Big 5 Banks Deceiving Customers and Nuvei’s Potential Buyout

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

[00:00:06] the confidence you need to succeed in the markets.

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

[00:00:15] Welcome back to the Canadian Investor Podcast.

[00:00:17] I'm here with Dan Kent.

[00:00:19] We're here for our Thursday episode doing news and earnings.

[00:00:22] It's going to be a bit more news heavy because our earnings season is definitely coming down

[00:00:27] a little bit, less companies reporting.

[00:00:30] But I'm sure it's going to pick back up probably about three or four weeks.

[00:00:34] That's usually the deal between the earnings seasons.

[00:00:38] Yeah.

[00:00:39] And there's still a lot of juicy news in the Canadian space.

[00:00:43] Yeah.

[00:00:44] Yeah.

[00:00:45] Yeah.

[00:00:46] Got a lot of interesting things to talk about for sure.

[00:00:48] Yeah.

[00:00:49] So definitely a lot of news that we'll be talking about Canadian banks.

[00:00:52] Not in a very good light but we'll talk on that when we get there.

[00:00:56] Let's get started.

[00:00:57] I mean, we have a lot on this slate.

[00:00:59] So the first things first it's fresh off the press.

[00:01:02] We have the Canada February 2024 CPI data.

[00:01:06] So the headline number came in at 2.8% year over year.

[00:01:10] That was lower than expected.

[00:01:12] The expectation I saw was like between 2.9 and 3.1%.

[00:01:16] The quoted numbers that I saw for the most part in different news outlets.

[00:01:21] On a month over month basis, it was up 0.3%.

[00:01:25] Now every major category but to increase on a year over year basis.

[00:01:30] Not large increases, obviously when you have a 2.8%.

[00:01:33] Those two categories were household equipment and furniture as well as clothing and footwear.

[00:01:39] Now food that's one of the big areas clearly because it affects everyone but even more

[00:01:44] so people that are on the lower end of the income spectrum.

[00:01:50] Food was up 3.3% year over year but flat month over month.

[00:01:55] I'm not sure if the fact that it was flat, I know grocers have this policy where they

[00:01:59] kind of freeze prices for a few months around the holidays so I don't know if that was

[00:02:06] kind of overlap there a little bit.

[00:02:08] I don't know actually I know law laws even just had a price freeze on their name or whatever

[00:02:14] they did it for a while.

[00:02:15] I don't think they do it anymore.

[00:02:16] That was like the middle of last year.

[00:02:19] I didn't know they froze prices around Christmas time.

[00:02:21] Yeah, I think they do so it's like this.

[00:02:23] I mean take it with a grain of salt I think because obviously they can just catch back

[00:02:29] up on those increases later on but I'm pretty sure they have some kind of policy.

[00:02:34] Shelter inflation continues to be the main driver here with 6.5% year over year and 0.4%

[00:02:41] month over month.

[00:02:42] I'll touch on that a bit more because if you look at the changes so there's four major

[00:02:49] statistics Canada said there's four major consumer price index components that decelerated

[00:02:55] in February.

[00:02:56] So it just means that they were lower in terms of a 12 month change and shelter was definitely

[00:03:03] not one of them.

[00:03:04] So in January, shelter was 6.2% on a year over year basis and like I just mentioned 6.5

[00:03:10] for February.

[00:03:11] Here is becoming a big problem because the Bank of Canada unfortunately they just don't

[00:03:16] have that many tools available to them.

[00:03:18] I mean, they have one tool and let's be honest, they have a hammer and the problem they're

[00:03:22] facing is definitely not an L.

[00:03:25] So it's not easy people will see shelter inflation.

[00:03:29] They'll say well just lower interest rates right people are paying higher mortgage rates

[00:03:34] so that's increasing inflation.

[00:03:37] Rents are going up.

[00:03:38] Well, it's not that simple because we've talked about it before if you lower rates even

[00:03:42] let's say you lower a 50 basis point so by 0.5%.

[00:03:46] It's not going to make a huge difference because I'm renewing my mortgage in about a year

[00:03:51] from now and if rates are 0 50 basis points lower than they are right now, I'm still going

[00:03:58] to be paying a lot more on my mortgage than I currently am in the high twos in terms

[00:04:03] of the rate.

[00:04:04] So I think that's really important for people to remember is that that's not really a great

[00:04:09] solution.

[00:04:10] Sure, it may help but then the consequence with that is it may spur the housing market

[00:04:17] increase prices and potentially not even lower the rate of inflation in terms of shelter

[00:04:24] if you look at just a mortgage component of it.

[00:04:26] So that's one of the potential side effects that you could get.

[00:04:30] Obviously have the renters so the rents that are keep going up that's more of a supply

[00:04:34] and demand issue.

[00:04:35] So I'm not sure to which point at least in the very medium short to medium term that

[00:04:40] would have any impacts if they lower rates.

[00:04:42] Sure, it may encourage some builders to build more rental homes but that's not going

[00:04:46] to be ready for several years down the line.

[00:04:49] And then you have obviously the US Fed that is looking like they may not be lowering

[00:04:53] rates so if you lower in Canada, you could potentially spur inflation on top of that.

[00:04:58] So they're really stuck and I tweeted something.

[00:05:02] I used a, let's say a colorful word to say what situation the Bank of Canada was in

[00:05:10] my tweet but I do think they're, I don't I'm not sure what they can do.

[00:05:15] I don't think they can do anything at this point.

[00:05:18] Yeah, especially like you said in order to see like the shelter inflation come down

[00:05:23] meaningfully like I got my mortgage in 2022 and I think I'm four.

[00:05:28] Four point four.

[00:05:30] So there's even a chance that like I could see an increase and the most of the people

[00:05:35] who are renewing in the next while are much lower than me.

[00:05:38] So I mean, I don't they would have to lower rates by so much to ease that a lot.

[00:05:42] I mean, it'll definitely help especially people on variable rate plans but then can you

[00:05:47] imagine the full mo it would create in the outlink in the state and housing market here

[00:05:52] in Alberta.

[00:05:53] It's already happening.

[00:05:54] Yeah.

[00:05:55] The housing market here is crazy.

