The Canadian Investor - Where to Park Your Cash and Why Canadian Savings Rates Are Surging

Episode Date: September 9, 2024

In this episode, Simon answers a listener’s question about cash allocation strategies in today’s unpredictable market environment. We explore key questions you should ask when deciding how to allocate cash, such as your liquidity needs and time horizons. But that’s not all. We shift focus to what's been working in 2024 so far, with a rundown of companies and sectors that have delivered incredible returns, including mega-cap companies with an average YTD performance of 36%. Braden also reflects on his 2023 market outlook, reinforcing the importance of staying invested through volatility. Lastly, we dive into rising savings rates and the increase in consumer debt in Canada, exploring what it means for Canadians’ financial health as they face higher interest rates, mortgage pressures, and increasing delinquencies.  Tickers of Stocks & ETF discussed: CMR.TO, ZMMK.TO, CBIL.TO, UBIL-U.TO, XGB.TO, SHY, TLT, TLH Equifax Canadian consumer report 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 Bélanger. The Canadian Investor Podcast. Welcome into the show. My name is Brayden Dennis, as always joined by the intrepid Simon Bélanger. Hope everyone had a wonderful summer. I personally think September is top tier month. So, you know, summer rolls on, the show rolls on.

Buddy, let's start off with a quick question from a listener on Join TCI. Join TCI.com if you want to support the show on Patreon, and then you can take it away, brother. Hey, Simone, I've been hearing a lot on the podcast about cash allocation, giving you the 5% as a safe haven, especially now with all the market speculation. Not sure if you already have one episode dedicated to that with some options, comments, and places to search. Some people may be very familiar with it, but I'm not. Thanks a lot.

That's a good question. What do you think? not. Thanks a lot. That's a good question. What do you think? Yeah, no, I think it's a good question. I mean, I've been getting, to be honest, more and more questions about that. I think it's probably because I've said it quite a bit on the podcast. I do have, you know, not a crazy big cash allocation, but I'm keeping it between 10% and 15%. And I'm more than happy with it because most of it is yielding you know four and a half to five point two five percent so it's some pretty good returns without

you know without too much risk associated to it but a couple of different things here i think you have to first ask yourself a few questions first what do you need the cash for that's because if you need the cash in a moment's notice, then you'll have to focus on options that are the most liquid. And if you're a bit more flexible on the time frame or you have, say, a set time frame when you'll need the cash or you want to use it a bit more as a hedge against the equities that you own, then you'll have a bit more options available to you because then you may have some locked in options or longer duration that will be acting similar to cash.

I would say obviously they're not cash, but they'll add similar to that. So if you need to have cash available quickly, which would be highly liquid, well, a savings account is the most liquid of the option. account is the most liquid of the option. So obviously, EQ Bank, we love our sponsor with EQ Bank, and they typically have some of the highest available interest rates on their savings account, which is basically a hybrid of a savings and checkings account. I think that's the best way to put it. Right, Brandon? Yeah, I think that that's right. It's an easy savings account that's liquid, like you would want from a normal savings account. But it's not the big bank rates of basically nothing. You're actually getting something for having your cash there.

Yeah, exactly. And with the big banks, oftentimes if you have a checking account, I mean, you're also paying a fee on top of that to have that account. So it's not the best use and you're not getting much from your cash. But if you're a bit more flexible here, you know, there is also some options. There's the money market fund option, which would be still right behind it in terms of liquidity, not quite as liquid as a savings account where you can have the money as a moment's notice. It might take up to a week depending because you have to factor in a money market fund as an ETF, for example.

It's T plus one. So the day you sell, the transactions actually settle the next day, which is where the T plus one comes in. And then if you're wiring the money to your bank account, then that can take three to five days. From my experience, it may vary depending on which broker that you have. But keep that in mind. If you really need the money within a day, it may not be the best option. But if you have, say, a week or two flexibility, there are some attractive options there. And don't worry, I will go over some of the options available.

There's also the new option that EQ Bank, again, offers is the notice savings account. Again, if you have, you know, you need something that's liquid, but you have a bit of flexibility on the time. So they have a 10 and 30 days notice savings account. The 10 days I think currently is yielding around four and a half percent, but it may be different by the time you listen to this. So take that with a grain of salt. And then the 30 days gives you a slightly higher yield. And the big prerequisite with that is when you want to withdraw, you have to basically, if you have the 10 days, for example, you put the withdrawal request in and you have to wait 10 days until you get the money and you're able to use it. So yes, there's the liquidity factor, I think is a big consideration. So that's why you need to understand

