The Canadian Investor - What Canadian Banks CEOs are Saying About 2024

Episode Date: January 18, 2024

In this episode, Dan and Simon start by going over the December CPI data. They then go over the drama surrounding the Spot Bitcoin ETF approval and go over earnings from Artizia, Good Foods. They finish the episode by discussing the recent comments made by the Big 5 Canadian Bank CEOs at the RBC Capital Markets conference. Ticker of Stocks discussed: FOOD.TO, ATZ.TO, RY.TO, TD.TO, CM.TO, BNS.TO, BMO.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  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 my friend out west, Dan Kan. Dan, how are you doing today? Are you excited? Earnings season's just around the corner, so not quite there yet, but slowly getting there. Pretty close. I mean, there was a couple

interesting companies that reported this quarter, Aritzia and Goodfood. Goodfood has had a pretty rough go the last few years, but yeah, it's getting pretty interesting. It's finally cold snap is over here. We hit minus 58, I think. Oh, wow. Holy. was yeah it was absolutely freezing yeah but it's uh it's a dry cold right over there that's what they say yeah it's dry i don't care how dry it is minus 58 my god that's crazy here it's been mostly snow starting to get a little colder but uh mostly snow so it stays relatively you know not too cold when it happens but i do have a question for you so i'm putting you on the spot a little bit is there one company in this

earnings season that hasn't well a company that hasn't reported yet that you're the most excited or interested to see what the results will be let me me think here. That is putting me on the spot. I would actually say, and it's a recent company that I bought, would be Boyd. I mean, a lot of people think they're Boyd Auto Body, but they call them Boyd Group Services. And they used to be oddly called Boyd Income Group, I think, but when they were traded as a unit, but they went back to a stock, but they had a ton of problems in 2022, 2023 with like labor issues, supply chain issues, stuff like that.

And they're, they've really been rebounding here. I think they're actually one of the best performing stocks on the TSX over the last 15, 18 months or so. So that's a recent buy by me. So I'm actually really interested in how they turn things around this quarter because it's been like four slam dunk quarters by the company.

No, that's a great pick for me. There's probably two I'm really excited or kind of excited to see what they're going to say. I don't own either of them. So the first one would be Canadian Tire. I think just as a barometer how the consumers are doing and if you're new to the podcast because I know we do get a lot of new listeners in the new year. The reason why Canadian Tire is so interesting it's a it's a bellwether stock for Canada because one of

the things aside from their stores they have a huge credit card business that allows them to get a lot of data on how Canadians are spending money. If I remember correctly, they have about 4 million credit cards outstanding. So they get a good picture of what people are spending on. And the other one is Air Canada. So I want to see how airlines are doing just because, again, the macro environment is shifting a little bit. And I'm interested to see how airlines but specifically Air Canada that's more tied to Canada how they'll be doing so those are the two for me right now yeah Air Canada definitely is going to be interesting like it's not like pre-pandemic it was like one of the best performing companies in the country like didn't it it went from like

two bucks a share up to 60 over the last 10 years it's been pretty crazy but they've had a pretty rough go another one i guess if i had to name two i would say equitable but they don't report for a bit here but i kind of want to see when gics like they become less attractive whether or not like they can keep up that insane rate of customer additions and like account openings and stuff like that because a lot of gics you're starting to notice they're like banks are cutting their rates so you know I think as a deposit-based bank like equitable was really heavy on you know the high interest rates on their GICs and their savings accounts so it'll be interesting now that

they're dropping on the GIC end of things whether or not they can keep up those those accounts and on a side note though they did boost my interest rate to 4% on my checking account. So yeah, that's pretty crazy. Yeah, that's really crazy. Same thing, just because I have automated deposits. Yeah, he did that to me. And they are a sponsor of the show, a great sponsor, by the way, I think they'll do pretty well, even if rates start going down. And there's less, you know, it's less enticing for people to just park money because interest rates are a bit lower, I still think EQ Bank will do well, mainly Bank, I don't think I've ever had to contact their customer service. So it just shows how well it's done and at least how good of a product they have. Yeah, I used to, I had all my banking with, I mean, people from Alberta will know the Alberta Treasury Branch.

And I ended up moving like everything to EQ Bank last year. And I would never go back. Like it's so easy to bank with them. I mean, even to like, you know, a lot of the times you think because they don't have institutions it'd be hard to get money or anything but with that EQ card like you just put money on the card and then you can you can pull out from any ATM and they just refund the fees so I mean I've I haven't noticed any sort of hardship swapping to them no no and that's a that's a good point. So now we'll move on to what we have on the slate today, because we do have quite a bit to talk about a mix of earnings

and also a little bit of macro because Canadian CPI came out just this morning for December 2023. A lot of people looking at that figure to see where it's trending. So headline inflation came it pretty much as expected i believe the median expectation for economists was 3.4 percent year over year for the headline cpi and that's what it came in at prices declined 0.3 percent from november to december so on a monthly basis in large part because of lower gasoline prices and gas prices actually fell for the fourth consecutive month on a month by month basis. And this is where it gets really tricky for headline inflation. I know a lot of media outlets will just kind of fixate on that 3.4%. But oil prices have been quite depressed for

what close to six months now they have been quite low i know sometimes it may not feel like that but they have been quite low and which is affecting gas prices there's other things affecting that for example like one that comes to mind is the refinery margins obviously those will kind of shift depending on demand so that would have an impact on gas prices too. Now surprisingly most categories actually fell on a month over month basis. The only issue is that when it comes to the categories that actually matter the most to the vast majority of Canadians those actually went up. So food prices were up five percent while shelter prices were up six percent on a year-over-year basis. They went up 0.3% and 0.4% respectively on a month-over-month basis. And rent prices are remaining very sticky with an average increase of 7.7% year-over-year across Canada.

