The Canadian Investor - Visa's Antitrust Showdown & Lightspeed Looking for Buyers

Episode Date: October 3, 2024

In this episode of The Canadian Investor Podcast, we dive into the U.S. Department of Justice’s antitrust lawsuit against Visa, alleging monopolistic practices in the debit network markets. We discuss how Visa’s dominance could be at risk and the potential outcomes for competition in the payments space.  Next, we explore the latest rumors surrounding Lightspeed Commerce, as the company hires JP Morgan to seek potential buyers, driving speculation about its future.  We also cover the ongoing dockworker strikes affecting ports across the U.S. and Canada, with massive economic impacts. Finally, we break down Costco’s latest earnings, analyzing its continued growth despite softening discretionary spending, and take a look at the performance of Bitcoin ETFs year-to-date.    Tickers of Stocks & ETF discussed: V, LSPD.TO, COST, TDOC, IBIT 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 are back for a Thursday news and earnings episode. Before we get started, Dan, how's it going? And how's the search been for finding some news items to talk about? Yeah, I don't know. It's pretty slow, but also,

I mean, we got one of the most expensive, I would say one of the most expensive mega cap US stocks reported earnings. So it's pretty interesting. And then we got obviously a Canadian tech company that's getting a bit desperate in my opinion, but it should be a pretty good episode, I would say, even though it's really slow. Yeah, exactly. So we still have, I think, a fun episode ahead. We'll start off here by the visa antitrust issue, which you alluded to, I think, when we recorded last Tuesday when the news started coming out that the Department of Justice, so the DOJ, was going after visa for antitrust. So obviously there's been more details on that.

So I'll go and just an overview and my thoughts. I think you own Visa. I also do. It's pretty, for me, it's a quite small position. I own Visa and MasterCard and I think together around like two and a half percent of my portfolio. So I think Visa on its own is slightly more than a percent. So it's not like, you know, I don't think my retirement will be affected, whatever the outcome is of this.

But I think for you, it's probably slightly larger, if I had to guess, if I remember correctly. Yeah, it's like two and a half to three to three percent. I'd have to go back and check, but it's like a core position for me, really. OK, yeah, perfect. So just so people get context, obviously we we are shareholders of visa here so the department of justice filed a civil antitrust lawsuit against visa for monopolization and unlawful conduct in its debit network markets it alleges that visa illegally maintains a monopoly over debit network markets some of the things it says that it's alleging that Visa is doing,

and because I say alleging because it still has to go to court, don't want to get into trouble as well. Although I think Visa has bigger problems here than coming after the Canadian Investor Podcast. So using its dominance to thwart the growth of existing competitors, preventing the development of new and innovative payment alternatives. They control over 60% of U.S. debit transaction, charging over $7 billion in annual processing fees. They are also saying their exclusionary agreement and practices.

So Visa imposes a web of exclusionary agreements on merchants and banks. They penalize customers who route transactions through other debit networks or payment systems. They said it has a negative impact on consumers and the economy because Visa extracts fees that exceed competitive market levels. It increases costs or pass on consumers through higher prices or reduced quality of goods and services. It results in billions of dollars in additional fees imposed on American consumers and businesses. I'm sure a lot of Canadian businesses would also agree with that. Yeah.

From here as well. It slows innovation in the debit payment ecosystem. It slows innovation in the debit payment ecosystem. They also say that Visa's market dominance is really massive. It maintains enormous scales on both sides of the debit market, so merchants and consumers. They refer to it as a position of enormous mode around its business. It engages in conduct to prevent rivals from gaining necessary scales, share data, and to compete, especially against smaller debit networks. And that's one of the things, if you read the press release of the DOJ, they definitely focus on that. You can also, if you feel like it, read the, I think, 70 pages or so actual lawsuit. Unless you're a lawyer,

you probably won't want to go into that much detail but again you can still control f and look for certain terms that you're more interested about and that's what i did so i was kind of curious because they do cite examples of deals with square through the cash app apple and paypal to ensure that they don't create payment system that would compete against Visa. But in the example of Apple, which I searched the filing because I was interested in return of abiding to the agreement, Apple gets Apple to not, you know, build a competing system against Visa and also not encouraging its users to go away from Visa. And as long as they abide by that, they'll share like a part of Visa's profits, although, you know, they didn't really specify

what part of the profit. I mean, I'm sure it's related to Apple transactions. So like Apple transactions, I'm assuming it's probably relating to that. But, you know, it wasn't in the lawsuit per se. This is definitely interesting. I think it'll be worth following. Obviously, I own Visa. Dan owns it as well. There's definitely some different outcomes here that could be possible.

