The Canadian Investor - Will Bitcoin Get to 1 Million in 90 days ?

Episode Date: April 3, 2023

We start this episode by talking about Credit Default Swaps (CDS) and what they are. Braden talks about dysfunctional dividends and we finish the episode by talking about Balaji Srinivasan and his bet that Bitcoin will reach 1M in 90 days. Symbols of stocks discussed: SCHW, DB 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 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 to Stratosphere for free 🚀 our platform for self-directed stock investing research. 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 Braden Dennis and Simon Belanger. The Canadian Investor Podcast. Welcome into the show. My name is Braden Dennis, as always joined by the very affable Mr. Simon Belanger. Sir, we have a full slate for the Monday release. We're talking frameworks. We're talking

definitions, everything from banking, dividends, Bitcoin a little bit today, and alcohol. Wow, that is quite the gambit of topics. Alcohol, Bitcoin, banking, and dividends. That sounds like a perfect episode for the Canadian Investor Podcast. What's going on, man? Is it a little bit warmer in Ottawa yet? It's getting, you know, I keep checking out the 14-day forecast and I get excited at any time that there's a high single digit. But now there's a couple of double digits in the forecast. Oh, we got some dub digits in the forecast. We still have a lot of snow, especially if you go in Gatineau Park on the Quebec side of the river. It's just I think people can still do cross-country skiing there.

But that's – They never did the Rideau. They never opened it up this year. I think it's one – maybe the first year ever that – or in a very long time that they did not open it. The weather never. Just wasn't thick enough. Yeah, we had some cold days. Like anyone, I know we have listeners in Ottawa and obviously they'll say, oh, we had cold days.

But the issue is we had like four or five in a row. Don't worry, they always have cold days. We had like four or five in a row and then we had four or five days of around like zero or slightly above zero. So that's why I never got cold enough for long enough to uh get the canal going which is too bad it's one of the the fun things to do in ottawa if you ever come in the winter i would highly recommend usually it's the second week of february there's

winter lewd tons of activities for the whole family you can go on the canal. Ottawa tourism, you're welcome. Yeah. Seriously. Wow. That is quite the endorsement. Let's talk about, first on here, credit default swap, CDS. It's coming back. It was the hot word. Everyone who had ever watched Wolf of Wall Street, every finance bro, was ready to tell you what a credit default swap was. And so was Margot Robbie in a bathtub. This isn't Margot Robbie in a bathtub or Selena Gomez at the poker table, but it is Simone Bélanger on the podcast, which is arguably better. Yeah, big fan of Margot Robbie.

Who isn't a big fan of Margot Robbie? Exactly. So yeah, I wanted to just talk about credit default swaps, or also known as CDS, because like you said, I've noticed they're mentioning CDS a lot more on mainstream financial media. And I know for a lot of people that may be starting to invest or maybe some people that are a bit more seasoned may not be familiar with this type of financial instruments. I just wanted to explain as simple as I can what it is. So a CDS is simply a type of financial derivative product. A financial derivative product simply means that its value is linked to a financial asset. So for example, if you're familiar with options on stocks, those are also financial derivatives. That's because the value of the option is linked to the value of the stock.

It could be correlated or it could be inversely correlated depending on the type of option. So that's just the basics here. And I wanted to give that example just because most people are somewhat aware of what options are. If you're not, we have done a couple episodes on that. So you can just go back to some of our older episodes. Now, back to CDS. A CDS is a derivative that transfers the credit exposure for bonds or debt. A CDS is very similar to insurance. Essentially, the buyer of the CDS pays an ongoing premium to the seller of the CDS. If there is a credit event, then the CDS seller has to pay the principal back plus any remaining interest payments to the CDS buyer.

Now, a credit event is not necessarily just a default. So there's a series of events for most contracts that could trigger essentially the contract to be executed. Examples of credit events. These are just a few examples. There's more than that. But, you know, first, the business or the entity, because it's not necessarily a business. The entity defaults, but it's not related to a failure to pay. There is a default or failure to pay. There's a debt restructuring when the underlying loans are restructured, for example, or there's government intervention that affects the contract itself so there's a series of credit events you can definitely read up on it if you're interested but these essentially just say that the contract

is in effect and executed if there's these things that happen so it's not necessarily just a default but it's a credit event so cds can we back up here why would i buy a cds like it's kind of like chump insurance but like i looked at it another way like you know there's a buyer and a seller the buyer's paying a premium to seller why would i go go do such a thing and and and i guess maybe you can kind of hint that into why it's important right now again in discussion. Yeah. So one thing that especially institutional investors will do is they'll, for example, have bonds of a business and they'll take a CDS to hedge their risks. So if they think that they have a 10-year bond, for example, and they think that in the next five years, there's a significant risk that the business will go bankrupt or will default on their bonds,

they may take a CDS for that five years, thinking that if they make it through those five years, then they're good for the whole 10-year period. So that's just an example. You can also trade these instruments, so you don't necessarily need to hold the debt. So there are markets for CDS. And actually, these are the markets that we're seeing some big swings with some financial institutions right now. So that's why it's so important. It's just literally a way to get insurance, but you don't necessarily need to hold the asset as well. You can just buy the contract if you'd like.