why you have cash or why, you know have cash or how you may need the money. Anything you want to add before I continue there? I guess my question to you is when you consider your cash position, and we're talking about a cash position, but you and I are both very invested. We're not sitting on the sidelines. We're not bearish at all. We're just talking about ways that you can actually earn on this cash. Are you talking about that 5-15% for you personally? Is that like encompassing like the whole pie or is that like just your brokerage account? a big distinction in what people talk about and how much cash they have. They might have like 3% cash in their brokerage account, but have hundreds of thousands or millions of dollars in their bank account. And they're actually in way more cash than they think that they are. So how do you

frame that? Yeah. For me, it's more the money that I'd be readily available for investing. So obviously I keep that separate. Everything X emergency fund type of thing. Exactly. That's it. Yeah. So that's the way I would see it. So that's the way I see it. Some other people may see it differently. But obviously, if you have tons of cash in a checking account, that's not yielding you much and it's way in excess of what you need for an emergency fund, you may want to consider looking at options that give you a bit more yield, at least even more interest. I mean, even if you don't want to invest

the money in stocks or bonds or whatever, you may want to consider something that gives you at least 4%. I think it's still pretty easy to achieve it at a pretty low risk. Now, if you do have, you know, you have more time, you have, say, a set period of time that you have, you have one, two, three years, whatever it is, then you have some different options. So you could look at longer duration bonds or GICs. With those, obviously, GICs, the advantage with those is you can actually lock in the yield. So right now we're seeing central banks, you know, the Bank of Canada, and I think we can all agree that the Fed will cut rates in the next

meeting. I think the debate right now is 25 or 50 basis points. But I think globally and the Bank of Canada kind of started the ball. They are cutting rates. So chances are that the yield you're getting will be going down how quickly will it go down how low will go down that remains to be seen but there's also another question you need to ask yourself do you want to lock in whatever yield you can get on the longer duration side so that can be achieved GIC is more of a short to medium term I would say but mean, if you can lock in a decent yield on the GIC for a year and a half, two years, whatever it is, then, you know, it may be a good deal to do right now to lock in that yield may or may not be. We'll have to see. But longer duration bonds, same kind of

thing. If you want to hold them to maturity, you can lock in some yields. You can go pretty far on the, you know, the time frame as well. You can go, you know,, you know, the timeframe as well. You can go, you know, one, two, five, 10, 15, 20 years, what it is. That is definitely possible. And that's an option. But again, you have to have, you have to be able to do that because if you need the money in a moment's notice, these will not be good options. So to go back through the money market fund option, I won't go into the fees because they're all low fees. They're all basically 15 basis points or less. So I don't think you have to worry too much on the fees for each of these ETFs.

Obviously, look at them. But when I was like starting to put down the fees for each, I'm like, OK, I'm just just going to say it's below 15 basis point because it's across the board. The first one here, CMR.TO. So it's the iShares Premium Money Market ETF. So it consists of commercial paper and Government of Canada Treasury bills. So commercial paper is just short-term loans that is provided to corporations to fund their short-term needs. So it's unsecured and will be less than 270 days in duration.

So you can essentially see that like the money make market fund making loans to corporations on a short term basis. These are what's considered non banking loans. So this one currently yields 4.75%. The one thing you want to make sure is that the corporations are solid financially, because typically these will be unsecured, like I said, so they're not backed by anything. But they are typically pretty low risk the second one here is ZMMK.TO from BMO and this one appears to be the vast majority of holdings is commercial paper and it currently yields 4.84 percent the two that I own myself so CBIL and UBIL from GlobalX, these are CBIL is the Canadian Treasury Bill ETF and UBIL is the US Treasury Bill ETF. They are TFSA friendly

as well, which is nice because if you hold the US version from other ETF providers that are based in the US and listed in the US, you will have the withholding tax. So keep that in mind. So the Canadian one is currently yielding 4.54%. And the USD one is currently yielding 5.29%. And those are essentially backed by the Canadian and the US government. So very short duration, if there's interest rate changes, the interest rate will change on that, Very short duration. If there's interest rate changes, the interest rate will change on that, but you won't have any capital losses. So that is the advantage of those.

But also the disadvantage is that you don't lock in the rates for long periods of time. So if they do go down, the yield that you'll be getting on those will go down as well. And then for long duration bonds, there's a bunch of different options. I won't go into great detail for each of them but the first one is xgb.to so if you're looking for canadian government debt mostly federal but also some provincial as well as some crown corporations like hidro quebec duration is widely spread with this one so it includes everything like essentially one year and above in duration and there is even some 20 plus years there is shy that's the i shares one to three years treasury bond etf for the us tlt that's the i share 20 plus year treasury

bond etf tlh which is the 10 to 20 year treasury bond etf these are all i shares those are interesting but keep in mind that these are bond funds, they're bond ETFs. So if interest rates start going up, you could see the capital that you have invested go down. So that's the downside with these ETFs, but the other way around is also true. If you see interest rates go down and you're holding these before they start going down, then you could see some capital appreciation. And when I say interest rates, I'm not talking about the Bank of Canada here or the US Reserve, the Federal Reserve. I'm talking about like the actual what the bond market is saying for the 5, 10, 20, 30 year, whichever duration you're looking at. So yes, the central banks will have an impact on those rates, but it won't be a one for one type of impact. So keep that in mind.