Obviously, it will vary depending on the geography. I believe PI had a decline there, if I remember correctly. Now, services were flat month over month, up 4.3% year over year. And I think that's encouraging because services have been extremely sticky since inflation picked up a couple of years ago. So something to keep an eye on. And in terms of the core measures that are typically looked at more closely by the Bank of Canada, they mostly were like two of them remain unchanged while one was up 20 basis points. So that came in a little bit as a surprise. I think there was an expectation that it would actually be lower on the

core measures. Any kind of first take on that? I'm sure you saw the headline figures and how to look at those metrics earlier this morning. Yeah, it's kind of been the story for quite a while that rent and mortgage interest are driving a ton of inflation. And food is puzzling to me why it still keeps going up so much. I don't know if it's a result of wages, but food prices just can't seem to slow down. I don't think it's as bad in Alberta. I don't think we've had high, high food inflation for quite a while, but I haven't actually checked the Alberta numbers for a while. The one thing I'll say on gas is it's actually gone up in Alberta because I don't know if everybody listening here realizes it, but when we have over $80 oil, our provincial government waives the provincial gas tax.

So we end up saving like 13 some cents a liter or something like that. But now that it's below that, they reinstated it. So our gas prices have actually gone up by quite a bit. But yeah, it's like the reverse. I'm sure the rest of Canada is shedding a tear for you. We're paying like $1.25 a liter now. Oh, wow. That's still cheaper than here.

So, I mean, I understand the reasoning though, right? So, they're probably getting extra taxes from oil producers. So, they kind of compensate with waiving that price at the pump. And I wasn't aware of that. So, that's definitely good context. And the one thing I wanted to add about inflation is, you know, obviously, it's top of mind for a lot of people, rightfully so. But there seems to be this generalized perception that inflation moves in a linear fashion. So in other words, it's either steadily going down, steadily going up or staying flat. The reality is that

CPI is volatile, it's nothing new, and it does not move in a linear fashion. I just had a look, I picked some random three months just like that, just for fun. I looked at CPI for October, November, and December of 2017, just picked that month, just ran those months randomly. So for October of that year was 1.4%, the headline number. November was 2.1% and December was 1.9%. So it just goes to show that a shift of, you know, 20, 30 basis points from month to month, even more is not that unusual to this current economic climate. And I think it's just to remind people generally, the target for the Bank of Canada is between one

and 3%. There's a reason why it's a range and it's not 2%. I know we say oftentimes it's 2%, but it's a range because of that reason. It is quite volatile and I think it's going to continue that way. I think it's a mistake to expect that it's going to be smooth sailing in one direction or another. And it'll be really interesting to see what comes in the months to come. Yeah, I think one of the most interesting things for me will be whether if it stays like sticky in the 3% range, if they just kind of adjust maybe the target to 3% and start easing off on interest rates just because of, I mean, what we talked about last week with the CBA loans,

like they need consumer spending to come back in that regard to help out a ton of those businesses and just mortgages obviously are a big issue here. No, no, that's exactly it. And I mean, the 2% target, no one really knows why it's 2%. I've tried researching that and basically it came out, the best explanation I got is it came from the Bank of New Zealand. I think in the late 1990s, early 2000, that came out with that. And then it kind of got adopted for major central banks

around the world. So it's kind of funny adopted for major central banks around the world so it's kind of funny i wouldn't be surprised if they adjusted because obviously their target their main preoccupation is to get inflation down but at some point they'll probably come to decision well do we wreck the economy and get it down to two percent or lower or do we accept a slightly higher rate and you know instead of having a severe, you know, instead of having a severe, you know, let's just say a severe recession, we have a milder one, because we're not as, you know, intensely focused on that 2% range. Yeah, exactly. And like you have, you know, 2024 2025, that's kind of like the breaking point in terms of mortgages, you know, with many landlords and

people renewing. So, I mean, rent prices, mortgage interest costs, like if you want to stabilize those, you kind of have to start cutting interest rates. And I mean, I think, especially in terms of that CBA loan we talked about, like so many people are cutting back on spending that, I mean, I think we've seen the top here. If I were to predict, and I think you'll speak about it eventually with all the major banks, a lot of them predict too, that it's going to start coming down pretty soon. Yeah, no, exactly. 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,

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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. Now we'll move on to some actual earnings. So for those who prefer the earnings portion, Ritzia, I know it's a name that's pretty wildly held from our listener base and you own it as well. So do you want to go over what they reported,

which the market clearly loved because the stock was ripping on the day it came out? Yeah, I think it went up 22, 23% after earnings. And then like, it's almost typical, like the next day you would see it sell off but it didn't it gained like another nine percent so you're talking like 30 plus percent but they did report a pretty strong bounce back quarter after you know what seems like a pretty long stretch of of like very weak results compounded with like excess inventory. So earnings and revenue both topped expectations

earnings by about 15% and revenue increased in the mid single digits across pretty much all of its segments, Canadian, US and e-commerce. I believe US accommodated for around 50% accounted for 50% of revenue. I think at its absolute peak that had been around 53% and now it sits at around 50. So it's leveled off a bit, but still, I think most of the growth for Aritzia is in the United States, just considering how big the population is compared to Canada and how it's kind of a well-established brand here versus kind of an up and coming one in the States. Considering how dire the circumstances have become for many Canadian consumers and even consumers in the United

States the fact they're even growing revenue at all to me is a pretty solid sign same store sales were relatively flat increasing just half a percent and if you're not sure what this means it's effectively comparing the chains that existed at a time in the past to those same chains now to give you kind of a judge of how much it's growing relative to the same store counts. Other than that, if they were to just report sales relative to just overall, it could be new store additions that's causing the growth relative to just overall growth in their current stores.