Exactly. Okay, so now this is important now because of X, Y, and Z. Yeah, exactly. Now it's important because all the banks, and by the way, countries as well, have CDS. and by the way countries as well have cds so there are insurance contracts on the banks because they have debt and countries like canada the u.s or like all the major countries that issue bonds there are credit default swaps for that so what we've seen is in the past i i don't know the exact time period but definitely in the past six months the cds for kdc swiss had been going up for some time so that means that there were more and more people in that market seeing thinking that kids

would default or there'd be a credit event happening so the price of cds was getting more and more expensive betting that there may be this kind of event clearly there was this kind of event that happened i think was about a week and a half ago and now the whole time period seems to be i don't know there's been so many events happening in the past couple of weeks that everything time-wise is mashing together but we're also seeing the same thing happening right now not necessarily in the same kind of way but definitely we're seeing dirt Deutsche Bank and Charles Schwab CDS going up. So meaning that the market thinks that there are increased chance of credit events happening that could happen with these entities. Now, the question here is whether it's justified or not.

Maybe, maybe not. So clearly the market may be overly nervous with what's happened in the past couple weeks in the US, but also crisis Swiss. So it may be the market overreacting a little bit. But at the same time, I don't think anyone can deny that the events in the past few weeks are definitely at least alarming to some level. And to say that there is not going to be any contagion whatsoever is probably a bit early. I would say that we'll probably have to wait at least a couple of years to know whether there is some more dominoes to fall. The question is, though, are there issues that we're seeing? Are they contained, more isolated? Or like I said, are there potentially

larger financial institution that could be at risk here? And Deutsche Bank is definitely one of the big question marks because it's a G-SIB bank, so a globally systemically important bank. But Charles Schwab- You just nailed systemically. I know, I know. It's a- Hey, for the people at home. After 15 episodes. Systemically, absolutely crushed it yeah and you know i can give my thoughts in

another episode because there's a lot of moving part when it comes to the financial system and the inner workings i mean i'm still learning i'm listening i've always been really fascinated with macro i love investing as well but it's always something I'm learning on. And the more I learn about it, the more I think I don't know much about it. So that's kind of how complex it can be. But like I said, I mean, I'll probably finish on this is I tweeted something about the returns recently of the Canadian banks in the past since basically just before the SVP, that infamous call that they did on, I think it was Wednesday, March 8th. And I said, oh, here are the returns for the Canadian banks. And I got a lot of people commenting on it because

I basically just left an open question and said, is it a value play or value trap? it because I basically just left an open question and said, is it a value play or value trap? And what's interesting is, you know, I'm not, it's a relatively small sample, but it's, there's kind of two camps, right? So people are either saying it's a value play or a value trap that more and worse things are to come. And my view on that, I would just say, look, I don't know what is going to come, but at the same time, I'm just going to say that to think that Canada is insulated by anything that happens in the banking system in the US or in Europe. I think, you know, we may be to some degree, but we're not fully insulated. I think it's, you know, you're being, you're not being honest with yourself, or maybe there's a lack of understanding to think that, you know, if there's a major bank that fails in the US or, you know, in Europe, that there won't be any consequences in Canada. There

may be, you know, lesser consequences, but it's very interconnected. And I don't think we can say that, oh, Canadian banks will be resilient while, be resilient while the US is in a banking crisis, for example. There hasn't been a – I think it was 1920, last time Canada had a bank fall apart. Anyways, people have been right to call out that how different our banking system and better it is in terms of safety. But I think that you're right to call that out, that it's head in the sand to just go, oh, it's never happened before. You know, look what happened in 08. We were fine. The banks were all on a huge discount. If you bought them, you know, the same multiples that US banks were at, you've made a killing. All of those things are true. that US banks were at, you've made a killing. All of those things are true. But it is head in the sand to think that there's no contagion, no risk of this happening. Anytime someone says there's no risk of something happening is usually what I know is lots of risk of something happening. You just described something really important called the Dunning-Kruger effect, by the way. Okay.

