The Canadian Investor - The Best Ways to Convert CAD to USD and Investing at All-Time Highs

Episode Date: July 4, 2024

In this episode of the Canadian Investor Podcast, we go over General Mills' Q4 results. Despite being a consumer staple company with brands like Cheerios, Betty Crocker, and Häagen-Dazs, the company is facing some challenges due to consumers opting for cheaper alternatives. Next, we turn our attention to Alimentation Couche-Tard. Reporting its second consecutive quarter of soft earnings, Couche-Tard saw revenue beat expectations but profits were below what bay street was expecting. We'll explore the factors contributing to their 32% year-over-year decline in earnings, including challenges in fuel margins and consumer behavior shifts in Canada. We also answer some listeners' questions about investing when markets are at all time highs, the best methods for currency conversion, and alternative fixed income investments.  Tickers of Stocks & ETF discussed: ATD.TO, GIS, XAW.TO, ITOT, DLR.TO, DLR-U.TO, HSAV.TO, CASH.TO, ZMMK.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital 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 Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. Welcome back to the Canadian Investor Podcast. I'm here with Dan Kent. We're doing our regular news and earnings episode, but given it's a bit lighter on the earnings front, we'll be doing a couple earnings and then we'll switch over to some listener questions.

Before I get started, Dan, we're recording on July 2nd. So happy belated Canada Day. Yeah, I woke up to fireworks. They set off the fireworks at like 11.30 p.m. last night. It was crazy. Oh, yeah, that's past my bedtime for sure. Yeah, exactly. Like we were going to stay up and then it's like, oh, they'll be going off at around 11 or 11.30.

And I'm like, well, I'm not staying up for that a i got a podcast to film in the morning there you go yeah that's it so we appreciate your dedication missing out on the fireworks but uh we'll get started i think the episode will be a bit longer than we had probably initially thought but i think there's some good discussion items some good questions we got So we'll start off with two earnings kind of in a similar category. We're talking about that. So it'll be General Mills and then you'll talk about Alimentation Cousteau. The reason why, you know, we were talking and I think there's some similarities is because the consumer is pulling back. And for those not aware, General Mills, you have a company here. it's a consumer staple.

So typically, they should do well in a tighter environment because they do sell goods that are typically more essential. In terms of the brands that they have, if people are not familiar, they will definitely know the brand. So Cheerios, Betty Crocker, Blue Buffalo Pet Food, Green Giant, Liberty Yogurt, Dunkaroos, Hag and Daz. There's tons of other, but these are some of the brands that they own. For the most part, I think a bit more on the premium side, I would say, at least compared to private label brands. But, you know, I think it'll be interesting comparing both and what management said during the calls, especially in their earnings release. Anything you want to add before I get started here? I just didn't even know they still made Dunkaroos.

I haven't had Dunkaroos for like 20 plus years. I used to love those as a kid, like obsessed with them. I didn't know they still existed. I haven't seen them in stores forever. I haven't looked for them. I feel like my daughter will probably be asking us for some yeah you know when she starts school because we wouldn't proactively get them but um i'm pretty sure my you know she'll see someone else having them and then we'll want them but it's basically what crackers with icing

yeah pretty much pretty much yeah i might have to go on a nostalgia trip and go buy a pack of them see how they are yeah i think they also make pop tarts i'm not 100 sure but i think that's one of their brands as well so which by the way for people interested in pop tarts there's an interesting movie i think directed by jerry seinfeld on netflix on like i think it's a i think it's based on the true story but very like loosely of how pop tarts were made but it's a good cast kind of easy watch if people are looking to be entertained during this summer just sugar sugar injected breakfast food pretty much there you go yeah tastes awesome reduces your life expectancy by

a few years but in the moment it's quite good so the results were not great for general meals during their fourth quarter it's not super surprising if you ask me, despite being a consumer staple company. Lots of their brands have in-store brands alternative, so private label brands. So, you know, let's just take the yogurt, right? For example, I like Greek yogurt. I mean, when I go to the grocery store, I don't really care what brand of Greek yogurt it is. I usually buy 2% plain Greek yogurt. So whichever brand it is, as long as it's the best kind of price and obviously it's not expired, I'll go over.

Or at least I have like a few days until the expiry date. I'll usually go with that one. So I think that's probably one of their issues is they don't have that much pricing power. And management definitely reflected that during the call saying that the increased popularity of private label brands because of the value they offer impacted them. They talked about consumer challenges during the call and also increased the value proposition for consumer to compete with those value brands. So that is interesting because their sales were down 6.3% year over year to 4.7 billion.

And it's actually a bit worse than that if you compare quarter over quarter. And typically, you know, they have goods that shouldn't be too cyclical, maybe Haagen-Dazs, it's a bit more a summer type of treat, that's fine. But for the most part, what they sell should be pretty consistent regardless of the time of the year. And almost every segment was down with the exception of their Canadian segment and their North America food service revenue. For those, the increase was actually very marginal, minimal, a couple percentage points. They did make some progress with their expenses, which resulted in operating income being up 2%. Some other good news is the margins were up. Gross profit margins were up 130 basis points and operating profit margins were up 160 basis points. Now, the problem here is this may be short lived because I just

talked about it. They want to be more value proposition in terms of being able to compete with those private label brands. So if you're going to be more value proposition, you're probably going to have to lower your prices and that's going to impact your margins. So yes, you may kind of increase your, you know, your sales based on volume, but that's something that will be very tricky for management. And just to round this out here, EPS earnings per share was down 5% to 98 cents per share. And the good news is that for the full year, free cash flow was up 21% to $2.5 billion. But again, something to keep an eye on because that's the full year. So we'll have to see, you know, in the next 12 months how it looks.

