Berkshire’s Record Cash Pile and Retirement Income Accounts

[00:00:00] [SPEAKER_01]: This is the Canadian Investor where you take control of your own portfolio and gain the confidence

[00:00:07] [SPEAKER_01]: you need to succeed in the markets.

[00:00:10] [SPEAKER_01]: Hosted by Braden Dennis and Simon Belanger.

[00:00:14] [SPEAKER_02]: The Canadian Investor podcast, welcome into the show.

[00:00:19] [SPEAKER_02]: My name is Braden Dennis as always joined by the stellar Simon Belanger.

[00:00:25] [SPEAKER_02]: Let's start with a game.

[00:00:27] [SPEAKER_02]: You know how I like to do this.

[00:00:28] [SPEAKER_02]: Yeah.

[00:00:29] [SPEAKER_02]: Keep you on your toes.

[00:00:30] [SPEAKER_02]: I've got a puzzle for you hot out of the gate year.

[00:00:33] [SPEAKER_02]: Are you ready?

[00:00:35] [SPEAKER_00]: Yeah, go for it.

[00:00:36] [SPEAKER_02]: What do these groups of companies have in common?

[00:00:40] [SPEAKER_02]: Okay, so I'm going to give you three baskets of companies and then you can try to weave

[00:00:46] [SPEAKER_02]: them together like what is what basket one have together what is basket two have together

[00:00:51] [SPEAKER_02]: what is basket three have together okay and then is there a story that connects

[00:00:55] [SPEAKER_02]: them.

[00:00:55] [SPEAKER_00]: Okay, I didn't know I had to study for this episode.

[00:00:58] [SPEAKER_00]: Yes, yeah.

[00:01:00] [SPEAKER_02]: You're being graded the first basket Mercedes Benz BMW GM General Motors Ford Volkswagen.

[00:01:12] [SPEAKER_02]: Okay, that's basket one.

[00:01:14] [SPEAKER_00]: Okay.

[00:01:14] [SPEAKER_02]: Basket two is Spotify, Disney, Paramount and Warner Bros.

[00:01:22] [SPEAKER_02]: Okay, that's basket two.

[00:01:24] [SPEAKER_02]: Basket three just makes up of two Canadian banks, RBC and TD Bank.

[00:01:31] [SPEAKER_00]: Okay.

[00:01:33] [SPEAKER_02]: These are the three baskets.

[00:01:35] [SPEAKER_02]: What do they have in common between them?

[00:01:38] [SPEAKER_02]: What do they have common across all three baskets?

[00:01:41] [SPEAKER_00]: Okay, so I'm going to go with

[00:01:44] [SPEAKER_00]: the first one obviously their auto manufacturers.

[00:01:50] [SPEAKER_00]: Correct.

[00:01:50] [SPEAKER_00]: I would say more kind of legacy auto manufacturers if I had to put it that have been around for

[00:01:59] [SPEAKER_00]: quite some time.

[00:02:01] [SPEAKER_00]: Yep, yep, that's right.

[00:02:03] [SPEAKER_00]: Okay, those are what comes to mind.

[00:02:05] [SPEAKER_00]: The second group with Spotify, Disney, Paramount, all of that I'm going to say is more like

[00:02:11] [SPEAKER_00]: streaming services.

[00:02:12] [SPEAKER_00]: Yep, correct.

[00:02:13] [SPEAKER_00]: That's the thing that comes to mind and then the last one I'll just say they're

[00:02:17] [SPEAKER_00]: the only two Canadian banks that are G-Sibs so globally, systematically.

[00:02:22] [SPEAKER_00]: You know what I mean?

[00:02:24] [SPEAKER_00]: Important banks.

[00:02:26] [SPEAKER_00]: G-Sibs.

[00:02:27] [SPEAKER_02]: See, you're a really smart guy and you're able to weave those together.

[00:02:33] [SPEAKER_02]: But you know what?

[00:02:34] [SPEAKER_02]: You're wrong.

[00:02:35] [SPEAKER_00]: Yeah, I was going to say it's not what you wanted to hear.

[00:02:37] [SPEAKER_02]: That's okay.

[00:02:39] [SPEAKER_02]: All three baskets, no matter which way you slice them.

[00:02:43] [SPEAKER_02]: If you add up the market caps of all of the baskets, you get a amount smaller than the

[00:02:53] [SPEAKER_02]: Berkshire Hathaway cash pile.

[00:02:56] [SPEAKER_02]: That's very, yeah, yeah.

[00:02:59] [SPEAKER_02]: $277 billion sitting on their balance sheet and cash or short-term liquid investments.

[00:03:08] [SPEAKER_02]: Unbelievable.

[00:03:09] [SPEAKER_02]: It's just absolutely unbelievable.

[00:03:12] [SPEAKER_02]: They've sold a bunch more of Apple here and I know this was an impossible riddle to solve

[00:03:18] [SPEAKER_02]: here but that's the fun here on the podcast.

[00:03:21] [SPEAKER_00]: So how much do they have again?

[00:03:24] [SPEAKER_02]: $277 billion.

[00:03:25] [SPEAKER_00]: Oh yeah, that's right.

[00:03:26] [SPEAKER_00]: Okay.

[00:03:27] [SPEAKER_00]: Yeah, I was pulling it up here on finchad.io.

[00:03:31] [SPEAKER_00]: It's kind of crazy and I've definitely been looking into this quite a little bit

[00:03:37] [SPEAKER_00]: as well.

[00:03:37] [SPEAKER_00]: And it's, well first of all I think people get too worked up with Berkshire adding some

[00:03:45] [SPEAKER_00]: money on their like having a lot of cash on their balance sheet because if you look at

[00:03:49] [SPEAKER_00]: their cash on their balance sheet, especially if I look on the kind of annual basis over

[00:03:54] [SPEAKER_00]: time, for the most part it kind of increases gradually.

[00:03:58] [SPEAKER_00]: You can even make a case that it kind of creases a little bit with inflation just

[00:04:02] [SPEAKER_00]: because they have such a big insurance business.

[00:04:05] [SPEAKER_00]: They need to have a decent amount of cash on the balance sheet but the most recent one

[00:04:09] [SPEAKER_00]: really took a lot of people by surprise because the increase was significantly more than traditionally

[00:04:16] [SPEAKER_00]: it has been for Berkshire.

[00:04:19] [SPEAKER_00]: Of course sometimes it goes down if they're making some pretty big purchases and usually

[00:04:23] [SPEAKER_00]: that's because he's being very strategic but this most recent one especially selling

[00:04:27] [SPEAKER_00]: of more Apple shares, I think it's an indicator that Buffett is really seeing the

[00:04:34] [SPEAKER_00]: markets as over value and I think he uses this, what is it the US total market cap versus

[00:04:39] [SPEAKER_00]: GDP is kind of the Buffett indicator and it's sky high right now.

[00:04:44] [SPEAKER_00]: I think it's one of the highest level it's ever been so that would make a whole lot

[00:04:48] [SPEAKER_00]: of sense why he's keeping a lot of cash on the balance sheet.

