonds when they actually do. And my biggest criticism for years now for bonds and it still is, I mean sure your principal is safe but at the end of the day I think it's probably one of the riskiest asset class when you try to keep up your purchasing power and I know Wall Street doesn't sell it that way and a lot of investment advisors don't sell it that way. By the end of the day, that's the whole point of investing is keeping up your purchasing power and ideally increasing it.

And what are you doing if you're not keeping up your purchasing power? You're really not in the right game. So we'll wrap it up at this. It's been a long enough segment to start off, but I think it was fun just to give people a bit of a lay of the land here, especially since I'm sure a lot of our listeners like us are guilty of focusing a bit more on the Canadian and US stock markets and not other type of asset classes. So that gives us a bit of an overview what it's done so far this year. Want to buy a stock but don't want to shell out hundreds or even thousands for a single share? With Questrade's new fractional shares you can invest any dollar amount and build a diversified portfolio instantly.

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Now we'll move on to Kushtaw, which withdrew its bid for Seven and I, the owners of the 7-Eleven convenience store. So you want to go over, kind of give us a little bit of a background of the whole thing and what they said and when they withdrew their bid. Yeah. So like we had mentioned at the start of it, it looks like this deal is finally dead and it's been, you know, probably a year back and forth. So it originally started back in August of 2024 they put in a bid for seven and I for 38 and a half billion US dollars

it was pretty quickly rejected I'm pretty sure I remember seven and I say stating like it was grossly undervalued something like that yeah yeah they they did not like the deal at all and they did end up ramping it up to 47 billion US dollars So this would have been the largest ever foreign buyout of a Japanese company And I mean to give you just to give you an idea of how massive it would be Cush start has around 14,500 stores seven and I has 80,000 I believe it is and initially there was a ton of questions as to how Cush start would even finance this deal I know they were talking about how they were comfortable running at like twice the leverage

ratio that they were currently running at and there would be equity issuances, things like that. Yeah, and I think the case that they put Placement du Québec, which manages the funds for the Quebec Pension Plan and other Quebec plans, I think they were backing them. Yeah, they said they would fund some of it. Yeah, they were going to help them out, but there was a lot of concerns here that, because I believe, I mean, Cushart is probably only worth even right now around 47 billion US dollars. So you're talking about an acquisition that is almost the entirety of the size of the current company. And it had taken a big swing like this prior.

It attempted to buy, how would you pronounce it? Carry for. Careful. Careful. Careful. Yeah. Yeah. So this was kind of a combo type company.

I mean, they had some convenience stores, but I think they had a lot of grocery stores and yeah, it, it was kind of out of left field and they did, uh, Custard's share price took a big hit there too, and the deal ended up falling through. And I mean, overall, this is kind of the second big swing they've taken in the last couple of years, because this is a company that's, you know, for a very, very long time has like made smaller,

tuck in acquisitions, you know, 200, 300 stores at a time, kind of merge them into the fold. But this was definitely like them trying to, you know, 200, 300 stores at a time, kind of merge them into the fold. But this was definitely like them trying to, you know, get into a home run here. And it was initially like the so Japanese regulators had stated that seven and I was core to national security, like they added it onto a list apparently, that made it core to national security. And there was a lot of, I mean, kind of, sounds like what Trump is doing for tariffs. So it can bypass Congress because it's a national security issue or national emergency, something like that. That's the pretext he's using for a lot of them. This was kind of like, there was a lot of indications that this was kind of done to in an attempt to

block the takeover. Seven and I was even going as far to separate its gas station business from the rest of its operations. So it stated that it could unlock more value for shareholders by doing this over selling it. It did end up splitting. I believe it split off pretty much everything but the gas stations and it did end up selling that chunk of the business back in March of 2025. And there was a lot of back and forth here for the better part of the year. And there was a lot of activist investors, I believe there was two or three inside seven and I saying that you should take this deal. So management did not want to take the deal. They said the deal should