But not a great quarter. And it's interesting to see how it's starting to impact. And it's a discussion we've had, you and I, right, where a lot of people are going more to the value alternatives for grocery stores. So going to an independent, you know, a superstore, whatever it is, you know, food basics, like whatever the more cost effective grocery store, you'll see more and more people going to there. I know on the Quebec side, not far from ottawa they are converting their brand so it's basically the loblaws equivalent but on the quebec side they are converting those to their maxi which is the value alternative so a lot of these are being converted so i think you're seeing that more and more with the consumer and makes sense that it's impacting a brand like

general mills that is priced at a higher price point than the private label brands well yeah especially one of the like most notable you'll see is kirkland like they're starting to come out with so much different stuff like that's all we buy in terms of yogurt like we used to buy brand label yogurt but you go you can buy kirkland yogurt that's like it's probably a third cheaper and it's almost the exact same I'd be curious to see I know they paid a whole bunch of money for Blue Buffalo what was probably like seven eight years ago now but I know that food had a lot of controversy around it how it really wasn't all that good and it costs a fortune so I'd be curious to see how

that acquisition has worked out for them thus far i don't know if they like separate those numbers individually yeah they do have this segment so i can pull it up here so they have it on their their i mean i feel like that's most of their pet revenue here so we you would think it'd be mostly all of it yeah yeah i think it's either the majority or all of it so you can see it's kind of it had a nice little increase. I'm going to attribute that mostly to COVID because a lot of people I think it's well known got pets and a lot of people that probably shouldn't have gotten pets got pets. Just, you know, for I guess, you know, I get it to some extent. People were feeling lonely, stuck at home. You know, having a pet gives you a companion.

I mean, I have a dog, so I it i'm a i'm a dog person i do like cats as well but it's kind of stagnated so i would say yeah it had a nice little jump up until i would say end of 2021 and then it's been i would pretty much sideways so sales kind of yeah peaked around 650 for the quarter ending in uh may of last year so actually more 2023 where it peaked but um hasn't been that high since yeah so they paid they paid eight billion dollars for it in 2018 so i mean they paid quite a bit of money for it and it's i don't know i i just kind of haven't really ever heard good things about it i know like the brand was really strong for a while and then it it kind of died off when they had some i think it was some issues that it

was given dogs like heart problems and stuff i don't know if that was yeah yeah it uh faced like a lot of like you said i have a few dogs and they both have like ridiculous food allergies so we've had to like research a bunch of food and blue buffalo has always kind of been like the not so good brand but yeah i mean okay it's evident everywhere i mean people are kind of for the most part off-brand stuff is almost the exact same as brand name stuff like the quality is virtually the same you're paying for the name and like people just don't really have a lot of money right now to pay for the name so uh they're starting to trim down it's really not not all that surprising yeah one that i'd be interested at looking at is uh you know can view the spinoff of J&J, which is the consumer. So J&J, Johnson & Johnson, so it's the big pharmaceutical company.

So they spin off Canview, which is their consumer arm, I guess, consumer goods. So they make, I think, their own Band-Aid, Tylenol, all these brands, right, that people are familiar with. I'd be interested because when I go to the store and say I buy Tylenol or Advil, I don't buy Tylenol or Advil. I buy acetaminophen. Sorry, that's a word I have a lot of trouble with or ibuprofen. I buy the private label because it's the exact same thing. It's just 200 or 400 milligram of either one, right? So I would be very interested.

Maybe we'll do that at some point in the next few weeks just kind of see where their cells are going because i can see them being impacted as well yeah like anything medication wise like ibuprofen acetaminophen yeah there you go you said it yeah so next time i need to say that word yeah i'll ask you and then any time you need to say Alimentation Couch Star, you can ask me. Exactly, yeah. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want.

And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. BestTrade.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 slash host. That is Airbnb dot C-A forward slash host. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything

I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world. Well, folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple, yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank, is delivering these amazing ETF products.

Please check out the link in the description of today's episode for full disclaimers and more information. I think we talked enough about General Mills here. So let's do Alimentation, Couchetard, so we have enough time to do some of those listener questions. Yeah, so Couchetard, second quarter, I would say of pretty weak earnings. Revenue of 17.59, topped expectations, but earnings per share of 48 cents came in a couple cents shy of what was expected and just year over year decline.

So the company's earnings are down 32% on a year over year basis and total sales are down. It looks like around 1.7%. The main contributor in the reduction in overall earnings, the company states, is fuel margins, primarily in the United States. In addition to this, there was one less week in the quarter compared to last, so that's definitely going to result in a bit of a decline, too, apples to apples. So that's definitely going to result in a bit of a decline to apples to apples. So the company reported same-store sales declines on a merchandising basis of 3.4% in Canada, half a percent in the United States, and 2% in Europe. And when we look to fuel same-store sale volumes, they declined similar in Canada, 3.5%, 1.5% in the U.S., and 1.7% in Europe.

