The Canadian Investor - Will the US and Canada Ban TikTok ?

Episode Date: March 30, 2023

In this episode, we look at the recent Fed decision to raise interest rates by 25bps and what Jerome Powell had to say about the banking crisis and future rate hikes. We then look at the recent congressional hearing of TikTok's CEO and if the US is gearing up to ban TikTok. We also discuss the short report on Block and the Lumine Group spinoff from Constellation Software.  Symbols of stocks discussed: CSU.TO, SQ, LMN.V, META, GOOG 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. Register for ShakepaySee 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 Bélanger. The Canadian Investor Podcast. Today is Tuesday, March 28th. My name is Braden Dennis, as always joined by the very versatile Simon Bélanger. How are you doing, buddy? I am pumped for this show. We got lots on the docket we got

an update from uh mr jay pow we're going to talk about tiktok maybe getting the boot uh the hindenburg short report on block and then we will uh round it out with uh the lumine group uh everything good with you how are you doing bro yeah i'm doing pretty well i'm excited to uh to record and it seems like you know uh with uh what's happening with the banks and all that there's always something going on so we're getting some some good and consistent content with you know a little help from short sellers too yeah a little help from our friends at uh hindenburg all right so uh mr j pow Bazooka Man, speaks. What was the latest move from the Fed?

Yeah, so I think it was mostly expected. The market was pricing it at around 75% chance that they would raise the rate by 25 basis points. So this is what they ended up doing. Now, obviously, that changed a little bit because of the banking crisis that's happened the last since mid-March. Here are some takeaways I got from watching his press conference, because that's what really people were focusing on is what is he going to say? So the recent banking crisis in some banks will likely lead to the tightening of credit, which would slow down the economy more than anticipated. They now anticipate that ongoing rate increases will no longer be required and that some additional increases may be appropriate. And he did zero in on ongoing versus additional increases may be appropriate.

So you're really looking at the language and that's what people look at is what is he saying? And he made a point of saying that as well during the press conference. And they'll be assessing future rate hikes based on data from the labor market, inflation and credit, the overall credit availability in the economy. So those were kind of the big points that I got from the press conference. Now, if we go back on the Wednesday, that infamous call where the management from Silicon Valley Bank, SVB. So that Wednesday, Powell was speaking in front of Congress. And based on that speech, the market actually started pricing in 75% plus change that the Fed would rate

hikes by 50 basis points and then the rest 25 basis points. So that was funny because, well, not necessarily funny, but that happened the day before that call or the same day, right? Earlier in the day. Now, following the collapse of SVB, the CME Fed watch tool, and I encourage anyone interested in seeing what the market is kind of pricing it you can just google that you'll find it it started to flip those odds and then basically remove any possibility of a 50 basis point hike and a small chance of a pause now the fed is really

in a tough a really tough spot right here they have a tight rope to walk. If it continues rising rates quickly to quell inflation, more things could break in the financial system. If they cut rates, then it might make inflation worse. So it would also be a signal to the market that the Fed is extremely concerned with the financial stability of banks if they decide to cut rates and obviously more specifically to regional banks. Now, the Fed has a choice between chaos in the financial markets or high inflation. So that's essentially what, you know, that tightrope they need to do. And I think that with the 25 basis point increase, they're trying to convey confidence in their new program,

the bank term funding program, BTFP, that they put to backstop those regional banks. So I've been listening to a lot of people that know a lot more than I do. And essentially, they're trying to, you know, they put that program in place to be able to continue at least slowly keep rates at this level or increase them ever so slightly um any questions any comments before i just finish i wrap up here no i i think that you touched on this well was like the consensus moved to 25 bps like almost immediately after what was that thursday friday of that week with SVB? Yeah. Yeah, exactly.