[00:04:52] [SPEAKER_02]: Yeah it's an astounding amount of cash.

[00:04:54] [SPEAKER_02]: I think most people kind of look at Berkshire, the conglomerate and you look at it

[00:05:01] [SPEAKER_02]: and you go okay you're probably going to get market returns or better just because they have

[00:05:05] [SPEAKER_02]: a great group of businesses, a bunch of regulated assets that have amazing contracts whether

[00:05:14] [SPEAKER_02]: it's utilities or railroads or the insurance businesses.

[00:05:18] [SPEAKER_02]: You're getting a lot of regulated return businesses inside of it and then of course

[00:05:24] [SPEAKER_02]: the public market portfolio you have one of the best of all time if not the number

[00:05:30] [SPEAKER_02]: one goat of all time managing it and so you think okay probably a pretty good bet and of

[00:05:38] [SPEAKER_02]: course it has been but this cash drag it's become such a sizable portion of the market

[00:05:45] [SPEAKER_02]: cap like the market cap is just under a trillion and you have 277 in basically cash.

[00:05:52] [SPEAKER_02]: You can get a pretty good return on it now luckily thankfully.

[00:05:56] [SPEAKER_00]: Yeah I mean you know my portfolio and I've been pretty vocal in the podcast now for over a year

[00:06:02] [SPEAKER_00]: is that I don't think there's anything wrong with having some cash in your portfolio at

[00:06:07] [SPEAKER_00]: these rates especially if you're looking at US Treasury bills which is what Berkshire

[00:06:11] [SPEAKER_00]: I think most of it is US Treasury bills really short term and I don't know if we talked

[00:06:16] [SPEAKER_00]: about it on the podcast or was just chatting like that but if you're looking since the

[00:06:20] [SPEAKER_00]: start of the year denominator in Canadian dollar you're looking at about 7% returns if

[00:06:26] [SPEAKER_00]: you've been holding US Treasury bills with the combination of the interest rates that

[00:06:31] [SPEAKER_00]: you're getting or the coupon you're getting for the Treasury bill plus the depreciation

[00:06:37] [SPEAKER_00]: of the Canadian dollar versus the US dollars it's been I mean it's not a huge portion

[00:06:42] [SPEAKER_00]: of my portfolio it's around 10% but it's been like I'm not going to complete sure

[00:06:46] [SPEAKER_00]: I've trailed the market but also the flexibility it gives me if there are opportunities I think

[00:06:53] [SPEAKER_00]: that is worth a decent amount of returns as well that you're not getting.

[00:06:58] [SPEAKER_02]: Let's move on to your first segment here RIF and LIFS you got a couple examples to work

[00:07:06] [SPEAKER_02]: through here as well these are obviously accounts here in Canada that people might

[00:07:12] [SPEAKER_00]: be familiar with down the line. Yeah exactly so if you're American keep listening because

[00:07:17] [SPEAKER_00]: if you decide to move to Canada maybe you'll use them eventually but having said that so RIFs and

[00:07:23] [SPEAKER_00]: LIFS and I'll explain I'll do a bit of a refresher here because we have talked about it but must

[00:07:28] [SPEAKER_00]: have been a couple years ago the last time we talked about it and the reason I wanted to

[00:07:33] [SPEAKER_00]: talk about this is I recently helped my parents they've turned 71 last year so they had to

[00:07:40] [SPEAKER_00]: convert in December of last year their RSPs and they're locked in RSPs to RIFs and LIFS so I'll

[00:07:48] [SPEAKER_00]: explain a bit how it works and the experience of kind of helping them with that and some of the

[00:07:53] [SPEAKER_00]: things you learn as you're actually converting it. So a RIF which is our IF so it's a retirement

[00:07:59] [SPEAKER_00]: income fund or registered retirement income fund before age 71 you can withdraw RSPs whenever

[00:08:06] [SPEAKER_00]: you want but it adds to your taxable income but like I mentioned by December of the year in which

[00:08:12] [SPEAKER_00]: it reached 71 you have to convert your RSP to either a RIF or another income producing vehicle

[00:08:19] [SPEAKER_00]: could be like an annuity for example a quick note here doesn't have to be either or you can do a

[00:08:24] [SPEAKER_00]: combination of both as well and RIFs are for regular RSPs not for locked-in RSPs so that

[00:08:31] [SPEAKER_00]: would be the left I'll talk about that in a second here and once it's converted to RIF there is a

[00:08:36] [SPEAKER_00]: minimum percentage that you must withdraw every year but there is no maximum the minimum percentage

[00:08:42] [SPEAKER_00]: that you must withdraw is based on your age now for example at age 71 the minimum withdrawal is

[00:08:50] [SPEAKER_00]: 5.4% and once you hit 90 it is 20% so it does increase quite a bit the reason is the government

[00:08:58] [SPEAKER_00]: wants to get its taxes sooner or later so they force you to start withdrawing in retirement

[00:09:05] [SPEAKER_00]: and the percentage is calculated based on the value of the RIF as of December 31st of the previous

[00:09:11] [SPEAKER_00]: year so for someone who would have a RIF this year for example they had it last year as well

[00:09:17] [SPEAKER_00]: so the value as of December 31st will determine what is the minimum amount that you'll have to

[00:09:24] [SPEAKER_02]: withdraw this year I was just gonna say I don't know how helpful it would be because

[00:09:29] [SPEAKER_02]: the lira the locked-in retirement account is an account that we've talked about on this podcast

[00:09:35] [SPEAKER_02]: you know despite being at episode you know in the multiple hundreds have talked about very very

[00:09:40] [SPEAKER_02]: little and I've noticed of course this is very elementary stuff but I've noticed that some

[00:09:48] [SPEAKER_02]: folks mistake some characteristics of the lira on their RRSP around it being locked in you can't

[00:09:57] [SPEAKER_02]: early withdraw and like there's huge penalties and all this stuff of course there's tax

[00:10:01] [SPEAKER_02]: consequences but I don't know if it just might be helpful to just talk about the lira really

[00:10:07] [SPEAKER_02]: quick I think a lot of people are very familiar with the RSP moving to a RIF but what about

[00:10:14] [SPEAKER_02]: the lira when when do you get a lira I personally have a lira because I used to work for the government

[00:10:19] [SPEAKER_02]: and moved it over to self-directed lira should I don't know should we just do a little yeah yeah

[00:10:24] [SPEAKER_00]: so no that's great so I can I know these quite well so I can just talk about it like that yeah

[00:10:29] [SPEAKER_00]: so a lira it's a locked-in retirement account it's very similar to a locked-in RSP the main

[00:10:35] [SPEAKER_00]: difference between the two is a lira will be typically if you have a pension that's

[00:10:39] [SPEAKER_00]: provincially regulated so each province will kind of have their own set of rules regarding the the

[00:10:45] [SPEAKER_00]: liras but typically it'll be a pension plan that was registered with the province so that's why you

[00:10:51] [SPEAKER_00]: were with Ontario so that's why it's a lira I have a lira as well because when I was with the