0.5%, 1.5% in the US and 1.7% in Europe. And the company did mention that fuel pricing volatility should normalize in the back half of the year. And they said they should see margins stabilizing. And in a way, it does make sense that Canada is witnessing probably the largest amount of weakness. We probably have the weakest consumer financially relative to you know the european countries and the united states and many people may be putting off you know particular trips travel related activities and just you know paying for the convenience of a convenience store they may find it you know a bit more cost friendly to make that extra drive to a grocery store rather than you know pay the like outright ridiculous prices that are that are inconvenient stores but really the main way kustard gets people into the stores is first to

fill up on fuel and then you go in and grab whatever snacks items anything else you need so if fuel sales fall like you you'll probably no doubt see merchandise sales fall uh the company go ahead i wanted to add something quick i actually have a question for you so yesterday you'll probably no doubt see merchandise sales fall. The company bought... I wanted to add something quick. Actually, I have a question for you. So yesterday it was Canada Day. I was walking with my daughter. My wife wasn't feeling great.

So after a nap and everything or most of the stores are closed, right? But there was a Circle K open and I'm like, I'll give her a little ice cream treat, right? So I go and buy a klondike like you know the the actual cones i think of yeah you know the klondike ones and uh guess how much that was nine bucks eight bucks okay no not no not that high no just the one cone it was um it surprised me but maybe i'm just not used to it was uh five $5. That is pretty high, I guess. Yeah. Just for a single serving? Yeah. I found that pretty crazy. I was kind of surprised, but I just wanted to mention

that as a real life example. Well, the only reason I said like $8, $9 is I went in, my wife was sick the one time. I had a sore throat, so she wanted ice cream and i didn't feel like driving to the store so i went to the 7-eleven and there was a little container of like ben and jerry's it was probably like maybe the size of like a small dairy queen blizzard and it was it was 850 yeah i think those would typically be a bit more expensive so yeah ridiculous how expensive it was like as soon as i got there i'm like ah well i'm already here now but i'm never like i'm driving to the grocery store now i didn't realize it'd be that much money yeah it's uh even a bag of like doritos like uh if you got people coming over something you want to go buy some chips or something they're like six six plus bucks whereas you can go to

walmart and they're like maybe 350 four dollars it's it's crazy exactly you're like i said you're you're paying for convenience and when money gets tight i mean you know less people will pay for that convenience they'll make the extra you know mile or two drive to the grocery store but uh the company bought back more than 300 million in shares on the quarter. And it is stated it is in a bit of preservation mode right now. So they're trying to kind of scale back expenses, especially when profitability is lower. So operating expenses declined by 1.7%. And they said they could be trimmed even further until the economy starts to strengthen

so the most notable piece of news probably on the quarter is the company's ceo brian hnash is retiring so kustard it's been around for 45 plus years they've only had two ceos so i don't really i didn't really get the lowdown on why he's leaving outside of the fact that he's just retiring he's been doing it for quite a while so i don't really think the lowdown on why he's leaving outside of the fact that he's just retiring. He's been doing it for quite a while. So I don't really think anything major is going on behind the scenes. By the sounds of it, he will be an advisor for a little bit to the company's new CEO, which is Alex Miller, who is currently their CFO, their COO, chief operating officer. And just overall quarter was pretty weak again probably the second straight quarter of weakness however most of this is just macro headwinds company can't really control

whatsoever uh it's i mean in my opinion it's still a pretty high quality company i don't really have all that many doubts that it'll it'll get back on track once the environment improves but yeah that's about it for yeah kusht. Maybe he decided to leave because he's like, okay, this is not going to be an easy couple of years. I'd rather just, you know, bow out and just leave now. But what I have on the screen here for joint TCI listeners and subscribers is since 2013, so basically in the last 10 years,

they've seen their share count decrease by 15%. So I just wanted to give some more context. So they've definitely been aggressively buying back shares. And I'm pretty sure this would have to be split adjusted because I'm pretty sure they've had a few stock splits right in the last decade or so. I'm not sure. I think they had one. I don't know if they had a few, but I'm pretty think they had one i don't know if they had a few but okay pretty sure so yeah and you can kind of tell that the the buybacks got more amplified like post-covid it kind of

stayed relatively flat until 2020 and then and then they started buying back a ton of shares yeah definitely like the buybacks and that's not a that's definitely a good point, because most of this, I would say, would probably be like since 2019. So, yeah, since 2019, actually, it a little bit. I think they had acquisitions around that time. So that makes sense. But just interesting to know, you'll probably be getting a decent chunk of your returns if you buy this just because of the money that's being returned to shareholders via buybacks and the dividend. Yeah. I mean, even though they're what, like a $70 billion company, I mean, it's a very fragmented market, like gas stations, service stations. There's a ton of them. So, I mean, I think they still got quite a bit of room to grow, but they need a bit of

a turnaround in terms of consumer spending. Yeah, no, exactly. But I think this was definitely a good overview. I think similar issues plaguing those two companies just by the fact, obviously, there are different companies, one convenience store store the other one consumer staples but i think they're being impacted by a consumer that is more reluctant to pay a premium on certain items that they can get cheaper elsewhere or cheaper alternatives and i think it'll just be interesting how things go forward for each of them but um one last question actually on animata some kushtal like isn't a big risk for them a big spike in oil prices because yes it may

improve their margins potentially but wouldn't it be a big hit on people traveling and then impact the rest of their sales more i mean to a certain extent i guess i mean people need it would probably help them in the fact that you know a lot of people need fuel regardless of fuel prices but on the travel end and like the leisure end definitely i mean you're looking at like if you're looking to you know go camping or something you're looking at like 200 plus dollars to fill a truck to tow a trailer and you're probably looking at a fill there and back so it's like 400 plus dollars right now so if you know fuel skyrockets fuel prices go up my god i can't even imagine what