be accepted as it's the safe play. Whereas this whole speculative nature of splitting the companies off and trying to unlock more value that way was far from guaranteed. And we fast forward to March. It seems like, I don't know about you, but when activists, investors like, yeah, you should probably take that deal. It's probably a good deal for the company. That's usually the way I see things, which the inverse of this is like, was it the best

idea for Couch'tard to actually go after them? And we've talked about it before and that's why I was critical is, look, clearly the company is, it's still a solid company, but it's struggling right now. It's a tough macroeconomic environment for gas station that sell overpriced goods, essentially. That's what it is, overpriced food, overpriced stuff. People will think twice before paying $4 for a water bottle or whatever they're selling at super expensive premiums. That's why for me, it just didn't really make sense that you're in this environment, you're overpaying

when you should be finding deals in this kind of environment because you should be finding operators that are struggling and buying them on the cheap, not overpaying for an acquisition that may or may not work out. Yeah, it was pretty clear here just judging by, you know, seven and I management that if Custard was going to do this, they were going to pay full value like they had no interest in yeah, doing the deal whatsoever. And yeah, I mean, in the current environment, like they're called

convenience stores for a reason, right? But convenience comes at a cost. And when money is tight, people just don't find that convenience worth it. So they'll go to the grocery store, you know, save two or $3 on the items they're going to buy for, you know, an extra little bit of a drive. But if we fast forward to March of 2025, there was public comments by both companies that they were actively engaging in discussions to close the deal. However, right off the start, there was, you know, a lot of warning signs, mostly mentioned by Cush start. So management wasn't showing up at meetings.

There was constant comments from seven and I about regulatory rejection. They were excluding. This is all, this is all according to Cush start. Like I don't think there's actually any definitive proof that they were doing this, but they said they were excluding particular financials that would have been key for Kush star to kind of generate a proposal and the interesting thing here is apparently Kush start was even willing to put up a Pretty big breakup fee into the construction of the deal because that's how confident they were that they would get the Process pass regulatory approval. However, Seven and I just they kept saying that it wasn't going to get by,

even though Christard was willing to compensate them if it didn't get by. And I mean, to me, it just looked like Seven and I never wanted this to happen. Period. It was all it was all smoke and mirrors. And I mean, I think the company had really struggled performance wise up until a biode. And I think just pretending to be interested was kind of a way to make shareholders happy. It likely would have slowed down some of the aggression from the activist shareholders who wanted this deal done as well. And, you know, Kushtard's letter was pretty open about the intentional delays

management was putting up. And although, you know, Seven and I denies all this and says it was actually Kushtard that acted in bad faith, I mean, I tend to believe Kushtard in this regard. I just don't think Seven and I denies all this and says it was actually Cush tar that acted in bad faith I mean I tend to believe Cush tar in this regard I just don't think seven and I was interested at all They just kind of pretended like they were to kind of justify the spin-off of the non gas stations And so that shareholders who were probably angry with you know, not a very good run by the company I know they were struggling from you know, an operating margin wise, their price wasn't doing very well. They weren't growing all that fast. It would kind of look like management was maybe looking to find a way to create value for them. But

I don't think, you know, judging by what has come out over the last while, I don't think this was ever going to happen because they did not want to make it happen. Yeah. And honestly, I think it's probably a good thing. Like a lot of people will say, oh, Kushta is like great history of acquisition. This is nothing compared to anything they've done in the past. They're literally buying at companies. That's what like three times bigger than they are. So same size, same size, but in terms of store account.