There could be a ruling in favor or against Visa. So they could lose or win this if it goes to court. I'm not a lawyer obviously so take this with a grain of salt. There could also be a settlement made as well. Obviously if there's a settlement clearly Visa would have to give something and obviously depending on the ruling I think it's safe to assume that it would likely increase competition in a space, erode visas dominant to some dominance to some extent in the debit space my assumption would be that the doj would probably ask for you know for visa to void some of the agreements that they're they have in place like the one i

just talked about with apple or square uh I guess Block formally, Square with a cash app or PayPal. So they probably forced them to void some agreements. I wouldn't be surprised if there'd be some kind of fines as well. I'm not quite sure because if we were talking before we started recording, there was the Google antitrust lawsuit. And for Google, it was a, you know, there were some similarities. I think, you know, one of the big sticking points and, you know, what they allege was that Google was paying Apple to have it as the Google as the default search engine on Apple iPhones. And that was part of the practice, the antitrust practice. And I think there's already been a ruling on that, but I think they're planning to appeal for the Google lawsuit.

And there also could be, from what I've read, the final ruling is not expected to be until 2025. So TBD, and there could be different outcomes. It could be, you know, again, fines. It could be requiring Google to modify certain practices. Or as far as breaking out the company, I think search has been, you know, a big point of contention there. There's also been YouTube, even I think the Android with their store, their app store for Android. So it'll be interesting.

But the Visa one, although there are some similarities, I don't think you'd be able to really break up the business. No. So, you know, I think people can make their own minds on potential outcomes if Visa loses the case or comes to some kind of settlement. Because if they're coming to a settlement, you can bet that they will be conceding some things. That's for sure. Yeah. will be conceding some things that's for sure yeah i mean the the main difference here for me between you know a company like google and visa is like google's monopoly dominance i guess would just be because you know there's really not a lot of competition in that search space like i believe

like even if they didn't pay apple to make it the default search engine i believe a lot of people would just do it anyway i mean i know if i had an iphone and it wasn't set like that i would just set it yeah because there really isn't another engine that's even close to the quality i mean they have 92 93 percent of search dominance for a reason whereas this is like this is visa pretty much paying off competitors that definitely have the money and infrastructure to develop the probably a similar you know competitive product but uh they aren't so i think there's going to be two different results here and like you said there's pretty much google like if they ended up like going really hardcore and making google break up the business there's like clearly defined segments of that business that they could split up whereas visa like i don't know how you'd ever do that yeah and to think about it too as you were

talking about that you know as a consumer i mean to me as long like i don't care whether it's visa mastercard amex discover whatever card system it is right as long as it's widely accepted and the fees are competitive or i don't pay any fees right it's usually the merchant and that will pay most of the fees but as long as that's the case i don't care whether it's visa or someone else whereas you're right with google i think they tend to have better results so that's why i would go to them it's interesting and i guess merchants too right if they can have other payment systems or payment rails that are, you know, as good as Visa or close to as good that, you know, their consumers are using for a better price, they would probably offer that or at least offer multiple options to consumers, which seems to be what Visa is trying to do. Again, alleged by the DOJ is that their agreements are built in where I think they had a quote from a former CFO saying that, you know, I think there are no enemies. They're just friends and partners. Basically, like they make sure that, you know, you will play ball with them.

So the agreements are made so that, you know you will play ball with them so that the agreement pretty much yeah yeah the agreements are made so that you know you benefit from it in some for sort of form or fashion but the downside of not sticking to agreement are so great that you know potential competition or merchants just never go that route yeah pretty, pretty much. And I mean, I know a few people who just operate small business and the fees on these credit cards are crazy. The amount they get charged just to process stuff like this. So I mean, competition would be good. And I mean, they say Visa has an enormous moat. I would argue again that Google has a much larger moat because Visa, like you said, nobody cares what card they use as long as the payment goes through and as long as they can use the payment at a wide variety of areas. They don't care if it's Visa or anything else. Whereas

Google is kind of from like a product perspective where it's just the clearly superior product. So I mean, in that regard, more people are using it, but it's going to be, it's going to be interesting. I would imagine they get fine, like absolutely. I mean, I guess I can't guarantee it, but I would say there's going to be fines to pay like at absolute minimum, because again, you know, paying Apple off and giving them profits to like to just not incentivize any sort of innovation in the space is clearly something that you know they're probably gonna hammer down on but who knows yeah and then there's the last part right with the like the u.s election being like pretty much a month away at this point

yeah you know some people may think oh depending on who wins you know if the republican wins they might drop it well i doubt that they would because you you know, it's an easy, you know, it's easy to beat on big tech, right? Like that resonates well with the population. So my perception is that they and I could be very wrong on that. Don't get me wrong. know it's probably whoever's in power they will probably just let the doj continue this um this lawsuit because you know you don't want to look like you're on the side of big tech i think you probably want to be look like you're on the other side and you want to rein in a big tech yeah i mean from an investor standpoint it might not be optimal but from like a consumer standpoint i mean this really only makes it better more competition things like that which is what