it would cost for something like that yeah because that's something i've been reading up on a little bit. And a lot of macroeconomists, that's what they say, right? They say, okay, there's a point where demand for oil or gasoline just kind of stops, right? There's a price at which people just like, they completely change their habits, even with commuting to work and things like that. And they change it to really what is absolutely essential. No one really knows exactly what that point is, but I think it's just a good reminder because I know Alimentation Cousteau is loved by a lot of dividend growers, people that are into dividend growers stocks in Canada. And I think they tend to look at this company as having, you know,

they have a very strong record. I'm not going to deny that. It's performed very well. But I think that's definitely a significant risk that's overlooked. I haven't heard a lot of people talk about this specific risk before where what if there'd be like a major oil spike in prices? What would that do for their business and the ripple effect on the rest of the business yeah like it would not only hit the fuel end but it would also hit the merchandising and no doubt because as i said like the bulk of the sales from merchandise are going to be from people

filling at the pump and then running inside it's not like going to be somebody who just randomly you know drops in to a convenience store to buy goods doesn't really happen all that often it's but yeah it's if fuel prices go higher i mean i can't imagine people are doing much leisure travel especially at uh like camping things like that just crazy crazy prices electric cars baby yeah yeah exactly you wait 45 minutes to charge your vehicle there you go yeah it's cheaper yeah it is that's it well let's move on to the listener questions here so the first one is a question from on twitter that i got from at diamond road 6 and he was asking if i still buy itot etf every friday so itot is the us uh iShare US total market ETF, very similar to the

S&P 500. The main difference is that obviously it's a total market, but the top names that you see in the S&P 500 are also the top names there. So it's going to be pretty strongly correlated because of what heavyweight it has in terms of market cap weighted to the S&P 500. But so, well, first of all, I was never buying it every Friday. So it was every two weeks that I was doing that. I did switch over to another one. So I still own ITOD, but for about the past year, give or take, I actually switched to XAW.TL, which I buy every two weeks.

I also buy an almost identical fund with my DC pension, defined contribution pension at work. The reason why I prefer that is because XAW is excluding Canada. So it's like kind of a total world, but it excludes Canada. And I've been pretty, pretty vocal on that on the podcast saying that, you know, I don't want too much exposure to Canada because my income is tied to Canada. A lot of my expenses as well, but also I want as much as possible exposure to the US, but also the rest of the world. I mean, my exposure to Canadian companies is still probably higher. It's definitely higher than what it should be as a percentage of the total investable stock market globally. But for those that are currently on Joint TCI here, you'll see that it's quite different in terms of looking at the ITOD or S&P 500. So the top holding is actually an S&P 500 ETF of XAW.TO, 54%. And

after that, you had European-focused fund, while European, Africa, and Middle East, I believe, which is 24%. And then you have an emerging market at 11%. And then some other US exposure with small caps and mid caps as well. So a bit more diversification, but I do like that it excludes Canada. So that's the reason why I switched over to that. And I actually just restarted doing a dollar cost average because I had a couple of large expenses that happened. We had enough money in our emergency fund to cover those expenses, but I would have had to replen in our emergency fund to cover those expenses, but I would have had to replant as the emergency fund anyways. So instead of digging into it, I just decided to pay for these expenses, halt my dollar cost average, at least for

my money that I voluntarily put in. I continued doing it for my defined contribution pension. And now as of last week, I restarted doing it because it's at a level that I'm comfortable with. So that's kind of the long answer to if I still buy ITOT. So I don't. But again, I'm still dollar cost averaging in an index fund. Yeah, I used to own XAW. It made up a huge huge pretty big chunk of my portfolio so what I would do I would just own XAW and then I had just individual Canadian holdings I ended up selling like XAW entirely when the Canadian dollar got really high and I converted all of it to US so I don't know I don't own it anymore but I took a huge chunk of my portfolio and converted that over when the Canadian dollar got way higher in, what would it be?

Probably mid to late 2021. And from a currency perspective, it's actually worked out quite well. As a result, I ended up buying a bit of US stocks at the peak, which hurt for most of 2022, but it's looking pretty good now but uh yeah i it's a solid etf i mean if you're looking to buy you know individual canadian holdings rather than index like a canadian index and you can you can avoid a lot of the you know cyclical areas of the stock market in canada by not index in Canada. But XAW is a pretty solid fund for somebody who goes that route. Yeah. And it's around 20 basis points for fees. I think

it's slightly more. I just don't have it in front of me right now. I closed that window. But it's reasonable fees. Obviously, you can get lower if you go for an S&P 500. But this one is definitely more diversified. And if you wanted, you could even do a two, you know, for some people it might make sense. You have like 90, 95% of your holdings in this one, and then five to 10% into an index fund that follows the TSX, and then your weighting makes a lot more sense where as something like VQT or XCQT, they have pretty high Canadian weighting. They have like 25, 30% Canadian weighting. So they're supposed to be a diversified index fund for the whole world,

but their weighting is actually much different than, you know, in my opinion, it's too heavily weighted to Canada. Canada is like around three to 4%, I would say, of the investable stock market globally. So you have to keep that in mind. There's nothing wrong to be overweighted, but you just have to be aware that you're kind of putting more risk into the Canadian economy and the Canadian stock market. 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. So not so long ago, self-directed investors caught wind of the power of low cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs

reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO,

the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. So I think that's enough for that question. I'll go with the second one and I'll do the second one as well. But I know you have some stuff to add there. My part will be a bit shorter and I think what you'll add is very definitely will bring a lot of value here. Now, given the question is given that the U.S. stock market gives you greater exposure to a wider market, what is your preferred method of converting Canadian dollars to US dollars? So for me, it's pretty simple.