Store account, yeah. Yeah, yeah, in terms of store account, like three times the store account. So clearly Kushta would have had to implement a plan to make sure that these store become more efficient or better run and so on. Can they do it? Have they shown they've done in the past? Sure, but can they do it on such a scale? I think that was a big question mark, especially if you end up paying more than you should have. I think

for people were like, I've seen a lot of people that are fan boy, fan girls of Kustal saying like oh they'll figure it out like they believe in them no matter what and to me there's just so many warning signs that look it may work out but they they're putting themselves in a really bad position like it better work out because if not, it's not like they'll be able to sell it at the price they bought it. Like it kind of has this, the making of when we talked about Dollar Tree and Family Dollar, it kind of has the making of potentially blowing up like that. Maybe not, but I think it's a, for me, like if I were a shareholder, I'd be pretty happy this fell through.

Yeah. And I mean shareholders were, I think it was up 15 some percent after. Yeah. And I mean, you're absolutely right. Like you, you know, you acquire a couple hundred gas stations and it doesn't work out all that well. It's not really detrimental, but when you're a $70 billion Canadian company on a market cap basis and you go when you're a 70 billion dollar Canadian company on a market cap basis and you go out and spend you know 47 billion US dollars and you have integration issues or anything I mean that's like that would bury the company really I mean there's no other way to put it you'd have large debt you'd have huge equity issues as I would imagine and that would that would like materially impact

the company. So market liked it when it was when it was shut down. I wasn't a gigantic fan of this. I mean, you know, they probably like on the flip side, if this worked out, it would probably it would be huge. But there's a lot of moving parts here. A lot of things can go wrong. And I guess the final thing I'll say is now that the deal is rejected, it looks like or now that they walked away, it looks like they re initiated a I think it's four and a half billion dollar buyback program or something like that. They're going to start buying back shares now where they had kind

of slowed down a bit just because this whole thing was going on. But and that kind of gives me an indication as well, you know, that it's probably done. Obviously something could come back later. But I think, you know, judging by their comments, they just know that Seben and I was never really interested, so I don't know if they're gonna re-engage. A lot of wasted time over the last year, I would say. Well, yeah, I mean, it's better than making a really huge mistake. I

think the last thing I'll mention about this is, remember, like these large acquisitions, it's not like the acquisition is done It's paid that the cost of the acquisition stops there There is integration costs and there's all these different kind of cause that will come into effect that will take time Yes companies will say oh We'll reduce costs with efficiencies and blah blah blah a lot of the time that actually doesn't materialize until and blah blah blah a lot of the time that actually doesn't materialize until much later down the line or it never Materialized so I think it's just a word of caution here, but let's let's move on to American Express I know we're gonna talk about Black Rock first

But I'll give you a time to catch your breath and I'll go over American Express Earnings and it was it was pretty good every time I look at American Express The more I like this company but build business Which is just the amount of dollars that flowed through the Amex network was up 7% to 416 billion And for those thinking you know what what does that tell me that's a big number well compared to Visa They roughly are about like give or take 8 to 12% of Visa network in terms of volume. So let's just say 10%. So it's roughly 10% of Visa's volume.

It's growing at a nice clip, but it's still the large, the much smaller of the three network if we include MasterCard as well. Revenue was up 9%. It was driven by increased card member well. Revenue was up 9%. It was driven by increased card member spending. So their cardholders increased spending there. Higher net interest income because they are a bank. So I know I have to repeat that. But MasterCard and Visa, they really just operate the network. Whereas American Express, they operate that network, but they're also a bank. So they do have other types of loans. And I believe you can even like have some savings account with them in the US. So definitely a bit of a bank,

yeah, bank and card network hybrid here. They continue strong growth for their cards that require a fee. And that's impressive because every time we look at them, it just keeps growing. Just keep growing up into the right. So I'm showing it for our joint TCI members. So the average fee per card, it was, I'm looking at a quarterly number here. So it was 61 back in December, 2019. And it's 117 in this most recent quarter.

So let's just say it's double in the span of roughly six years. So let's just say it's double in the span of roughly six years. So that's pretty good. Yeah, and I mean, I would imagine they're offering a lot better rewards now. I mean, a lot of people are just like, these credit cards offer such good rewards platforms, especially for people who can manage them and pay them off.