they try to target which is what they try to eliminate is stuff like this so yeah tbd well i will keep everyone posted because obviously we both own it i'm sure there's a lot of people who own visa as well and even if you don't own it directly, if you have index funds, chances are that you own at least part of it if you have US index funds. So something to keep in mind. 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 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 forward slash host that is airbnb.ca forward slash host

now we'll move on to i guess some rumors the rumor mill in canada with light speed so you want to go over what's going on there well it was rumored but now it was it was rumored last week but now confirmed yeah so the rumors started like probably mid last week that lightspeed commerce which is like it's a point of sale platform but they've kind of they've emerged into you know a lot more stuff other than you know outright point of sale but if you follow the company at all you'll know that after nuve sold which would have been earlier this year Lightspeed had been rumored to be seeking out potential suitors to either be bought by another company or private equity or anything like that. And that was, I can't remember when Nuve sold. It was probably early this year, I think.

Yeah, I think it was like in this early spring, if I remember correctly, something like that. And I think it was private equity, if I remember correctly. Yeah. remember correctly yeah right yeah yeah so they got bought up by private equity and then you know a week later there was there was rumors that lightspeed was kind of you know seeking to do the same thing and even dax like the ceo had mentioned something like that but it was never confirmed but now these rumors kind of resurfaced again last week and they were confirmed by the company that they have hired JP Morgan to kind of help it seek out potential buyers for the business. So the news caused the company's share price to shoot up around 21% over the last week or so that it was announced. And when we look back to what Nuve sold for, so they sold for around 4.5X enterprise value to sales. And prior to the news, Lightspeed was trading only at around a third of this. And after the news came out, it jumped up to

around 1.7X EV sales. So I'm an owner of Lightspeed. I mean, I've traded in and out of this one quite a bit during the pandemic. So I'm pretty interested to see where a deal comes in here. If it does, I'm actually betting there's more chance that nothing happens out of this rather than the company gets bought. I don't think it's worth the same as Nuve. They were a profitable company. I think they had nearly $300 million in free cash flow. Lightspeed is really struggling to get towards any sort of reasonable level of profitability. But I do think it's safe to say that it's probably worth a little bit more than what it's trading at now if it were to end up being taken private. I mean, even if we think of half the cost of Nuve, that would still be around a 30% premium to what they're trading at

right now. Obviously, pure speculation by me, there's been no confirmation of any sort of value or nothing, but I think that might be appropriate. But just overall, it just kind of seems sloppy to me. It seems like management can't really take the business to the next level. So now they're just looking to kind of sell it off and move on. I mean, it's kind of weird for them to come out publicly. This doesn't't really happen too much, but it's happened. Like it's been rumored to happen earlier in the year and now it's been confirmed to happen now. I mean, it's just, it's a bit odd. And I know a lot of people had mentioned there's a bit of arbitrage opportunity here if they were to get bought out at a higher premium, but I think it's a really high risk one. Yes. If the company were to be acquired, its price would probably be higher than it is today.

However, if nothing materializes, it's more than likely gonna give back that 21% and probably more because obviously now it's gone public that the company's looking to seek out buyers. And if no buyers show up, I mean, it kind of might spook investors even more. So I mean, I still hold my shares. I'm kind of willing to hold on to see if a deal materializes. But if no news comes out relatively

soon and the stock just kind of starts to bleed off the gains from the bump of news, I'll probably just move on. I know what they need to do. They just need to get a deal done with Ryan Reynolds. That's it. Yeah, exactly. Just pulled a new way now. But what I'm sharing here for a joint TCI, so just basically what you were saying, right? So, you know, sales have grown quite nicely, especially spurred during the pandemic. But one of the issues for them, as like you said, has been profitability. So, you know, free cash flow has been negative around 100 million for several years now. Earnings on a gap or IFRS basis. It's getting a little better, but still looking at on a trailing 12 months base at 150 million in the holes. So yeah,

definitely some issues on the profitability. And there's also a lot of competition in this space too. So I think that's one of the other issues that they're dealing with but uh i mean it's interesting to keep an eye on uh it's they were one of the darlings of 2020 2021 and then i think they're struggling a little bit to find their footing um i do hope they have a backup plan because it's not good to only relying on you know being bought out because then you probably you know potential, potential buyers are not stupid, right? So, they will probably say, well, you know, if that's your only option, we won't give you an awesome deal. Exactly. Yeah.

Yeah. So, it's, I think that's where I'm a bit kind of, I find it a bit of a head-scrasher because the fact that they're coming out like this, they might not be. And I haven't looked. You can maybe tell me. I haven't looked in terms of how much cash they have on their balance sheet. I think last time I looked, it was pretty decent. Quite a bit. I think they have probably around $900 million Canadian.