It's Norbert's Gambit. So I don't believe it's possible for all brokers. And reading what you had said, I think you can confirm that, that you cannot do that for all the brokers. No, you can't. Like, well, simple trade. You can't do it pretty much everywhere else you can do it I think with like something like interactive

brokers they have some of the best conversion fees so I don't even know if it's worth it to do it but I'm not a hundred percent sure on that front but no well simple you can't yeah and so how it works it's quite simple so first of all you would go into your online brokerage. First thing you do is you buy the ETF DLR.TO. And then you contact your online broker, whether you do it in a chat, email, whatever it is, you know, just get in touch with them. And then you ask them to journal your shares to DLR-U.TO. So the DLR-U.TO is in USD and the DLR.TO is in CAD. So once the shares are journaled,

which typically takes a few days, you then have everything in USD and you can actually sell that ETF and guess US dollars. And by doing that, you actually bypass those conversion fees, US dollars. And by doing that, you actually bypass those conversion fees. But you do have to pay the fee of buying and selling the ETF depending on what is charged by your broker. Something to consider is because you're saving on Forex exchange fees, you'll still pay some fees depending on what online broker you're using. So that's really important because that will impact whether it's worthwhile or not. If your broker, for example, charges $10 for buying and selling, you'll want to make sure that you're converting enough Canadian dollars to USD so that it's cheaper to do it with Norbert Scambic versus paying the exchange fees. My rule is that I only do it when I have at least $1,000 to convert since I have to pay $5

fees with Questrade when I sell the ETF, only when I sell it. So obviously, if it's a lower amount than that, I'll typically just pay the fees because there's a time component to it as well. So yes, I may save a little bit if I do 750. But at that point, it'll be a few dollars. And at the end of the day, if I want to invest in something right now, there's still going to be a delay of a few days for the transaction to settle when they do the journaling of it. So that's something to take into account as well. Clearly, if you have a broker that charges 10 bucks to buy 10 bucks to sell, then it probably doesn't make sense to do it unless you have like $2,000 to $3,000, right, depending on what the exchange fees are. So something to keep in mind, and you should be able to also do it the other way around.

I've never done it, but it's basically if you have USD, you buy DLR.SU.TO, you contact them, ask them to journal it to DLR.TO. Then once it's journal, you sell it and you get Canadian dollars. Yeah, and there's a few. I can speak on QTrade just because I know you have to. When you buy DLR.TO and you do journal it, you also have to make sure, because QTrade has separate Canadian and US dollar accounts. So if you mess up and actually sell, once you've journaled it and you sell and you think you get US dollars, if you sell it into the wrong account, it'll convert it back. I've had that done a few times and it's it's it's a nightmare too because

you pay just you know you'll pay that gap and it'll just auto convert your money back they're they're good enough on like the customer service end that they've like kind of closed that off and haven't charged me anything but it's still it's kind of a pain because it takes a few days and then you accidentally sell it the wrong way and it converts it back i know i don't know if rbc still does this but with royal bank used to be able to journal so you could buy say fortis in canadian and journal it to us and it would be almost immediate and then you could sell but you could sell the u.s dollar version of say fortis and have your u.s dollars there i don't know if they still do that i imagine they do but uh yeah that was another way before they created that dlr and dlr uh well dlr etfs i think that's how most people get it right they would

pick a dual listed low volatility stock that's listed in canada in the u.s and then they would just do it that way yeah yeah it's um the one thing about a lot of these brokerages, a lot of people kind of rag on Wealthsimple in a way because they charge 1.5% to convert. But a lot of the brokerages are actually more than that if you just outright convert it. If you go to a place like, oh, I don't know. I don't want to name any individual brokerages because I don't know the exact fees. The exact one, yeah. A lot of them are over 1.5% if you were to just convert the money right away. But yeah, it's-

I guess the lesson here is be aware of what the fees are, right? Exactly. Both ways, whether you're buying, selling the ETF or converting straight up, make sure you're aware of the fees because that's going to determine whichever way makes the most sense for the dollar amount but as a general rule i would say the more money you have to do so if you're looking you know now in the like five figures and your broker allows norbert's gambit yeah i think at that point it's a no-brainer to do it like i think that's you know the higher the dollar figure. You kind of have to, yeah, because at a straight across currency exchange, you'll pay a ton of fees. I mean, for me, I use

a combo of EQ Bank and Wealthsimple Trade. So I exchange every single week. So I pretty much, I make weekly deposits. I take half of my deposits. So I'll be on EQ bank. I'll take half of my money that I want to deposit into my brokerage account and I'll convert it at EQ bank. And then I have it set up to direct deposit in US dollars for at Well Simple Trade. So it does save me a bit of money. It's not really all that much. I ran numbers on $1,000 in currency conversion. So you'd pay 15 bucks, one and a half percent at Wealthsimple Trade. But I think with EQ Bank, it's anywhere from $1,150 to $12. So I mean, it does save you a bit of money. And it also depends, I think, on what the spread is at EQ Bank. So they don't charge you any fees to convert,

but you'll pay a spread on the currency for sure. They have to make some sort of money in that regard. QTrade didn't have free commissions. I used to be with QTrade. So to perform Norbert's Gambit, it would cost me around, I believe it was around $17 in commissions, plus any, I think there's a bit of a spread