Which was when you're talking about... Yes, by the way, the Dunning-Kruger effect, by the way. Okay. Which was when you're talking about, yes, by the way, so the Dunning-Kruger effect. You talked about learning about macro, how you felt. The more you know, the more you realize that you don't know. And there's a cool graph here on the screen for you, the Dunning-Kruger effect. It's very classic. You have confidence on the Y axis and wisdom on the X axis. And so when you know nothing, your confidence is super high. And that is called the peak of Mount Stupid, which I love. stupid, which I love. As you learn more and more, you realize you have really low confidence because you know how much now you don't know. And that's called the valley of despair. And you keep

learning. You have the slope of enlightenment all the way to the plateau of sustainability. But this is a very common thing. It uh imposter syndrome as well where like you feel all confident you go into some new field new career choice you think you know everything and then you realize you found you found yourself at the valley of despair and that is totally normal that's literally how human brains learn things so um yeah that's the the dunning-kruger effect i'm somewhere between the peak of Mount Stupid and the Valley of Despair. I'm not sure yet. Probably slightly out of the Valley of Despair, I would say, but pretty far out from the, yeah, maybe like halfway through the graph,

I would say. Yeah. There you go. 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. 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, let's talk about dysfunctional dividends. This is a topic that just encompasses my thoughts so well. And it was brought to me by Azwa Thamador. And there was a thread and a podcast listener. I'd love to give you a shout out here, but I can't remember who it was. You know who you are. Thank you for showing it to me. They sent me the thread and they're like, this is basically what you've been talking about on the podcast. And it's this thread about capital allocation, mostly around buybacks, but also dividends. And it basically is saying dividends are a mechanism of returning cash to shareholders of the business.

It is not free money. There's no free money loophole glitch. There's no wormhole into free money freedom. This is cash from the business moving from their pockets into your pockets, from their balance sheet into your bank or your brokerage. Therefore, the value of the business has gone down. Don't forget that. The value of the business has gone down. Cash off their balance sheet. This is why you just can't print free money

by buying a stock for its ex-dividend date. I think every DIY investor is like, wait, at some point in their journey, they're like, wait, can't they just buy this for the ex-dividend date. I think every DIY investor is like, wait, at some point in their journey, they're like, wait, can't they just buy this for the ex-dividend and sell it the next day? Yeah, you can, but the value of the stock will go down and net net is zero. And so you can't do that. If it was only so easy, Simone, that's probably the peak of Mount Stupid, thinking that that's possible. You realize it's not, you end up in the valley of despair. So with that out of the way, dividends are very effective

at completing that mechanism of returning cash to shareholders. Many companies have compounded value while paying a dividend and growing it for that matter and done exceptionally well. Typically, this is when the business is operating with prudent capital allocation. That's a functional dividend, okay? A dysfunctional dividend flips it on its head. Go to thecanadianinvestorpodcast.com. We'll have this as a blog post called Dysfunctional Dividends under show notes. And there's a nice flow chart here. Now, functional dividends, basically dividend allocation is at the bottom of the decision tree.

In a dysfunctional dividend, it is first. It is paid based on what's been paid in the past, the sector policy. All our competitors are paying a huge dividend. We should too. We've been paying a huge dividend historically. We can't reduce it. We can't cut it. And so you basically are lining up with short-term incentives instead of long-term incentives.

How many times have we talked about this topic on the on the podcast you know algonquin power comes to mind yeah for sure of just like dysfunctional dividend yeah intel recently of course intel yeah which by the way gordon moore rest in peace uh side yes yes rest in peace gordon Gordon Moore. If you have an entire law, like Moore's Law, behind your name, you had a badass life. Perfect examples. Intel, Algonquin, Canadian name, US name. The amount of times we just look at our financials and the dividend policy with our arms just like up in the air. We're the guy with the arm up in the air emoji. And it just makes no sense. And I never want to own a stock where my 10,000 foot view from the business, I feel like

I can do a better job than the person sitting in the CFO chair. That should never, ever be a thought I have, or at least I shouldn't think that I run the business with me. Even if I'm at the peak of Mount Stupid, I should still not feel that ever. And many times with these dysfunctional dividends, I, a regular guy, think this makes no sense. The CFO, the capital allocation, what is happening? This is a dysfunctional dividend. In this flow chart, a functional dividend policy has dividends paid at the bottom. You have high return activities are allocated to first. Initiatives within the company are evaluated. The balance sheet is served and made sure it's rock solid. And then they say, okay, we're printing lots of cash. We can't allocate

all of this money to high return activities. Let's distribute it to our shareholders who can then take it and have optionality with what they want to do with their capital. And so many businesses with dysfunctional dividends get this wrong because they put the dividend decision at the very top. So let's use an example of we pay ourselves dividend for this podcast. The podcast generates revenue from advertising, and then we pay ourselves out as the owners distributions. We've had several months where we've not paid ourselves the same dividend each month. We've changed the distributions because we have big expensive. We had some big growth project we want to invest in.

We want to do advertising ourselves or we have huge accounts payable coming in essentially. advertising ourselves or we have huge accounts payable coming in essentially that's us operating a functional dividend policy by by not just going siobhan our shareholders will be mad if we don't distribute the same amount this month right like that's a dysfunctional dividend for a small business yeah and we'd rather and just speaking of of our business, we'd rather pay a smaller one. And then if we find that we do have the free cash flow to do a special dividend, then we do. And that, I think, is a prudent way of operating over setting your expectations super high. And then something kind of happens that puts a wrench in there. And you're too stubborn to want and rectify the flow.