[00:10:56] [SPEAKER_00]: city of Ottawa it was provincially legislated and then you have the locked-in RSP which would

[00:11:03] [SPEAKER_00]: be for pension plans that were with the federal legislation so for example if you have a pension

[00:11:09] [SPEAKER_00]: with an airline you would have a locked-in RSP with a big bank you would have a locked-in RSP

[00:11:15] [SPEAKER_00]: so they're very similar there's kind of small differences in terms of when you do convert it to

[00:11:21] [SPEAKER_00]: life income fund for example there's some variances of that and the life incomes fun is the lift so

[00:11:28] [SPEAKER_00]: it's essentially how you want to withdraw the money like you mentioned you alluded to

[00:11:32] [SPEAKER_00]: the lira and the locked-in RSP are locked in so you're not able to withdraw the funds until

[00:11:39] [SPEAKER_00]: you converted to a retirement vehicle or retirement income vehicle there are certain very kind of

[00:11:47] [SPEAKER_00]: special exceptions that you know I think if you have a shortened life expectancy I think you can get

[00:11:53] [SPEAKER_00]: potentially the funds a bit earlier they're very rare and they're very stringent as well

[00:11:58] [SPEAKER_00]: so you have to be able to prove in order to be able to kind of withdraw the funds or unlock

[00:12:03] [SPEAKER_00]: a certain portion of the funds before a certain age as well yeah okay helpful context not a lot

[00:12:09] [SPEAKER_02]: of people will have I don't know what percentage of the people listening this is relevant like a

[00:12:15] [SPEAKER_02]: lira is relevant to you and I both happen to have one but I don't know what percentage of

[00:12:20] [SPEAKER_02]: people would qualify but I wanted to touch on that because I have seen incorrectly people translate

[00:12:29] [SPEAKER_02]: some of the characteristics of the lira into their understanding of how RSPs work and that can be a

[00:12:36] [SPEAKER_02]: mistake tax planning in a major way in my view and around the flexibilities of what you're able

[00:12:42] [SPEAKER_00]: to do yeah exactly like the RSP gives you just a whole lot of flexibility that you don't have

[00:12:47] [SPEAKER_00]: with the lira I mean there are certain rules or both retirement accounts that are very similar

[00:12:52] [SPEAKER_00]: identical to both but again I think the withdrawal flexibility is one of the main differences I think

[00:12:58] [SPEAKER_00]: we've given this example before where let's say we have someone that goes on maternally for a year

[00:13:04] [SPEAKER_00]: and her income is much lower than it normally is and she has RSPs then you know it may be

[00:13:12] [SPEAKER_00]: worthwhile to look at potentially withdrawing some of those RSPs because you'll be at a much

[00:13:17] [SPEAKER_00]: lower tax bracket during that year for example so you can be kind of a bit more strategic with RSPs

[00:13:23] [SPEAKER_00]: without necessarily being at retirement prior to retirement you can kind of try to withdraw when

[00:13:29] [SPEAKER_00]: it's opportunistic especially if you think that those years you'll be at a lower tax bracket than

[00:13:34] [SPEAKER_00]: potentially even at retirement and so you could you know if you have a really low year in terms

[00:13:40] [SPEAKER_00]: of revenue you could you know supplement your revenues with that or even take the money get

[00:13:46] [SPEAKER_00]: taxed at a lower tax rate and put in your TFSA if you have room this is exactly what I did or I don't

[00:13:51] [SPEAKER_02]: know if you remember this like when I was just starting my company I had basic I went from making

[00:13:57] [SPEAKER_02]: you know good salary as an engineer to zero and that was very tax advantageous for me to

[00:14:05] [SPEAKER_00]: use my RSP yeah so there there's a lot more flexibility in terms of withdrawal but the

[00:14:11] [SPEAKER_00]: most important is it does add to your taxable income so I think that's that's what people need to

[00:14:17] [SPEAKER_00]: remember here to get back to the lift an easy way to remember lift and riff so an RSP starts with

[00:14:23] [SPEAKER_00]: our R so you have the riff and a life income fund is for lira or locked in RSP they both start

[00:14:30] [SPEAKER_00]: with the NL so you have the life income fund or the lift short that's associated with those

[00:14:35] [SPEAKER_00]: so that's just a little trick sometimes people kind of get confused between both of them

[00:14:40] [SPEAKER_00]: that's one trick I use when I first was getting started learning those several years ago and again

[00:14:46] [SPEAKER_00]: same thing by December of the year in which you turn 71 you have to convert these accounting to an

[00:14:51] [SPEAKER_00]: income producing vehicle however you can do it before then if you wish to do so it will vary

[00:14:57] [SPEAKER_00]: again depending on the legislation when you can convert it so keep that in mind a key difference

[00:15:03] [SPEAKER_00]: here is that you won't be able to start withdrawing funds from the locked in account

[00:15:06] [SPEAKER_00]: like I said until you convert it to a lift or another income producing vehicle so you could also buy an

[00:15:13] [SPEAKER_00]: annuity with it or a combination of boats so that's something for example that my parents did they

[00:15:19] [SPEAKER_00]: bought they use a part of it to buy an annuity and the rest they kept it in the lift and the

[00:15:24] [SPEAKER_00]: riff so that's something you can do as well another key difference is that the lift will

[00:15:29] [SPEAKER_00]: have a maximum but also sorry a minimum but also maximum withdrawal percentage

[00:15:34] [SPEAKER_00]: the percentage can also vary based on the jurisdiction of the account federally versus

[00:15:39] [SPEAKER_00]: provincial and which province more specifically I can't remember I think it's Newfoundland where

[00:15:45] [SPEAKER_00]: once you reach 80 I think you have to buy an annuity with the remaining funds I'm pretty

[00:15:52] [SPEAKER_00]: sure it's that one but uh anyways I'm just going on memory here now in terms of the

[00:15:57] [SPEAKER_00]: learnings I think this will be helpful for people in their 50s or 60s that will probably

[00:16:02] [SPEAKER_00]: be converting those into lifts or riffs in the next decade or so so once the money is in the

[00:16:09] [SPEAKER_00]: riff or lift you have a lot of flexibility when you get the payment in the calendar year so the

[00:16:14] [SPEAKER_00]: important thing that is really that you withdraw the minimum required for the year so that means

[00:16:20] [SPEAKER_00]: you can set up payments on a frequency of your choosing monthly quarterly semi-annually or

[00:16:26] [SPEAKER_00]: even a lump sum as long as you withdraw what you need to withdraw during the year you're fine

[00:16:32] [SPEAKER_00]: second is that this is something that I found with TD direct investing which is what my parents use

[00:16:37] [SPEAKER_00]: not sure if it's the same for all providers but there was some challenges to keep the US

[00:16:43] [SPEAKER_00]: denominated accounts separated from the Canadian one so I'm not sure if it's specific to TD

[00:16:50] [SPEAKER_00]: or this is all the they all operate but certain accounts they were able to keep the

[00:16:56] [SPEAKER_00]: same account but have you know how like you can keep the the US with the US your cash in US and