Yeah. So you had the speech where it kind of increased the 50 basis point chance from Jerome Powell on the Wednesday during the day. And then everything happened with SVB and it kind of flipped on his head, which was really crazy. You would check the tool almost every day and it would like change pretty significantly where usually as you get closer to the federal decision it actually kind of levels out and the market has a pretty

good idea of what they'll do and they're usually right in terms of you know the expectation especially if you're within one week have you seen the data visualization that I've seen go around the internet, make its rounds in virality that shows what the consensus path of rates was moving forward and how it just keeps changing like every month and the array of expectations, consensus moved so, so much in the last like, I don't want to say like 16 months-ish. It's baffling to see. It's why you go never go full macro. And it's a nice visualization of no one knows what's going to happen, right? And don't forget that. I think so many self-directed investors think that they are missing some informational edge when it comes to macro. And I just don't think that that's true at all. And so that visualization is a healthy reminder. Yeah, exactly. And I mean,

macro is extremely complicated. There's a lot of moving parts, even the best at it. And actually, the best at it are really, you know, they get into the weeds of things. But even then, they'll never predict something, you know, try to pinpoint it. I've talked about this before, they'll talk in probabilities of things happening. And they'll give some pretty wide ranges so that's that's the way i kind of see it and i was um i was texting with dan from our real estate show and uh he's read the book but um and handling i think um one of the books from oh man i i forget the name but um ray dahlia i'm doing oh yeah, Ray Dalio. Yeah, exactly. Ray Dalio. Sorry, I had the brain cramp.

So just to, about the big debt cycles, and I'm a quarter of the way through, and it's kind of crazy. It was, he wrote that book five years ago, and a lot of the stuff he's talking about is happening right now. So you're listening. Is it the one with big debt crises?

Yeah, that's it. Yeah, the big debt crises. So it's really interesting, especially with what we're seeing uh but he has a good approach right i think it's just um you know he puts the data out there but it's kind of freaky listening to it and a lot of the stuff we're seeing happen is actually talks about in the book but to get back at jerome powell what was really almost funny because um while jerome powell was having his press conference about the rate hike, Janet Yellen, the U.S. Secretary of Treasury, was doing a congressional hearing in front of the Senate.

And she was essentially saying that the U.S. was not considering backing all of the uninsured U.S. bank deposits, while Powell was essentially implying the opposite. deposit, while Powell was essentially implying the opposite. Now, a day later, she kind of changed, she backtracked a little bit and said that they would be prepared to take further action to ensure deposits would be safe. I just found that really funny because at the same time, I know they're separate, the Fed's supposed to be independent. I think that's debatable. But the fact that they wouldn't have at least, you know, have a similar message on that, it's a bit of a head scratcher, especially the two, I would say, two of the most high profile people when it comes to the bank stability right now. 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'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 TikTok. Have you been following this story much at all? I have, yeah, a little bit um i didn't watch the congressional hearing it was five and a half hours so yeah but i heard like you know little bits and pieces and uh anyways i can give my thoughts after that i the only thing i watched was a couple of clips here and there and And I did read the entire opening statements, including the five minute opening statement from the CEO of TikTok. And I think he actually did a really phenomenal job. But that's a hard seat to sit in. My goodness, that is a tough seat.

All right. So is TikTok getting the boot from the United States and maybe the Western world? That is the question on everyone's mind. And I know we're talking lots of US macro and politics here, but the Canadian Investor Podcast, you know, we're going to talk Canadian content later as well. I'm going to talk about the Lumine Group, the Constellation spinoff, but TikTok. All right. constellation spinoff but tick tock all right um dude did i ever tell you about the uh the story of when i reserved the canadian investor podcast name on tick tock was i telling you about this or no uh i recall your girlfriend helping doing that but that's exactly yeah okay okay exactly okay so for the listeners my girlfriend was like are you guys thinking of i don't know eating lunch or something she's like are you thinking of doing tiktok like podcast clips and i was like i feel like we should you know like grow market the show like that's the that's the new thing to do um but i've never had tiktok i've never had it downloaded. I don't know how to make a TikTok. Like, I'm such a noob here. And, you know, I'm on my phone and I'm like, hey, let's do this. So I was like, all right, let's download it. I'll reserve the podcast name because I want someone

to take it. And then I'll delete the app, like in and out, you know, I'm in and I'm out. And right away, you know, you download the app, you're, you're brought into this like engaging video clip, endless scroll, right? And everyone knows what I'm talking about. They know I'm a dude, they know my age, which, you know, I gave them whatever, who cares? But if you know my Instagram feed, it is NFL clips, news, hockey, finance, gym bros, Tiger Woods, golf, swing clips, more golf, cute dogs, and attractive women playing golf. I don't make the rules. This is just what, this is what's on my feed. All right. And the first 10 videos were like basically that in order. And I'm like, okay, so something like something's up, right?