So it's a pretty important metric as it's kind of apples to apples comparison. So it just stops new stores from kind of skewing those revenue numbers. So that's pretty flat, which kind of shows the economy is getting tighter, especially for like a mid, I would say like a mid tier luxury clothing line. They aren't exactly upper tier, but they're not exactly cheap either. But the main thing that, you know, I would predict that caused the company to jump so much after earnings is the fact that inventories have decreased by 22% going from 508 million to 397 million. So we talked about this last week and I said they would kind of somewhat get control of inventories and the fact that a company can get in a ton of trouble, especially

a high-end fashion retailer by having high inventory. And this reduction was largely driven by high markdowns. So pretty much they had to mark down their inventory and sell it, which in the end hits their margins. So their margins decreased again, but not by much. They increased quarter over quarter, but year over year, I think they're down still around 180 basis points, 1.8%. So otherwise, other than that impact of margins, it's still a pretty solid sign that they're at least moving inventories out and getting back to normal levels. And they even said that they expect all inventory issues, the excess inventory, to be eliminated by the end of next quarter. So I think this is what caused the huge, huge jump. Because if you've been following this company over the last year or so, the drop was primarily because of the inventory

stock up. Their inventory increased by, I think it was something like 250% over the course of two quarters. And people get really, really scared when that happens because obviously these inventories cost money. And if you can't sell them at full price or even small markdowns, you're paying inventory costs. You're paying to store all that stuff. You're eventually going to have to mark it down. It's going to hit your profits. But it's looking like it's going to work out for the company.

They bumped the bottom end of their outlook by pretty much an insignificant amount. It wasn't very much, but the fact they bumped anything at all is a pretty good sign. They generated a ton of free cash flow on the quarter, $171 million. But this is primarily due to just $104 million in inventory that moved out. And just overall, it was a pretty good quarter, especially considering what's going on economically. And it kind of turns out that this inventory issue was a short-term blip. A lot of people were fearing that maybe the company had lost momentum, lost popularity,

because this can happen so quickly. A prime example would be Canada Goose. It used to be just a crazy, fast-growing Canadian retailer, and it just kind of fizzled out and has gone nowhere for quite a few years now. But it doesn't look like that's the case for Aritzia thus far. I don't know if you have any thoughts on the quarter.

Yeah, the inventory portion is something to keep an eye on. I mean, a lot of companies mismanage inventory. I mean, I think we have to almost give a ritzy a little bit of a pass there and forget that they're a fashion retailer because if you look at target walmart they overstocked into like pandemic goods if you'd like where people wanted you know patio furniture furniture like these large items that people were buying because they couldn't travel uh there was pent-up demand for that. They miscalculated it when things reopened, so they had to discount those things.

So I would put Aritzia a little bit in that same category there for the inventory part, but something I'd keep an eye on. Where my questions with Aritzia kind of arise is, like you said, it's definitely a higher price point it's not like the luxury but it's kind of that middle high end kind of price point and if people are cutting back on spending like we talked a bit earlier to me it seems like that could eat into aritzia's margins and i think that's something that's the one thing I would keep an eye on is those margins, which have been trending down. They're slightly up, like you said, on a month, quarter over quarter basis.

But on the year over year, they're definitely trending down. Something to really keep an eye on, because if those margins starts hitting or going down and the sales are still pretty good, it's going to tell me that their pricing power has definitely shifted a little bit. And people, even though they might still like the brand, they're not willing to pay the full price for it. Yeah, and that's partially the element of like brand momentum overall. Like you can probably maintain that pricing power

if you still have strong brands, which is so key in like fashion retail like like companies can fizzle out so quickly i mean they do they did say that they expect uh gross margins to decrease again by 300 basis points compared to fiscal 2023 so that would be what like in the high 30 percent range and they pretty much say it's just inflationary pressures uh continued markdowns because again they still do have quite a bit of inventory. I think in 2022, they had 200 million. So you're still double. So they're probably going to have to continue to mark down old clothing that they have stocked up. And again, like you said, they were realizing so much demand during the pandemic that they kind of said, holy, we need to order more to meet this demand.

And then like right when they did is pretty much, you know, the Bank of Canada, the Fed, like marked up rates by insane amounts. Everything kind of, you know, changed so quickly that they just kind of mistimed it, I guess. Much like you said, a lot of retailers did. But next year might be tough again in terms of margins, 300 basis point decline. They're going to increase selling gen and admin expenses up 300 basis points. So it might be another tough 2024, but we'll see.

They expect revenue, I think, to grow in the mid single digits. So you can probably expect profits to be relatively flat as well. I mean, there was a lot of negative priced into the stock. So especially with the inventory situation being on its way to being resolved, I'm not exactly surprised by... Well, actually, I am surprised. I did not expect it to go up by 30%. Yeah. I was surprised too. Yeah, I looked at it. I mean, you know, it's great for shareholders. For me, it's something I'll kind of stay on the sideline for a while. I really thought there was, you know, an interesting business there. But I'm very

cautious when it comes to fashion. So I'll just say that as a whole. I own Lululemon and that's about it. But I do kind of put Lululemon in a other category. And one thing I wanted to specify, again, for newer listeners, when we say basis points, so 1% is 100 basis points. So one basis point would be 0.01. So when increased by that, so it's just a term that's good to get familiar with because whenever you talk about percentages, it's going to come up pretty frequently. Anything else for aritzia or we can move on to the uh i won't use the term i want to use but the uh crazy show that was the bitcoin etf approval last week it was crazy no i don't have anything else to say about aritzia take it away with the uh

have anything else to say about aritzia take it away with the uh bitcoin etf yeah but by the way our timing was quite good when we recorded we knew there was a really high probability i think at the time there was like 90 probability according to the bloomberg etf experts that the etf would be approved by the january 10 deadline which ended up happening so the the ETF was approved by the SEC last Wednesday, January 10th. And it was the deadline to approve the ARK21 slash 21 shares ETF application. With the approval, the SEC also approved a total of 11 Bitcoin ETFs. And these are spot Bitcoin ETF that track the price of Bitcoin. There were already some Bitcoin ETFs in the US, but they were futures ETF, which, you know, also track the price, but it looks at the future price and it's more of a trading vehicle. And we already have spot Bitcoin ETFs in Canada, but it was still