I'd rather work the other way around. And I think for, you know, the same example for dividend paying businesses, they should also be thinking like that. Maybe you're on more the side of caution and upside surprise versus the other way around. Costco, perfect example of just like had so much excess free cash flow. They could have raised the dividend aggressively, but they didn't. And every once in a while, they've gone, all right, special div. Here you go. Let's move a bunch of cash off our balance sheet to our shareholders.

They deserve it. They're awesome. They're the best. How often? And they do one like every couple of years. Periodically. I mean, it's never like the exact amount of time in between, but essentially- Because it's functional. Exactly. They do it because they can afford it. And I think the issue too with some businesses

is I think it just shows how poor management is if they're not willing to cut the dividend when it should be cut. We've seen it with Algonquin or Intel where it's like, okay, it probably should have been cut six months to a year before that. To me, it just shows that management is afraid of making the hard decisions because they know if they cut the dividend, some shareholders will be unhappy, especially large shareholders that rely on the dividend and they may get grilled. But do you really want them as shareholders? It's probably a good question. If you're not willing to make the hard decision so the business is sustainable over the long term, I'm not quite sure why you're managing these companies. That's the way I see it.

There's plenty of management that unfortunately have that train of thought where it feels like they do the move when it's too late. And then they basically kneecap themselves or whatever the saying is. So here's the high level, a functional dividend policy from companies you own or evaluating looks at cash the business is generating and reinvest it as quickly and effectively they can in high hurdle rate activities, meaning activities they have evaluated and or know from previous operating experience that they're going to get a high return on the capital. Reinvesting to compound the value of the business in high expected return activities is number one.

It's my job running my company, for example, to do this. When I'm evaluating growth channels, it is my job to have a hurdle rate and know what good looks like and invest it accordingly. A dysfunctional dividend policy, on the other hand, everything flows down with remaining cash to reinvest in the business after the dividend's been paid. And that's the problem. It just flips the order. So that's what this segment is about, is a dysfunctional dividend policy flips the order of how it should be, which is start with quality earnings. You go all the way down to free cash flow, and then you get this decision tree, and it's flipped on its head.

It makes no sense. And it's never how the highest quality compounders act historically, from my experience. And the good thing is mature and not even mature, highly profitable companies can do both. But they don't get it twisted where they're being bad stewards of capital, basically. So that's dysfunctional dividends. Yeah. And I think that's why we hammer so much on the payout ratio, especially when it comes to free cash flow. I think it's really important. There's not a magic number for every businesses, but I would say what I tend to do as one of the first thing I'll check if I invest in a dividend payer is I'll check out that payout ratio, but I'll compare it to some of its peers. And typically the companies I'll want to invest in are those who have it on the lower end versus the industry average. Because clearly, you know, if you're looking at a tech

company, if a tech company is paying 75% of their free cash flow in the dividend, that's a big red flag right there for me. Because a tech company needs to be able to reinvest in the business because whatever they do, you know, research and development will still have to play an important role. If it doesn't, over time, their leadership position, if they have one, will just fall behind. And we've seen that with Intel. That's a good example there. But if you look at the industry average, and definitely, you know, if it's within there, especially on the lower end side, that usually means that they'll be able to keep paying the dividend and reinvest in the business i mean at the very base that's an easy way to like at least eliminate some red flags right off the bat totally and it's so it's why it's so good to have like a research tool like stratosphere you can literally

see it visually like if you type in the payout ratio and see how it's trended over the last like 15, 20 years, and you see like, it's gone to an unsustainable amount, it's probably because they have a dysfunctional dividend policy that it's crept up like that. And, you know, maybe the business is more mature and sure they want to distribute more cash to shareholders it's more nuanced this conversation sure um but it can be useful uh you can make that decision right like the payout ratio ballooned on intel like ballooned to a place that it should it should not be but they were very hesitant to cut it because of short-term incentives. Exactly. That's it. So, sorry for those who own Intel.

Yeah, it's been on. Okay, well, how about Algonquin Power? I mean, geez, I've never understood the capital allocation decisions there for two years now. I mean, for utility. I only stopped for a hot minute and then i was like wait what is this you have to do well with it actually too yeah you have to try pretty hard for utility to to mess it up like that it feels like it's the perfect um for the most part you know business model to be able to pay a stable dividend as long as you're not too greedy and you manage your business well and you

know and you don't try to you know grow too quickly usually you know these companies can grow at a steady rate you know pay a good dividend sustainable and shouldn't encounter too much head winds but clearly they got a bit too ambitious i I think, when it comes to Algonquin. They wanted to grow too quickly. 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. questtrade.com. 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. Let's talk about this hot, hot, fiery, spicy take.