The last thing you can do is you can buy bonds directly with your broker. So the advantage of this is you can actually, if you want to hold them till maturity, you know, you can buy individual bond from companies. You can buy, you know, bonds for the government of Canada, US treasury bonds, whichever you can think of. For most brokers, you won't be able to do it online. So I know you can't with Questrade, which is the one I use, the one we both use, you have to call in. But the advantage of that is if you're planning to really just hold them for the duration, even if the yields, the interest rates change, at the end of the day, it shouldn't impact you. Your principal won't change if you just collect

the coupons until maturity and then you get your principal back. So keep that in mind. It may be more difficult to sell them if you have to sell them before they mature. Keep that in mind where the ETF is way more liquid than the individual bonds, but that is an option for someone who would just like to hold them to maturity and not have to worry about the capital fluctuating. Yeah. And I think that there's a clear case for doing that. I've always had to do some kind of mental gymnastics to understand bond ETFs as a product, even though it seems pretty simple. I mean, under the hood, you have this extremely liquid equity asset trading these government bonds and corporate bills. Those two things don't matter. They're yin and yang, basically.

Yeah. And typically what you'll see is the longer the duration, the more they will be impacted by interest rate, you know, fluctuation. So that's what you have to keep in mind. And, you know, it's just it can be difficult to watch because it's trading every day. And ask anyone who was holding any of the ETFs I was talking about for the bond ETFs, you know, that was holding him starting, let's say, in 2020, 2021, 2022. And then how they're feeling with the returns of those bond ETFs now, they probably won't be very happy with them. I was just looking at the very popular Canadian money market ETF cash by GlobalX. So back in May of 2022, and I get it, the fund was just starting out, but interest rates were materially different. The volume on cash, the ETF was fluctuating at a couple hundred thousand a day, or sorry, a week,

a week. The Monday, July 29th, the week of that on their website here, I'm looking at the volume, 29th week of that on their website here, I'm looking at the volume, was 11.7 million. Wow. So basically 20x the volume from 2022 to the summer of 24. Yeah, because it's, I mean, it's more worthwhile, right? I mean, for a lot of- It's more worthwhile. Exactly. This segment, this podcast segment wasn't even worthwhile discussing that time.

No, exactly. I mean, at the end of the day, like for a lot of people getting 5% with, let's say in cash or US or Canadian government treasury bills, and they know their principal won't move. For a lot of people, that's pretty attractive. for a lot of people that's pretty attractive so um long term you know i'm probably not the best way to be a hundred percent in cash but there's been let's be honest there's been worse trades than that like let's just be straight up like in the past two years you know you've done you know you've underperformed the market don't get me wrong but you've done okay you've done okay yeah and for people using that new fhsa account this is a very attractive instrument right it's like okay i plan on buying a home i'm putting money depends where you live i guess if house prices are not too high sure sure but you know what i mean they're using that instrument and you know the common knowledge is like you is don't buy equities if you want to withdraw in the next couple of years.

Just kind of rule of thumb. That's a pretty attractive place to park it. Yeah, definitely. And there's so many options. I think it's just important for people. I gave some examples there. You gave cash.to as well. There's a lot of options, but I think the two main questions people need to ask themselves

right now is how quickly would you need the money if you need to access it? And two, do you want to lock in a yield right now as all indications are that interest rates are starting to go down and could potentially go further? We don't know. That's why I'm saying could potentially. And those are the two big questions if you're looking to put some of your portfolio into cash. You don't know the exact rate and amount that interest rates are going to move, Simone? No, exactly. That's why I listened to this podcast. What's going on? Give me a dartboard. I'll throw a dart with different rates and I'll probably have a better shot than when he gets right now. 100%. 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.