between DLR and DLR dlru or maybe it's true true conversion i'm not exactly sure well if you also you know if you do that with eq bank a few times that's like you can get a klondike cone yeah exactly the convenience store two conversions that's a klondike cone three conversions a tub of ben and jerry's there you go that is true that's how you get ahead in life yeah and i mean like with with well simple like they got the fractional trading and they have the and they have you know free commissions so even paying these fees i mean i find myself making way more transactions like when i was with q trade i never used to make weekly buys because

the commissions i mean i didn't really ever make a purchase until I had a couple thousand dollars in there just because, I mean, you're paying commissions. So you kind of want to make that a little more worth it. Whereas Wealthsimple, I mean, it's free. I don't have to pay anything. If I ever did have a large sum of money to deposit, I would definitely be using Norbert's Gambit though. It ends up saving you quite a bit of money. Yeah, definitely. I mean, that's why I use it. So great question. So now we'll move on to the next one. Forgot to put the name on here. So our apologies, but here's a question and I will let you go ahead and I can give my thoughts at the end here. So what fixed

income product would you recommend if someone doesn't like bond etfs but wants higher returns than high sus or high interest savings etf like cash or hsav now just to be clear this is not investment advice i know dan will talk about different possibilities you know there's a lot of good options for I would say most of them are close to five percent in terms of yield and there's little trade-offs right I think depending on which option you're you're taking some will offer a bit less yield but maybe it's a bit more convenient I'm gonna probably add a few in there that you didn't talk about but I think it's just making being aware what you're looking for. And,

you know, in terms also of the potential trade-offs. Yeah, there's definitely like all of these kind of look the same on the surface, but they're definitely like, they're very different investments. I mean, even the HISA ETFs like cash or HSAV compared to like a money market fund or like a T-bill fund. Like they're very, they're constructed very differently. I mean, I just did like a simple search on an ETF screener and most non-bond fixed income ETFs that are not those high set ETFs are going to give you, you know, net yields of anywhere from 4.7 to 5% except the U-bill, like the US zero to three month. My favorite. Yeah.

Yeah. Because Canada lowered their policy rates, whereas the United States is still a bit higher. The U-bill is paying more. I think, what did you say it was, 5.25? Yeah. Yeah. Depending on the month, I would say, because they typically, one month, the distribution will be tiny, tiny bit lower than the next. But on average, right now, for the past 12 plus months, it's been paying an annualized yield net of fees, I would say, between 5.1 and 5.15 on average is probably where you're right around. Yeah. So I would say that's going to be a non-bond fixed income ETF. That's probably going to be one of the higher yielding ones. At this point,

most of those high set ETFs, I know GlobalX is cash and HSAB, but Purpose has them, similar yields. And what those funds do is they pretty much go to banks and they have large sums of money so they get institutional savings rates so they deposit that money into those savings accounts at the banks and in return you know it accrues interest and they and they pay it out to you so the one advantage the the money market fund would have over a high interest savings et is I can't say for sure but I'm almost most of them are CDIC insured I believe like uh like the money market funds one of the main risks really I thought they weren't they might not be but they I'm not 100% sure money market funds yeah weren't weren't CDIC yeah they might not know i mean that yeah that might level off you know it to be almost

equivalent risk i mean the the one thing about those heise etfs is so they'll go uh i'm not really sure i haven't checked like where the money is held in the last like six months but most of the time i believe they were holding it at national and CIBC. So the big risk with those HISA ETFs would be, would be if like, say you go to CIBC and buy a GIC, that would be CDIC insured. We're the point where if CBIC were to get into financial trouble, you would have insurance on that up to, you know, a hundred thousand dollars. Whereas with these H CETFs they don't have CDIC coverage so if you know national or CIBC or wherever else they held the money were to get into trouble you you would not have coverage I didn't I thought that the money market funds might be fully insured but they might not be one of the highest but typically I think would they'll be segregated though. So for people like just that they're aware is the way money market funds will work is you have a asset manager, but if the asset manager goes

bankrupt, typically what, you know, laws in Canada, the U S is they will have the funds segregated into almost a separate entity as they manage it. But if they go bankrupt, they can't go and take those funds. And this we can actually make a parallel with. I don't have my FTX risk management hat right on. But that's one of the things that did not happen with FTX. And people were saying that this should be the case going forward for legislation for cryptocurrency is ensuring that it's required by law that the funds be completely segregated. And that's one of the issues why they actually mingle the funds and then the bankruptcy, you know, everything that happened with the bankruptcy, and it's different than actually

the money market fund. So in that way, there is some safety where the funds are segregated, but then the underlying asset, like you were mentioning, may not be as safe because there's not this CDIC insurance component behind it. Yeah. Most of those money market funds will be commercial paper and treasuries, pretty much. Commercial paper, just short-term loans issued to corporations, they finance short-term liabilities. They're very secure loans. The one money market fund, the highest yielding money market fund that I could find is Purpose's Cash Management Fund. I think they were about the same, but around, well, actually no net yield. So they have a 0.2% fee. They're around a net yield of around 5%. And they're 85% commercial paper and the

remaining is just treasury bills. This is probably what you're going to get on most money market funds. And in terms of like, you know, ultra conservative would be Global X's T-bill funds. They're just zero to three month treasuries. The Canadian one, like we said, is lower. It's got a net yield of around 4.7, which is 10 basis points higher, while UBIL is, again, yielding north of 5% due to just the higher policy rates. The one thing about those high-set ETFs is they used to have way more attractive yields, but regulators, the big banks complained because I believe there was a lot of money flowing out of, you know, their sort of savings type funds and money market funds. And they were flooding into these, you know, high set ETFs because at one point, I think the yields were around 60 basis points higher. So you'd still be looking at, you know, 5.3% probably for something like cash, but a regulator stepped in and there was something to do with, you know, how they had