No, actually. Yeah, maybe looking at the U.S. Yeah. Yeah. So, in terms. But I 673 74 million latest quarter was as high as uh yeah 953 million it peaked in march of 2022 yeah yeah it's uh i mean light speed aside the one i and i actually dug this up as you were as you were talking there so nine of the 20 technology companies to launch initial public offerings on the toronto stock exchange during the covid 19 linked boom have already gone private so almost half of them have already gone private

so i mean i think nuve would probably be included in that because it IPO'd in like 2021, I think, or 2020. Somewhere around there. Yeah. Absolute software, true context. It only lists a few of these. This is just an article from the Globe and Mail. But yeah, I mean, they all IPO'd during a time that was very, very, very good to IPO in. I mean, Lightspeed, i don't think would would be

included in that because they ipo'd before covid yeah i'm pretty sure they ipo'd in 2018 or 2019 yeah so they wouldn't be included in that but uh definitely pre-covid that's for sure i'm not sure when but pre-covid for sure yeah it's just pretty interesting to see like how you know so these companies all ipo'd at probably much much higher prices than they got taken private and they're just getting scooped up now so i mean it's interesting to see i don't know i didn't even know there was 20 tech companies that ipo'd on the tsx during the covid boom but i didn't know there was even 20 tech companies on the i know yeah i didn't i didn't either yeah no i think no i think it's a good overview it's worth watching um i know there's I know. Yeah, I didn't acquisition, one that I own myself.

And I, you know, sold, you know, a year and a half ago, I think at this point, almost two years ago, Teladoc, same kind of thing. So they made a really big one ill-advised acquisition that they're still paying for right now. And I was actually looking at their sales. It's flat or declining. So you can tell they're really struggling. I mean, at least they're still profitable on a free cash flow basis. But still, that's another example where management definitely made some questionable decisions at the height of the hype in 2021. And now they're paying for it. Yeah. Yeah. Like Lightspeed made some big acquisitions in 2021 and now they're paying for it yeah yeah like lightspeed made some big acquisitions in in 2021 uh new order was one of them and i mean it's it's pretty clear now very hard to tell that

they overpaid back then but clearly they did now i mean another canadian tech company would be open text paid i think it was like six six or six and a half billion dollars for Micro Focus. That has not worked out very well. I mean, OpenText is a lot more established, profitable, cash flowing. So it hasn't taken as big of a dip as Lightspeed has, but it just kind of shows that growth through acquisitions. It's a very risky business model. And when it doesn't work out, it gets rough. Yeah. And there are some that have been impressive, right? Doing acquisitions like it's it's a very risky business model and when it doesn't work out it uh when it doesn't work out it gets rough yeah and there are some that have been impressive right doing that i think constellation software probably comes to mind as one of the ones uh alimentation

has a really good track record we'll have to see going forward it's uh seven and i but um yeah you're right i mean a lot of the time i think people get excited with acquisitions but i would say more often than not it doesn't end up being as you know productive as management expected it to i think i'm trying to be nice there either they overpay for it or just uh they they aren't able to um i think i love this word, efficiencies. So establish these efficiencies as much as they thought. So I think always take that with a grain of salt when they make acquisitions, unless they have a really strong track record of doing so. I think it's something that investors, I think personally, it's something I'm always kind

of very cautious about, at least in the last couple of years since I've been burned with Teladoc. Yeah, there's definitely very few companies that can do it successfully over the long term. Okay, so I guess enough about Lightspeed. We'll talk here about the next dock workers across the US go on strike. And there's also a limited strike in Montreal in the Pal de Montréal. So I'll start off with that because clearly there's the Canadian components. The two are not related per se. So the Montreal port, there's a limited three-day strike that began on Monday this week. So we're recording this on Tuesday.

Roughly 350 workers on limited strike. For context, Montreal is the second largest port in Canada. The issue seems to be really more about job security than salary, which is different than the US strikes that are happening here. And I'll go more into detail shortly about the US. And it's really interesting to see what's happening. That's the really the contention between the two. Keep in mind, these are different unions, so not the same in Canada and the US and different employer association. Obviously, we saw, I think it was the Vancouver port that had

a strike in 2023, and that had a pretty big impact on the Canadian economy, cost billions of dollars in terms of for the Canadian economy. So you can really tell how important these ports are, especially when you're talking about Montreal and Vancouver. I think I would assume I didn't look it up that Vancouver is the largest. If Montreal is the second largest, that would be my assumption. I would imagine. Yeah. I can't see anything else.