That is questrade.com. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get

global stock exposure with one ticker. Keeps it simple, yet incredibly low cost and effective. exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go

on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking,

sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. All right. Next up on the show here, summer is over. And I wanted to go through what's been working year to date. We have now gone through kind of a halfway point. I did this kind of recap, and now I wanted to do some digging into what's been happening in the market, which sectors have been important, what's been happening in the market, which sectors have been important, how has the overall market been performing for investors, and just get kind of a vibe check on how we're doing through eight months here. And I ran a screen for Canadian and US stocks that have had year-to-date performance on the stock price, so not total return, of over 18.4% because that is the share appreciation of the S&P 500 as of recording

today on S&P's website. So I think it's close to 19-ish total return, but 18.4% on the equity values. And I screened above 6.4 billion in market cap because that is the smallest constituent in the S&P, which is Etsy at that market cap. And I, as every numbers math nerd does, start crunching stuff and trying to find some parallels. And 10% of the companies that meet this criteria are from Canada and 90% are from the US. Now, that just makes sense, right? There's a lot more companies that can fit the bill here just based on listings in the US. And so 10% performance out of Canada is actually pretty solid. It's pretty good. I was going to say, yeah.

Yeah. Not too bad, right? The following 14 companies have all doubled or more this calendar year. And again, these are not small micro caps doubling. These are companies that were all over 6.4 billion in market cap. Summit Therapeutics, Viking Therapeutics. So two biotech names right out of the gate. Carvana, which was left for dead. FTAI Aviation. Kava Group, which is the quick service restaurant business.

Innsmed. Honestly, I have no idea what that is. NVIDIA. Have you heard of that one? Yeah, I heard of that one. Yeah, I think it's down a couple hundred billion dollars today. Today? Okay, just a couple hundred billion wiped out.

Applovin. Talon Energy. Vistra. Tenant Healthcare, Sprouts Farmers Market, which has been a very interesting story in the US, Carpenter Technology, and Commvault, which is a software company. So those companies have all more than doubled year to date. And again, these are not some small cap names. 392 companies meet this criteria right now. So that's a pretty sizable amount, again, in the US and Canada, 10% being in Canada. So around 40-ish odd names. Now, the sectors that had multiple, the highest number of companies

in the sector come up multiple times. So they had the highest counts of companies meet this criteria. Banks, insurance, capital markets. So I like the kind of the three headed monster of insurance, capital markets, bank. Financials, yeah. Financials, oil and gas. Now you had software and semiconductors, of course, to the surprise of no one. Metals and mining, it's been a pretty good year for the actual underlying commodities there. And biotech, with some monster names coming out of biotech. Such a crapshoot as an investor, but there are the odd winner, of course. Now, I think the most staggering stat from my research this morning as I was going through the data is there are 50 companies, five zero that meet this criteria and are also over

100 billion in market cap. So mega caps for all intents and purposes. I think the definition of mega cap these days is over 200 billion. I guess the goalpost needs to continue to move with inflation and all these companies, but 100 billion, 200 billion, what's the difference between $100 billion between friends, right? It's just $100 billion a month. So for 50 companies over 100 billion market cap, on. So for 50 companies over 100 billion market cap, these are mega-sized corporations, and their share price performance has exceeded the S&P 500 year to date, which means over 18.4%. The average return of those 50 companies, again, these are monster businesses. The average return amongst that group is 36%.

This to me is the most wild stat and encompasses the year to me. This is wild. The takeaway here, stay invested. You and I were just talking about what to do with cash because you can do something with cash these days. But there was no part of that segment where you said, I'm thinking about moving a bunch to cash or that I'm not invested. The takeaway here is stay invested because no one knows what's going to happen. I can't say who it is because I don't want to step on any toes of our current advertisers.

This is, call it a competitor of some of our advertisers. And we appreciate people sponsoring this podcast very much. So I'm not going to bring up their competitors. Let's just say I was interviewed by a Canadian financial institution at the end of 2022. And 2022, as you recall, was a tougher year in the market. You had a lot of new investors come in 2020, sorry, in 2020 and 2021, and things just go up and to the right. You had a flash crash for like two months, but then up and to the right. 2022 is the year I call the COVID hangover year. And this was now well over a year ago, of course, but they asked me what's going to happen in the stock market in 2023, this financial institution. 2022, you know,

it was a tough year. Experts are saying, stay cautious, stay in cash, you know, that kind of thing, right? Remain on the sidelines until things get better, right? That's what these pundits were saying, according to this expert that was interviewing me. And I said, I don't think they enjoyed my commentary too much because it didn't make it into their column. I said, one, what if I told you no one knows what's going to happen? So this is a completely pointless exercise. They don't want to, you know,

that doesn't work for financial media. No, they like predictions. Yeah. They like predictions. They like confident sounding. I said, what if I told you this completely pointless exercise? Number two, I said, I think it's actually a pretty nice entry point for a lot of investors who may be actually dealing with their first real drawdown, believe it or not. And three, statistically, if we go back through the data, forward returns are actually pretty nice from here based on all the data going back 100 years in the market. And the companies that make up the index today, those constituents, are last time I checked, doing better than ever this year, make more profitable than ever, growing at very nice rates. The economy actually looks like there is maybe a soft landing in the future. Things actually look

pretty good. And four, stay invested because the only thing that I know for certain is that there's going to be volatility. I'm not going to give you a prediction on anything other than that's what happens in equity markets. This is what we signed up for. My investment account in 2023 went up 39.71%, one of my best years ever. And so far in 2024, 26%. So 39.7 and 25.7. So call it 40 and 26 percent returns the following two years. And I was looking on join TCI.com, very similar figures for you too. I think you had the edge on 2023 and I had the edge on 2024, but we're within a few percentage points of each other. And they posted the content and they didn't include any quotes from my interview. Shocking. But they included all the experts who wanted to sound really smart and doom and gloom through 2023 and 2024.