to allocate the savings and, and, and pay out of those funds. So the yields ended up getting hit by, you know, 0.5 or 0.6%. There's not as big of an advantage to holding them anymore, especially, you know know like i said like the chances of cibc and national getting into financial trouble like the risk is not zero but the risk is still it's relatively low and would probably step in in some former fashion i think maybe it's uh yeah uh yeah i feel like there's no chance the government would not step in. I mean, people may think that, I'm not saying that to say it's not like, you know, it's super safe or something. Because if the government were to step in, you create, there's consequences to whatever, you know, to doing that kind of stuff. And you can probably, you can make some very strong arguments that some

of the stuff we're seeing right now with markets and exuberance is a byproduct of how the US government stepped in after 2008, 2009, and maybe should have left, let some of those financial institution actually fail. Yeah. Yeah. I mean, if the government needs to step in there's probably a lot of other issues involved yeah i mean exactly it would be a pretty nasty situation but i mean like the the risk the risk is very low risk with those with those savings ets but the risk is not zero i guess whereas something like like the treasury bill funds i mean there's effectively no next to no risk there yeah the one thing I will say no risk on your prints or very low risk on your on your principle yes exactly and that's why I own these is because

ultimately they're backed by the Canadian federal and US government and it would be very unlikely that they would not, you know, pay the money on that when they come do so. Um, that's why I own those. Yeah. Yeah. And the one, the last thing I guess is like, don't expect the yields to be maintained. So if rates start coming down, these funds will not pay as much as they do right now. So, I mean, we've already seen it. They've scaled down the yields of those high CETFs. And if the bank of Canada, you know, continues to lower to lower rates, those are going to come down for sure. innovative when it comes to Canada is the notice savings account from EQ Bank. So they do offer 4.5% for 10 days notice and 5% for 30 day notice. The way it works here is pretty simple is you put

in these accounts and then if you select the 10 day notice, whenever you need to take the money out, you have to basically redeem it and you are able to redeem the money, but you have to wait 10 days. And then the same thing for the 30 days, you select to redeem it. And then you were 30, you wait 30 days to actually redeem them. So that's a pretty good option. Obviously the downside compared to the ones that Dan talked about is, um, they're much more liquid. So you're talking about being able to get the money within a few days versus, you know, 10 or 30 days, depending on here. So, you know, it is a trade off. But one of the advantage here is it is CDIC insured. So that's something that you gain in terms of that

provides more flexibility than a GIC as well. So that's an option if you think that whenever you need the fund, you don't mind waiting that notice period, then it's definitely an interesting option here. Yeah, it's a pretty cool account. Even like 10-day notice, if you deposit into a brokerage, buy one of these high-set ETFs, by the time you sell it, withdraw your money, it's going to take three, four days. Whereas you could have a 10 day notice, you know, you wait an extra six days, but you're getting pretty much the same rate. And I mean, if you have, you know, money that, you know, not necessarily you need immediately, I mean, 5% for just a 30 day notice. I don't, you don'tday notice. You obviously give up some liquidity, but not really all that much.

Yeah. So I thought I wanted to mention, I mean, I use it. So I have it for a 30-day notice. The reason I use it is mostly for our emergency fund because for the most part, I'm like, you know, if there's an emergency, we can slap it on the credit card and then before the bill comes due you pay it off and within the the notice period so that's kind of the reasoning behind it but again it really depends what your use is yeah because you don't like i guess for your first one as soon as you make a purchase on the card you're interest free for a month

so i mean yeah with a 30 day unless it's a cash advance that's like immediate but uh yeah so i mean if you need it i didn't even think of it that way but yeah you could get away with running a credit card for you know the first month and then by then you can get your money and pay it off yeah yeah exactly even like if you have a repair on your house or car repair or something if you know it's coming up, sometimes, you know, your appointments, not for like a week or two, you can already do the redeem. And then,

you know, by the time you actually pay on with your credit card, you only have 20 days left of the notice period. And then you're more, more than fine to pay your credit card off and not have to pay any interest. Yeah, they definitely, they're making a lot of accounts like that are crazy. Like I can't wait till they open their business account.

I will be migrating from from Royal to Equitable extremely fast. But yeah, same for us. But I think we'll finish with this last question here. I'll chime in again, but I'll let you kind of take the lead. So this one is how do you guys approach investing at all time highs? This is a good one. So I mean, the answer is pretty straightforward for me and it's just I continue to buy. If you take a long term approach to your portfolio, buying at all time highs will largely be irrelevant. But this, the one thing for me is this is coming from somebody who's fully invested and just contributes, you know, smaller amounts on a weekly basis. I could like some of my purchases will be made at all time highs. Yes. But as somebody who just buys every week, I mean, some of those purchases are also going to be made at 52 week lows.

I find where, you know, a lot of people get into trouble as they try to time things i knew plenty of people who avoided the all-time highs during the pandemic but then you know in 2022 when we finally get that massive correction then they start second guessing themselves again you know whether the market will continue to lower exactly so i mean i as i had mentioned earlier in the podcast i bought quite a big chunk of u.s equities near the start of 2022 with some excess capital i had from selling off that xaw not at all-time highs but it was pretty damn close and 2022 it felt awful like i i took a d i was deep deep in the red uh on a lot of those purchases because of that correction.