[00:05:57] Like on my street, when I moved here, it's like a fresh neighborhood.

[00:06:01] There was like three buildings, three houses on my street and they've put up like 15 of

[00:06:05] them in the last like year and a half, two years.

[00:06:08] It's absolutely nuts.

[00:06:10] Our housing market even right now is going bonkers so yeah, it's picking all the data

[00:06:16] I've seen as that.

[00:06:17] It's starting to pick up in other areas at least in Ontario.

[00:06:21] Prices are starting to pick up.

[00:06:22] I'm not sure if it's more, you know, there's a bit of an imbalance between supply and demand

[00:06:27] as well.

[00:06:28] And I think there might be an expectation from people that rates are trending down so

[00:06:32] people are getting excited maybe taking, you know, a year or two fixed mortgage while

[00:06:38] dad in with the hopes that it'll be significantly lower down the line or kind of planning for

[00:06:42] that but it is interesting to keep an eye on.

[00:06:45] But aside from the housing front, I think there's other components that could definitely

[00:06:50] reignite inflation.

[00:06:52] So gasoline was essentially flat year over year but up 4% on a month over month basis.

[00:06:58] Energy which obviously gasoline is included in but they do break down gasoline.

[00:07:03] Energy was similar with 1.3% increase year over year and 2.8% month over month so relatively

[00:07:09] small increases here so it's not having a major impact but there's still that risk that

[00:07:14] it could significantly pick up in the coming months or quarters and would drive up the

[00:07:20] headline number at the very least.

[00:07:22] And then on the release they mentioned that cell phone plans were 27% cheaper than last

[00:07:28] year.

[00:07:29] And then for internet access services prices fell 13% year over year so that's interesting.

[00:07:35] I'm not sure, I don't know, do you feel like cell phone plans are in that much cheaper?

[00:07:41] No.

[00:07:42] I'm not going to lie, my phone is just through our business so it's not like I've actively

[00:07:47] sought out a lower plan.

[00:07:49] I'm sure I could get one but I don't know if I could get one that much cheaper and internet

[00:07:54] access services have definitely I don't think I could get cheaper internet where I'm at

[00:07:58] either at all.

[00:07:59] Yeah and I think it's I'd be interested in seeing the methodology they're doing for

[00:08:04] that because there was in the language it makes me gives me the impression that they're

[00:08:09] factoring in like the fact that people may be being paying the same price but having

[00:08:15] more data as you know as a reduction.

[00:08:18] Yeah, as a reduction I'm not 100% sure it's just the wording was a bit strange the way

[00:08:23] that they worded it so I'd be interested in how they're waiting that.

[00:08:27] Yeah, I don't think that's just like an outright cell phone plans are down that much.

[00:08:32] I mean there is more competition here from I've noticed like a lot of the smaller companies

[00:08:36] I mean you can get pretty cheap phone plans.

[00:08:39] I've seen some people with like 30 35 40 dollar phone plans here with like a decent amount

[00:08:44] of data so I don't know they definitely need to get cheaper than we pay the highest we

[00:08:49] pay the highest cell phone bills that'll like develop countries in the world I think

[00:08:53] that sounds quite a wide margin.

[00:08:55] Yeah, I don't know I don't have the data in front of me but I've heard that before and

[00:08:58] I guess the last thing here are the core CPI data so there's this CPI common median and

[00:09:04] trim won't go into detail but all that to say that it is the one that the Bank of Canada

[00:09:10] these three measures they focus on the most and they are trending down so they've been

[00:09:14] trending down pretty steadily essentially since you know September of last year and I

[00:09:20] think even before that and now they're all at 3.1 or 3.2% so getting close to the bracket

[00:09:27] of 1 to 3% that's the target for the Bank of Canada so it'll be interesting but again there's

[00:09:32] so many variables involved I really don't know where they're going to go with interest rates

[00:09:38] at this point I think there's there's consequences whatever they do right whether they stand

[00:09:44] pad the lower rates I don't think raising rates is really an option but whatever they do

[00:09:49] there's gonna be some perverse consequences and I would not as critical as I've been

[00:09:54] with the Bank of Canada I would not want to be in their shoes right now.

[00:09:57] Yeah, it's like a kind of a damned if you do damned if you don't situation I mean a lot

[00:10:01] of people are struggling and need rates to come down but then if the Fed doesn't lower

[00:10:05] rates in Canada has to start lowering rates and it creates a whole other basket of problems.

[00:10:11] Yeah, exactly now enough about the Bank of Canada you want to tell us about these Google

[00:10:18] and Apple rumors.

[00:10:20] Yeah, so this came out on Monday morning I think so Apple isn't talks to utilize Gemini

[00:10:27] which is pretty much Google's competition to chat GPT to fuel some AI features on their

[00:10:33] phones.

[00:10:34] So Google ended up spiking up on the news I think like yesterday it was six up six six

[00:10:39] and a half percent on the day and I think if this is true and the deal is locked down

[00:10:45] it would probably be they would obviously have huge benefits for Google so there's billions

[00:10:49] of Apple devices out there.

[00:10:51] Apple and Google have already been partners for quite a while in regards to Google being

[00:10:56] the default search engine on Safari.

[00:10:58] This drives a ton of massive revenue for Google as it gets so much more exposure through

[00:11:03] its Google ads things like that.

[00:11:05] The partnership is pretty much bullet proof as well in my opinion because Google's market

[00:11:09] dominance when it comes to search is simply unmatched so if Apple ended up swapping search

[00:11:14] engines I have a feeling that many people would just utilize a different browser.

[00:11:18] It might not use Safari just because I know whenever like my Chrome browser gets like

[00:11:24] accidentally swapped to like the Yahoo default search it just drives me mad because the

[00:11:28] results are so bad but there's no concrete information and although the talks are

[00:11:34] for sure happening that's pretty much been confirmed.

[00:11:38] The functionality of what will be done is is pretty much pure speculation so Apple did

[00:11:42] mention there would be AI features utilized in their upcoming devices and I think it's

[00:11:47] like iOS 18 they're on or something like that.

[00:11:50] And the interesting thing is I think it is 18.