I'm assuming if you listen to that article and listen to the experts, you didn't do 40% and 26% the next two years. 40% and 26% the next two years. So 50 companies over a hundred billion market cap, mega-sized corporation, and their average price increased 36% this year. And we're just recording early September here after Labor Day. Good old Berkshire Hathaway, trillion dollar company, A trillion dollar company, Mr. Buffett, 94. The stock is up 30% this year, Simone, 30%. So all this data, all of the market commentary over the years, no one knows what's going to happen. But compounding surprises investors. If you told me this data in 2022, I would frankly be surprised and so would most that the average return amongst a huge basket of companies over a hundred billion in market cap in the US would be 36% year to date. You'd probably say I was crazy. So what do you do? You stay invested and you focus on the select few things that matter.

And that's it. There's too many things for me to think about. There's too many things for a lot of DIY investors to think about. And you focus on just a few select things over a long, long run and ignore all the crap and things work out pretty well that that's that's the takeaway from all this data yeah and i mean i think whenever you have someone to that saying like you know go all in on one thing or another that's always where i'm like you know they kind of lose me a little bit because i'm more the reality is like I like to think in probabilities. And the best money managers, if you listen to the best ones, they think in probability as well. So they'll never be invested fully in cash. They may have some cash.

They may have some hedges in place. Because they know, you know, they can see what's happening. But they also know that they can't predict the future. So they position themselves to do well in most circumstances. And the problem is if you just go and I heard on another podcast, they were saying, you know, T-bill and chill, which is nice. I mean, you're getting 5% in US treasury bills. If you're Canadian, you're probably getting, you know, 7% so far today with, you know, the weakening Canadian dollar, which is nothing to sneeze at. But, you know, because you're so heavily just in one asset class and cash and that's it. I mean, you missed out a lot

on the upside. And I think, you know, we have slightly different approaches. I mean, for me, I just, you know, it's a bit more balanced in terms of asset classes, but I'm not, you know, I'm not putting everything in cash. Like I still have about 50% of all my holdings and equities. And then I have a pretty big allocation to Bitcoin, cash, and some gold too. So I think it's just, I know it's not sensational to say like, oh, you're well positioned to do well, to do pretty well in a various variety of scenarios. You may not do the best if any single outcome,

but you'll do pretty well in most of them. That's how I like to position myself. But again, yeah, obviously, if we go into a great depression, we'll probably both be getting crushed and hope that we'd be 100% in cash. But the probability of that happening is probably quite low. And if it does happen, which you and I would be, we expect the unexpected, we expect volatility moving forward. If that does happen, I'm going to focus on the few select things that matter, continue to stick to the plan, continue to stop dollar cost average and come out of the other side. I mean, what is it? Three big bear markets most investors will face?

I don't know what the stats are, but that would make sense. Yeah. I remember I used to know a family friend was a portfolio manager. He managed high net worth individual money. He actually, he sold his first company to Morningstar. He built a really awesome family office after that and actually tragically passed away. He was a great guy. But one of the first things he ever told me was, my clients are going to face three bear markets in their life and they make all their money in the second one. I was like, that's a really interesting framing. Because they learned from the first experience

and what not to do probably. What not to do. And by then they have actual, like their first bear market, they're early in their career. Yeah. So they're not making enough money to throw a lot of gas on the fire.

Their second one, they usually are. And I can get them to aggressively add to their portfolio in that second bear market where they're getting way better valuations. So he's basically saying that's where they make all their money because they're the most aggressive investors. Yeah, that's fair. Yeah.

But it's not easy. No, it's not. It's not. People can think they may be listening to podcasts until you've actually been through it. And we can even debate that we haven't really been through a real bear market, you and I. Like, you know, the flash crash of 2020 i mean i was back to you know the previous level within a quarter pretty much so i mean a real bear market could last you know several years and it could be

that just things kind of trade sideways a bit down you know for a period of time i think a lot of people may end up getting discouraged you know they end up selling at the wrong time. So it's all about having the right mindset and, you know, looking more long term, obviously, assuming that you have a long, long period of time in front of you. And if you don't, you probably shouldn't have been 100% invested in equity to begin with. But that's another discussion. You can go back to the first segment of this podcast. So if we're going to face three bear markets, you and I have been investing long enough that maybe we make a lot of money in the first one and the second one.