a pretty big thing, quite anticipated. Now, out of five SEC commissioners and the SEC is the Securities and Exchange Commission that vote on these decisions, three voted in favor, including Gary Gensler, who's the chair of the SEC. Gensler said that we did not approve or endorse Bitcoin. Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto. And it really felt like Gary Gensler, the commissioner, was reluctant to approve this, but he ended up doing so because of the court ruling that they had against Grayscale last year. So in 2023 that the SEC lost, essentially it gave them not much to stand on if they were not going to approve it this time around. And it was a long party line. So the commissioners are typically either Democrat

or Republicans. So there were two Democrats that voted against, two Republicans that voted for, and then kind of the swing vote, which is Gary Gensler, more of a Democrat. But I think he reluctantly did so because the courts basically gave him no other option and if they would have declined it they would have probably faced some even more lawsuits including from blackrock now the etf started trading the next day on january 11th and believe it or not so if you've been living under a rock, that wasn't the biggest news. So after we started recording last Tuesday on the 9th about you, you reached out to me. You're like, holy crap, like they approved it. And the price just went straight up.

But then about 15 minutes later, give or take, Gary Gensler tweeted out that the SEC account had been compromised and the tweet that went out saying that the ETF got approved was actually not correct that the SEC has not approved the listing and trading of a spot Bitcoin ETF so it's that was definitely really interesting and then on top of that Twitter Twitter or X, formerly known as Twitter, came out and said it was not a security issue on Darren and that the SEC account did not have two factor authentication enabled. So someone internal or external, I guess, figured out the password and got into their account and posted that tweet. guess figured out the password and got into their account and posted that tweet which is pretty funny when you're supposed to you know be the regulator to protect investors and you can't even protect your account which obviously made the markets move so what was your take on that the kind of whole debacle of the bitcoin etf approval i mean i remember i can't remember what tweet it

was that the sec made but yeah it was something about like protecting investors and like the information that comes from this account is like authentic and then it's just it's absolutely hilarious that like how does a account like this not have like a two-factor authentication installed you can just know that like i have two-factor authentication and I have a very small following and absolutely no influence on any sort of thing that I tweet. And this account has nothing on it. I mean, it was pretty crazy. I've even heard some of these Bitcoin ETFs are outperforming Bitcoin itself. I don't know if that would like a demand thing that would kind of separate the ETFs a bit just based on, you know, popularity. But I had read that,

which one is it? BlackRock's Bitcoin ETF has outperformed it by about 2%. Okay. No, that's interesting. I mean, I think usually that will level itself at the end of the day because they're ETFs, right? So up making sure that yeah yeah net asset value is always kind of in line at the end of the day so it could have been a kind of day thing and then it got rebalanced to ensure that the amount of shares probably track the price yeah that's what because it yeah it was strange to me to hear that you know there was a it was something like Bitcoin had lost 10 percent where uh i think it's i bit i bit uh had only lost around eight but that's kind of all i had looked up on that i mean

it's interesting i think it's about time i had i think i had mentioned it that week that uh yeah no it's they approve a lot of you know etfs that in my opinion are much worse than this like 3x leveraged inverse etf and you know then they like this is way well it should be less volatile than something like that and they let investors buy and sell those funds which most people are just going to get wrecked in so i mean i yeah yeah i totally agree with that. I mean, to me, you know, as a regular as a regulator, you're there to kind of, you know, just establish some rules, but you should be consistent. And the fact is that they weren't really consistent when it came to the spot Bitcoin ETF approval. And I think a lot of people view the SEC as having lost some credibility. And one of the commissioners, I believe it's Commissioner Pierce, first name, I think it's Esther Pierce. So the commissioner was really critical on the SEC's past action on that because saying they wasted so much time and resources on denying these ETF application when they could have used their limited resources

into other important affairs of the SEC and regulations for the SEC. And I think for a lot of people, unfortunately, they have lost some credibility. And one last thing I'll add, and you pointed that out to me, is that Vanguard and some other online brokers were not allowing investors to buy spot Bitcoin ETFs. I think most of them, it's just a compliance thing or they're just kind of evaluating and they'll allow it eventually. But the names I saw reported were Citigroup, Bank of America, Edward Jones and UBS saying that people were just saying that they could not buy the spot Bitcoin ETFs in their self-brokerage account. And Vanguard in the U.S. also has a platform where people can buy, you know, stocks and ETFs.

And Vanguard was actually quite the opposite for that in terms of, yes, they weren't allowing it. And they even said in a statement that spot Bitcoin ETFs will not be available for purchase on the Vanguard platform. in a statement that spot Bitcoin ETFs will not be available for purchase on the Vanguard platform. They said it does not align with their views on asset classes that should be the building blocks for a well-balanced long-term investment portfolio. And it looks like Vanguard has done this kind of thing before, more specifically with inverse ETFs and 2x leverage ETFs. My personal view here is that, look, they're allowed to do that if they want to, sure. But I find it a little bit ironic coming from Vanguard, which used to be the disruptor, and they popularize index ETFs, lower fees, better for investors. And then when there are certain products that are there that gives investors more choice and ways to get exposure to Bitcoin, obviously, you could go out and buy Bitcoin on your own before this if you were in the US.