Yeah. So I know, I know like especially Bitcoin, it's polarizing for a lot of people. A lot of people will be, you know, really bullish on it. Some people are very bearish. And I think there's definitely a lot of people that, you know, may be open to it, but they're still not sure. But this one made the round. So you might have heard of it. So Balaji Srinivasan. So I'm probably butchering the name, but he did a bet that Bitcoin would reach a million dollars in 90 days. His Twitter account is AdBalaji, B-A-L-A-J-I. Now, obviously, I own Bitcoin, have strong conviction in it, but I also have a bunch of different companies, stocks that I own, index funds.

And I know you may just hear the headline or you might see it. I think most of the mainstream media, the financial media have taken this because it's, headline grabbing 1 million in 90 days. So he did that bet following all the bank turmoil that was happening. That was on, I think about like March 16, if I remember correctly. So he's a couple of weeks in here. And it's easy to look at the headline and think, OK, this guy is completely crazy. And I'll say what my thoughts are at the end here, because I just want to give, again, a more nuanced approach, because this guy, you know, he has a track record. He's not completely out there. So, Bilalji, I'll just refer to him as his first name because it's easier to say, is a venture capitalist investor.

He's the former chief technology officer at Coinbase and was a general partner at Andreessen Horowitz. So, he's not like a nobody. He also tweeted something very interesting on January 30th, 2020. So he said that, and let's recall here that January 30th, 2020, there was just a handful of confirmed cases of COVID-19 in the U.S. at the time. So no one was thinking that we would start seeing massive lockdowns and what we've seen in the past three years. Now, here's a sweet word for it. Going viral. What if the coronavirus is the pandemic that public health people have been warning for years?

It would accelerate many pre-existing trends. Border closures, nationalism, social isolation, preppers, remote work, face masks, distrust in governments. What is preppers? I'm not sure. Yeah. I'm just going to say it's the- Doomsday preppers? Oh, yeah.

I guess so. Yeah. No, that's- Is that what it is? I would assume so. I was just a guess. I knew the six others, but no, I think that's- You went over that one.

I'm like, what is a prepper? Yeah. Okay. Interesting. Yeah. And January 30th, 2020. So I think it's good to just remember what we were kind of going through at the time. Yes, we know there was a coronavirus, COVID-19, but, you know, our way of life hadn't changed

at that point. The lockdowns didn't start until mid-March. And obviously, you know, there was just a handful of cases in North America that were confirmed. There was probably more in reality. But, you know, a lot of people would have seen this tweet and think he was absolutely crazy. And now we know three years later that most of this stuff has actually come true. So that's why he's gotten a lot of credibility because he made this prediction. It kind of reminds me of Michael Burry as well with his predictions. And, you know,

people give him a lot of credit just based on what he predicted would happen with the U.S. housing market. Now, what Balaji is saying is that most banks are currently insolvent and governments will have to step in with massive amounts of fiat, which will lead to hyperinflation. Fiat, for those not familiar with the word, it's essentially just money as we know it. So Canadian dollar, US dollar, whichever currency you're looking at. Fiat just means that it's not backed by anything other than the government. looking at fiat just means that it's not backed by anything other than the government so it's not a gold-backed system for example like we used to have uh you know many many many decades ago now the bet that bilalji will put is that he will put 1 million usd and uh there's this fellow called james on twitter would put one bitcoin with a custodian and the term of the

bet is 90 days. It's a bit weird how they're arranging it, but essentially the bet is that he's betting that it will reach a million dollars USD in 90 days. To keep it simple, we'll just say it's that. Now, to put additional context here, if Bitcoin reaches a million dollars, it would have a market cap of around 19 to 20 trillion dollars. That's double the market cap of around $19 to $20 trillion. That's double the market cap of gold and just shy of the US GDP. So it's quite a bit of money to go to a million. 90 days is such a ridiculous, like, this is the problem with hot takes, right? Yeah.

It draws so much attention and only upside if he comes even remotely close and there's no downside because you have this like outrageous thing that probably not going to happen anyways this is the incentive dichotomy issue with hot takes and we've talked about this when we do our bold predictions for the year it's like yeah there's no there's no incentive for me to not be extremely extremely bold because i look like a hero if i'm right and if i'm wrong it's a whole thing yeah it's a whole day it's just a joke you know like don't worry guys i'm just joking yeah and i don't know really what his intentions here are with that is he really you know looking to just get publicity is he being serious i think he's he's from what i've seen he looks like he's

serious on it but who knows his true intentions but if bitcoin reaches a million in 90 days the world is going to have some big problems i'm not saying Bitcoin to a million at some point is not possible. I mean, I'm very bullish on Bitcoin, but 90 days would essentially mean that the banking system is collapsing and people are fleeing towards any kind of uncorrelated, you know, asset to our fiat money system, whether it's gold, whether it's Bitcoin, whether it's, you know, hard assets, system, whether it's gold, whether it's Bitcoin, whether it's, you know, hard assets, other commodities, real estate, whatever it is, you know, it would see people flee a lot towards those assets. And I have a few more thoughts here.