[00:11:53] But there's apparently going to be some AI functionality on the new devices and the

[00:11:59] iOS 18 that I mean they might use Gemini for I would imagine they will but it's never

[00:12:05] a guarantee there's still in discussions but there's been a lot of scrutiny and criticism

[00:12:11] of Google's AI platform.

[00:12:12] I mean it's pretty much the reason it's caused the stock to be pretty average over the

[00:12:17] last while.

[00:12:18] Google's a core position for me.

[00:12:21] I've ignored the AI news a lot because a lot of these stocks simply trade on headlines

[00:12:26] over the short term.

[00:12:27] I think a Google is going to be a pretty big player in the AI space seems like Apple does

[00:12:32] too.

[00:12:33] I wouldn't view this partnership as like Modi as their search engine partnership with

[00:12:39] Apple just because you know the AI race is so young so early while Google you know it

[00:12:45] has a 90% market share in search so it's not really the same type of situation but I mean

[00:12:50] you would imagine most of you know I would imagine it would be Apple paying licensing

[00:12:56] fees to Google to utilize Gemini so it's probably like I said you know you got billions

[00:13:02] of devices it would probably be pretty big news for Google.

[00:13:06] Yeah they just have to make sure that Gemini image generator is a bit yeah it's a bit

[00:13:11] better or not as biased as it was because that was a bit of a bit of a disaster.

[00:13:16] I think one of the original Google founders I think said like yeah they really messed

[00:13:21] up with the launch product.

[00:13:23] Oh yeah and I think that's Apple that's what Apple wants to use it for.

[00:13:26] I think a lot of that a lot they had mentioned with like image generation and stuff so I mean

[00:13:30] well as an Apple I'm as an iPhone user is like for me the only thing I want is Siri

[00:13:37] to not be crappy.

[00:13:39] Like Siri is so bad like if they can just make Siri better it's half of the time it doesn't

[00:13:45] understand what I'm saying maybe granted a like you know Siri doesn't understand my

[00:13:50] French accent so maybe that's the case but I there is I was watching curb your enthusiasm

[00:13:55] I don't know if you watched that show but there was a bit with Larry David where he

[00:14:00] just like gets so pissed at the smart car that's using Siri because it's like saying

[00:14:06] he's asking to go somewhere and it's saying completely different and I could definitely

[00:14:09] relate with that.

[00:14:11] Yeah I've had I had an iPhone like oh it had to be like seven years ago now and it was

[00:14:16] completely useless yeah I'm surprised I haven't made any improvements I'm an Android

[00:14:20] like the I have a pixel and it's actually it's pretty good I mean the most things I use

[00:14:25] for it is to just tell it to set reminders for me that's about the extent I've utilized

[00:14:30] it so it works out.

[00:14:31] I thought you were going to say your Huawei user and you like to give your data to the

[00:14:35] Chinese government.

[00:14:37] I like to mention I'm track for everything I feel like we are already on our phones but

[00:14:43] I digress will go now to the CBC marketplace investigation about the big five Canadian

[00:14:52] banks and their sales practices so have you were you able to watch that video or

[00:14:58] watch a video but at what I read over I read over the notes here and it's I mean I'm

[00:15:04] not surprised at all.

[00:15:06] Yeah, I was in either.

[00:15:10] Well like and it's not the first time so there was another kind of investigation that

[00:15:16] was done I was in marketplace that one but it was go public that did a similar investigation

[00:15:22] with CBC in 2017 and the findings that they found were very similar and I encourage everyone

[00:15:29] to either read the article or listen or watch the episode you can view it on CBC gem for

[00:15:34] free.

[00:15:35] I think you just have to watch them ads.

[00:15:37] The gist of it is that the big five banks are pushing products on customers and it's

[00:15:41] big five.

[00:15:42] They did not include national banks.

[00:15:44] I don't know if they went to national bank and there was an issues or they just kind

[00:15:49] of focus on the big five banks so I don't you know, I don't necessarily want to put them

[00:15:55] under the same umbrella.

[00:15:57] I mean it's possible that they have similar practices if I had to bet I probably would be

[00:16:03] surprised.

[00:16:04] I wouldn't be surprised either but again they weren't part of this and essentially is not

[00:16:09] the big things are pushing products on customers that don't need it or giving incorrect misleading

[00:16:15] or misleading information and India investigation.

[00:16:19] They even said that the information was in some cases illegal.

[00:16:23] There was an example where they put someone under cover and essentially this all started

[00:16:28] because they were bank employees that went to CBC and essentially telling them this was

[00:16:34] happening and they for the most part they wanted to be anonymous because they were afraid

[00:16:40] for their jobs to lose their roles but it prompted them to do this undercover investigation

[00:16:48] and one scenario is a person went in and they said they had $50,000 coming in inheritance.

[00:16:54] What the person wouldn't say is that they also had $17,000 worth of credit card debt

[00:17:01] and $350,000 in mortgage and the person went in wanting to do wanting to know what to

[00:17:07] do with the money and they weren't upfront right away about the debt aspect because a

[00:17:12] good financial advisor planner would ask you these questions right off the bat especially

[00:17:18] credit card debt because if you have credit card debt essentially like that's the no brain

[00:17:24] or thing to pay off because you're essentially getting what 20% is now the interest you're

[00:17:29] getting 20% guaranteed returns on your money if you pay it.

[00:17:34] You're never going to earn more than 20% I mean you're not going to owe me but it's

[00:17:39] going to be really risky right.

[00:17:41] It's going to be crazy risky.

[00:17:44] I mean it made like back in the pandemic when people were, you know I knew a lot of people

[00:17:48] who took out some money from a heat lock when it was like 3%, 4%.

[00:17:53] At some point that made a bit of sense but you should always eliminate credit card debt

[00:17:58] before buying high fee mutual funds.

[00:18:02] Yeah this is like basic stuff and essentially what they were telling this person is that

[00:18:07] some were saying oh pay a little bit off.

[00:18:09] Some one even said they should only do their minimum payment which is completely ridiculous

[00:18:14] because then your balance just takes forever and forever to pay.

[00:18:19] Some said to get a line of credit to pay off the credit card and then invest the $50,000

[00:18:25] obviously because they can get more fees on the mutual funds.