Well, then they take a stand and they say, well, you know, it doesn't align with our philosophy. And my view, and I know I had people pushing back on Twitter on that, and it's fine to not agree with me. But my view on this is, look, you have to be 18 to open an account. If it's approved by the regulator, why is it not available on your self-directed platform? At some point, you have to let people, to me, it's a free market. You have to let investors invest in what they see fit, whether that's a good investment or not. There's tons of crappy investments out there, penny stocks, whatever you want to look at. You mentioned it like these weird ETFs that are super risky. If they're approved, I mean, I probably don't agree with them or that they're a good

investment myself, but investors are there. It's a free market and you should have the choice. That's my view. I don't know what's your take on that. That's pretty much my view. I could understand why vanguard itself would maybe not want to have a bitcoin etf because they don't i don't think they do any of you know they don't have i don't think they have a gold etf they don't have like a crude etf any sort of those like and they don't they definitely don't have any uh i mean unless unless I've missed them, like leveraged or inverse any sort of ETFs like that. So I can see why they would not want to have one, but I think like it's your money. You know, if you're a client there, I think to like stop the purchase of them, that, that seems off to me. I mean, it's your money. Like you said,

you're an adult, you know, could it be a bad decision to buy it sure but there's a lot of junk products out there that a lot of people end up buying that are probably like i said in my opinion far worse than a bitcoin spot etf yeah no exactly and i'll just finish on this for the spot bitcoin etf so the top three in terms of inflows were Bitwise, Fidelity and BlackRock. Number four actually was ARK21 shares. So the one that had the deadline looming. I don't know if you saw Franklin Templeton when the ETF got the news got approved. The avatar or the picture for Franklin Templeton had laser eyes. They changed their profile picture to put laser eyes which was really great the tweet was basically like you know the tweet you have like the default tweet

when you change uh change your pic profile that was just the tweet oh yeah yeah i think i thought that was hilarious uh for them but overall the inflows were 655 million of net inflows with grayscale seeing some outflows. The reason for that is Grayscale had the highest fees. I think they're 1.5% compared to the other ETFs that are like 0.2%. So 20 basis points or 30 basis points, way, way lower. So a lot of people will be shifting their money from Grayscale, which had the GBTC before that, a close-ended fund. They'll be switching that to ETFs with lower fees. However, a lot of people are probably

sitting on some substantial gains and may not want the tax implication. And a lot of people are speculating that that's why they kept the fee so high is because they know certain investors are kind of screwed from a tax perspective. So they're going to capitalize on that. But overall, I think it was a relatively successful launch. We'll have to see. I think it'll be interesting to see in a few months, six months, a year from here, really the total net asset value for each of these ETFs.

I think now it's a bit too early to make a conclusion one way or another, but I think that's about it on the ETF. We've talked about it last week, so I think we've talked enough about it. 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

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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. We'll move on as you referenced. So good food has its earnings. So you said you used to own this. So I'm interesting in hearing what you have to say. So I own this and then sold a bit at the top and then kind of held on to a bit just in case it kind of bucked the trend of you know maybe they maintain momentum

coming out of the pandemic but they're a food box company that i still get the odd time but it's kind of you know you wait until you get like that comeback deal where they give you like 50 exactly the same oh yeah and it's like from a like a consumer perspective it's amazing like you order it a couple of times and then and they're like oh it's going to be full price next time so you just cancel and then they give you a comeback offer like it's probably like a month or two later and if you get a good rotation bear case yeah you just have the bear case for this company you can basically rotate in between all of them yeah so you go like hello fresh cancel them and then good food comes back and says come

back to us but yeah it's um i own this company during the pandemic and ran up i sold some at highs to just kind of offset the risk but i i did keep a decent sized portion that i ended up selling for maybe a small loss i believe I bought them in the $6 range and then I sold them at like five, but I ended up doing not too bad on this. But my idea was maybe people wouldn't mind the convenience of these coming out of the lockdown period. This obviously ended up being completely wrong,

but I mean, it wasn't just a slowdown in the food box area. Like they tried to expand into on-demand grocery delivery in, I think, Montreal and Toronto. It ended up being a disaster. They were bleeding a ton of cash. And I think they were trying to do this just because they knew that they would see a slowdown in food box orders and they needed some other trajectory of growth. So year over year revenue was down 14%. However, cost of goods sold is also down by nearly 20%. So you can see like food costs, probably food costs, shipping costs,

all that kind of stuff was through the roof last year. So, you know, like the cost of goods went down by more than revenue. So it's actually a bit of a good thing, I guess. But they've slashed SG&A, so selling general and administrative expenses by 34%. They've eliminated all reorganization costs, which resulted in their overall losses being reduced dramatically. So they lost $12 million in December of 2022, and they lost $1.9 million in December of 2023. But just subscriber counts have just plummeted. So in July of 2021, which was, that probably would have been the peak, like maybe the peak of the food box craze, all that kind of stuff. They had 317,000 active subscribers. And I think what they called an active subscriber was somebody who had ordered from them in the last month.

This quarter, it came in at 124,000. So this is a crazy, crazy drop off. And, you know, as an odd user myself, there's no doubt these food boxes are really convenient. And I've never actually had like a bad, even from Good Food, HelloFresh, I've never actually had like a bad box or anything from them but like it's definitely right now especially with how high interest rates are it's a luxury and just not something people are going to spend money on in these circumstances i mean again it's really convenient it's delivered right to your door uh there's no food waste anything like that and generally it's it's pretty good food yeah at least not at full price yeah exactly like yeah well i was saying like i at full price i mean i think it's about 120 110 120 dollars

for four to five meals so like if it's a couple you're looking at 15 a plate you can almost go to like you'll pay probably 25 at a restaurant but i mean you don't have to cook it things like that so i think it's just like at 15 a plate it's really tough to justify and again that's why a lot of people wait for those comeback bonuses so they can get five meals at 60 bucks which is like a slam dunk but the company doesn't make any money on those and then you know you just cancel and maybe for the odd person they catch them at a full price box and something like that. But overall, I think the discount model just doesn't really work that well. And I think they get kind of exposed in that regard. They've steered away from aggressive

growth and they're instead just focusing on getting what business it does have profitable. So I will give it credit for that. It is doing a pretty good job. It's increasing cash flows. They've been positive for the last few quarters, but I mean, it's a really, really steep drop for, you know, a company that I think spent two years in the TSX 30 as one of the best 30 performing stocks on the TSX. But right now, like I'm actually pretty surprised. And I don't know, you know, if there's any rules regarding this, like immediately, but I'm surprised that this stock has even stayed on the TSX. Yeah. So it has a market cap of $23 million and is trading at $0.30 a share.