Like they have the data on me, which, you know, no one's, no one's surprised by that. Like, you're not surprised by that really. Are you you? Like, all the apps are doing this. And I don't think that's a coincidence. So, anyways, I stuck to the plan. Let me put my tinfoil hat there listening to you, Brayden. Dude, like, you can't make that up. No, no, no, I know. Especially when you join the app, like, you'd think it would take some time for them to.

Some time. Yeah, but they probably have something where it's almost you know they have you like based on your age and everything the fact that you're a male like they give they give you what will work most of the time and then they probably just tweak it yeah yeah and of course i'm exaggerating because here i am i've now scrolled through like i've ate like all my entire sandwich and i've scrolled through so i'm i'm picking of course they're showing me like what's viral on the app like you know it's not just that in order so of course i'm i'm exaggerating a little bit but not a lot um and so anyways are you a ccp operative right yeah i see that i'm a ccp operative operating the canadian investor podcast um biden's like speech the other day he called canada china i don't know if you saw that oh really like had

like a freudian slip and uh i don't know how freudian is okay i forgot ray dalio's name you know yeah exactly exactly you forgot I literally like was listening to the book like 10 minutes before recording dude that guy writes a lot of books like who's writing all these books for him because they're like they're not short right like the no principles book is like I don't know like 600 pages or something I don't know I think he still does that it's just it's his team that does the research. And then from there, obviously, he'll I that's my impression. Maybe I'm wrong.

I think he writes it. But obviously, the extensive research is done by a group that works for him. Right. Because Ray Dalio himself and the author is a big marketing engine for his hedge fund, Bridgewater. So these these are connected. Anyways, TikTok, what's going to happen here? In late February, the White House gave government agencies 30 days to ensure they do not have Chinese-owned app TikTok on federal devices and systems. Europe and Canada

have also done a very similar thing. They've announced a ban on government-issued devices, saying Canada said it is, quote-unquote, an unacceptable level of risk to privacy and security. Okay. Last week, TikTok CEO Shu-Zi Chu, who is a Singaporean guy, I had never heard him speak before, but I did listen to his opening remarks. I think he did a good job. He's a Singaporean. He did university in the United Kingdom, and then he's lived in the US ever since. He met his wife here in the US. He did the whole thing like, hey, like, I'm American. I'm sitting here in front of you Americans as an American.

He did that whole thing. So that was probably pretty smart. And so this was before the House of Energy and Commerce Committee. So this went exactly as you would expect. It is the classic technology CEO in front of the US government. classic technology CEO in front of the US government, you have a list of reasonable questions, some hard questions, some easy questions, and some absolutely out to lunch questions. There has to be some sort of minimum level of technology before you enter that room. You'd think, is that not a fair

thing they should have to implement like you have to have the base level of knowledge of like what is a smartphone what is the internet i'm not kidding though you're not kidding i know i know it's hard to watch and you know what it? It's a waste of a lot of time. When a lot of these government employees don't have a base level of homework done before they're having the CEO testify in front of you about a very important geopolitical issue. That's just not acceptable, in my opinion, like the level of some of the questions that are like, um, that's just not acceptable in my opinion. Like the level of some of the questions that are like,

ha, does your, does your app use internet? That was one of the questions. It was like, is it connecting to my internet? I was like, oh,

okay. Uh, you, you just lost the talking. Yeah. It's like, let me put your phone in airplane mode and let me know if the app works. Yeah.