First, you know, does he really believe this or is he actually using this to get mainstream awareness to Bitcoin? Because, of course, mainstream media will pick this up. You know, it is. He probably owns a shit ton of it and he's probably going to profit off this. Yeah. So he says that I think he has like 99% of his net worth into Bitcoin, whether that's true or not. I guess no one really knows.

But, you know, it is a polarizing statement. So whether you hate Bitcoin, you're going to be talking about it. Whether you like Bitcoin, you're going to be talking about it. Whether you like Bitcoin, you're going to be talking about it. So from that standpoint, it is interesting. Is he using this to create awareness with what's happening with our financial system right now? Like that bank term funding program, the new Fed program that they started just after the fall of SVB, which allowed banks to get loans at par value on their treasuries even if the market value is way below that essentially the fed would lend them money one for one and essentially a lot of people

are also saying that you know they're saying it's only a specific amount of money but it's likely to just increase and a lot of people don't think it'll end after a year we'll have to see is he just fear-mongering and posting this to get clicks or views on twitters or has ulterior ulterior motives that we don't know so there's a lot of questions here and the last thing i'll say is obviously bitcoin i'm sure people have seen it there's been headlines on it so it's performed pretty well since March 8th, since it all started with SGB. It's up 25%, whereas the NASDAQ is up 4.35%. The reason I'm using NASDAQ is Bitcoin has been pretty correlated with the NASDAQ in the past year or so. And it's interesting to see a bit of a decoupling right there. I don't make predictions for the price of Bitcoin.

I mean, I've done a few times or once on our bold predictions, but that was just throwing numbers there just for fun. Like you said, it was just bold prediction. I personally think obviously could go massively down or up. I don't know what it's going to do. Maybe some people know, but I'm not, you know, smart enough to be able to predict that. And maybe I'm smart enough to not try and predict that. But I do like to have nuanced views. And the way I see it in terms of Bitcoin, that's just my view, is that it's just insurance against the financial system. It's something that has a fixed supply, then has a protocol that is stable, unlike what we've seen with central banks where liquidity can increase, decrease. Interest rates are constantly changing, money supply as well. And I'm not even talking here about the euro dollar,

which is something I can talk about in another episode. For those not familiar with the euro dollar, it's essentially an offshore US dollar trading mechanism that's kind of out of the control of the Fed. So that is quite complex, but I've been reading more and more on that. And it's pretty fascinating how it started, started back more in the kind of early, I think the 1950s, where Soviet banks were looking to get access to US dollars and finding a way to access that without having to go through the US. dollars and finding a way to access that without having to go through the US. Yeah. The Euro dollar is a funny name for just dollars outside of the US.

US dollars. Yeah. So people may- US dollars outside of the US are Euro dollars. A term you'll see all the time. It sounds way more fancy than it really is. It's US dollars outside of the US. It's very complex. And the one thing about the Euro dollar market, it tends to be quite good at predicting where the markets will go. Because yeah, it's not tied to really, the Fed doesn't really have influence on that market. So it's, anyways, I can do an episode on that. Yeah, it's their currency that has its own life of its own outside of their country. Yeah, exactly. So, no, that's just my take here.

I think it's obviously going to grab headlines. It is, I don't know, maybe it'll be the title of this episode and I'll get people worked up. We'll see. Going to 1 million. Oh God, there's going to be the angry people in your DMs in no time. You know that, right? Yeah. But I think, you know, you know me enough and listeners, I've been listening for a while. You know, I may be bullish on Bitcoin, but I like to look at things and have a more, you know, I want to look at both sides and just not try to make my mind right away. I like to ask questions and definitely have a more nuanced approach because usually, you know, the truth is usually somewhere in between. Yeah, good point. That's a good point, dude. It's so many. Oh man, that's just like, I'm picturing

society with no issues. If everyone just had, if everyone could say that statement right there, one, the ability to change your mind and presented new facts and two, to not be set in your ways without even actually thinking about it or asking questions or having human curiosity it's also a good way to make a lot of money in life is to not is is to not shut down everything that comes across your plate like i would here's a like recent example so this is kind of tangentially related because you know cryptocurrency and Web3. When everyone was telling me Web3 is going to replace Web2, and I like Bitcoin. I understand the purpose of Bitcoin.

You try to send money cross-border and the fees is ridiculous. Dude, tell people this stuff's not useful in a country that has 70%. Tell that to people in Turkey that this isn't a useful technology. And they'll tell you, oh, yeah, well, the value of my deposits have gone down 70% this year. And so that's another tangent. When people told me crypto, Web3, I was like, you guys are just making new problems to solve without them actually existing this is such a load of shite i'm not buying a cartoon for five hundred thousand dollars nfts it's just like you know like oh it's gonna revolutionize home ownership you're gonna have

this deed that says you own it i'm like yeah i have, I have one. I don't need, I don't need to be on a blockchain to sell. Like there's no problem. It doesn't exist. The problem doesn't exist. And then some, I mean, naturally healthfully skeptical about this stuff. And now, you know, my initial response to chat GPT and AI and you know, the bubble that's forming there is, is so skeptical right out of the gate. Because if you've been an investor in the last three years, you've been born to be skeptical on this new hype tech, right? We're messing around with it now and doing things that are unbelievable.