So I would imagine they'll have to reverse split or maybe go on to the venture. I'm not sure. That seems like a really low market cap to stay on the TSX. Yeah, join the ranks of all the cannabis companies that were split. But no, I was surprised. I didn't realize that he had fallen so much from the peak. I mean, it must have been, what, like 500 million market cap at the peak or something like that? Just quick math.

Let me check. I think it might have been. Because it was like trading over 13 bucks a share now it's 25 cents a share yeah i remember uh royal bank did a share issuance for them at 12 50 i think they were they were pretty high market cap got up to a billion 990 million so they were almost a billion dollar company. Wow. Holy crap, huh? I mean, I think it kind of goes to show, right, with these services, there's just not much, like there's no mode, right?

It's just so easy for customers to switch in and out. And I mean, you just said it, right? You wait for discounts. We do the same thing. We have HelloFresh and GoodFoods, basically. Like every now and then we get a good discount, we'll buy it. you wait for discounts we do the same thing we have hello fresh and good foods basically like every now and then we get a good discount we'll buy it but the reality is without that it's not cheap we're trying to save expenses i mean you have your fantastic kirkland hoodie that the joint tci listeners can see yeah i can't remember do you own costco or no no no but we have it over

at premium like i hate okay because buying i feel like when you wear that shirt you should at least have a share of costco but that's uh that's all right but the reason i'm saying costco is they have like these prepared meals that you can get a shepherd's pie there's this like faida chicken that we'll get so oftentimes when we go there's these like stuffed peppers they're like between 20 and 25 bucks each and you get pretty much like four portions for it yeah it's pretty much the same and it's like debatably just as good a quality too yeah the food like is is decent so whenever we go to costco we'll buy like three we'll fry it freeze a couple and then we'll eat one the night of and to like just that just goes to show it to me that's a good alternative if you're looking for

food that's already prepared that's you know a decent quality and not super expensive yeah it's i mean i think when when rates were low you know people were hoarding money they had a lot of money i think it's pretty easy to even spend full price on this like 110 120 bucks it's delivered right to your door yeah you throw nothing out because it's all pre-portioned things like that but now i don't see a good path forward for them i mean maybe they'll turn it around and you know start to get profitable which it seems like they are but i think i don't know if they'll ever touch 315 000 subscribers again i highly doubt it yeah it it feels like a prime acquisition for a company like one of the big grocers you just like buy and you give them a nice little premium you buy the brand and then

you do a lot of it in-house you probably have some efficiencies because you are a grocer you probably already prepare a lot of food so to me that could be an option but no i think it was a really a really good breakdown here let's move on to the rbc capital markets for the big bank ceo recap here so feel free to chime in because i did these notes uh as i'm talking you know just let me know if you have some comments so these are the five largest can banks. So they basically had one on one interviews with each of the CEO. And I did some takeaways because most of them kind of were talking about similar things. So I'll start off with Scott Thompson,

the Scotiabank CEO. So they are forecasting 75 basis point reduction in interest rates this year. They expect their net interest margin to increase as rates come down. And the net interest margin is essentially just looking at the bank as a whole. It's the difference between what they pay to depositors in terms of interest and what they make from their loans. So obviously, the higher is better here. For the most part, it will vary from bank to bank mostly just because the big canadian banks some are similar but some are more diversified like an rbc for example i'm not super familiar

when it comes to scotia bank to their full loan book composition but what it tells me is they expect their net interest margins to increase as rates come down is that they have a lot of loans that are at higher fixed rates or they anticipate that a lot of their mortgages, for example, will be renewed at higher rates, and they are paying a much lower rate or will be paying a much lower rate on deposit. Therefore, it'll expand their net interest margin. The interviewer asked him if they would be potentially releasing provisions for credit losses in 2024. And Thompson was pretty firm on saying no, and that they see more of a steady hand on PCLs in 2024. Not quite sure what that means. I think it probably just means that it'll kind of the

same trend will continue. That's my takeaway from that yeah i mean by releasing do they mean like clawing back or do they mean just like adding more no releasing provision like pcls like releasing them back as earnings yeah yeah okay that's what i think yeah so he was asking that and uh this thompson was like no you know we're not anticipating releasing then that'd be pretty early yeah exactly it seems like they'll keep probably increasing them at the same pace or kind of level off a little bit but not releasing any yeah and i'm pretty sure scotia was playing like scotia had a lot like way over and above every other bank so i mean it kind of seems like they kind of missed the mark you know maybe

underestimated so yeah they definitely um that was one of our takeaways last year is that, yeah, they kind of caught up, especially in the last quarter. Now, going to TD Bank, Barhat Marsari, Marsarani, sorry, he didn't assign a specific number in terms of interest rate prediction. He was the only CEO that didn't say a specific number that the bank was kind of ballparking. Obviously, all of them were saying like, it's just our best estimate. And clearly, a lot of things can happen. They don't expect rates to go near zero anytime soon, but they do expect them to drop more of a neutral rate. Now, the neutral rate when it comes to interest rate is a rate at which the economy is as close as possible to full employment and inflation is within the target range. The target range for Canada, like we've discussed before, would be between 1% and 3%.

And he mentioned lower rates should help TD net interest income based on the volume that they do because they issue a lot of loan. They think that 2024 will be a challenging year. And they think there is a bit of euphoria right now with the perception that high rates are done and that equity markets specifically and bond markets as well have got a bit ahead of themselves. They sound like they are doubling down on mortgages. And when I say they, it's just TD as a whole, obviously, is reflecting the views of the bank. And one thing that he said is that they have a much lower cost of funding than other bank, which means that their deposit base is cheaper, and it's a big advantage for them. So that was an interesting takeaway from TD. They also had a section where they were asking them

about the, not directly, but indirectly, the anti-money laundering practices, especially in the US. So I can't recall exactly, but they did talk about that as well. Didn't they know about it like six months before they even, they knew it was happening like almost six months before it got released. It's pretty crazy. I mean, it's not really a bold prediction to, they don't expect rates to go back to zero again. I mean, I think that's pretty obvious. They're never going to go down to that low again. Yeah.