I mean, I can't imagine this ever slows down just because of all the, you know, different types of cards you can get with different cashback, all this type of stuff. It's a pretty crazy system. Now, the one thing that surprises me is the fee because there is a lot of cards that offer pretty decent rewards, but don't charge a fee.

But I mean, these must be over and above. I would imagine. Yeah, American Express, I've compared in the past and they tend to offer better rewards. The downside with them is always going to be if you wanna pay everything with credit cards, like I know a lot of people do and I do and then I just paid them off,

you almost need like a backup card, especially if you pay for a fee card, like most of, not most, but like let's say one of their premium cards You'll want to have like a backup master card or visa because the issue is that amex is not accepted everywhere So that's always the issue you'll encounter With american express but net card revenue was up a whopping 20 percent year over years So that's really impressive. It's now 2.5 billion and it's roughly 15% of their revenues.

It's almost a Costco model that you're seeing here where they're getting this as revenue and almost flows, like a lot of it will flow to the bottom line. Net income was down 4% compared to last year and earnings per share was down 2%. In terms of guidance They reaffirmed their guidance of 8 to 10 percent revenue growth for the full year and did the same for their earnings per share target Provision for credit losses were 1.4 billion for the quarter, which was higher than the 1.3 billion last year

They said the increase was because of higher net write-offs as a result of the increase in toll loans and higher reserves. You can tell that based on those write-off rates, and I will show this to our joint TCI viewers here, they are much lower, like they are at the bottom of the industry. So I think it's a good reminder here whenever those who are investing in banks, specifically banks that offer credit and specifically credit card, you have to keep in mind that not all credit cards are created equal or credit cards segments

of financial institution are created equal. Because if you're looking at the credit metrics here, their net write off rates are about 2%, give or take, and then the 30 plus day pass due is about 1.3%. This is phenomenal, this is really good. Like you don't see that very often for credit card, and if you start looking for, they actually break it down for millennials and Gen Z,

so the industry for millennials and Gen Z, it's about the 30 day pass due 4.4% and they're at 1.9%. And if you're looking at Gen X and baby boomers, it's 3.1% for the industry and 1.3% for Amex. And actually, I think that's a good reflection of what's happening in the economy overall is that K-shape recovery. So have you you heard that term before? No. So the key shape, yeah so the K-shape, so you

have like you know the classic what people will have heard more is the V shape recovery right? So let's say in the pandemic you know a lot of people may have said oh it was a V-shape recovery the economy is going up then plunges like you know the first line of the Ves like, you know, the first line of the V and then goes back up like the next line of the V. So that would be a kind of quick plunge and then full recovery or close to full. A K-shaped recovery is actually, think about the letter K. So half of it is recovering like a V. So it's recovering to the point it was before, but the other half of the K is actually

not recovering and going downwards. So it's just a way to explain that the ones that are doing well keep doing well, and the ones that are not doing well keep essentially doing worse. And the reason why I think Amex is so interesting is they're clearly they've said it you listen to their call It's very clear. They're focusing on premium card members. So they're focusing on the more affluent part of the population and Clearly that part of the population is doing quite well Whereas if you start looking at credit card issuers that focus a bit more on the broader population not necessarily focusing just on the more affluent, they're just kind of looking

at the whole population as a whole, you'll see those write-off rates that will be much higher than what you're seeing with Amex. Yeah, I kind of like looked up, I looked up the K-shape recovery and it's pretty much the rich get richer and the poor get poorer. Yeah. Yeah. And I mean, I think like this is right off the top of my head, but I was pretty sure when we looked over the banks, weren't they in like the three and a half percent range

in terms of write-offs? Yeah, I think it was. With the big banks on their credit card side. Yeah, on the credit card side, I think it's about there. You had Canadian Tire that was higher. It varies by the bank. They were in the fours, I think. Yeah, I believe so. I'm just going on memory. I could be a bit off too.