[00:18:30] It was I mean I don't know to what extent it's a mix of the financial advisors and air

[00:18:38] quotes just being completely clueless or really them knowingly giving false information

[00:18:44] or wrong information or information that's just not appropriate for the client and not

[00:18:49] having the best interests at heart but clearly you know they get incentivized to sell these

[00:18:56] mutual fund products.

[00:18:58] And one thing they also ask and they actually prompt in them at some point because they

[00:19:04] weren't being asked whether the was debt or not.

[00:19:06] They said I do have this debt and that's the kind of advice that they were getting which

[00:19:11] is completely terrible and then when they ask the financial advisors well what are the

[00:19:16] fees and how are the fees applied?

[00:19:18] Is it just on the profits that I make or is it on the total sum that I invest or the total

[00:19:23] asset under management?

[00:19:25] We couldn't even answer that and for those who are new to the show and are not familiar

[00:19:30] with that essentially when you have fees on whether it's ETFs, mutual funds let's say

[00:19:35] you have a 2% fee whatever money is under management that 2% fee will apply so whether you

[00:19:42] lost money on it whether you gained money it's the full value that's why over like 15

[00:19:48] 20 years.

[00:19:49] It can literally like reduce your returns by you know half or close to it.

[00:19:54] Yeah I think it is pretty close to half.

[00:19:56] Yeah like I don't know I would have a feeling that these guys would know where the fees come

[00:20:01] out maybe they're a bit you know vague about where they're coming out and like it's just

[00:20:06] such it's so obvious what they're doing they're trying to like they don't care that this

[00:20:12] person has that much debt they know that she should pay it off but instead they just want

[00:20:17] to collect the 50 grand into their pockets because they you know they probably get incentive

[00:20:21] to sell the fund.

[00:20:22] I mean it's pretty sad.

[00:20:24] Yeah and I mean it's bad because people are actually trusting the bank here and clearly

[00:20:30] the bank does not have their best interest at heart if they're like I mean some of the

[00:20:35] employees and I had I did a tweet on it or a post on ex and people I've had multiple

[00:20:41] people come and that they worked at a bank like 10 15 years ago and that was common practice

[00:20:47] it's nothing you so they've been doing this for a very long time and a lot of people just

[00:20:52] don't know any better right so they go to the bank they trust them and they get this

[00:20:56] terrible advice just because the bank wants to boost their profits and another instance

[00:21:01] where they showed is you know like a lot of the big banks they'll have a checking account

[00:21:06] and they'll say well it's $20 a month unless you keep $5,000 in there.

[00:21:12] And then you don't we waive the fee if you keep it but what they don't say oftentimes

[00:21:16] is if the balance did below 5k in this example one day you don't get the fee waived so you

[00:21:23] may have the whole 5,000 the whole month one day you won't get it waived and you're not

[00:21:28] really saving that much money or at all if you compare with what you could get right

[00:21:32] now it's not hard to get 5% on your money if you you know you go with a GIC you go with

[00:21:39] a money market you know treasury bill option you can get easily 5%.

[00:21:44] So I think that's one part that the investigation kind of is because it it does in fact are

[00:21:49] in what you could do with this money aside from it being locked out that's something else

[00:21:54] that they pointed out and I'll just finish on this because I clearly you know I hate seeing

[00:22:00] the things like that but the big banks honestly they just you know they're not they don't

[00:22:07] have your best interest that hard I think this is what is clearly evident here so you're

[00:22:12] your own bank I would say I think or you have your own best interest that hard always make sure

[00:22:18] you shop around I mean that's why I'm like really happy that we have you Q bank as a sponsor

[00:22:22] because I think they they're doing a great job at disrupting the legacy banks and you don't need

[00:22:29] a minimum balance in their savings account and you get a good rate on your money and their apps

[00:22:36] is fantastic and you're not you're not being pushed these terrible products like you're you're seeing

[00:22:42] here so I think you know obviously Q bank is there to make money as well but I think they have a

[00:22:47] much better approach and the big five banks here and I do hope that regulators kind of step up

[00:22:53] one of the pieces that the report is that the regulators are basically not doing much

[00:22:58] they're not even doing slaps on the wrist and one of the person interviewed said look if

[00:23:04] they want the banks to stop doing that they need to impose fines they need to do surprise visit

[00:23:11] undercover operations and impose fines that will make it unprofitable for the banks to have

[00:23:17] these kind of practices and I'll go as far as saying like they should hold these CO accountable

[00:23:23] like this you know you see that very often and it just pisses me off where you have like

[00:23:29] these CO's that are like well you know I didn't know about that like that's BS

[00:23:33] oh yeah this is so rampant that it's coming from the top I do not get that whatsoever

[00:23:38] these people are making a whole lot of money and they should be held accountable for this

[00:23:43] and it's completely unacceptable that regulators are not doing anything if they don't have sufficient

[00:23:48] resources they should say it and get some more I mean there's enough money that's being wasted

[00:23:53] elsewhere this kind of stuff is costing regular people you know hardship especially when we're

[00:23:59] extremely indebted and the solution from these big banks is more terrible debt products I don't

[00:24:05] I think my rent has been long enough I won't say anymore yeah it's I mean there's a lot you

[00:24:12] wonder why like there's just a crazy amount of you know people who've gone self directed investing

[00:24:17] as well because I think there's a lot of trust that's been broken because a lot of people dealt

[00:24:22] with these banks and you know they kind of figured out over you know whether it be the shorter

[00:24:26] long term that they just well that like you said they don't have your interest at heart they're in

[00:24:31] the business of making money that's pretty much it and if they can if they can push their mutual

[00:24:36] fund sales reps to sell you particular funds with you know immunity pretty much no regulatory

[00:24:43] impact and that's definitely what they're gonna do because ultimately at the end of the day

[00:24:48] they're trying to make money they're trying to make the most money possible for for shareholders I

[00:24:52] mean I swapped last year completely entirely to equitable bank and I think they give me 4% on my

[00:25:00] deposits so just in my checking account I make 4% and then on the card or whatever I get half a

[00:25:05] percent cashback so with no fees no fees at all whereas like I mean I was with a treasury branch

[00:25:14] in Alberta so it was a little different but they still charge me like 12 bucks a month for my