[00:17:01] [SPEAKER_00]: the stock that are US base and then the Canadian and Canadian cash ones but other accounts they had

[00:17:07] [SPEAKER_00]: to all be in the Canadian one which creates a challenge if you want to sell a US stock and then

[00:17:14] [SPEAKER_00]: buy another US stock because it'll automatically convert the sale to Canadian dollars and then

[00:17:20] [SPEAKER_00]: you have you would have to use the exchange rate again to buy the US stock so I don't know

[00:17:25] [SPEAKER_00]: if this is every single broker but something to be aware of if it is something that affects you as well

[00:17:33] [SPEAKER_00]: because you'll probably want to you know plan accordingly in terms of what you're buying because

[00:17:40] [SPEAKER_00]: you're going to be charged a commission potentially twice it's a bit annoying I don't like I said

[00:17:45] [SPEAKER_00]: I don't know if it's all of them they were already set up this way but having cash in your

[00:17:49] [SPEAKER_00]: riff and lift to cover the currency or payments should be in my opinion the absolutely absolute

[00:17:56] [SPEAKER_00]: minimum amount of cash that you should hold so it should be the minimum I don't think there's any

[00:18:02] [SPEAKER_00]: issue with having more cash in that I mean it's pretty simple right Braden if you have sufficient

[00:18:06] [SPEAKER_00]: cash to cover the payments then you don't need to sell shares of the stock bonds or whatever assets

[00:18:13] [SPEAKER_00]: that you have other than cash to cover those payments if you don't have enough cash then

[00:18:19] [SPEAKER_00]: you may end up screwing yourself if the markets you know go down and you have to sell assets when

[00:18:25] [SPEAKER_00]: they're depreciated so planning is extremely important here because you want to make sure

[00:18:31] [SPEAKER_00]: that you're not kind of forced to sell and we talk about that all the time right as a retail

[00:18:37] [SPEAKER_00]: investor you know you want to have an emergency fund to not be forced to sell well this is the

[00:18:41] [SPEAKER_00]: same kind of logic you want to make sure you have enough cash to cover the payment at the very

[00:18:46] [SPEAKER_00]: least for the year personally for them I think it's closer to five years that they have in treasury

[00:18:51] [SPEAKER_00]: bills to to cover the withdrawals at the current rates so they're they're pretty well set up

[00:18:57] [SPEAKER_00]: and then the last thing to keep in mind is especially if you've had multiple jobs you

[00:19:04] [SPEAKER_00]: have multiple lifts and riffs account make sure you diversify each account that's because

[00:19:10] [SPEAKER_00]: the minimum payment is established per account and not for the totality of your assets so say you

[00:19:16] [SPEAKER_00]: have all stocks in account a and all cash in account b even if you have enough cash in account b to cover

[00:19:23] [SPEAKER_00]: several years of payments for all of your accounts you won't be able to do so since the

[00:19:27] [SPEAKER_00]: withdrawals are per account so you'll still have to sell stocks in this example in account a to

[00:19:33] [SPEAKER_00]: be able to cover the minimum withdrawals so it does require some planning especially on a

[00:19:38] [SPEAKER_02]: I would not have thought that like I wouldn't know I would have never thought of that because usually

[00:19:43] [SPEAKER_02]: it's like if I have you know if I have like 10 tfsa accounts but like that encompasses my entire

[00:19:51] [SPEAKER_02]: contribution limit it doesn't give me 10 times the yeah amount of like yeah that's wild to me

[00:19:57] [SPEAKER_00]: yeah it's because too you know you'll have you could have what you know before the conversion

[00:20:02] [SPEAKER_00]: right up to a riff and lift you could have a regular rsp and then you could have a locked in rsp

[00:20:09] [SPEAKER_00]: because you worked with a federal employer and then a lira because you've worked with a provincial

[00:20:15] [SPEAKER_00]: employer in one province and then another lira where you've worked with a provincial

[00:20:19] [SPEAKER_00]: employer with another province so you know in this situation you have four accounts and it's

[00:20:24] [SPEAKER_00]: really each account because each account has there's different rules so each kind of minimum is set

[00:20:31] [SPEAKER_00]: with the account so you really have to be careful obviously if you have multiple rsp's you can combine

[00:20:36] [SPEAKER_00]: them all in one account but if it's with multiple providers I think they'll still have to force you

[00:20:42] [SPEAKER_00]: with the minimum withdrawal for each because it'll I mean at the end of the day it'll be the same

[00:20:46] [SPEAKER_00]: thing but it's still with multiple providers something to keep in mind I know it's more

[00:20:52] [SPEAKER_00]: the logistics but it can make a huge difference if you're not planning correctly because then

[00:20:57] [SPEAKER_00]: you can end up having a surprise that you were not expecting how did you learn all this when

[00:21:03] [SPEAKER_00]: you're meant to go help your parents because I mean yeah it was uh I mean I helped my parents

[00:21:08] [SPEAKER_00]: doing it for the most part there were some things I wasn't aware so all the different uh you know

[00:21:14] [SPEAKER_00]: the per account things it's not something I was aware thankfully their accounts were pretty well

[00:21:20] [SPEAKER_00]: diversified so I had to tweak things um accordingly to make sure that each account

[00:21:25] [SPEAKER_00]: had a decent amount of cash and similar kind of diversification in each account but just things that

[00:21:32] [SPEAKER_00]: I kind of learned on the go that you you know it'll be hard for people to find that information

[00:21:38] [SPEAKER_00]: until they actually do it or they work with a financial a professional that you know a

[00:21:44] [SPEAKER_00]: financial planner that specializes in that so I figured it would it would be helpful for

[00:21:49] [SPEAKER_02]: people just based on the experience I had with my parents yeah the piece of like the tip that I have

[00:21:56] [SPEAKER_02]: with this what all just called taxation stuff or registered account activity it all seems

[00:22:05] [SPEAKER_02]: incredibly confusing and that's because it is and when you read about it it is a little bit

[00:22:13] [SPEAKER_02]: overwhelming especially on government websites like they're doing they do a really good job

[00:22:17] [SPEAKER_02]: of making it confusing but it's one of those things where when you go do it in practice for

[00:22:23] [SPEAKER_02]: yourself or a family member that's when you learn it at all makes sense like it's it's really hard to

[00:22:30] [SPEAKER_02]: learn when you don't have an application of it in your own in your own world right like you can

[00:22:37] [SPEAKER_02]: learn about all the taxable accounts you can read every book about the rsp the tfsa the

[00:22:43] [SPEAKER_02]: lira the you know when it converts to lifts and riffs but until you actually have to do it in

[00:22:50] [SPEAKER_02]: practice with your own account or family members count it's really overwhelming so my my tip here is

[00:22:56] [SPEAKER_02]: don't get discouraged early because it can be discouraging early once you get into the

[00:23:03] [SPEAKER_02]: weeds and into the thick of it like you did in this example it starts to make a lot more

[00:23:08] [SPEAKER_02]: more sense when you have a like application to apply it to in real life whether it's account