But it varies by credit card issuers, but even the big banks, right? Like a JPMorgan or Bank of America in the US, they won't have the same write-off rates for the credit cards. It shows what type of... what is their client base, essentially. And what kind of income their client base essentially, and what kind of income their client base will have. And JP Morgan, I won't, you know, I'll probably not surprise anyone, but they tend to skew a bit more towards those

who have assets and do have money and a bit more affluence. So they tend to have a bit better charge off rates or net write off rates compared to some of their competitors. But I just wanted to mention that just to show the importance. And it's not only for credit cards, for loans in general, is just understand what client base they're actually catering to because that's going to make a pretty big difference in terms of those provision for credit losses and those charge off or write off rates when

it comes to the various credit products they They're they're offering in this case It would be credit cards Yeah, I mean I think that k-shape recovery kind of you know sheds a light on probably a lot of subprime lenders as well That would probably directly benefit them to a certain extent I guess but that's why you know, I believe from 2023 to 2024 like subprime lenders were talking like a Goeasy and a Propel, they were the best performing companies in Canada, at least TSX listed companies. And I mean, that sort of, you know, recovery makes complete sense for a market like that.

Yeah, exactly. And the key, if you think about the key, though, going downwards, though, you have to be careful because I guess it's not great for those in that situation, clearly you think about the K going downwards though, you have to be careful because I guess it's not great for those in that situation clearly, but for the companies catering to them, it's fine as long as they can charge enough interest to cover the charge-off rates. And it's also fine until the economy really starts deteriorating. If it ever gets there, we'll have to see, but that's as long as they have jobs and they can pay those loans, it's not too bad for those companies.

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to the smallest asset manager in the world, BlackRock. Yeah, so pretty good quarter. Revenue up 13% and earnings up 16%. The company actually reported lower operating income and it pretty much attributes all the decline to acquisition related costs. It did make quite a few deals, which I'll go over more so the deals rather like there is some earnings here, but I think the deals kind of give, you know, a bit of an indication as to where BlackRock is going over the next while. So the company is still seeing some pretty strong inflows. I think you had a chart up. Can you

throw that chart up? I think they're seeing 6% year over year and I mean iShares is driving a huge chunk of this. They had 85 billion in total inflows. They just continued to crush it in terms of money coming into the market. You'll notice here there was a couple big institutional outflows, I think, on their passive, kind of their passive institutional indexing. But the thing is the company said that a lot of that money flowed into not necessarily that money, but there was enough money that flowed into higher fee type funds. We're talking, let's say Bitcoin, gold, like, you know, other actively managed funds that kind of offset this.

So they kind of said it wasn't all that big of a deal in terms of speaking on Bitcoin. It's Bitcoin ETF crossed. That would be IBIT across 80 billion in assets under management on the quarter. And I looked this morning at it's around 86, 87 billion. So, I mean, that's got to be one of the largest, the quickest, you know, to that level of assets under management in quite some time, especially, I mean, obviously, the US was kind of begging for a Bitcoin fund like this for a while. But the one interesting thing here is the Canadian one, which was launched back in January of this year. It only has 300 million in assets under management.

I would have expected this to be larger. I mean, when we look to a fund like Purposes Bitcoin, they were BTCC. It still has assets under management of over 3 billion. And the fees, like you're paying, I believe it's around 1.2% for purpose where you're paying only 33 basis points for IBIT. And I mean, I don't know why this would be, there has been outflows from BTCC for quite a while now, but it hasn't been as large as I expected.