But again, throughout 2022, I continue to just buy every single week. Now, most of those positions I purchased near those all-time highs, along with just continual ads on the lows. They're pretty green at this point. The one thing that gets difficult is for people who have you know a huge sum of money right now that's uninvested it's like i said it's easier for me to sit here and contribute you know a couple hundred you know maybe a week and and buy stocks but if somebody's sitting there you know with a hundred thousand dollars it gets a lot more daunting to just dump it in to the markets at all-time highs.

The S&P 500 in particular is pretty expensive, highest level of concentration we've seen in history. There has been plenty of studies that do highlight, regardless of market prices, lump summing capital in the markets has outperformed dollar cost averaging, but I think there's a bit of a human element, an emotional element there you know yeah that isn't really factored into those studies and just how big of

a mental toll you know say a 20 or 30 percent market correction would take on somebody who just dumps it all in at once so i mean that's something to consider it's it's really a a personal decision yeah i think that's a great point because I think a lot of these studies just disregard the psychological aspect. And the reality is everyone reacts differently. Some people will panic and sell. And even though they had this right strategy to begin with, if there is a significant correction, they might panic and sell. And then it ends up being way worse outcome because if they would have dollar cost average, they might panic and sell. And then it ends up being way worse outcome because if they would have dollar cost average, they would have just stayed invested because they kept buying,

you know, low, high and all of that. For me, I probably would say I do a hybrid strategy right now just because I do know like, I mean, I've been pretty vocal on it that the markets are very richly valued. I mean, it's not equally richly valued. I think that's a good point to make is you have the S&P 500. You mentioned it's extremely concentrated right now, highest in history with names like NVIDIA, Microsoft, all the big tech. And there are some names that I've been adding to that are more better valued, but it's sectors that are a bit out of favor right now. So that is what I'm focusing my energy a bit more on is adding to

those. But I'm also dollar cost averaging with my defined contribution pension at work every two weeks when I get paid. And like I mentioned earlier in one of the questions, I restarted with XAW.TO. But having said that, when I add in some of the money that I do on a regular basis to my investment account, I put roughly about that voluntary money that I add, I put about a third into cash. So in those, in that U-Bill ETF, because I want to be able to buy aggressively if there is a massive correction that happens, whether it happens or not, it will probably happen. But it may be, you know, tomorrow and maybe in 10 years and maybe in five years, like it will happen at some point. But again, I'm leaving probably some returns, but I'm very comfortable with having a decent cash allocation, not crazy big and getting more than 5% on my cash because most of it

is in UBIL. I'm very comfortable with that on top of the equities and Bitcoin investments that I have. But that's what works for me. Obviously, if it was yielding 0% or 0.5% my cash, I'd probably have a bit of a different approach. But given the current market and the valuations, and I think probably double click on valuations, right? The exact all-time high number is different than what the valuations look like.

So I think always keep that in mind. But for me, that's what's been working is I'm trying to just hedge it a little bit and just having more ammunition if there is a correction that happens. Yeah, that's the one huge benefit right now is if you were to kind of use that strategy in, well, actually anywhere from what, 2011 to up to the pandemic, like you would earn next to nothing on that cash. Whereas now you can hold that cash and earn, you know, five and a quarter points. So it's a lot more attractive to do it

from that standpoint. So holding cash is, is never a bad thing. I mean, again, it really all boils down to, you know, personal preference. If you have a huge chunk of money to invest, you know, a lot of the professionals will tell you over and over again from a historical standpoint, the best way to do it is to just dump it in. But I mean, it's not going to be the best for everybody. And if somebody had a huge sum of money to invest and they told me they're going to buy a certain amount every month for 15 months or something, I mean, that's if it helps you, you know, because like you said, it only takes, you know, you lump some of that money and you panic sell that decision. It, it quickly erases all of the benefits of, you know, investing it all at once. So yeah, it's, yeah, exactly. it's up to you really you'll read a bunch of studies but those studies like they're in a vacuum there's no you know there's no human or emotional element

there there's no yeah it all depends and i think it just maybe we'll wrap on this is just you know it doesn't have to be an all or nothing exactly Exactly. Right. I think we just showed that is for me, that's what works. But notice I'm not putting all my money in cash. Like I'm still dollar cost averaging. I'm just dollar cost averaging and putting this portion into cash. It's not all or nothing. And I've been I've talked about it on the podcast. My cash allocation right now, my target is 10 to 15 percent.

I'm within that target. I intend on staying within that target unless there is a significant correction. And then I have names that I'm following that I would like to buy that I'm hoping gets cheaper than I would put the trigger. But if not, I'm still benefiting from the market going up, maybe to a slightly lesser extent, but that cash is still getting me five percent so i'm exactly i'm more than happy with that the worst case scenario here but uh i think it was a fun episode i mean at first we weren't sure um if we'd have enough content but i think it ended up being quite a good episode with the listener questions that we had we were supposed to record a bit

earlier but uh had a little bout of vertigo and I had to push that back, which is not fun if anyone has had that before, but feeling much better now. And I think we had a very good episode. So we appreciate everyone listening. If you haven't done so, if you can give us a five star review, it's always appreciated on Apples, Spotify, whichever platform you're using. You can also find us on Twitter at CDN underscore investing for the podcast, Twitter, and for myself at Fiat underscore Iceberg and Dan at StockTrades underscore CA. Yep. I get that correctly? You did. There you go. Vertigo is cured. There you go. I got it right. So on that, happy belated Canada Day, everyone. Hopefully you enjoy the summer and you find some time to

listen to our upcoming episodes while you enjoy the nice weather. Yep. Thanks for listening, everyone. The Canadian Investor Podcast should not be construed as investment or financial advice. The host 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.