And one of them did talk about the rates where they expect them to meet. Well, we'll go that through. But I think typically the big bangs, they expect the rates to stabilize in the next couple of years around 3%. Now, Daryl White is the next one on the list here is the BMOCO. Now, in their view, cuts would start in the middle couple of years around 3%. Now, Darrell White is the next one on the list here, is the BMO CEO. Now, in their view, cuts would start in the middle of this year, and that seems pretty consistent with all the CEOs, is that rate cuts will start in the middle of 2024.

He said that the Bank of Canada would cut rates earlier than the Fed, which is definitely an interesting take when you factor in the upcoming U.S. election, because if the Bank of Canada is cutting rates in the middle of the year, so let's just say June, July, August, around there, and the Fed is afterwards, I kind of question that because there could be a perception that the Fed is cutting rates close to the election and is trying to help the Democrats there. So I'm not sure I fully agree.

I think they're just focusing mostly on the Fed, just thinking from a economic basis and not a political basic basis. But, you know, between you and I, I feel like central banks are mostly independent, but I don't think they are fully. So I think it's a bit weird to say that. And their projection is that the Bank of Canada will cut rates by 75 to 100 basis points in 2024. Anything you wanted to add to that one? No, not really. Other than, yeah, they're supposed to be the central banks are supposed to be independent. But I mean, there's definitely going to be people who's saying there is political

interference i mean even we have an election coming up soon as well i mean when is that 2025 i mean yeah yeah i mean i guess it could be sooner depending on that that alliance yeah like the the housing situation is so huge in our election as well that i mean this is going to be an interesting concept there as well but i think i said in our bold predictions 150 basis points so i mean and they say 75 to 100 so i mean they're not not far off what i what i had suggested i would imagine they start cutting rates this year as well i mean it seems obvious to me but i I mean, predicting this stuff is nearly impossible. I mean, even these guys, these are like major banking, you know, and even they don't really know. They have PhDs that are working on this.

And one thing that he said that was really interesting that I didn't fully think about this before is that he said that the consumers and businesses may actually delay some of their spending until rates cuts begin as they will be cheap. It will be cheaper to borrow money later in the year. And I thought that was a really interesting point because, you know, there's so much speculation now as like we are talking about rate cuts right here that they are coming this year and that is a good point if you're going to bank a major purchase or your business you're going to make a major investment if it doesn't have to be right now and you can wait six months or a year why would you not wait and he said that that could weigh on the economy so i thought that was a really

interesting point now moving on to cibc because we're towards the end of the episode here, and I don't want to, you know, go on for too long. Victor Dodig from CIBC, and I don't know if I'm butchering the name, but who knows, they see over there two to three rate cuts this year, starting at the middle of the year again. So that would be 50 to 75 basis point. Now, if that happens, they would see their net interest margin improve towards the end of the year. They see loan growth in 2024, but low single digits. They still want to grow their mortgage book, which is interesting, but they say that they want to be more selective with their clients.

Now, the reason I said this is interesting, and I know Dan, you know that, it's that basically half of their entire loan portfolio is mortgages for CIBC. They have an outsized exposure to mortgages in Canada. So I thought that was very interesting. But he did say that overall clients are managing with higher mortgage payments by reducing spending elsewhere. And that actually aligns with a recent Bank of Canada survey that said 80% of mortgage holders said they are at least somewhat confident they will be able to make higher mortgage payments when their mortgage payments increase. payments is oftentimes a better financial outcome than selling the home and buying something cheaper because of all the associated transaction costs, which can easily be in excess of $50,000 if you factor in a realtor commission, land transfer tax, depending on the amount of the house,

especially in Ontario, because it's a kind of bracket thing. So the first 200,000, it's like a small percentage, a second one, like I don't know the exact brackets, but like it's a progressive land transfer tax. And Toronto, I think also has their own municipal land transfer tax. So it can be really costly even if you're looking to downsize. Yeah, it's definitely not cheap to sell a home.

Like you said, like lawyer costs, closing costs, like realtor fees are just crazy. So you're talking, say, like $50,000. I mean, I think it would probably cost you $50,000 to sell a million dollar home, I would imagine. Yeah, that's basically what he was saying. Like a million dollar home would be like in excess of $50,000. Yeah, so I mean, that's quite a bit. Yeah. Yeah.

And he has a good point, right? Is that, you know, does it make sense to incur that cost and get a cheaper house or, you know, you figure it out and make those higher payments and you keep your current larger home or more expensive home. So I thought that was a really good point. And oh, the last thing here for CIBC is they have reduced the amount of negatively amortizing mortgages and are working to reduce that even more. So these are the mortgages that made a lot of headlines. Essentially, these are fixed rate, they're fixed payment variable mortgages. So essentially, your payment does not increase as rates go up. What ends up happening is you pay more and more interest on your actual payment until you essentially are no longer paying just interest and your mortgage start growing.

the person has a five-year term or the couple, when that five-year term is up, it re-amortizes on the regular term. So then the payments actually increase. Whereas in the meantime, you're seeing like what 55, 60-year amortization periods. These are just kind of paper amortization. They do reset when the mortgage is, the term is over and people have to refinance their mortgage. So there would be a payment shock there as well yeah so i don't know if you saw that tweet with the royal bank statement on like the the it was like a 1.1 million dollar home or something and yeah and the payment was 75 000 in interest and 1600 in principle throughout the year and their amortization was like 64 years like in that case you're probably better off paying fifty thousand dollars in like mortgage

fees to sell your home like that is crazy you're pretty much you're renting you're renting from the bank imagine how big the jump will be in monthly payment when they have to you know the mortgage comes up the term comes up and they have to refinance yeah well yeah because typically they're what 60 percent interest on like a front loaded like you know at the start of your mortgage so if you're paying 100 interest i mean your payment is going up by quite a bit yeah it's terrifying it's pretty crazy yeah i mean it's crazy i was even allowed but i guess we'll have to see if regulators will eventually take those away. But I think Office fee, they said they, did they say these would not be allowed going forward?