[00:23:14] [SPEAKER_00]: your own account or like a loved one yeah yeah exactly and don't be afraid to ask like people

[00:23:20] [SPEAKER_00]: that've gone through the process before or you know find a good financial planner that would be

[00:23:26] [SPEAKER_00]: able to support you that specializes in this kind of stuff can you have a whole lot of value

[00:23:31] [SPEAKER_00]: even if there's obviously there's cost to it but again i think we've i've we've been pretty

[00:23:37] [SPEAKER_00]: consistent like a good financial planner you'll see the value that he or she provides

[00:23:42] [SPEAKER_00]: i think that's pretty not not the one that's all your mutual funds at the bank this exactly what

[00:23:47] [SPEAKER_02]: i was gonna say yeah money well spent is on complex tax situations with a very good accountant

[00:23:56] [SPEAKER_02]: and you know fixed fee financial planning for this type of stuff like if you're looking at this

[00:24:01] [SPEAKER_02]: and going okay i'm gonna need some help no problem that's that's fine you go you go get some help

[00:24:09] [SPEAKER_02]: save all all the money you've saved by not paying mutual fund fees sleep find at night knowing

[00:24:16] [SPEAKER_02]: you're gonna pay this fixed fee amount or whatever to sort through what i'll just call the umbrella

[00:24:21] [SPEAKER_02]: of taxation that's money to me that's money well spent and it can be net net profitable

[00:24:28] [SPEAKER_02]: when done correctly and if you have someone really good whereas like there's no value in this day and

[00:24:34] [SPEAKER_02]: age buying mutual funds compared to the index like i can't think of any really good claims anymore

[00:24:39] [SPEAKER_00]: no it's not easy to find them again and especially now that you can find even active

[00:24:44] [SPEAKER_00]: traded funds like active vtfs that have reasonable fees that could you know

[00:24:50] [SPEAKER_00]: that can offer you some alternatives even if you don't want index funds there's

[00:24:55] [SPEAKER_00]: pretty good alternatives out there's so many etfs that yeah i agree with you especially if we're

[00:24:59] [SPEAKER_00]: looking at you know load minimums and that you have to commit and stuff like that etfs offer

[00:25:07] [SPEAKER_00]: i mean it just offers way more flexibility in my opinion what's that charlie munger quote

[00:25:12] [SPEAKER_02]: off the side off the top and in the off the middle yeah exactly yeah he's got some good quotes on

[00:25:20] [SPEAKER_02]: that one all right let's shift gears to an update on my small cap segment do you remember i did i think

[00:25:27] [SPEAKER_02]: i went through six canadian small caps i don't know a month or two ago earlier in the summer

[00:25:31] [SPEAKER_02]: i remember that okay so the company that i highlighted at the end was like in summary

[00:25:39] [SPEAKER_02]: the one that i have the most kind of i need to look at this more and i kind of ranked it as

[00:25:46] [SPEAKER_02]: this one should be on my watch list the other ones are interesting but this one should be my

[00:25:50] [SPEAKER_02]: watch list strong growth nice growth prospects secular trend and actually profitable if you can

[00:25:58] [SPEAKER_02]: if you can imagine that i was talking about mda space which is ticker mda on the tron of stock

[00:26:04] [SPEAKER_02]: exchange yeah aerospace company does lots of work within in space and aerospace and so this is not

[00:26:14] [SPEAKER_02]: they don't do undersea exploration they don't do no they don't uh not yet anyways no yeah this is

[00:26:23] [SPEAKER_02]: not meant to be a news a news episode but hey this canadian company needs another look again

[00:26:29] [SPEAKER_02]: and a quick update disclosure do your own research i'm not a shareholder as of recording this

[00:26:34] [SPEAKER_02]: podcast is august 13th 2024 i am not a shareholder i don't have intentions of buying shares in

[00:26:41] [SPEAKER_02]: the next you know a little bit and i'm just putting it as like hey i've been trying to find some more

[00:26:48] [SPEAKER_02]: smaller names now this is not like some nano cap it's a couple billion of market cap but hey this is

[00:26:54] [SPEAKER_02]: there's more out there than big tech all right so their recent quarter they won a one billion

[00:27:04] [SPEAKER_02]: contract with canadian space program and the backlog is now at 4.6 billion as of the the

[00:27:12] [SPEAKER_02]: quarter end which was up 320 percent year-over-year 318 percent year-over-year now across the board

[00:27:19] [SPEAKER_02]: profitability revenue growth you know high 20 or low 20 percent across the board they've had a

[00:27:27] [SPEAKER_02]: really consistently profitable track record which is nice as well but this backlog has ballooned

[00:27:35] [SPEAKER_02]: and it's really quite impressive so the backlog went from like december q4 2019 ending quarter at

[00:27:42] [SPEAKER_02]: 462 million to now 4.6 billion so it has 10x'd since the quarter before covid basically

[00:27:53] [SPEAKER_00]: yeah like 4x in like a year basically yeah yeah it's big big contracts and when i look i'm just

[00:28:00] [SPEAKER_02]: gonna look here as well on like how much they're executing on the backlog too because we tracked

[00:28:06] [SPEAKER_02]: that kpi as well yeah well order bookings in the quarter was one and a half billion in the

[00:28:14] [SPEAKER_02]: quarter of just new bookings which is kind of absurd they won like some one big billion one and

[00:28:21] [SPEAKER_02]: you know then another 500 million which is well elevated off of other bookings like in a regular

[00:28:27] [SPEAKER_02]: quarter too so things are accelerating is the point i'm trying to say here and i asked finchat

[00:28:34] [SPEAKER_02]: to kind of summarize what big contracts they've won recently and they rewarded a billion-dollar

[00:28:42] [SPEAKER_02]: contract from the canadian space agency for the next phases of the cana canadarm

[00:28:47] [SPEAKER_02]: three program final design construction assembly integration so they're vertically

[00:28:52] [SPEAKER_02]: integrated from that perspective the international space station from the canadian space agency

[00:28:58] [SPEAKER_02]: big contracts out until 2030 the geo non-geostationary orbit satellite constellation

[00:29:06] [SPEAKER_02]: another 80 180 million dollar contract there and their square kilometer array observatory project

[00:29:14] [SPEAKER_02]: from the national research of council of canada so i'm like okay in q2 they won a bunch domestically

[00:29:23] [SPEAKER_02]: interesting but i'm i wanted to ask finchat again what about in the last four quarters

[00:29:28] [SPEAKER_02]: have they won some big contracts outside of canada because you know it's great to win a bunch of

[00:29:35] [SPEAKER_02]: canadian space program contracts but can they win a bunch in the us too is like what i really

[00:29:40] [SPEAKER_02]: want to know and no in the last four quarters they've been involved in winning contracts for the

[00:29:45] [SPEAKER_02]: nasa lunaturane vehicle the global star program the tele sat light speed network the us department

[00:29:53] [SPEAKER_02]: of defense they had a big build out for the satellite systems and the space development

[00:29:59] [SPEAKER_02]: agency for the leo constellations whatever that is so i just thought that this would