Yeah. Third one, probably capital preservation mode. Yeah. But who knows? No one knows, right? Exactly. No one knows. right? Exactly. No one knows.

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of today's episode for full disclaimers and more information. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends,

and there's other stuff like learning, Duolingo-style education lessons that are completely free. You can search up Blossom Social in the App Store and join the community today. I'm on there. I encourage you, go on there and follow me. Search me up.

Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. All right. Last segment of the day, Simon, take us home. Yeah. So I was kind of thinking about what I was going to do another segment on, and I came across, so StatsCan has some data, and the title of this segment is Canadians are saving more, dot, dot, dot, to pay for debt, question mark. And I came across the savings rate,

so the household saving rates from StatsCanada, and it goes like prior to the year 2000. They've been keeping this data for a very long time. And going back, so I decided to go back to Q1 of 2019 pre-pandemic to have a look of, get a sense how much people are saving. And household savings rate is just the money you don't spend, you save based on your you know, your kind of after-tax income, so your disposable income. So back then in Q1 of 2019, it was 1%, meaning that households were saving 1% of their disposable income. Now, that peaked for, you know, obvious reasons in the middle of 2020 with all the supply

chain disruptions and the closures and the lockdowns obviously people you know were also some people in the u.s but i'm talking about canada here but a lot of people were you know getting paid to stay at home because of the different lockdowns affecting their jobs so savings rate went at 26.5 percent in the middle of 2020 and and then went back as low as 4.1% in Q2 of 2022. I think in large part, this is when around the time we would have started seeing an uptick in interest rate increases from the Bank of Canada and probably mixed with, you know, the,

what was it, the revenge spending? What was it called from the pandemic? So I think it was probably a mix of, you know, the, what was it? The revenge spending, it was a call from the pandemic. So I think it was probably a mix of, you know, people. I've never heard that term, revenge. Yeah, yeah, I've heard it. I was using the real nerdy pent up demand. Pent up demand, yeah, all the pent up.

I like revenge spending way more. So the revenge spending, and I think that probably started kind of, you know, hitting a wall around that time. And as of Q2 of 2024, so pretty current data, the savings rate was 7.2%. So since 2000, I could have gone earlier, but it would have taken me a bit more time. But since 2000, aside from the pandemic, which let's just put aside, because that's an exogenous event that was kind of a black swan event that we probably won't see for a long time. It's never been this high. And there are kind of economic theories. I've been reading a little bit about that where

people, when they think that the economy is getting worse, they start saving up a bit more to make sure that they do have a kind of a cushion, a bit of a cash cushion in case of things happening. But then again, I came across the Equifax consumer debt report of Q2 2024, which it's a bit of a headscratcher when you look at these two figures. So consumer debt rose 4.2% year over year to 2.5 trillion in Canada. So that is quite massive. That's a pretty big increase. Not surprising that, you know, some people are struggling. So they're taking on more debt to be able to pay for their expenses. Credit card debt was up 13.7% to 122 billion. And on average, the credit card balance was $4,300, the highest since 2007.

And credit card balances jumped the most for mortgage holders. Again, not surprising if you're really paying your mortgage, you may be, you know, putting some extra money, especially if you were looking at variable rates to, you know, you might be spending a bit more with a credit card so you can still pay for your cost of living and things like that so is that is that like of people who carry a balance month to month and don't pay off their credit cards in full yeah exactly would be that amount yeah it's not just like it's people who pay it off or not included no exactly yeah this would just be those who have a balance. Because I was very concerned. Yeah.

I mean, it's still a bit concerning, but maybe not as much. It's still concerning, but I'm like, oh, we're all screwed. Yeah, and the non-mortgage delinquency rates were at 1.4%, the highest since 2011. The rate was 1.99% for those aged between 26 and 35. was 1.99% for those aged between 26 and 35. So definitely one thing they're highlighting is the younger cohort is definitely struggling a bit more here. And although delinquency rates are still low on an absolute basis for mortgages, and specifically in Ontario, there are now 3,000 mortgages, which are worth 1.3 billion that are in severe delinquency. So they're not necessarily in power of sale just yet,

but people are, they didn't define it. I'm assuming it's 90 days plus that they're probably entering. So they haven't made payments on the mortgage quite some time. Not a crazy amount, but obviously not great either. And one of the issues that reports said is that raising unemployment is offsetting some of the positives of lower interest rates. So yes, and I've been talking about that pretty frequently is people are cheering for lower rates.