I mean, maybe a lot of people are sitting on some huge gains or something like that and they don't wanna sell these funds. I would have expected IBIT on the Canadian end to grow a little faster. Yeah, yeah, I mean, it's hard to explain. I think they may, I know some of the Canadian ones reduced their fees not too long ago, so I guess that could be it. I'm not sure if that one had reduced its fees or not, but you

definitely are seeing it here that you're seeing if you're looking here for joint TCIs like the anything above the line that would demarcate a zero is basically inflows that are going to Bitcoin ETFs. These are all the Bitcoin ETFs in the US. You can just clearly without doing any math or any calculation, just looking at the graph visually, you can clearly tell that there's a lot more inflows than outflows going on in these ETFs. You can clearly tell that there's a lot more inflows than outflows going on in the CTFs Yeah, and you look at a huge chunk of it like IBIT is the blue and it's there's a lot of blue there

So yeah, it's a lot of Yeah, they've they've done quite well in that regard so back in 2024 BlackRock acquired global infrastructure partners So GIP is a private infrastructure investing firm. So, they buy and manage large scale assets, airplanes, pipelines, renewable energy, shipping ports, things like that. So, they just closed out fundraising rounds for one of its new funds and they got 25.2

billion. So, that was well ahead of their expected target. I think they were expecting to raise anywhere from 20 to 22. And it's also the largest infrastructure raise in BlackRock's history. I mean, this kind of just gives you an indication of how much attention is being paid to the private markets right now.

I mean, whether it be private equity, private credit, private infrastructure, things like that. It's, I mean, this is the direction. Yeah, this when there's way too much Products coming up for something that kind of rings the alarm bells a little bit And those who don't like Bitcoin will probably say the same thing for Bitcoin Well, if you're saying that for private credit private equity is and that also true for Bitcoin I would say sure to some extent, especially if you start going in the

the sphere of other products being offered. I mean the Bitcoin ETFs have been around quite a bit, but I think it's probably just the the other products for companies that maybe are not public and things like that that I would just be careful. And if anyone is interested in some of those, just make sure you do your research because clearly a lot of people did not do their research back in 21 and early 2022 and then ended up holding the bag into companies or having assets with companies in crypto that were essentially not solvent ended up filing for bankruptcy. So I would just say approach that with caution.

But yeah, whenever I see a whole lot of products coming out or new products being offered, like private credit and equity in this situation, yeah, I get a little scared to be honest. I mean, on the infrastructure side of things, I think it would be a tad different because I mean, these are like physical cash flowing assets for the most part, but the private equity and private credit for sure. But the infrastructure side- More for investors. More for the investors potentially getting into those products is where I should qualify.

But the one thing about BlackRock on this end is, I mean, these funds, no doubt, they make more money on these funds than they would their passive ETFs. So oh yeah, I mean they can see where the money is being made. Yeah. And I mean they made the yeah, it's it's and they're making a lot of deals right now in terms of getting in to that side. And another one they closed out on a purchase of HBS investment partners. So this focuses on the private credit side of things. So HBS adds around 100 billion in fee

paying assets under management and around 165 billion in assets under management total. And finally, they acquired prequin, which is a data and analytics provider for the private market. So so effectively, it provides different types of flows and data in regards to those private markets. So what they want to do is buy this and kind of enhance it with their current platform so they can get more private market data to institutional investors. So kind of more visibility, maybe more objectivity, things like that. Like it's probably a good idea in the in the grand scheme of things. But the thing is they've made three acquisitions here, pretty much every single one of them in that area of private credit, private equity, private infrastructure, things like that. So they have mentioned quite

a few times on how profitable they expect that private end of the market to be. I mean, they want it to, I believe they mentioned by 2030, they want this area to be 30% of the company's total revenue and they do expect that these three will have a big play in that. So that was the acquisitions back to earnings a bit. They took a bit of a hit on earnings day primarily due to collected fees that had a bit of weakness. But again, I mean, this would have included the big, big drawdown. This quarter would have included that big volatility in the markets back in April. So obviously, a lot of these funds at BlackArc has, they get paid fees