[00:30:07] [SPEAKER_02]: interesting to bring up company out of canada here the stock has obviously done tremendously well it

[00:30:13] [SPEAKER_02]: popped a lot on this result becoming public that they've won this big contract and that the backlog

[00:30:20] [SPEAKER_02]: has ballooned from you know 462 million to four four point six billion in just a few years so

[00:30:27] [SPEAKER_02]: definitely want to keep track of it's very hard to get exposure to this kind of sector in canada

[00:30:35] [SPEAKER_02]: so i posted it on twitter that like this backlog chart and a lot of people commented that

[00:30:41] [SPEAKER_02]: i know listen to the podcast like long the stock long the stock thanks for bringing it up in that

[00:30:46] [SPEAKER_02]: small cap segment right so i was like not advice but you know hope you like the pod

[00:30:54] [SPEAKER_00]: yeah and i mean i think even with um the fact on even looking at this from a macro basis

[00:31:02] [SPEAKER_00]: you're probably going to be seeing a lot of fragmentation between spending more in the

[00:31:08] [SPEAKER_00]: kind of western nations and then with the rest of the world spending on their end so they could

[00:31:14] [SPEAKER_00]: definitely benefit from more spending from friendly nations with canada obviously the us and

[00:31:20] [SPEAKER_00]: western europe as well so i think for such a small company i think the market can be

[00:31:25] [SPEAKER_02]: quite big yeah it can be looking forward uh you know the the multiple well i mean the stocks up

[00:31:35] [SPEAKER_02]: 150 total return on a trailing one year which is obviously quite nice but i don't think that price

[00:31:44] [SPEAKER_02]: is absurd i mean trailing it's a little bit pricey but analyst has to have it at a forward

[00:31:50] [SPEAKER_02]: price to earnings of 21 for next year's uh next 12 months the next four quarters of earnings

[00:31:58] [SPEAKER_02]: and estimates have been revised up a couple times too on top of yeah how accurate are estimates

[00:32:03] [SPEAKER_00]: going to be for such a small company though like there's probably what like one or two analysts

[00:32:08] [SPEAKER_00]: like covering this stock at most four four okay okay yeah four four analysts covering the name so

[00:32:15] [SPEAKER_02]: it's not like yeah i anything under like yeah if it's like one or two i kind of just throw that out but

[00:32:21] [SPEAKER_02]: you know for for professional investment bank analysts coming through cap iq data into finchats

[00:32:26] [SPEAKER_00]: that's legit yeah yeah well even dan and i we when we recorded for the earnings we're talking about

[00:32:33] [SPEAKER_00]: go easy right the subprime loan company in canada and that's one of the things we're like i personally

[00:32:39] [SPEAKER_00]: like don't give much attention to the analyst forecast because that's a company that can be

[00:32:45] [SPEAKER_00]: so affected by macro if job losses start paddling up and then the uh write-off start going up through

[00:32:53] [SPEAKER_00]: the roof like it just how can you even forecast earnings especially in the period right now so i

[00:32:58] [SPEAKER_00]: think it just i wanted to mention that because i think there are businesses where it's a bit easier

[00:33:03] [SPEAKER_00]: to forecast earnings a year out where others i think you need to take with a big grain assault

[00:33:10] [SPEAKER_00]: in this situation like i mentioned or a situation where there's like one or two analysts at most and

[00:33:16] [SPEAKER_00]: it's you know the sample so small that i think there can be a lot of variance yeah no and it

[00:33:22] [SPEAKER_02]: makes sense you gotta look at how many analysts are covering it if it's a small cap name that

[00:33:28] [SPEAKER_02]: kind of stuff but you know just just thinking out loud here they're doing 130 million of ibeda

[00:33:36] [SPEAKER_02]: the market cap is 1.7 billion canadian by the way that's a canadian that's 500 million us yeah

[00:33:45] [SPEAKER_02]: that's like 20 bucks us so you know you look at it from that perspective they're growing

[00:33:51] [SPEAKER_02]: the growing profitably an accelerated pace do you think the company can be worth a lot more than

[00:33:59] [SPEAKER_02]: 1.7 billion and i know that's really back of the envelope way to look at it but that's kind of first

[00:34:04] [SPEAKER_02]: principles of how i'd look at a lot of these names if you're buying something small your

[00:34:11] [SPEAKER_02]: hurdle rate for growth should be higher that's that's been my opinion on looking at small caps

[00:34:17] [SPEAKER_02]: for a long long time i don't think it makes sense to look at it the other way when you can buy

[00:34:23] [SPEAKER_02]: you know microsoft growing the top line at 15 percent like it's it's a hard it's a difficult

[00:34:29] [SPEAKER_00]: hurdle rate yeah would you find a company like this which clearly it is you know at the cutting

[00:34:36] [SPEAKER_00]: let's it's probably at the cutting edge of technology when it comes to it's actually a

[00:34:41] [SPEAKER_00]: old company by the way yeah but how like would that be a concern to you just for me it would be

[00:34:47] [SPEAKER_00]: right just trying to fully understand the business i'd like or you're or you just get into it knowing

[00:34:53] [SPEAKER_00]: that you know you won't fully understand the business you may get a general idea of like what

[00:34:59] [SPEAKER_00]: they do and you stay on top of the metrics and everything like that but it gets so kind of

[00:35:04] [SPEAKER_00]: technical that you almost have to kind of trust them to some extent i do think you have to have some

[00:35:12] [SPEAKER_02]: sort of understanding of what they are doing in there in this value chain for the governments here

[00:35:20] [SPEAKER_02]: like they are a government supply same way if you're buying uh rathion or why am i playing

[00:35:31] [SPEAKER_02]: rathion or something yeah buying lockheed i don't know how i blanked on that you have to have some

[00:35:36] [SPEAKER_02]: sort of understanding like what are they delivering for as a defense contractor and yes it's really

[00:35:44] [SPEAKER_02]: hard like the switching cost for these governments when you're in is really really high and that's

[00:35:49] [SPEAKER_02]: what makes some of these businesses so great spending keeps going up over time and doesn't

[00:35:53] [SPEAKER_02]: seem to ever really falter but with these ones on space specifically yes i do think you

[00:35:59] [SPEAKER_02]: have to have some sort of opinion and i don't right now so that i'm not in a position to own it

[00:36:05] [SPEAKER_00]: no i think that's a good point yeah i just wanted to mention that because some companies like the

[00:36:09] [SPEAKER_00]: products they produce are just so complex but i agree with you i think you have to get a at least

[00:36:15] [SPEAKER_00]: a decent understanding right you don't need to know the technology in and out i mean you

[00:36:20] [SPEAKER_00]: own asml and you own it it's not like you you understand eub like in and out from point eight to

[00:36:27] [SPEAKER_00]: point uh z of like the intricacies of the whole technology right like you know it pretty well but

[00:36:34] [SPEAKER_00]: you're also you don't have a phd to to be able to understand that the intricacies you kind of

[00:36:41] [SPEAKER_00]: you know know enough about it and i think it's a good point because obviously if you want to

[00:36:47] [SPEAKER_00]: understand extremely well everything you invest in especially the super technical products