But if you see the central banks lowering the rates pretty quickly, it's usually because the economy is not doing well. Because if the economy is doing well, they will probably just keep the rates the way they are. So there's not that much incentive. and that's how historically it has been where central banks tend to be a bit more reactive and auto loans delinquencies are at historically historic highs for non-bank lending and the highest since 2019 for banks and obviously renewing mortgages are a challenge for

Canadians or locked in at historically a little rates if they were looking at a fixed rate now looking at payment increases in the double digits in terms of percentage increase and they said a lot of homeowners are opting to extend the amortization to make payment work now the reason why I wanted to go with these two, so first the savings rate, but then the Equifax report is, I don't know what to make of this because you would think that people, yes, okay, it's smart to save more if you think the economy is slowing down, you're building a buffer a little bit, but if your debt is increasing, why you, you know, you may want to pay off that debt over saving, right?

So I don't know. I just figured it would be some food for thought. I don't quite know what to make of this because it's a bit of a head scratcher where you see all these debt metrics getting worse, but then the savings rate getting up. It could also be very skewed, right? The savings rate is the average. So it could be that the top earners are saving more while the kind of lower earners are focusing on paying debt and their savings rate

is close to zero. That is one way to see it. The other way to see it is if the economy does pick back up, there could be some people with a lot of excess savings that have money to spend because they were saving for the worse. And essentially things ended up being, you know, more of a soft landing and not as bad as they expected. So there's different ways to view that. I didn't want to be too bearish either, because even if things may not look as great for certain sectors of the economy, certain areas, you have to keep in mind, it can create some opportunities as well. And that's, I think, really important because sometimes people will kind of focus on the

bearishness. And then like you mentioned, you know, they'll go all in cash. Well, you know, when there's some bad news or things that may be not doing so well, I mean, there could be certain sectors that are struggling, but there could be some fantastic companies in that sector that are trading at a discount because the market is overly bearish on that sector as a whole because of the forecast, like I said, the macroeconomic forecast. So keep that in mind. One name that I talked and I'd be interested in hearing what your thoughts are on that is Lululemon. So Lululemon, I mean, I cannot recall.

I was talking with Dan on the Thursday episode last week on that. And essentially, we went over the earnings. And it wasn't a great quarter. They had some mishaps with their products line, especially when it came to the women's line for the bottom, specifically that they mentioned. And obviously, there are some macroeconomic concerns. But the company is growing fantastically well internationally.

They said they're looking to ride the ship. I mean, their chief product officer left in May. Now we kind of understand a bit more why, although they said it was a resignation, but there was definitely some more behind that story. But that could be an example where macroeconomic outlook is not that great. It's a consumer discretionary fashion, not that great for a company like that. They fumble, I guess, their product line for women's a little bit. It's trading at essentially below 20p and below 20

price to free cash flow on a forward basis, which I've never seen. Since I've been investing in Lululemon, I've never seen it this low. So that's just an example here. Well, it's a growth story facing growth challenges. But still growing. But still growing. But those multiples contract on a dime. Yeah. Like very fast.

And there's usually an overreaction. So you got to figure out if you're in the overreaction phase, and that's where the good value is. But I think that you're right. I mean, this is a company, I think, in the North America segment for sure, where it's not true luxury. So you have a lot of consumer discretionary pressure from the economy and something like this i think yeah because it's a premium premium but not luxury that's an area

that can get smashed on contraction in the economy yeah no and you're absolutely right but what's been the most interesting and all of that is their margins actually improved and they have zero debt of that is their margins actually improved and they have zero debt and they generate still about 1.6 1.7 billion free cash flow every year so it's just i i just you know maybe it keeps getting worse for lululemon i mean i'm a shareholder but you know i think there's a solid argument to be made that this could be a very attractive entry point. There's a solid argument to be made that it could keep going down, obviously, but it's just an example when there's a lot of bad news, sometimes it can create some opportunities,

whether it is or not, or it's a value trap for Lululemon, we'll have to see. Again, I do own it, I'm down a decent amount. I guess I bought a bit too early on the downturn, but something to keep in mind is even though the news may look bad or macroeconomic and so on, if you look hard enough, you can find some silver linings. Anecdotally, this was great, by the way. This is a lot of very useful stats for the first, the Canadian household savings rate, but then also the consumer debt report from Equifax.

That's like objective truth. Let's go super anecdotal truth here of just how you and I are thinking about this. Are you seeing amongst your peers a lot of economic pressure? a lot of economic pressure. For me, I've been noticing friends that are on the shelf for new jobs are staying on the shelf. It's a lot harder to find. And there is a very clear amount of data

that Canadian job growth has been almost entirely public sector in the last eight, nine years. That's one of the most concerning charts I can find is the job growth by sector. And you realize that self-employed entrepreneurial folks and private sector jobs, those two are basically stagnant to negative. And you have public sector growth at double digits. That's a very concerning graph because there's no real actual economic growth there.