I can't remember. I'm not sure. No. But regardless, so we'll move on to the last big bank here, Dave McKay from RBC. I'll just rapid fire. So he mentioned that they see rates coming down 200 basis point by the end of 2025 and stabilizing around 3%, which they see as a neutral rate. And that seems to be somewhat the consensus, not just for the big major banks, but also economists in general. Most of them say we will not be going back to near zero rates. They think they'll see their

net interest margin go up slightly this year. They anticipate that their wealth and capital markets will do well in this environment from higher fees. This is a result of moving money out of money market funds, GICs, fixed income into equities and other types of investment, which would help them collect higher fees. Lower rates should help the Canadian economy coming out of a soft recession. So that's why they see rates coming down. He believes that RBC is best positioned to handle most outcomes given how diversified their business is. It's hard to disagree with him there.

They are very well diversified and although their new loan origination has slowed, he expects that to pick back up as rates start coming down. Anything, any thoughts here on what Dave McKay had to say? No, not really. I would agree that, you know, 3% seems like a pretty reasonable neutral rate. I know RBC has a ton of mortgages coming due at the end of 2025. So maybe they kind of hope that it comes down to a more neutral rate it's conveniently when i think they said oh hope is not a strategy dan i'm pretty sure they know

that yeah yeah no i think it's a pretty good recap from all five of the banks and what four out of five predict that they'll start cutting this year although rbc said end of 2025 which if they say end of 2025 yeah that yeah i'm sure they're baking in some cuts this year but i think they they just gave their prediction until um the end of 20 i don't think they expect them 200 basis points just in 2025 so obviously they expect some this year yeah let's be clear And I think that I don't know if you look at these videos sometimes from TikTok and we're kind of wrapping up here, but you see these realtors that are clearly, you know, clearly last year was not a good year and they're trying to get excitement around and telling people to buy now because once rates start going down, the market's just going to

be booming. Let's be let's be honest here. If rates come down 50, 75 basis point, first of all, there's no guarantee the mortgage rates will automatically follow because the rates of the Bank of Canada is doing is the front end of the curve. The rates that you get on your mortgages are based on the five years, typically the five-year Canada bond. If you're looking at a five-year fix, the front end, so what the Bank of Canada does will, will impact variable rates. But there's no guarantee that the, you know, the fixed rate, the five years I keep referencing here will, you know, drop by the same amount. But let's just say it does drop 50 or 75 basis point,

it still means that a lot of people will be renewing at higher rates. It still means that, you know, rates are still probably going to be in the 4%, 5%, depending on a lot of different variables for each home buyer. So the fact that there's this assumption that housing markets will just rip, if that happens, I find it a bit funny. And if it drops by 150 or 200 basis points, we have bigger problems. That means that we are in a pretty, we are not in a soft recession. And that's the Bank of Canada panicking and dropping rates to encourage people to spend and to help the economy recover. So I think there's this perception that if there's major rate cuts, it's going to be a big boom for the market. Maybe it will help. I'm not saying

that it's a zero probability, but I think you can make an easy case that it may not be as beneficial as people think. No, especially, I mean, realtors have a vested interest in you know telling you yeah like i'm not a tiktoker but i've i've watched a few like absolutely horrible horrible videos on there overall i mean like fixed rates are like five i don't know anywhere i'm looking at them right now anywhere from like you can get a it looks like a five percent fixed rate from equitable right now which is like the lowest one. But I mean, what if they decrease it and that goes down to 4.25%? Is that really going to make a massive difference in the real estate market?

Like we signed ours a three year fixed at 4.49. And I think in order to get the same payment like they need to drop rates this year so I think a lot of people are still going to be seeing some pretty big increases to their to their mortgage payments I don't think they'll never drop enough to make it so that you know a lot of those pandemic mortgages kind of get I mean bailed out per se like they're not going to be paying a ton more but and you know if they have to drop it 200 basis points, like you said, there's a lot bigger problems at that point. That's a pretty bad, bad situation. Yeah. I'll finish like this. There are some good realtors there. So we are looking for a house currently. We're taking our time. Our realtor is really good and he knows I won't take any BS.

But he's very, he understand the macro landscape and everything much better than a lot of realtors I've seen. And if you're working with one to buy a home, just make sure you ask them before working, you know, just ask them some tough questions because I think it will really help. And if you don't like the answers that they're giving you, then work with another realtor. Like they should really be working for you. Yes, you know, they're working for you. If they do some good work, I mean, they'll earn their commission, but that's the way I see it. They should be working for me and, you know, they should get paid. If, you know, I sell my home and buy a new one, that's fine. But you have to work for me, not work to try and get your commission you should work for me first and then

get your commission as a result of that yeah and i mean there's so many of them now that you definitely have a lot of choice if you don't like the one you're with right now i mean i i don't know if this is true but i heard that there was more realtors than homes for sale in toronto i think i i read that probably i think that's probably true to be honest. Yeah. So yeah, I don't see like a material improvement in the housing market just as a result of them dropping rates by, you know, 50 basis points. Like I think it's still going to be pretty tough for a lot of homeowners. No, and I think that's a great way to wrap it up. I think that was a really fun episode. Next week, earnings will really be kicking off much more companies to talk about. Thanks, everyone, for listening. If you haven't done so, please give us a review on Spotify,

five-star review, write us a nice review on Apple Podcasts. It just takes a few minutes, helps people finding us. And you can find Dan and Dan's team's work on stocktrades.ca. The link is in the description. And we'll catch you next week. Dan and I will be back. And next Monday, Brayden and I will be back with one of our regular episodes. Yeah, thanks for listening, everybody. See ya.

The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.