Unbelievable what we are accomplishing with artificial intelligence in our data set, training the algorithm, spitting out things. People are going to be able to soon use a chat interface and ask Stratosphere how Constellation Software did on their last quarter and give me a summary. That is going to be possible with what we're doing right now. And it could make me very rich. You know what I mean? Like people who shut themselves down to new ideas, like it doesn't make any sense. Just sell your API to PayPal.

Yeah, I'll sell my API to PayPal. Yeah, the customer service API. Yeah, no kidding. All right, that's a side tangent. A couple of thoughts here about the Bitcoin thing. With hyperinflation that he's saying is possible, and we've clearly seen inflation be double digits. The real number, I think it was hit the peak of around like 12%-ish year over year. That number is still persisting in the UK and Europe.

Because if you have inflation on the US dollar, it's not about what happens in the US. It's outside of it that is like hyperinflation, even with just 8% USD, right? Like the fallout is not just the currency of USD. No, no. I mean, it's, yeah, the implications are really wide ranging and that's what we're seeing, especially countries that are, you know, not on as favorable terms with the US. They're the ones that are being the most impacted, whether that's right or not. I mean, you know, I don't want to get into politics of things, but clearly the Fed offers what they call swap lines with central banks that are friendlier, let's say friendlier countries, including Canada.

And that's just a way for these banks to have easier liquidity to the US dollar. But again, aside from that, if you have whatever is happening in the US, we've seen it in Canada, right? Especially when you look at the currency, if it weakens versus the US dollar, it can create some problems because a lot of the trade is done in US dollar. So you can kind of compound what's happening there and you said in europe i think they're still seeing double digit inflation so yeah yeah they are for sure even like the uk yeah um i think that the government reported numbers 10 10 something like that and the the true inflation number I think, is a lot higher. All right.

Alcohol. Is alcohol on the way down, Simone? A question that keeps being thrown around with new trends. It's so funny because anecdotally, I don't think so. You walk around, you go to a concert, and I was like, wow. The Budweiser family is still doing quite well. And so anecdotally, you're going to be like, no, people are drinking alcohol left, right and center. The bars are full. And that is true. But the stats that I've been referring to on the podcast have been that particularly Canadians and globally, younger people are less interested in drinking. BBC reports Canadians appear to be losing their taste for alcohol. According to findings, beer and wine is at a historic low of sales. And there was like a 2% sales bump, but that's inflation. Actual volumes were at

historic lows, which is the more important KPI to follow is volumes, not dollar. So from 2021 to 22, volume of beer per person in Canada slumped drastically. The volume of wine slid by its largest margin since 1949. Okay, interesting. And so, but that's beer and wine, right? Like I'm in before the, that's only beer and wine. And there's no surprise because everyone's drinking these hard seltzers, you know, the low carb, the white claws, the cottage springs. And these are alcoholic drinks that are not in the beer wine category as far as i know and they have exploded in the last decade or so there there'd be more in the i guess spirits i don't know yeah i don't know what they are classified

at because wine and spirits is usually classified together you know like yeah anyways let's let's just say beer and wine we know for sure have slid okay but let's look let's look at seltzers and that you know holistically stats canada says alcohol as a category slid for the first time in a decade by 1.2 percent and the wine category decreased by four percent here's from global news uh report from baron berg baron berg research shows that gen z so that's the like i guess people who are younger than 25 today to like i don't know let's say producer mel you're producer mel you're a gen z right nod yeah it's gen z so that's like uh i don't know like maybe like 12 year olds to 24 year olds today yeah it's usually like a little more than a decade i really

i mean i think depending where you look at the the grouping it changes slightly differently it's just yeah yeah depending on which wikipedia article you pull up. And it is arbitrary. But anyways, the young people, the high schoolers and the university students today for sure are the Gen Zs. And I'm sure if you go to any university campus, they're still drinking as much as ever. But statistically, they are saying that they drink 20% less per capita

than millennials, which I am. You are. You're an older millennial. I'm a younger millennial when it comes to alcohol consumption and not to be outdone. It says here the report also shows millennials are drinking less than Gen X and baby boomers. Okay, interesting. Our report from Australia's University of New South Wales backs up the trend worldwide, finding 44% of those ages 18 to 24. So those that the older Gen Z's are drinking less than older generations. Dominique Morenzo specializes in this. Says people have become more health conscious and shifted their habitats.

Not habitats. Shifted their habitats. Shifted their habits. Shifted their habitats. Now they live in tree houses now. Now they've shifted their habits to other substances. Interesting. Weed.

Shrooms, I'm assuming. Shrooms. I mean, I've seen. There's dispensary all over the place now for mushrooms. Yeah, for the shrooms. Yeah. I've seen them in Toronto now. I've seen that. Yeah.