Yeah, just because the way Montreal is located, right, with the fleuve Saint-Laurent, like the St. Lawrence River. Sorry, when I talk about Quebec, it, my French kind of kicks in there. So the Saint-Laurent River, so the way it kind of, you know, it goes, right? Montreal's basically the last port, the closest one to Toronto and all the major cities. So it would make sense that it's the second largest and, you know, out east, you know, with the west being the largest with Vancouvercouver but if it's not that let us know it's just my assumption here and in the u.s what's happening here it's the international longshoremen association so the ila represents about 45 000 port workers they announced that

they were going on strike as of this morning so tuesday morning It affects 36 ports from Maine to Texas, so it's all along the east, central east coast. The strike started earlier today. Like I mentioned, the negotiations are done with the U.S. Maritime Alliance, so that's the USMX, so it's an association representing multiple employers in that industry. I guess it's similar, right, when they go on strike for autoworkers, although autoworkers, I when they go on strike for auto workers. Although auto workers, I think they'll negotiate with each automaker is still kind of that same union that's centralized. Yeah, centralized. I think so. That's just my perception here. One of the big sticking points is that the union is asking for a 61.5% pay increase while the employers are offering 50%. So pretty big gap here and it's

pretty noteworthy because it is the first strike since 1977. And some retailers, some of the larger retailers have actually made some preemptive orders or ordered goods earlier than usual to make sure that they could meet demand for the fall and winter. Obviously, that came at a higher price, but they were concerned of a potential strike. Of course, here, the blaming game is in full effect. The ILA is blaming the Employer Association, so the USMX, and vice versa. One is blaming the other for the result of their strike. The White House has said that they don't want to intervene, but they are monitoring the situation. Apparently, there's over 100,000 containers waiting to be offloaded in the New York area,

which is obviously quite a bit. And it's hard to say how much this will cause the US economy. I tried researching it. The numbers that I've seen were kind of all over the place, but they were all falling between 2 billion and 5 billion every day that the strike is ongoing. So that's kind of the numbers that I saw in terms of the economic impact. So obviously, the longer it lasts, the bigger the impact it will have in the U.S. It could have an impact on the economy, obviously, but also potentially could have an inflationary effect as well. Right. If there is limited goods, you know, we've seen what happens when there's supply chain issues. I think there's a lot of people that still have PTSD with that during the pandemic. So who knows what will happen there? that during the pandemic. So who knows what will happen there. But these are all potential issues that could come up if this strike goes on for a while. And if you're thinking about the White

House too, right, the Biden administration with Kamala Harris are trying to get reelected. I know they have kind of adopted an attitude pro blue collar workers and pro workers but i think they're probably between a rock and a hard place because you know they want to get those votes but they also you know want to make sure the economy it doesn't get too bad so it's exactly it's really interesting and it'll be fascinating to see if this goes on what the white house will actually decide to do because it's obviously not good for them either way and intervening is probably not a great look either and obviously the republicans and trump would probably try that to use to their advantage oh absolutely yep i mean you want to be like pro worker but then you know you also don't want this to be held out very long to the point where it does start to impact the economy.

The one thing I read is, I can't remember who it was that said it, but they said because demand is not very high right now, this shutdown won't fuel inflation too much. Whereas if the economy was strong and demand was high, then this would cause a lot of issues over the short term, which they still did mention it will cause issues, not as much yeah just because you know there's sluggish like not during covid you know when when demand was just with stimulus checks and stuff yeah the stimmies yeah but yeah it's uh it's gonna be i don't see it lasting very long before somebody would would step in i think it's that that critical and in terms of the ports in in canada so port of vancouver is the largest okay and it's the third largest in north america so it is yeah it's big

yeah yeah montreal is second largest yeah exactly getting all this stuff from asia so that makes sense that uh it would be quite large and then obviously that impacts a lot if some of the listeners are listening and they own like railways in the u.s for example uh those would be definitely impacted by that the port of vancouver when they had their strike going there was definitely some ish impacts that were created for the can railways. So something to keep in mind, pretty obviously. I do hope they come to some kind of agreement. It's not good when this is going on. Some kind of a fair, you know, agreement for both sides.

I think that's always what you want to achieve, but we'll have to see. 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. I guess we'll move on now to, yeah, Costco earnings. You know, that company that keeps doing pretty well, I would assume. Yeah. Yeah. Yeah.

So they reported sales of $78 billion, which missed estimates by a couple billion. They were expected to report $80, but they beat earnings expectations by about 5%. So I think that cushioned it a bit. It is trading off its highs, but not very much. So when you look at headline sales, you'll see 1% year over year revenue growth. However, last year had an additional week of reporting. So when you kind of compare apples to apples, they grew by 7%. Same store sales increased by 5.3% in the US, 5.5% in Canada, 5.7% internationally and average ticket prices, which is pretty much

like how much people are spending in the store. Like total they they're falling by 0.3% in the U S and around 2% in Canada and internationally. However, the company is just seeing so much more foot traffic into the stores that it's just, it's more than offsetting this. So foot traffic increased by 6.4% year over year. So, I mean, what this would tell me is like, for the most part, the company's probably seeing a decline in discretionary trend or sorry, in discretionary spend, but traffic volumes for, you know, those who are looking to buy staple items are offsetting this, which should kind of, you know, provide the company with some additional tailwinds when discretionary