relative to AUM. So when that goes down, obviously the fees are going to take a bit of a hit here. And as I had mentioned at the start, they did have one of those clients pull out $48 billion, I think, institutional out of like a institutional index fund. And they kind of offset that a bit. The company's total AUM sits at 12.5 trillion highest in company history. It is a company that has definitely benefited from, you know, the larger inflows into the markets over the last few years, the just surge in market interest on the retail side of things like post pandemic, but it is going to be cyclical based on not necessarily where the economy goes, but just, you know, where the

markets go. And I mean, overall, I would continue. I would expect to see the company continue to make aggressive acquisitions into the private markets like we last saw here over the last while. And I mean, they're even this isn't like, this is, you know, kind of commentary that's directly from them. A lot of people for a long time kind of thought this company was capped out in terms of growth because they're so large. But this, the private side of things seems like a new avenue for them. And they're definitely getting a bit aggressive acquiring companies in it. Yeah. And what's interesting I find too with BlackRock is, look, when you look in terms

of asset under management, it's about 54% equity, 25% fist income, multi-assets, a bunch of different assets together in one product, 8%, alternative 3%, and then you have digital asset which obviously includes Bitcoin, 1%, and currency and commodities commodities 1% and then 8% in cash. Why I wanted to illustrate that is clearly if there's a big market downturn, yes, they will take a hit because asset, their fees are typically based on their asset under management. So it is going to take a hit. But at the same time, you can also make a case that yes, it will take a hit, but at the same time, you can also make a case that, yes, it will take a hit, but they do have all different kinds of assets available with their products, so some assets will do better than others.

So it should alleviate the blow a little bit. It may be a reason why they're trying to diversify a bit more away from just pure equities because it does give them a bit more, a bit more flexibility or diversification in the case of a pretty significant market correction. Yeah. I mean, when you look at them, they're what? 54, 55% equity. So obviously, you know, the markets are going to, as I had mentioned, the markets are going

to have a huge play on this company's earnings. And you know, we've seen it quite a bit. Like they really, really struggled when the bear market during 2022. I mean, they, they fell quite a bit. And obviously, I mean, the markets fell quite a bit. And if that situation happens, first off, there's lower inflows because people, you know, generally, especially on the retail side of things, people aren't really all that interested. I mean, I imagine most listeners on this podcast would,

would love to buy stocks during a bear market, but a lot of retail, they buy when stocks are high and they don't buy when stocks are low. So obviously that's gonna impact them. And then just overall the lower fees they collect on what they already have. So if I own this one, if you're interested in owning it or if you do own it, again, it's gonna be more

of a cyclical company relative to the markets, not necessarily the economy. Yeah, well said. Well, I think that's a good point to wrap it up for today. I think it was a fun one. Switch things up a little bit. Make sure we had a decent amount of Canadian content with KUSHOG and obviously the returns to date. It was a fun one.

When you're hearing this, we'll actually be in Toronto for the TSX event so hopefully that'll be a blast. There's gonna be close I think upwards of 90 people, close to 100 people that will be there. Should be fun, drinks and food will be provided so it'll be a fun event. Kind of bucket list things to do. At least for me, I don't know about you Yeah, I've never been to Toronto. I've never closed it never been to Toronto

No, I've never been to Toronto. Oh wow the only place the only place I've been the only place I've been to Ontario Period would have been London. Okay. Well, there you go. Two bucket list, Toronto and the Toronto Stock Exchange. Yeah. That should be fun. So I'll see you in a few days then. Thank you everyone for listening. We always, as always, we appreciate the support and we will be back next Monday for an episode. Actually a fun one will be comparing Lululemon and Aritzia. So two companies that we've talked quite a bit on the podcast. We oftentimes reference a little bit one or the other

when talking about one or the other. So it'll be fun to do a bit of a deeper dive, kind of look at how they're looking at and the future prospect and of course, which one we think is a better investment going forward. So tune in on Monday if you're interested in that and we will see you on Monday. Thanks again for listening. The Canadian Investor podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do

your own due diligence or consult with a financial professional before making any financial or investment decisions.