[00:25:18] checking account with it and unless I had like you said I think it was $3,000 over it yeah that's

[00:25:25] pretty common I mean I switched I think five years ago because I used to be at one of the big banks

[00:25:30] and I called them and I said look wave that fee and I don't want to put a minimum balance if you

[00:25:37] don't wave it I'm taking all my business away they said well you need to put like I think it was

[00:25:42] 4,000 at the time to get it waived and they're like no there's no flexibility then I'm like okay

[00:25:48] that's it and I moved everything and now I have two but I primarily do a UZQ bank as well just

[00:25:55] because I mean it just makes all the sense in the world so I know it's it sucks switching banks

[00:26:00] the switching costs in terms of time it's not the easiest thing to do but you know you have to

[00:26:06] do what's in your best interest and obviously if people are satisfied with their getting with

[00:26:10] their big bang that's fine but and I guess the last thing I'll mention is I do feel for these

[00:26:15] employees at time because I think the sense I got is a lot of them just feel pressured from management

[00:26:21] to do this because if they don't do it they'll actually lose their job so I think it's just I

[00:26:26] want to be fair to them to me I think management whether it's in the middle management senior

[00:26:32] management they all need to be held accountable because it's coming from somewhere yeah and I would

[00:26:37] imagine like if you didn't want to push these like aggressive tactics they would just kind of find

[00:26:43] somebody who would because I'm sure there's a lot of people who would yeah so this has been going on

[00:26:50] for a very long time I mean it's yeah I think what's really gonna hurt the banks and who knows

[00:26:56] what's gonna happen but I think the timing of it coming out now as more and more people are

[00:27:02] struggling financially are dealing with high debt you know in 2017 it wasn't as bad as it is

[00:27:08] right now I think just the fact that there's this perception that the banks are even like taking

[00:27:12] advantage of Canadians I don't think this is gonna go well for the big banks at the next

[00:27:17] some months and quarters I think you know I hope they get some pushback from government and regulatory

[00:27:25] agencies obviously I know Asfis really busy trying to reduce the yields of high savings ETFs

[00:27:33] to help out the banks but at some point you know maybe they'll work they'll collaborate different

[00:27:38] agencies to crack down on this kind of this kind of behavior yeah that's a very good example of how

[00:27:44] like there probably won't be a crackdown because all those banks did was complain once about those

[00:27:50] high-side ETFs and they were just within six months they changed the definition of I think it

[00:27:57] some to do with a fund where they had to take the yield down by I think it was 50 basis points so now

[00:28:02] they don't really yield as much as many of the big banks conveniently as many of the big banks

[00:28:07] money market funds so it worked out yeah I mean something needs to happen but it's hard to imagine

[00:28:15] anything will at least over the short term here but this maybe this comes to light and there's a

[00:28:19] bit more crackdown on it yeah so I think we've talked enough about this I will put the link in

[00:28:26] the show notes if people want to look at the and listen or watch the investigation also put a link

[00:28:34] to the 2017 one for those who are interested now we'll go on to you know a company that's back by

[00:28:42] probably the best-looking guy in Canada according to my wife so you want to tell us about

[00:28:49] newbie who's famously backed by Ryan Reynolds yeah so I think Ryan Reynolds bought in last year

[00:28:56] I think it was I think so yeah it hasn't been something like that it hasn't been too too long but

[00:29:01] they're they're a payment processor in Canada the IPO not too long ago and at one point you know

[00:29:07] over their short trading duration obviously they were one of the best performing Canadian IPOs

[00:29:12] I think this was mostly as a result of just the pandemic much like any other payment processor it's

[00:29:17] gotten like obliterated post pandemic so at one point it was it was trading your $170 and now it's

[00:29:23] sitting at just under 40 and that is with the 35% spike we witnessed yesterday because of the news

[00:29:32] so you're talking it's taken an absolute beating the last while so the news was the private equity

[00:29:39] company advent international is apparently an advanced talks to buy new veh with a price largely

[00:29:44] unknown so this makes the move on the news here even more crazy as there's huge risk here because

[00:29:50] nobody really knows what the premium you know would be or even if there would be one I imagine

[00:29:57] there would be one because the stock is pretty cheap at these points with nobody knows the price

[00:30:01] that's going to be paid for the company but new veh's decline hasn't really been from you know

[00:30:07] a lack of operational results management has done some really odd things over the last bit here

[00:30:11] and they've certainly broke trust they made a really odd decision I believe this was at some

[00:30:16] point last year to declare a dividend yeah I remember that yeah and it just confused like I'm

[00:30:22] pretty sure when they issued that dividend the stock bombed I can't remember completely but

[00:30:26] I'm pretty sure it did because it was just so so confusing it's guidance has been relatively weak

[00:30:33] and it's been a bit of a mess I don't really blame the firm for looking at the company right now

[00:30:37] though it's only trading at 20 times cash flow and 11 times expected earnings this isn't a cash

[00:30:43] burning company they're profitable they have $285 million in trailing TTM cash flows trailing 12

[00:30:49] month cash flows they've pretty high gross margins debt does remain a bit of an issue at least on

[00:30:55] the surface so a quick look up a financing cost in their most recent quarter and they've almost

[00:31:00] 4xed so they paid 92.3 million dollars in interest in 2023 compared to just 23.3 million in 2022

[00:31:09] so pretty much the company formed a special committee over the weekend to take a look at the offer

[00:31:14] that would take the company private and I have read a lot of chatter about possibly speculating on

[00:31:20] this one in regards to buying it and hoping the multiple is even higher than it's sitting at now

[00:31:24] and I do think there's big risk in that because I believe in a way the vultures are kind of

[00:31:30] circling here I mean it was trading at 2950 pre acquisition rumors and it's now in the high 30s

[00:31:37] so if you're buying here and hopes that the multiple is higher what exactly are you expecting this

[00:31:43] you know venture capital firm to pay it would have to be like a 75 to 100% premium and I mean even

[00:31:49] like if the premium is lower you're taking a huge risk just to you know you could get an

[00:31:56] outsized return if the premium is much higher but you're also taking on a lot of risks that if

[00:32:00] the premium is lower you might not even make all that much money because if the deal I would