Perfect. let me put your phone in airplane mode and let me know if the app works yeah perfect he just walks over there to like the the stand he's like here slide down press that airplane mode try to load tiktok um yeah so that's how it went no no can they ban it uh the answer is I'm not sure. I'm not a lawyer. And, of course, Apple, Google have to be involved here in a major way, right? They're the gatekeeper of these major app stores. So a lot of big tech's involved here. Mark Zuckerberg's just licking his chops, isn't he? He's just hoping they… Yeah, I think Google, too, because YouTube and YouTube Shorts would be… licking his chops isn't he he's just well google he's just hoping they yeah i think google because youtube and youtube shorts would be uh i think it would be true obviously i think it would be meta and you are google that would benefit the most because then maybe snap as a as a third kind of

benefactor but yeah those yeah they would definitely benefit the most and it also makes you wonder even if they force them to sell it why would they even pay a decent price like at that point yeah no you don't they probably would say well it's a forced sell yeah exactly um yeah and then there's all the anti-competitive issues that they've had with big tech so there's a whole lot of questions whichever way they go with this so yeah the the answer is i'm not sure and no one is for sure it is still a lot up in the air legality wise can they do it how swift can they do it uh i'm not sure now there's some things to think about there there's legal amendment rights in the U.S. they'll run up against. And also risking, you know, saying China, the way you guys act, we don't agree with.

And we're going to do the same thing by blocking one of your technology companies in our country the same way they do that to U S companies. Like you can't go on Facebook in China. You can't go on Instagram. You can't go on even Google. Google is not there. No. Yeah. You got to use,

uh, what is it? Baidu? Uh, yeah, it is Baidu. Yeah. You got to use that or,

uh, WeChat basically like the super app from Tencent. And so they risk looking extremely hypocritical, for one. But is that a point of contention? I'm not sure. I don't think so. So this hearing was five and a half hours of bashing TikTok, grilling the CEO, political theater.

theater. And what I think is, this is more about US versus China than anything else. TikTok is becoming a prop of geopolitical tension in my eyes. And it's an easy one to draw on because it has so much influence and so much data, ideally, in their eyes, right? So the CEO has been right to call out as well. US social media companies have been anything but angels in data privacy. Look no further than Facebook and Cambridge Analytica, engaging in building maliciously addictive algorithms to maximize engagement. And so from that perspective, he's right. But two wrongs don't make a right here. And I think it's fair to say most people don't want their data being harvested to the CCP. Now, I don't know where to see where I sit here as an individual. I'm not on tech talks. I could I could care two shits. We live just fine without it. And'll live just fine if it's gone.

It will certainly disrupt the ads business. Creators who make money doing this, who market themselves, business who market themselves. But if the application is as invasive as people are saying it is, then yes, something needs to be done. Let's see what happens i i do believe if i had to bet money that there's a forced sale or or full outright ban uh to go down i i think that it will happen and and yeah you can just see zuck licking his chops right now he's loving this yeah and it's also kind of making people forget a little bit about big tech right i think while they're focusing on that because there's been a lot of focus on big tech, right? I think while they're focusing on that, because there'd been a lot of focus on big tech

and how influential they had become in the last, you know, decade or so. You just see Microsoft in the back. They're like, so can we acquire Activision Blizzard? They're like, they just like sit in the corner. Just sign this piece of paper, we'll be gone. They're like, shut up, Microsoft. We're talking about TikTok right now. Yeah, and I think you're totally right.

I mean, I think it's a low-hanging fruit when it comes to almost what the CCP stands for. I'm not saying it's right or wrong, but I think if there's one thing in the U.S., even though they're extremely polarized, obviously, whether it's Democrat or Republican, there's less and less bipartisan cooperation. And this is one thing that Democrats and Republicans are kind of unified on when it comes to most things CCP. They tend to agree on it. So I know there's some nuances a little bit, but unfortunately, that's the reality, whether it's good or bad. mean it's hard to say i personally would not want to see like an escalation because you're talking about um two superpowers the u.s and china whether

we want to admit it or not they are the two superpowers in the world and you know countries will if there's a conflict between the two um there's gonna be sides that'll you know some countries will go on the side of the u. you know some countries will go on the side of the u.s and some countries will go on the side of china we can probably guess some of those obviously canada you know the western nations clearly we know which side they would go on but there are some other countries like you know i don't know brazil politics well enough but i don't know which way they would go so that's um that it's just a lot of things that come up in terms of geopolitics well enough but i don't know which way they would go so that's um that it's just a lot of things that come up in terms of geopolitics where i'm not an expert but yeah it seems like the

u.s uh democrats and republicans don't agree on much but they tend to agree on this stuff that's right yeah you got a good point there's like a few things that everyone can agree on in that room. And this is certainly one of them. And it's become a prop for geopolitical tensions, but with good reason. I mean, if it is as in, I don't know. Like, and no one knows. That's the problem. Like the technology in ByteDance,