spending returns. Because I really doubt, and I've had this quite a few times here, I don't think that people purchasing staple goods from Costco will ever go away. I think the shopping shift for consumers to places like Costco, Loblaw, Dollarama, I do think it's going to be permanent regardless of where interest rates go. I mean, the cost of groceries is never going down, or at least if it does, there's probably, if you see long-term deflation in food prices, there's probably other major issues, but I think it's definitely going to be permanent. And I mean, Costco is just realizing the benefits of this massively. Memberships came in at 76.2 million, which is up 7.3%. This is pretty much the company's bread and butter when it comes to profits. They're, you know, razor thin margins on the actual goods they offer. And they just try to get, you know, people renewing their memberships and they generate a huge chunk of their profits from this and renewal rates 93% in North America, while worldwide it's at 90.5%. And I know people view this company as ridiculous,

ridiculously expensive. And it is like it is on a forward earnings basis. It's worth like 50% more than Nvidia is trading at on a forward basis. I think it's trading at 45 X expected earnings. It's just crazy expensive right now. But, uh, you know, I don't really ever make decisions based on anecdotal information, but I have never witnessed a retail store as absolute chaos in my life as a Costco. Like they are, we went, we went we went uh we usually go always almost exclusively like weekdays like right when it opens because there's nobody in there but we yeah we were like driving by one the one day on a sunday at like 3 p.m we're like oh we need to grab some stuff so we went in there and i got like stuck i parked and i was parked close to where the gasoline line was and i could not get out because the lineup was so long that they blocked me into the parking stall.

And I had to like, I had to get out and tell the guy like, I need to exit this stall. Can you just wait for me to get out? And we didn't even, we just left. The parking lot was open or like full. The inside of the store was just, I couldn't even believe how many people were in there it was absolutely nuts i do have a good story for you but first i'm just showing the revenue a membership fee revenue which has been steadily on an increasing slope and what's really interesting here is people should remember they only recently increased their membership fee as of september

1st so i'm not even sure if this is capturing the increase. Well, not the full-fledged, right? A lot of people will be renewing, you know, throughout the year, right? It's not that everyone's renewing at the same time. And you're still seeing essentially membership revenue, which almost all goes to the bottom line. It's increasing at a 7.29 compounded annual growth rate and for and now it's above i think this uh yeah for the past year it's uh it now it's creeped

above 4.8 billion and that's just the membership revenue and it's been increasing steadily but the fact that it was increasing despite increasing the membership fee just goes to show how many new members are actually getting yeah and i mean like i i cannot imagine any reason to ever cancel my membership like i can't think because often like i know a lot of people say like oh i refuse to like pay to shop but i mean i typically when we go there i mean we save that almost in a single visit just on the you know lower cost for goods and i mean you do have to buy in bulk but i mean we just you know freezer pack most of the stuff that lasts forever and but i mean and then we have an executive membership so not only does it pay for the membership but we shop there often enough we

actually end up making money so i mean for us yeah yeah it's just it's such a genius business model like you get more members which you know you buy more goods in bulk which lowers the prices which ultimately gets more members which means you can buy more goods at bulk prices and it's just a continuous cycle and like just 93 percent renewal rates like 19 out of 20 people every single year are just you know pretty much renewing their their membership and it's been very consistent too yeah so if you've been following costco for a while like you'll see it's always in the kind of low 90s it never pretty ever like i can't remember the last time if i ever dipped below 90 as all and i mean the one reason why its global rate is lower is typically and the companies mention this so they get they open up a

new store internationally and you know a ton of people flood in and buy memberships and then it kind of weeds out the people who you know it might not be for so their renewal rates are lower you know that first or second year and then they gradually trend up towards that you know, it might not be for. So their renewal rates are lower, you know, that first or second year. And then they gradually trend up towards that, you know, 90% plus rate. But yeah, my family shopped at Costco. I remember going to Costco in like the 90s. Yeah, yeah, I remember too. Yeah.

But, and it was nowhere near as huge as it was then, but now it's just absurd. Yeah, and we, so before I get to the last segment here, parents that are listening to this show, so obviously I have a toddler. She's two now, turned two like a month ago, and I had the smart idea, and I'm being slightly sarcastic.

My wife had plans a Saturday morning, so I was looking after my daughter, and I'm like, you know what? I'm going to go to Costco with my two-year-old daughter at 10.30 a.m. on a Saturday morning. So it was not, and it was raining. So I ended up being okay, but it was crazy. And she, again, for parents, obviously, I know you don't have kids,

but at that age, they can there's terrible twos right and it is a thing so she was uh not having a great time at the beginning but i was able to power through and with the sample samples all over the place that got her in a bit better mood i brought some snacks i was able to do it but it is definitely a challenge if you go there like just one even two parents with like a young child it's something else because you already have to deal with everyone else being it's so packed and then you have to deal with a child so that's my recent anecdotal or funny story from costco i would have a complete meltdown yeah i think they like the the older