[00:36:53] [SPEAKER_00]: you're probably gonna limit your investing horizon quite a bit yeah i totally agree like on that asml

[00:36:59] [SPEAKER_02]: point that's a perfect example it's like i can explain ultraviolet lithography good enough

[00:37:06] [SPEAKER_02]: but like yeah i mean am i going to be able to talk about the complexities of how they fire

[00:37:13] [SPEAKER_02]: microscopic a microscopic piece of tin with a laser and how that creates three nanometer

[00:37:21] [SPEAKER_02]: wafers no but the fact that i can even say that is like okay you know you know the company if it

[00:37:27] [SPEAKER_00]: was very easy there'd be uh they would not have monopoly in that let's just say that well that's

[00:37:33] [SPEAKER_02]: exactly it right there's there's it's trade secrets in itself too right like their biggest

[00:37:38] [SPEAKER_02]: competitors don't know and no enough to replicate it yeah exactly and i think uh what do you think

[00:37:45] [SPEAKER_00]: we'll keep i think my next segment for next time because you've got uh no let's do it we

[00:37:51] [SPEAKER_02]: we have yeah we have we have time okay and i and i want to talk about this sure because i am

[00:37:59] [SPEAKER_02]: i'm gonna play the the devil's advocate in this segment and we're gonna talk about bitcoin

[00:38:05] [SPEAKER_02]: really quick here uh for those who are who are wondering yeah i want to play the devil's

[00:38:10] [SPEAKER_02]: i want to play the devil's advocate and set up your segment here because go for it i'm the guy

[00:38:16] [SPEAKER_02]: who likes the asset i own some of the asset but i also am like why is there so much freaking

[00:38:24] [SPEAKER_02]: correlation i've been told this is an uncorrelated asset talk me through your segment here yeah so

[00:38:31] [SPEAKER_00]: i mean the first thing so i'll talk through the segment and i would say the more obviously i've

[00:38:37] [SPEAKER_00]: learned about bitcoin a whole lot and since i've owned it for more than five years now i think

[00:38:42] [SPEAKER_00]: it's going on six years and i think the simplest explanation is liquidity i think if you understand

[00:38:50] [SPEAKER_00]: you start understanding the needs for liquidity so if there's a lot of liquidity in this system

[00:38:55] [SPEAKER_00]: it will probably be bullish for a bitcoin and then if there's a big drain on liquidity it will

[00:39:00] [SPEAKER_00]: have an opposite effect on bitcoin and that's kind of where my segment came from so bitcoin actually

[00:39:08] [SPEAKER_00]: victim of its high liquidity and the fact that it's one of the most liquid assets in the world

[00:39:14] [SPEAKER_00]: the reason for that is you are listening to mainstream media and some so-called experts there

[00:39:20] [SPEAKER_00]: are essentially i find sometimes either they don't understand it very well or they're simply

[00:39:25] [SPEAKER_00]: lying to you and the reason i'm saying that is because on sunday august 4th so remember the

[00:39:30] [SPEAKER_00]: day before the market had a large drawdown because of the yen carry trade unwinding bitcoin started

[00:39:36] [SPEAKER_00]: dropping fast so it started happening actually around like uh you know 8 p.m eastern time zone

[00:39:43] [SPEAKER_00]: and before i get into this is essentially the yen carry trade i'm talking with dan about it on

[00:39:50] [SPEAKER_00]: the episode that will be released later this week when you hear this one i do a deep dive into it

[00:39:56] [SPEAKER_00]: i explain how it works and in short though it means that the investor borrow and yen at low

[00:40:00] [SPEAKER_00]: interest rates and convert the money to say us dollars for a lot of cases to invest in us treasuries

[00:40:07] [SPEAKER_00]: or the us market so it can also be done to invest in assets in other countries but essentially you

[00:40:13] [SPEAKER_00]: borrow at low interest rate and invest in countries where the rates are higher and you collect

[00:40:17] [SPEAKER_00]: the spread the difference between both or the returns on assets you invested in if you invest

[00:40:23] [SPEAKER_00]: in other stocks for example and ideally the yen keeps getting weaker against the currency

[00:40:28] [SPEAKER_00]: you actually are investing in so the us dollar index in this example because if it gets weaker

[00:40:35] [SPEAKER_00]: you need less us dollars to repay that loan that was in yen and therefore it boosts your returns

[00:40:42] [SPEAKER_00]: on top of that and then when the yen started rapidly increasing on august 4th and 5th it

[00:40:48] [SPEAKER_00]: turned that trade upside down especially for investor that had used large amounts of leverage to do the

[00:40:54] [SPEAKER_00]: trade and when the markets crashed in japan around 9 a.m a monday august 5th it was 8 p.m in canada

[00:41:02] [SPEAKER_00]: eastern time like i mentioned so for investors that were heavy in the yen carry trade and

[00:41:07] [SPEAKER_00]: needed to cover their loans in yen or get more capital as a margin requirement for example

[00:41:13] [SPEAKER_00]: bitcoin was really the only asset that they could do that in aside from if they had actually japanese

[00:41:20] [SPEAKER_00]: asset at the time because it traded 24 7 you can convert it right away to whichever currency you

[00:41:26] [SPEAKER_00]: want so i think that explains one of the big reason why you saw that big drop on the 4th

[00:41:33] [SPEAKER_00]: is because people can move massive amounts of bitcoin very fast at a low cost and

[00:41:41] [SPEAKER_00]: obviously the other reason is there was probably a lot of leverage longs on bitcoin

[00:41:46] [SPEAKER_00]: so people that were leveraging up betting that the price of bitcoin would go up and then the price

[00:41:52] [SPEAKER_00]: drops and essentially they get liquidated or they have to add to their to their margin account

[00:41:58] [SPEAKER_00]: to not get liquidated and then you have some more price pressure down so that's why i think

[00:42:04] [SPEAKER_00]: that's a great example and i can't remember where i heard it from on the first place could

[00:42:09] [SPEAKER_00]: have been linald and talking about that but essentially i think bitcoin as it is right now

[00:42:15] [SPEAKER_00]: liquidity i think has the biggest impact on its price fluctuation whether it goes down or up

[00:42:23] [SPEAKER_02]: so for not as smart people like me the because if it's liquidity and 24 7 trading

[00:42:33] [SPEAKER_02]: you saw the price action there before us markets open on the monday is that is that

[00:42:39] [SPEAKER_00]: is that the tl dr tl dr because uh keeping like when you need money fast right you're gonna sell

[00:42:50] [SPEAKER_00]: whichever asset that you can get essentially that money the fastest and in that case it was bitcoin

[00:42:57] [SPEAKER_00]: even if you love the asset i mean when you're stuck in a bind you'll sell whatever you can

[00:43:04] [SPEAKER_00]: and oftentimes they're the either the highest quality assets or the most liquid so when you get a huge

[00:43:10] [SPEAKER_00]: market correction and someone has a margin requirement if we look at stocks for example if you had like

[00:43:15] [SPEAKER_00]: you know you're investing on margin and you have some you know apple uh you know you have the mag 7