the owner of TikTok, it's's proprietary like their algorithm that they serve up to their users is a trade secret um it is not widely out there the same way instagrams is and youtubes is it's their technology um and so it is a full trade secret that does not need to be unveiled yeah so i don't know where this goes no i'm sure and a force cell too i i mean i'm not an expert and i'm sure there's people that understand it better than i do but i mean i it feels like it would be quite the undertaking to for whichever company would acquire that because they would have to most likely agree with the u.s that they first of all the data would be stored with the US that they, first of all, the data would be stored in the US and then vet all the code to make sure that's no, like I said,

I'm not an expert, but no backdoors or anything still feeding in China. If there is, I don't know if there is, but that would clearly be a concern. Yeah. As do-it-yourself investors we want to keep our fees low that's why simone and i have been using questrade as our online broker for so many years now questrade is canada's number one rated online broker by money sense 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 this short report that uh definitely took a chunk out of the market to the market cap of block aka square and certainly a couple maybe a couple zeros off jack dorsey's uh net worth yeah and definitely taking a big shot at jack dorsey himself to a few uh for interested here. So Hindenburg Research, they produce a short report on Block. It was pretty scathing. I'll just say that. And I'll talk about the big points here. It's quite a lengthy report. So for those not familiar with Hindenburg Research, they are the same group that released a short report on Adani Group, the massive conglomerate

located in India. Adani, since the short report, is down more than 50%, although it seems to have stabilized a little bit. It was in free fall for a while. Now, it seems to have leveled off a little bit. Now, the block report is quite something. It'll sum it up with, you know, they do a decent job of giving all the kind of points that they're, you know, alleging or saying that is going on for their thesis. But even that was like five pages. It's kind of funny. It looks like the summary is still quite long.

But here are the main takeaways from my perspective. So first, they allege that there is widespread fraud on the Cash App, one of the bright spots of Square and that i know and square and its suit of offerings the app was used they claimed that the app was used by individual to receive multiple stimulus payments pay for contract killers yes you heard me correctly pay for contract killers for sex trafficking hiring hit men on the square app that's pretty much what it's word for word what they're saying. They also interviewed former employees who say that 40 to 75 percent of accounts were either fake, involved in fraud or multiple accounts tied to one individual. Side note here, when you interview former employees, sometimes they also have a grudge against the organization.

So you have to take that, you know, I'm not saying it's not true. I'm just trying to- It's like Glassdoor reviews of the CEO after they've been fired. Exactly. So I'm just saying, you know, you have to,

I like to look at both sides whenever I look at something. Now they said that they are not following AML regulations. AML is anti-money laundering, which all regulated financial institutions have to follow. They said there are multiple accounts with the names Donald Trump, Jack Dorsey, and even Elon Musk. To prove their point, they created an account with the name Donald Trump and received a cash card in the mail under that name. Oh, my God.

Are you kidding me? No, I'm not. So they're charging more interchange fees than what is legally allowed by law based on their assets. And they are saying they're going through, essentially trying to bypass that by going through some smaller banks for the payments. The after pay acquisition was a flop

and its losses are growing. No surprise here. I think we talked about that. And actually, you know, people that have been listening to the podcast for a while know I used to own Square or Block, sold it. I think it's been like probably around six months now. And one of the big reasons was I just didn't get the acquisition of after pay it just was a big overpay with for something that's just not that's easily uh replicated and so many competitors in this buy now pay later thing and and there's also i think some you know they're playing the gray legal zone as well with those kind of services because there are rules in terms in many countries, including Canada and the US, where you're only allowed to charge a certain amount of interest. You can't go above a certain amount. that the service was designed to avoid land rules by charging fees for late payments,

which can be as high as 289% if calculated on an APR basis. So that's essentially the way these services work is it's an interest-free loan that you do over, you know, what, three, four months, installments, whatever it is. And then if you don't pay on time then that's when the fees start kicking in so that's how they make the money they finish by saying do these installments zero percent interest free but if you miss a payment my friend the apr is yeah it isn't not beyond the legal bounds what you can charge in in ontario like i thought it was like 49 some of these payday lenders do yeah i don't know this is crazy yeah and they say up to 289 so i don't know if that

varies by jurisdiction by you know the value or who the customer is so i i really don't i've never used any of those by now worry later um type of type of thing so i it's just not in my niche i don't like to buy stuff on credit i i use my credit card and i pay it right away it's basically just a way to get points like that's that's how i do it um but anyways that's something it's definitely a gray zone especially if they're going over that you know, limit in terms of lender rules for specific countries. I mean, they may say it's fees, but that could definitely go to court. I'm not a lawyer, but I could see, you know, people suing them for that. Now, the last two points here, they finished by saying the company is overvalued.