costco is in calgary So the one I went to, I don't know anybody listening to this is from, from Calgary. It's on like Sarsi trail and it's a very, it's an older Costco and like the, the infrastructure there can't even handle how busy it is. So like not even the Costco parking lot, it backs up like almost onto the main road because people are trying to get into the costco but the roadways just don't have the capacity to even support the people that want to go to costco i can't like i understand why people think it's expensive but i mean i don't think this company is going to slow down anytime soon i just can't see it yeah and uh one thing there i don't i don't

think they have it yet in calgary but in ottawa i think it's one of the first cities where now you have to scan your they got that now they got that now okay i think ottawa was one of the first cities to to try it out in canada so now you have to scan your membership pass as you get in uh but we have that same issue the older ones are just insane so i actually go i do a detour i go to uh for auto listeners don't know there's a bar even one that's relatively new so i drive an extra 5-10 minutes i would say from where i live to go to the new one because the parking is much larger and uh for my sanity i'm just like you know what and the aisles are bigger and stuff like that. So it's worth the detour.

Yeah, it's bonkers in there. If you can go brave Costco on a weekend, you're a lot stronger than I am. You can do anything. Yeah, you can do anything. So I guess we'll move on from Costco. The last thing I wanted to talk about, just because I haven't talked about Bitcoin in some time. And people will know if you've been listening to the podcast for a while i'm obviously a bitcoin bull i believe in the technology but it's interesting just to look at the bitcoin etf how it's doing i mean it's three quarters of the

year in uh since the approval on january 10th uh the u.s spot bitcoin et. And I always find it fascinating because the block.co has some really good data when it comes to that. So I'll share that with our joint TCI list watchers, subscribers that are watching the video. Well, first of all, I mean, the asset under management since the launch, essentially as close to doubled here. So it went from 20 billion at the launch essentially as close to doubled here so it went from 28 billion at the launch which was almost all because of gbtc which was the grayscale bitcoin trust and they converted it to an etf when this pop bitcoins were approved now you know that one is still uh seeing a little bit of i would say you know it's still the second most in terms of asset under management. But the one that has the most asset under management is the BlackRock. So

iBit. So that one has the most. You have second GBTC and then the Fidelity one. So the top three are definitely in advance. And what you can see with what I'm showing here is just that the asset under management had kind of been in between roughly like 50 billion and a bit above 60 billion since March. Obviously, the price appreciation has something to do with that, where when it launched, it was 56,000 USD per one Bitcoin, and it actually peaked around 73 in March and ever since it's been between like 50 and 72 ish so clearly the price going up will bring the asset under management Definitely higher but what you can see here as well is that you there's definitely been some inflows So you can see what this chart here. So these are the

spot Bitcoin flows. And you can see that the lines above are every essentially their inflows and outflows are the lines below, even though there's been some outflows mainly because of the grayscale. So the GBTC TF, mainly because of that one, because of the higher fees, a lot of people have been selling and going to I bid the BlackRock one or some of the other options that are lower fees. But I don't know exactly how much flows there's been since the launch, but there's clearly been quite a bit of inflows. And it's really fascinating to look at that because you're seeing, you know, some i would say some pretty clear winners so far like i said blackrog gbtc is probably a clear loser because it's lost close to half of his asset under management since the launch a lot of outflows but then fidelity the third one and then arc is a

and bitbo are far distant number threes But it's just interesting to see what's happened since the launch here. And what will be also interesting to watch in the next few months is, I don't know if you knew that then, but on September 20th, the SEC actually approved options trading for the iBit ETF. I didn't know that. No. Yeah. So they approved that. I mean, I looked this morning. They still couldn't buy options for iBits ETF. I didn't know that. No. Yeah. So they approve that. I mean, I don't I look this morning. They still I still couldn't buy options for iBits. I'm assuming the actual it'll come into effect. Well, I think they can launch them whenever. I think it's just now that, you know, the back end getting everything ready to launch the options. But it should start trading soon. So it'll be

interesting whether that brings the price up or low, because obviously, if you're talking option, you can start buying like put options, call options, like there are different kinds of options, some options where you can bet against the price and some where you can bet, you know, if you're bullish on the price, obviously, people will be also able to lever up on these options. So there's a lot of different implications. People will be also able to lever up on these options. So there's a lot of different implications. But I think it's cementing the fact that Bitcoin is becoming a more and more kind of financial asset. But on the other hand, it's funny that BlackRock was the only ETF that was approved for that.