[00:43:22] [SPEAKER_00]: and the market starts going down while you'll probably end up having to sell some of your best

[00:43:29] [SPEAKER_00]: assets to be able to cover that so that's probably an easy way to compare it to stocks as well

[00:43:36] [SPEAKER_02]: and just like order flow as well into the asset when something like that happens a lot of a lot

[00:43:41] [SPEAKER_02]: of selling pressure a lot of fear coming through the market right away and you have something

[00:43:46] [SPEAKER_02]: trading live 24 7 like bitcoin i i i guess my my thing with bitcoin is like why am i getting so much

[00:43:58] [SPEAKER_02]: correlation to the naz-dak i just the price charts look the same to me like of course you know the

[00:44:05] [SPEAKER_02]: scale being different you've done better at bitcoin but you know what i mean like the the dips and

[00:44:10] [SPEAKER_02]: and the bull runs happen at the exact same time i think it's probably a reflection of liquidity

[00:44:15] [SPEAKER_00]: i think it's probably that right you get sentiment probably in general yeah sentiment and

[00:44:20] [SPEAKER_00]: liquidity for both is the more you have liquidity with the naz-dak it was probably created in part

[00:44:25] [SPEAKER_00]: by that japanese yen carry trade because you know you get these massive amounts of money

[00:44:33] [SPEAKER_00]: that what else are they gonna invest in i mean they're not gonna be buying mda because if

[00:44:39] [SPEAKER_00]: they invest in that they'll buy the whole company outright right so they they go into whatever is

[00:44:43] [SPEAKER_00]: the most liquid and that would be the mag 7 or naz let's just say the naz-dak for the you know

[00:44:50] [SPEAKER_00]: for this discussion but they they invest in what is the most liquid that's essentially what it is

[00:44:56] [SPEAKER_00]: and treasuries are a great example treasuries us treasuries are extremely liquid probably the

[00:45:01] [SPEAKER_00]: most liquid asset in the world so that's why they these massive amounts of money they tend

[00:45:06] [SPEAKER_00]: to go where liquidity is and that's why i think a big part you're seeing those big mega caps get

[00:45:13] [SPEAKER_00]: bigger because that money which is also levered as well which you know that's a discussion for

[00:45:20] [SPEAKER_00]: another day and a little bit scary at the same time but that's the only thing really they

[00:45:25] [SPEAKER_00]: can invest in without making the price move too much yeah it's the whole idea of like

[00:45:30] [SPEAKER_02]: reflexivity and and and cheap cost of capital like for those who are not familiar with the term

[00:45:37] [SPEAKER_02]: it's a it's a very fancy word but it's really just a feedback loop reflexivity just means like it's a

[00:45:43] [SPEAKER_02]: reinforcing a self-reinforcing effect on market sentiment so if you have i think tesla has been

[00:45:59] [SPEAKER_02]: and customer base has provided very very cheap cost of capital for the company to succeed against

[00:46:08] [SPEAKER_02]: against all odds basically it's like the the fact that investors and customers were so excited

[00:46:16] [SPEAKER_02]: about the vision of tesla and the charismatic leader that it actually made tesla happen in a

[00:46:25] [SPEAKER_02]: way because then you had this like unbelievably cheap cost of capital stock could be issued at

[00:46:32] [SPEAKER_02]: all-time highs and you have customers buying a cyber truck that gets delivered five years later

[00:46:39] [SPEAKER_02]: right like yeah you have deposits sitting on for a long time i think tesla's a good example

[00:46:43] [SPEAKER_02]: of reflexivity and that's your that's kind of a market same market idea that you're talking

[00:46:48] [SPEAKER_00]: about here yeah yeah but uh no i think it's uh it was just fun to look at that and

[00:46:53] [SPEAKER_00]: you know just to see all the intricacies of like the domino effects and you know one thing

[00:47:00] [SPEAKER_00]: affects another and then the ripple effects of our financial markets fragile hey yeah i mean yeah

[00:47:07] [SPEAKER_00]: that's a good way to put it great on the bear yeah well you know anything that can be so self

[00:47:15] [SPEAKER_02]: reinforcing like that is inherently fragile it's like it's like when we the bank run that everyone's

[00:47:24] [SPEAKER_02]: forgot about immediately after with silicon valley bank last year like that was a self

[00:47:30] [SPEAKER_02]: reinforcing highly reflexive scenario where you have vcs like peter teal saying everyone get your

[00:47:37] [SPEAKER_02]: money out now and then you have widespread contagion self-reinforcing fear spread you know

[00:47:44] [SPEAKER_02]: a small bank run turns into entire bank collapse and it is inherently fragile when you have such a

[00:47:50] [SPEAKER_00]: self-reinforcing mechanism yeah it's okay j powell came in with his money printer and saved everyone

[00:47:58] [SPEAKER_02]: burr thanks for listening to the podcast folks we really appreciate you i think that was a fun chat

[00:48:03] [SPEAKER_02]: so i'm gonna i'm gonna do my best to try to keep finding some small little gems and thanks for

[00:48:14] [SPEAKER_02]: just to recap rsp riff rr lira locked in rsp ll turns into lif you got it the rst with the rs

[00:48:27] [SPEAKER_02]: l stays with the else for people for people at home who are just maybe you know on the run

[00:48:32] [SPEAKER_02]: listening or in the car uh that's how you can think about it and uh dude mark Leonard manages my

[00:48:39] [SPEAKER_02]: my lira for free by the way yeah i know

[00:48:45] [SPEAKER_02]: mark Leonard obviously the founder c of constellation software manages 100 of my lira for free also known

[00:48:52] [SPEAKER_02]: as gandalf but also known as a discussion for another day if you haven't gave the pod a follow

[00:49:00] [SPEAKER_02]: on your podcast player review it goes a long way it really really helps us if you can go on there

[00:49:06] [SPEAKER_02]: and smash uh you know five star leave us a little rating give us a little endorphin dopamine hit

[00:49:13] [SPEAKER_02]: that's fantastic and if you are in the real estate game we haven't given a shout out recently to the

[00:49:20] [SPEAKER_02]: real estate pod the canadian real estate investor podcast that's kind of like our sister podcast

[00:49:25] [SPEAKER_02]: hosted by daniel foch and nick hill they talk everything canadian real estate so if you are

[00:49:32] [SPEAKER_02]: in that game or landlord you are thinking about getting into that game or just a homeowner or

[00:49:38] [SPEAKER_02]: thinking about becoming a homeowner that is a fantastic show there's the canadian real estate

[00:49:42] [SPEAKER_02]: investor podcast and you can find it on your podcast player we'll see you in a few days take care bye

[00:49:47] [SPEAKER_00]: bye the canadian investor podcast should not be construed as investment or financial advice

[00:49:54] [SPEAKER_00]: the host and guest featured may own securities or assets discussed on this podcast always do

[00:50:00] [SPEAKER_00]: your own due diligence or consult with a financial professional before making any financial or investment

[00:50:07] [SPEAKER_00]: decisions