They argued that it is priced like a profitable growth company, which is not, although they do turn out some free cash flow, but I'm sure they're talking about earnings here. And even before factoring their findings, they believe that it has 65 to 75% downside. So those are the big lines. I encourage anyone, it's readily available to anyone who wants to have a look at it. It's a pretty scathing report. There's a lot of things they mention, a lot of allegations. So I don't know whether they're all true or not, but that's what they put out. This report, it came out, obviously, block stock got absolutely hammered uh did you see that they posted that they made and made a youtube video compiling all of the times that rappers are talking about using cash

app for drugs sex and like you know gang gang murder stuff oh yeah and it's part of their report yeah yeah they put it in there i was just like oh man like these guys are having fun with this stuff and you know what i don't think that has any correlation but what it does do is it helps tell their tell their story and their narrative with pop culture and like the there's like a realness aspect to that, to having that in there. It's real. And it's showing the screenshots of there being seven Elon Musks and 87 Jack Dorseys on the Cash App. Don't quote me on those numbers, but they have some screenshots of that in the report. And you know what? I don't know. I don't know if any of this is legitimate, true. I don't have the cash app. I think it's just a US thing. But what I can say is absolutely,

this has been a capital allocation disaster since the second they acquired Afterpay. I mean, was it 29 billion in cash and stock something like that was ridiculous i mean uh probably the worst acquisition the pandemic uh following teledoc and levango yeah yeah but teledoc levango and after pay i mean like come on this is who in their right mind would have thought that it was worth $29 billion at the time? And you and I scratch our heads. Now, you know what? You should have known that this was going to happen.

Have you seen their investor relations website with all of the executives on a block? I've seen that. I have a screenshot of it here on the doc. That's got to be the cringiest thing I've ever seen. The most useless, questionable rebranding ever was Square to Block. We're going to look back and we're going to go, oh, interest rates were way too low. You know how we know?

Because Square changed their name to Block for no reason. Jack was bored after he left Twitter, basically, it seems to me. Anyways, this is the Block response. I wanted to include this in here as well. We intend to work with the SEC and explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about our cash app business today. Hindenburg is known for these types of attacks, which are designed solely to allow short sellers to profit from a declined stock price. We have reviewed the full report in the context of our own data and believe it's designed to deceive and confuse investors. We are a highly regulated

public company with regular disclosures and are confident in our products reporting compliance and controls. We will not be distracted by typical short seller tactics. Now this was a lot shorter and a lot better than a Donnie's 200 page response because a 200 page response to a short seller is 1 million percent something someone would do who's guilty. You know, like this quick response, this is madness. They're just trying to make money off us is a way better response to a short seller than the Adani 200 page report that they somehow spin up like the next day. anyone who already kind of had that on the ready is probably a fraudster and i called them out of being fraudsters well before that

short report even came out so uh let's start the brado short uh short seller group yeah and i mean i think it they're always there tends to be two camps right there tends to be camps that hate short sellers and then people that think they play a really important role in the market. And I'm kind of in the middle, I would say. I think there are short sellers that do play an important price discovery role in the market. Wait, so you have a balanced and nuanced opinion on something in 2023? What the dude? What's wrong with you yeah i think look i think there's definitely some sorts short sellers that have practices that are eyebrow raising where you know clearly they have an incentive for the stock to go down so they could spew out you know some you

know borderline you know true or kind of twist the facts to get the outcome that they want. But I also know that there's been short sellers who have literally uncovered frauds. And without them, these frauds could have been ongoing for much longer and cause even more pain and damage to to other to other people. So I think it's somewhere in between whether I don't know all the regulation that's involved with short sellers. Maybe there just needs to be a little bit more transparency just because some of these reports, some are well done and I think more legitimate than others. But some, you know, you just it's it's a, yeah, it's a little hard to take seriously, yet they tend to accomplish what they want with tanking the stock price of the company they're short on. It is a method that brings out a group of people who are looking to profit from this.