And I know there's a lot of people in the Bitcoin space that are lamenting that because, I mean, I think it may be, you know, if i put my thin foil ad on it's like okay the the u.s government through the sec are seeing like i don't think we can get rid of bitcoin so if not then we'll make sure that the incumbent in terms of massive asset manager yeah you know is the only one to be able to launch options. I'm sure they'll approve it eventually for the other ones, but there's always that potential first mover effect. Yeah, I mean, the options is,

I mean, you have a highly speculative asset in the grand scheme of things, and now you're adding more amplified speculation on it in terms of options, which is, I don't know, it's pretty crazy. The one thing I was saying in terms of outflows is, and I'm actually surprised it's not this much, but I'm surprised it's not more than it is. But BTCC, like the purpose Bitcoin ETF, it's lost $540 million this year. So year to date outflows of 540 million. this year so year-to-date outflows of 540 million it's got assets under management of 2.15 billion i expected this to be more because the expense ratio on that fund is

like 1.4 1.5 but i would imagine maybe this is people who like want to keep the currency this is an unhedged fund that's what i would think yeah keep it in canadian or maybe they bought this fund when did it start trading i mean it only started trading in 2021 so i don't think like unless you bought it at the bottom in you know 2022 you you probably don't have gigantic capital gains because i could see that being a reason why people you know hold off on selling but yeah i'm not sure why more money isn't flowing out of this and into the cheaper cheaper funds i mean i i sold pretty much the day that uh ibbit i mean ibit came out i sold this converted it and just bought it yeah i remember you doing that i own the the bitbo one not bitbo sorry the a bit wise so um so i own that one again, it's Bitwise a bit smaller. But I mean, the fees are

very similar to the BlackRock ones. So I don't think you most of the US ones, I don't think you can really go wrong aside from the grayscale, which still has high fees. And I mean, despite the price of Bitcoin going up, the latest data that block the blog.co has is that it has 14 billion in asset under management i think it started around 28 billion when it launched right so there's been a lot of outflows lost about half of its asset despite the price of bitcoin being higher yeah yeah i mean people are it's it's very easy to just go to stuff that has lower fees these days like it takes you a few clicks of a button i mean obviously in the states.

You don't have to deal with currency exchange. Like we do. Because you as Canadians. We pretty much have to go south of the border. To find lower fees. I don't think there's a Bitcoin ETF. That's even close to what they offer. South of the border here.

No I think the Galaxy one. I think they reduced their fees. But it's still like i think 75 basis point or 60 or something like that i'm not sure but i know there's one i had looked i was surprised that they had actually dropped the fees a decent amount i think it was the uh the galaxy one galaxy is 0.76 that's what y charts are saying i don't know if it's no i think that's still accurate but yeah i think that's the one i think that sounds about right but it's still you know three and a half four times what you'd be paying with the u.s one so yeah if you're looking to hold this for a while it's probably

best to even pay the currency exchange fees because you'll long term you'll save a whole lot of money just on those fees yeah yeah like outside of the fluctuation in the canadian and u.s dollar i pretty much because i know ibit they had really low fees for a while but i think they that was like an introductory fee or whatever but it was i'll get my money back like i just straight up converted it on well simple paid the 1.5 percent i'll get that back in like a year just in saving the fees no i think exactly so uh no but i think that's it i think it was just good to see how it was doing especially with the price of bitcoin kind of going pretty sideways for the better part of since march like i said again it'll be interesting what happens obviously the u.s election will probably have a big impact

here where you have uh you know trump has been more kind of embracing crypto, whereas you have Kamala Harris. That's, you know, been a bit wishy washy from what I've read, but less, you know, against it than the current administration as much as it's weird. I mean, she's trying, I think, to differentiate herself a little bit. So it'll be interesting whether the markets react to that. I mean, I think the markets are really, let's be honest, like, I know, we don't talk really about politics too much. But you know, with the port strike, for example, but also this, obviously, politics will have a big part. And I think in the markets right now, I think it's safe to say that the markets now are just waiting to see what happens with the US election. I think it's safe to say that the markets now are just waiting to see what happens with the U.S. election.

I think there's going to be a whole lot of volatility. I think we're seeing that ups and downs until then. But I think the markets are just trying to weigh, you know, who could potentially get in and what kind of industry and what will it mean for, you know, businesses going forward. I think that's what the markets are trying to weigh. And I haven't looked at the polls, but it looks like it's all still kind of a coin flip from what i've seen very close yeah yeah so i'm uh i'm gonna be down in arizona for the election oh okay it's like a like a soap opera yeah wasn't it like a battle state the last one wasn't there a lot of drama i think they're mostly republican i think but i'm not 100 sure

yeah but i think it is one of the tighter states but i think generally yeah i might be completely out to lunch there i don't really pay too much attention to u.s politics so i know i pay a little bit of attention but mostly because i'm curious of what they're saying about the economy and what you know none of them are saying about tackling the U.S. deficit. But that's a discussion for another day. It's like it just doesn't exist, right? Two trillion a year, three trillion. Like, yeah, no one really cares except for like a handful of people.

But, you know, we'll have to see. So I digress. I think we've gone long enough despite being a slower news week. Thank you, everyone, for listening. We really appreciate the support. Like always, you can follow us on Twitter. I'm at fiat underscore iceberg. And then Dan at stocktrades underscore CA.

We're pretty responsive on Twitter as well. So feel free to get us mentioned there. Or you can go on our website in the show notes. Send us a message there too so it'll come to us. So we appreciate the support and we'll see you next week. 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. May own securities or assets discussed on this podcast.

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