[00:32:05] imagine if the deal fell through that the stock would probably take a bit of a beating again

[00:32:10] because it went up you know 35% on the news but I think whatever venture firm buys it

[00:32:16] is probably getting it at a pretty good price there's a lot of a lot of slowdown priced into the

[00:32:21] stock right now it hasn't done very good the last while yeah and I have here for joint TCI

[00:32:26] listeners so like you are saying interest expense has just been kind of continuously increasing since

[00:32:33] pretty much the rapid interest rate increases started so clear without knowing the type of

[00:32:40] dead they have I'm gonna go on a limb and say that it's variable rate so it's yeah some kind of

[00:32:45] dead that's variable rate just based on on what we're seeing here assuming that they haven't added

[00:32:52] like additional debt to that it'll be interesting I guess the one wildcard is there's multiple P

[00:32:57] firms that are looking to buy them out and this would most likely be a leverage buyout that they

[00:33:03] would do to buy new evade take it private get it levered up that's usually the playbook and then

[00:33:09] five 10 years down the line you sell it or you go public again so that's kind of the playbook for

[00:33:16] private equity with these type of plays yeah from what I heard or from what I read I can't

[00:33:21] remember this exactly but I think they want to keep the CEO on like or the majority owner is

[00:33:27] gonna stick around I'm not sure in what okay in what position I might have read that wrong but

[00:33:33] I'm pretty certain that's what's gonna happen I mean if anything happens there's nothing that's

[00:33:38] been confirmed yet I mean they're discussing the deal depending on what it is like I mean if you're

[00:33:44] if you bought new ve and you know 2022 and you're sitting at a hundred dollar 120 dollar

[00:33:49] cost per share you're not exactly excited about a 50 60 dollar buyout that's for sure no that's

[00:33:56] yeah and and I guess what we're seeing to it payment processors is that you know I think visa

[00:34:02] and mastercard being this de exception because of how massive their networks are but a lot of them

[00:34:08] I think my perception is it seems like it it's it's almost like becoming a commodity right there's

[00:34:14] so much competition in this space and I know new ve kind of focuses a bit more if I remember correctly

[00:34:20] on the gambling aspect but I think they diversified a way a little bit from that not it's actually

[00:34:26] 100% sure on that I know I don't matter like the other guy it's doctorates he's he own new ve

[00:34:32] I'm pretty sure he bought it on IPO so he's kind of he yeah I I'm not sure on their total overall

[00:34:41] makeup I know they do have some gambling but I didn't think it was a huge huge chunk of the business

[00:34:45] what it might be wrong on that oh that's okay yeah that's I went on memory it's been a while

[00:34:49] since I've looked at them but it'll be interesting I'm just kind of questioning even the private equity

[00:34:55] buying that when it just feels like if there's a lot of yeah it's come almost becoming like a commodity

[00:35:03] right like it's just there's so much competition and I think it's just gonna be going to be harder

[00:35:10] and harder for companies to be extremely profitable I'm not saying they're not going to be profitable

[00:35:15] but I think the margins are gonna be reduced because there's so much competition

[00:35:20] and we would you have like these a masquerade PayPal you have light speed what else would you have

[00:35:26] I don't even know of another oh there's tons of them yeah there's a there's a strike like

[00:35:31] different oh yeah strike it yeah there's probably hundreds of them like if not thousands depending

[00:35:38] on the size of the companies there's behemoths but even stripe and audio and they've seen their margins

[00:35:42] really drop off because they're seeing more and more competition so it's it's an interest

[00:35:49] pay interesting space I own visa and mastercard not a lot it's like a relatively small portion

[00:35:54] of my portfolio but those are the two and the rest I'm not too interested just because I

[00:36:00] I just don't know how much of a moat that they have and how easily it can be replaced especially

[00:36:07] if they end up losing a big customer yeah it's kind of the same with me I own like a decent

[00:36:12] size position in visa and then like a smaller pretty small position and light speed that I've

[00:36:17] kind of bought in and out of since its IPO I mean I guess I would be more interested because I own

[00:36:22] light speed what multiple a company like like new ve is going to sell that like that's that's

[00:36:29] the most interesting thing for me is how much are they actually gonna pay I mean nobody really knows

[00:36:34] it's kind of weird like the stock jump 38% maybe you know maybe it'll jump another or maybe

[00:36:40] the multiples lower than that there's a lot of I don't know why this is this just pure speculation

[00:36:45] people jumping in now expecting a buyout over and above that I don't know it seems crazy

[00:36:51] gambling fever is back it's like 2021 again I guess yeah I was listening couple podcasts and I

[00:37:01] one of the things that one of them was saying and I can't recall I think it was Michael howl

[00:37:06] uh really smart guy from the UK and his basically is explanation for kind of a bull market we've been

[00:37:12] seeing is that even back in late 2022 was saying that liquidity was at its low in October and November

[00:37:20] and liquidity has been increasing steadily since then which is a reason that we're seeing like a

[00:37:25] bull market obviously Bitcoin pull back up as well since all tied to that so it'll be interesting

[00:37:31] he thinks it's going to be continuing uh up until the end of 2025 we'll have to see but if that's

[00:37:37] the case I mean I'd be interested in seeing if we see an uptick in these type of acquisitions or maybe

[00:37:43] IPOs start picking back up again yeah because we've had well what do we have last year like maybe one

[00:37:50] or two IP at one yeah we have one on the T.S. X yeah absolutely nothing yeah that's it okay well

[00:37:58] we'll move on because we have a couple more things to get to I think that was it right in terms

[00:38:03] of the details for this for you know yeah yeah there's not much news right now just kind of they're

[00:38:07] in discussions I'm sure some will come to fruition pretty quickly so I'll do this earnings that

[00:38:14] I had planned for last week and then uh so this is pet value they had their earnings release and

[00:38:19] then we can finish with empire another grocer and I think that'll be enough for today as we're

[00:38:24] getting pretty long on time already now pet value they had their Q4 in fiscal year 2024 I'll go

[00:38:31] over mostly the full-year earnings just because uh we don't talk about this company very often

[00:38:37] now system wide sales were up 10% to 1.4 billion revenues were up 11% to 1.05 billion the main difference