Like, I don't know how to say that more eloquently. It's going to bring a bunch of people with bad intentions if the market allows this to exist. But it also needs to exist. And that's why it's difficult to have, that's why I said, like, you have a balanced and nuanced opinion on this. Because yes, I think both of us can agree on that. It is an important actor and mechanism in a healthy financial market that these people exist, but it is going to naturally bring Brad actors along with it. Luckily, the guys and girls who are short sellers who just spew bullshit and don't have a good reputation can't move the stock very much no exactly versus ones that have good reputation they can move the stock and so i

think again that's the market regulating it um and that's a good thing. All right, let's talk about Lumine Group, which has now began trading on the TSX Venture. So finally, last Friday, so now three business days ago, Group of Constellation Software has spun off and now begun trading on the TSX venture called Lumine, which is under ticker LMN.V. I think so. Let me verify that. You're the consolation expert here. LMN.V. Yes, I am right.

LMN.V. I don't want to give bad info here. And this is now their second spin co that trades on the Toronto Stock Exchange venture. The first one was Topicus, and now we have Lumine Group. The shareholders of Constellation received three Lumine shares for every CSU share held. They debuted at a high of $18. They finished Friday at $16.75.

Today, it's around $15-ish. So it's definitely come down a little bit from that $18 price. The market's still just trying to find where they should trade because there's limited information right now. So let's use the Friday at the close number of $16.75. This represents $4.2 billion in market cap company, which is quite significant. Every financial data website out there, we don't even have it on Stratosphere yet because we're trying to get the data right because everyone has it wrong, showing the wrong share count.

Understandably, it's a bit of a gray area. And from, at a glance from the investment banks, which I had to research through, they had the right share count. And BMO Capital Markets has it at pro forma revenue for calendar year 2022 at 468 million, and EBIT of roughly US dollars 130 million. People are wondering, what is this company? That's cool, but what do they do? It is a perfect comp to EngHouse, the Canadian serial acquirer of communication software, interactive communication software and telco type software. And I used to talk about Enchouse quite a lot until I realized CS users are much, much better acquirer. And I basically switched entirely. And funnily enough, this spin co is almost double and chouse's market cap uh today so according to rbc estimates this

trades at a slight premium to constellation and a slight discount to topic is given organic growth rates are basically sandwiched in between them in the middle so makes complete sense to me yeah i mean i don't have too much to to add here i mean you know it much better than i do i own consolation through a fund that i have with my dc pension um but it's just you know it's a top 10 holding for that fund but it's not a used position for for me overall one share of a global index fund and just say i own i'm just going to walk by. Own everything. Yeah. You see that company? I own it. Hey. See that company? You do.

I own it too. Yeah. The only difference is BlackRock or Vanguard or whoever the asset manager is. They're the ones that make all the decisions and the votes. So, yeah. Yeah. It's been a corporate governance nightmare, but that's a topic for another day. Thanks for listening to the podcast today, folks. That is our Thursday release. Thursday releases is earnings and news. Lots

of news today. Is TikTok going to be canceled? I think that it'll come up again on the podcast with one decision one way or another or updates along the way. And then the Monday recordings are our thoughts, our frameworks, investor frameworks. And a lot of that content is now on our website too, thecanadianinvestorpodcast.com. You will see a link there, not only to the show notes, but join tci.com where you can support the show and see our portfolio updates. So today's the 28th. This is coming out on the, what day will that be? The 30th? Yeah. Yeah. And so that means when you wake up on Monday morning of the following week, after you listen to this, our updates on jointtci.com will be available for our portfolio updates. So you'll see what Simone and I are doing in our individual portfolios.

available for our portfolio updates. So you'll see what Simone and I are doing in our individual portfolios. And lastly, there is a link to stratosphere.io, which is the best financial data analytics software that Simone is an investor in and I am the co-founder of. So go ahead and check that out, stratosphere.io. 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. 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.