It's just more government spend. Yeah. I mean, it's definitely something you don't want to see when governments get too big. I mean, the return, you governments, the bigger the debt load for governments, it is the more government spend, the lower the return on the spend is for each dollar. And I think it's just important for people to remember that when, you know, they see all these government programs is, you know, the more there is spending, and we've been doing this for a very long time, it just you get less and less a return

on the government spend and which makes it even more worrying that you're seeing less job growth in the private sector versus the the government sector there's lots of data you can find on this from the globe and mail national post financial post covering the data on this. You can find it with a quick Google search on the different sector by job growth. And that's probably one of the more concerning things in the country. But just anecdotally, I mean, the job market I think has been tougher, I mean, the job market, I think, has been tougher. But people's willingness to spend, again, this is pure anecdotal, my generation's willingness to spend on activities, experiences, trips, fancy dinners is pretty – there's a high willingness to spend there in terms of allocation of budget.

Yeah. And I mean, in that same Equifax report, I mean, at the end of the day, that cohort has the highest delinquency rate by far. So you're looking at 18 to 35. So if you include 18, 25, 26, 35, and I'll share it for Join TCI here. And for those watching Join TCI, I'll share the link in the show notes, but by all means, you can have a look. But you have the middle column kind of here that I'm trying to highlight. So this one, the delinquency rate, Q2 2024, the most recent one. So yeah, I mean, it's pretty clear those are the two cohorts. The highest cohort in delinquency rate is 26 to 35. It's you, buddy. It's you, buddy. That's me.

So it's 1.99%. And what's alarming there too is their average debt, Q2 2024, is pretty high. The good news is it's increased the second less, I guess. But the fact that the delinquency rate is basically 2% and you have groups like my age group is 1.64 percent 46 to 55 1.21 percent but those are the two groups and it's kind of sad to say they're the younger population and i do hope it gets better because then you can get in a pretty dangerous debt spiral in terms of uh you know things going forward and they're usually people too that are not in their prime earnings years generally, right? So yeah, it's a bit concerning. I think that generation is growing up in a scenario where their parents all got rich on real estate in this country. For the most part, a lot of net worth went from their investment

into their home or rental properties in suburban, urban areas of Canada, like the big three, I'll call Vancouver, Calgary, Toronto and the Great Toronto Area area montreal am i forgetting anything yeah i mean you can say i would say even like most cities that are like with the suburbs a million plus i think there's six or seven in canada like you've probably done pretty well if you're a boomer and you uh you got uh you know you got into the rising tide has lifted all boats there. Yeah. And then you have this, I mean, the data here on this group is just like, I have no shot of a down payment. I might as well spend, yeah. Yeah, I might as well spend.

I don't have any clear path to the way my parents got rich. And I think that a really key part of this podcast is highlighting an entirely different asset class that your parents may not have gotten rich on that you can, that doesn't require 200 grand liquid of down payment. That's why that same generation is looking towards the equity markets, or should be at least, if they have no clear path to the way that their parents got rich. Yeah. Yeah. I think that's my anecdotal thoughts on why that might be happening. Yeah. And that's one I'll keep an eye on just because I'm hoping it gets better, but I am a bit worried that the younger generations are doing just that. And they're

just taking on debt to do these experiences. And then, you know, these numbers will get worse. I'm hoping for the best, but I'm not quite sure what to expect going forward. But I just saw it was interesting. Obviously, it's Canadian focused. And for those wondering, the New York Fed comes with similar data in the US, and the US is not doing that much better. So I keep that in mind. I'm going to do a buy now, pay later on some fancy trips. BNPL. Yeah.

Thanks for listening, folks. I think this is a pretty rounded discussion on, okay, here are the facts. Here are why people are talking about economic pressures. But then also points of optimism on why you stay invested. S&P is up 19.5% total return year to date. Those things can coexist and they do all the time and they are right now. And so what do you do? You focus on a few things that are in your control and you keep going. And that's what we're here for on the podcast.

We'll see in a few days, take care. FinChat V4 just launched, by the way. Simone, you got to check that out. I'm going to send you a testing link because it's technically going out after this podcast. Okay. Yeah. I was on it today. It's really pretty. Yeah.

I have V3.13. 4.0. It's just a cleaner interface. It gets to a point where you add so many features and so many toggles that you're like, okay, we need a new design system or else in three years, it's going to be unrecognizable. I'm just going to say you skipped a lot of decimals there. So you went from 3.13 to four.

Must be a big update. We skipped a couple decimal points here. It's a 4.0. We'll see you in a few days. Take care, guys. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making

any financial or investment decisions.