[00:38:46] between the two is because the majority of their stores are franchises they have 222 corporate

[00:38:52] own stores and 561 franchises and same store sales growth was 5.2% net income was 11% higher to

[00:39:01] 90 million free cash flow was down 8% to 78.1 million and margins have been trending down compared

[00:39:09] to previous years uh one thing to keep an eye on here is the interest expense which went from 20

[00:39:16] million to 30 million last year and in terms of guidance they expect revenues to be in the around

[00:39:23] 1.13 billion I just took the mid range here and that would be a 7% increase from last year

[00:39:31] and they expect their same store sales to be up 2-5% and open 40-50 new stores this year so

[00:39:38] clearly it's a business that you're relying on opening new stores to grow it's not a business

[00:39:45] that I would be interested in personally but I still think it's really interesting to keep an

[00:39:50] eye on these kind of businesses especially those that obviously like focus on pets because I have a

[00:39:56] dog and we spend way too much money on our dog yeah and you do you have a dog as well right yeah

[00:40:03] yeah and it's you know it's like a member of the family right and it would be one of the last

[00:40:09] things that we would cut in terms of expenses sure we may cut on certain little things that are just

[00:40:14] kind of nice to have for him but um with the Fed and all that I mean usually right you just kind of

[00:40:22] pay whatever you need to pay for your pets so that's why I think these business are really

[00:40:26] interesting because my deen of the day they can be resilient in a lot of different kind of environments

[00:40:32] that's exactly what I was going to say like this is where I get my dog's food because he's got like

[00:40:36] he's got to get this allergy food um our my dog is definitely cost our dog and sure our pet

[00:40:43] insurance company a lot of money but yeah we I didn't even know this company was this big

[00:40:50] like we just have one close by where we're at and I have to buy the food from them but like you said

[00:40:54] I was exactly gonna say that like people don't really trim down on their pet spending I mean

[00:41:00] I'd probably cut a lot of stuff before you know I had to start buying my dog you know cheaper food

[00:41:05] things like that so these I'm pretty sure pet value was like a pandemic IPO wasn't it

[00:41:11] I think it may have been yeah and they just relatively recent yeah June 2021 pretty much

[00:41:18] absolute there you go yeah market peaks yet yeah pretty closer but I thought it was just an

[00:41:23] interesting one because we have them all over the place here obviously there's pet smart too but

[00:41:28] pet values are more kind of intimate or smaller footprint pet smarts are like these huge you know

[00:41:35] huge stores so it's I enjoy going there are my little buddy is uh 15 pounds and I'm sure if

[00:41:42] there's listeners that have been here for a few years they've heard him a few times on the podcast

[00:41:46] but I thought it was interesting just to look at because the doing all right I wouldn't say it's like

[00:41:52] you know firing on all cylinders but I mean they're still growing and even the same store sales

[00:41:58] are keeping up with inflation so you can't ask for much better I think for this kind of business

[00:42:04] yeah this is kind of what I would expect a I wouldn't expect explosive growth from a

[00:42:09] from a pet store business but yeah I don't know is a decent quarter by them we'll have to see

[00:42:15] how it is moving forward yeah we'll have to do it again there in there a couple of orders yeah see

[00:42:21] how they're doing now do you want to go over empire they reported the results recently I can't

[00:42:27] remember when though I think it was last late last week I think four or five days ago probably now

[00:42:33] it's uh this one's pretty interesting because I've mentioned a few times myself like I've started

[00:42:37] I used to shop at sobies all the time which is pretty much their staple store but I've kind of

[00:42:44] stopped going there and I've started to go to like a no frills stuff like that more just because

[00:42:49] it's so much cheaper so they missed estimates on both the top and bottom line but it really wasn't

[00:42:54] by much like in terms of headline numbers it was a relatively inline quarter and they were actually

[00:42:59] doing a bit better than I predicted but it's still been it's been pretty rough for empire over

[00:43:04] the last while sales are effectively flat on both a quarter over quarter basis and when you compare

[00:43:10] the first nine months of this year to nine months of 2023 and when we think of how much food prices

[00:43:17] have gone up in the last year it's a bit surprising to see sales flat when we look to a company like

[00:43:21] Lobla they're growing sales I think in their food segment by about 5% so there's a there's a pretty

[00:43:27] big difference there especially when you're talking like that big of revenue from those departments

[00:43:34] operating income dropped by low single digits over the same time frames as I had mentioned before

[00:43:39] and adjusted that adjusted earnings per share dip by 11.7 and 14.7 percent

[00:43:48] so or sorry that was adjusted net income so when we look to earnings per share the company actually

[00:43:54] hasn't had earnings per share declined that much because it's buying back a ton of shares

[00:43:59] so at the end of the third quarter of 2022 the company had around 261 million in shares

[00:44:05] outstanding so it now has 249.7 so this is a buyback of around 4.3 percent through the first nine

[00:44:12] months compared to the last which is it's quite a bit in terms of buybacks same store sales on the

[00:44:19] quarter excluding fuel grew by 1.9 percent when we looked at the first nine months they're up around

[00:44:24] 2.6 percent and the company's operating income on the food retail side of things seems to be pretty

[00:44:30] solid however it's real estate end which for the most part and I have a dug too deep into this but

[00:44:36] I think it owns a big chunk of of crombie reat so I think like crombie owns a lot of their grocery

[00:44:44] anchored retail reats and then and then I believe empire owns a big chunk of crombie itself but I

[00:44:49] believe it had it you know it has had some pretty poor results over the last while which is

[00:44:54] impacting them a little bit they're in the midst of transitioning a bunch of soap with

[00:44:59] sobies and safe soapways stores to fresh co it's discount banner so this is likely to result in a

[00:45:07] bit higher capital expenditures over the next few years but I imagine it you know it pays off for them

[00:45:12] because the discount model is becoming a bit more popular these days and we can clearly see this

[00:45:19] because you know empire is reporting declining earnings whereas law laws is growing earnings by

[00:45:25] you know 13 14 percent and just overall they've struggled to get it going for quite a while

[00:45:30] the recent correction in price has the company back to pricing levels you haven't seen in six years

[00:45:37] and this is with buybacks as well so they've been they've touched they touched all time highs in