Dude, Gen Z's love their shrooms. Producer Mel. Yep. She didn't actually nod. She did not, yes. No, I'm just kidding. So, interesting that this is the case. Now, obviously, people are still drinking.

It's ingrained in the culture. But I'm very curious to see where this trend goes. Does it plateau 50 years down the road? Does this look different? Does it become like the smoking cigarettes of 2079? You know, I don't know. We'll see. But it's something to keep an eye on.

Of course, I still like my old whiskey and paper planes and Manhattan's. I love that stuff. So I'm going to drink it. Yeah. I mean, I like to drink once in a while. I mean, I think, too, we're seeing it with marijuana and cannabis, like where there has to there's a shift that takes time, even though it was the legalized, I think, 2018 now. Yeah, it was 2018, right? I think October 2018. Yeah, October 2018.

Yeah. Yeah. And it was decriminalized years before that. And it's still, I've noticed, depending on the age group, you know, the older the age group, even though it's legal, there's still a bit of a negative perception about cannabis. I'm not, I'm generalizing here. I know some people are more open to it than others. And let's say Gen X or baby boomers. But I've noticed in my life that there's still a bit of a negative perception, whereas they'll have a very positive perception or not as negative of alcohol. And I think that's just the fact that you've grown up with one substance being legal and the other one not being legal until recently. And I think personally, that's what we're seeing. If you give it 25, 30 years as there's more options for people to, you know, consume substances, you know, it won't be that alcohol is the predominant substance that's legal. There's going to be a variety of options. And I will clearly, you know, if you're taking mushrooms, I'm going to say that you're probably not having, you know, 10 beers. So, you're probably sticking to the mushrooms. Maybe. Maybe.

But I feel, you know, may not have a good time. That sounds like a fun Saturday. I don't know. But I think you know what I'm saying. You're right. It's just options, right? Yeah, that's it. The consumer has more legal options.

Exactly. Or at least more legal options. Exactly. Or at least more decriminalized options. Didn't they decriminalize cocaine in British Columbia a couple weeks ago? Oh, I didn't know that. Yeah. Yeah. I mean, I don't want to spit out wrong facts. We'll even look it up for another time.

But that was all over the news. And what you're getting at is there's more options for the consumer that, you know, it's not just alcohol and that it's competition for a market is what it is. Yeah, exactly. It just but also it takes over time. It takes time for habits to change. And I think that's the other thing. It takes time for habitats to change. Exactly. And we're seeing the younger crowd that kind of have grown up, you know, if you're 18,

you know, essentially, you know, probably ever since it's been on your radar, these substances, marijuana has been legal and decriminalized. So, it's much more normal to consider that on par with alcohol, for example. Yeah. It's going to be less taboo in your life, like in terms of the people you know and how you grow up. Because, you know, people born since 2018, October 2018, it's been legal their entire lifetime.

I mean, they're just babies right now, but, you know, in grade one. No, but it's true. It's a big difference. Yeah. And, you know, people can Google on YouTube some of the, like, hilarious videos, especially in the States. They were aggressive on that where, you know, you would smoke a joint and basically become a serial killer and stuff like that from the like 1960s and 1970s you know people see that over and over and obviously could have the reality is like how late is the mcdonald's drive-thru open until

oh that's too funny uh no i i agree There's like more competition and it's going to change kind of like what's normal. I mean, think of it doesn't take it takes a long time, but not that long for these things to change. Like, you know, in basically my parents lifetime, smoking's become completely normal to smoking cigarettes. Like, why? You know, it's bad for you it's gross it makes you smell bad it's waste of money it's you know you're never gonna get laid you know there's all this like stuff that goes into the culture of like connotation being bad and maybe that happens to alcohol. I don't know. I doubt it, but we'll see. I guess we'll just be here to report the news every Monday and Thursday. Yeah. Yeah. Thanks so much for listening to the Canadian Investor Podcast, folks. We really appreciate you. We are here Mondays and Thursdays, as I alluded to. This is our time to talk frameworks. And this is the good content that's on thecanadianinvestorpodcast.com.

So all the stats that are just rifling off from PBS and BBC and global news on alcohol consumption, for example, it's all there. You can read it yourself. So go ahead and check that out. If you have not given the show a five-star rating, we have had an absolute onslaught of five-star wonderful reviews here, primarily from Spotify. You hit that five-star button, hit the follow button. And then on Apple Podcasts, you hit subscribe and you hit the five-star button. And if you have 13 seconds to write a little review, we've done hundreds and hundreds and hundreds of hours of research and work for this podcast. Now, this is episode 261. So we put in all that effort. The podcast is free. All you ask is 13 seconds of your time. You write a little review, say what you like about the show, what you'd like to see more of, hit that five-star

button, and you've paid for 261 episodes of content with 13 seconds of your life. So we appreciate if you do that on Apple Podcasts. We'll see you in a few days. Take care. Bye-bye. 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.