[00:45:41] April of 2022 and ever since policy rates have been increasing it's it's been in a constant downward

[00:45:48] slide so since those 2022 highs empire is down over 24 percent while law laws is up 4 percent

[00:45:54] or sorry Metro is up 4 percent and law laws is up 31 so I know this is popular for a lot of Canadians

[00:46:02] due to its big dividend growth streak I think it's at like 28 plus years but this just kind of

[00:46:06] goes to show that the market really doesn't care all that much about dividend growth you know they

[00:46:11] just care about earnings cash flow growth you know future expected earnings things like that

[00:46:15] yeah no I think you're right I mean the one thing I like about them and they

[00:46:20] I don't know I'd have to look at their financial results and listen to their calls I mean it's not

[00:46:25] a company that interests me all that much but I mentioned them before so they bought farm boy

[00:46:31] think for 800 million in 2018 and they do those stores are like very nice like they

[00:46:40] are different experience yeah it's a different experience and I think they're only an Ontario

[00:46:45] so anyone outside of Ontario you wouldn't be familiar with them but essentially it's more like almost

[00:46:51] feels like almost like a kind of more farmers market they have a lot of food that's made

[00:46:59] there already prepared so it's typically very popular especially like they'll have their locations

[00:47:05] at the bottom of a huge apartment building huge condo building so a lot of people will go there or

[00:47:11] nearby a lot of office spaces so people go there lunch to grab these like kind of you know

[00:47:17] these kind of hot food from them so it's quite popular but they have they tend to have really good

[00:47:23] produce but it's not the cheapest so I think they are very selective as where they open new locations

[00:47:31] and definitely not you know it would not be catered to where more kind of cost effective clientele

[00:47:38] yeah yeah I think like there is a specific strategy in that I mean I had a buddy who lived in

[00:47:43] downtown Calgary so he always ended up shopping at Safeway but that's only because it was an

[00:47:48] absolute pain to get anywhere else you know what I mean so if you can strategically place these

[00:47:53] stores where you know it's convenient or you got a lot of people who don't mind spending the money

[00:47:59] but outside of that I mean I can't I don't shop at sobies anymore it's so expensive

[00:48:04] groceries are just getting crazy yeah that's the same like I mean we tend to be more

[00:48:09] we used to shop at farm boy more than we used to and now it's just yeah like you said it's just

[00:48:15] too expensive and we have to be smart with our money like everyone else and here I was just pulling up

[00:48:20] because you mentioned in terms of total returns so yeah they've definitely trail both Metro and

[00:48:27] Loblaws so Loblaws is up 150% over the last five years you have Metro at second here with 66%

[00:48:36] and you have Empire that trails them 26% so clearly I think I'm safe to say that you're trailing

[00:48:43] the market pretty massively with Empire and Metro yeah I mean if you look at where like Loblaws

[00:48:50] is outperform for for quite a bit I think like in a post pandemic world for sure they've been the

[00:48:54] best grocer but you can you can see if you look at a chart you can see like a clear distinction

[00:49:00] in 2023 where it just started to take off because of yeah and I think that is because of the fact

[00:49:06] that you know they have the widest reach I believe I mentioned this before but I think

[00:49:12] the average Canadian is only about nine kilometers away on average from a Loblaw store

[00:49:17] and that's like country wide averages and they also just have so many more discount brands like

[00:49:22] Loblaws super store things like that so I think that's why they're performing quite well whereas

[00:49:27] you know Empire it's just for for the average Canadian it's way too expensive I mean

[00:49:34] soby is expensive but Safeways even more expensive I don't know if you if you have Safeways there

[00:49:40] no I don't have too many anymore but yeah no we don't I can't recall any Safeways in Ontario yeah

[00:49:46] yeah which is why like it's clear that they know this too because they're starting to

[00:49:51] you know that that fresh co its discount brand they're like just completely revamping stores and

[00:49:56] turning them into those so they clearly understand that you know this is probably the way

[00:50:02] to go in the future but for me I've mostly like Costco I shop at Costco so much now yeah yeah same

[00:50:10] for us I mean the trick is to always check the expiry date when you buy perishable because you get

[00:50:19] large quantity yeah Costco because even if you eat a lot of stuff like a lot of a certain thing

[00:50:25] sometimes just having a couple more days to eat it makes a big difference my my wife

[00:50:30] joined me at a recent trip and she learned that the hard way where she bought these like salads

[00:50:35] and forgot to check and then the following day she's like oh my god they expire or the best

[00:50:39] before is like tomorrow like a rookie mistake when you buy perishable you have to look at the

[00:50:46] data Costco because you just have the quantity like you need those extra few days exactly yeah

[00:50:53] I mean there's a clear shift what were we I think we talked about Costco's earnings

[00:50:57] last week and like the foot traffic in terms of Canada is just huge

[00:51:02] the same store sales Canadian same store sales and traffic through the stores like it's definitely

[00:51:07] a shift in Canadian spending at least yeah the next time we talk about Costco you'll have to put your

[00:51:13] Kirkland hoodie on yes I know it is that yeah so I put my Kirkland represent jeans on yeah

[00:51:19] represent the brand but I think that's it for today I think we went long enough and the last time

[00:51:27] I think we talked about grocers we had someone reach out to us and I think I think it was reaching out

[00:51:33] to me on Twitter saying that he went to I think it was food basics or one of the discount brand

[00:51:38] any body didn't mention what meaty but but he's like yeah I bought some meat last night I cooked

[00:51:43] it and I'm still chewing it this morning oh yeah food basics is metros metros discounter yeah

[00:51:52] I think yeah food basics I don't know I miss I can't we don't have any here I

[00:51:57] yeah I kind of forget all the brands but they're all very similar that the discount brands but

[00:52:01] I think that's it for the episode today thanks everyone for listening if you haven't done so we

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[00:52:37] stock trades underscore CA is that yeah I think that's the first time you said it yeah I got it yeah

[00:52:43] or you know or stock trades dot CA if you go on the website yeah so thanks everyone for

[00:52:49] listening and we'll see you again next week yep thanks everybody the Canadian investor

[00:52:55] podcast should not be construed as investment or financial advice the host and guest featured

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