Canada Goose Buyout Speculation and The Risks of Government Investing in Stocks

[00:00:01] Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own cyclicals, don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time.

[00:00:31] Welcome back to the Canadian Investor Podcast. I'm back with Dan Kent. We are here for some news and earnings, some fresh ones, because we're recording on August 27. So if you've been listening for the last few weeks, there have been some pre-recorded episodes, but this one is fresh. It'll be out tomorrow on the 28th on a regular news and earnings date. I am still at the cottage. We rented a cottage a couple of weeks, so that's why we took a hiatus, spending time with the family.

[00:00:59] So if my audio sounds a little different, I'm in a different room, but brought all my equipment, the video equipment as well. So it should still be a decent quality minus me getting out of a cold. So I still feel a little bit stuffed up. So please take my apologies if I'm talking a little bit from my nose during this podcast. Yeah, we got a couple new recording studios here this morning. I'm in a new office here in the cottage. Yeah, it's Canadian Bank Week. They've... Yeah.

[00:01:28] I mean, we'll probably do a dedicated episode on it later on, but I mean, there's been some big quarters from the banks. Yeah, exactly. So I think we'll do a recap next week, but you'll go over Scotia today and then we'll also talk about Dollarama. I'll be listening intently because I didn't have a lot of time on my hands given that I am not at home and spending time with the family. So I'll be listening pretty intently for those earnings. Only had the chance to glance at them very quickly.

[00:01:56] And then we also have some general market news. We'll be talking about some macro things because they does influence the markets and the stock market. And even coin gold have been influenced by those big picture news. I think it's pretty relevant, especially as earnings do slow down a little bit minus the bank earnings. So let's get started. The first thing here that came out last night. So did you see that one that Canada Goose may be taken private? Yeah, I think they're...

[00:02:23] They have like the majority shareholder is what 60% of the company and they're getting offers from... I think a wide variety of companies to try and take it private. Yeah, it's... I mean, I'm not really all that surprised. Yeah, Bain Capital, which apparently has had ownership, the majority ownership I was reading, I think for like 10 years or something. So they got in a long time ago. Obviously, it's still publicly traded. They only have 60% of their voting shares.

[00:02:48] It was reported by CNBC that there were offers coming in around 1.35 billion USD for the company. Now for context, before the news came out, it was... It had a market cap of around 1.1 billion. So we saw a nice little bump today. Obviously, the market reacting to those news. They said that there are multiple potential suitors for the business, which makes sense. I mean, it is trading at a pretty attractive valuation.

[00:03:18] I'm not exactly sure. They did mention the motivation for Bain Capital for wanting to take that private or sell that to be able to take it private. Clearly, they want to sell their stake in the company. It's again, sales have been pretty stagnant over the last 18 months for Canada Goose, especially at some key markets. Even key markets like Canada, China and the US saw some declines.

[00:03:44] So it is something that they might be selling a little bit on the low here, but who knows what the reasons are. Maybe they need some liquidity. But clearly, at the price that they're asking and the offers they're getting, there's definitely seems to be a lot of interest this price. And I mean, I wouldn't blame companies, especially if you take it private, you have more flexibility to be more efficient. I can see why they'd be interested in these assets. Yeah, I think that like, I think that's the main thing here.

[00:04:14] And we have to remember like Canada Goose at one point was a, I think it was close to an $11 billion company. It was pretty crazy. Like back Canadian, I think maybe a little closer to like seven and eight. Yeah. Yeah. And I mean, they have, I mean, their gross margins are like 63% plus. And like before they got into all that trouble during COVID, like they had operating margins of like 25%. So I would imagine it's going to be pretty attractive for, you know, somebody to maybe try and buy this and kind of turn that around because the operating margins now I think are like 8%.

[00:04:43] So they're down like way, way from pre pandemic. But I think they've had a lot of issues. I mean, I know this company was, they kind of made like China, their main growth avenue. And obviously COVID had a, had a huge hit on that. And then I think they ended up having a bunch of counterfeit issues as well in China where people were just buying like a $200 knockoff or whatever versus, you know, a $1,300 real one.

[00:05:08] So yeah, I'm not sure at like, they generate almost 300 million in free cashflow to set to, so it seems really cheap. Um, and I'm not surprised that they have a whole bunch of people lined up. I mean, they could just be saying that as well. You never know. Yeah. Yeah. They could be saying that just to drum up off. Exactly. So we'll have to see, but they seem relatively motivated, motivated based on what's been coming out from CNBC. So we'll have to keep that in mind.

[00:05:37] And just the last thing you mentioned COVID over the last five years, Canada goose is down close to 46%. Although they had some decent COVID years, but especially in the last year and a half, they've been struggling. So we'll have to keep an eye on that one after a slew of Canadian companies that we've talked about in the smaller cap area or purchase and taken private over the last year. So it'll be interesting. I think this one, especially because it's a pretty iconic Canadian band. So let's leave it at that.

[00:06:07] Next on the doc here is Jerome Powell, the fed making some headlines, obviously moving the markets once more. And I know some people really love macro. Some people don't as much. And I think anyone listening to this podcast likes to invest, but I think it's important in this context, at least understand what's happening just because it does move markets, including the stock market a whole lot. So it's something that I think everyone should be at least aware of that's investing.

[00:06:35] You don't need to know and follow it on a daily basis. I completely understand that. But I'll take just a big picture takeaways here from his Jackson Hole speech that happened last Friday. The economy is slowing, but not collapsing. So job growth has cooled down sharply and GDP growth has slowed, but unemployment remains historically low. We'll have to see with these revisions and Donald Trump firing the head of the BLS. So it's the Labor Bureau of Labor and Statistics over there.

[00:07:04] But they also said that both labor demand and supply are softening, especially due to weaker immigration. So it does raise the risk of faster job losses if conditions continue to deteriorate in terms of what we've seen in some of the revisions in the recent months in the US that were pretty significant revisions. The second point here, tariffs are pushing up inflation. Core inflation is still close to 3% with good prices rising again because of higher tariffs.

[00:07:33] They are starting to see that, by the way, in the US, the tariffs effects starting to trickle down. Powell framed it as a one time price shock, which most economists are saying it will likely be. But the one thing they won't want it to be any stress that is they don't want it to be kind of a perpetual inflation pressure pushing inflation up.

[00:07:57] And then the last thing, the main takeaway here is the Fed funds rate remains restrictive, but closer to neutral than a year ago. The Fed sees upside risk to inflation from tariffs, but some downside risk from jobs and slowing job growth. Like we saw in Powell emphasize that the Fed will stay data dependent and they're not on a preset path. Now, the markets read that I think that they were he was opening the door to a cut in September.

[00:08:26] He's been more dovish, meaning that he seems just the way the speech went that there is definitely some more possibilities in terms of a cut. But I don't think it was as clear cut as the market was interpreting to be. But at the same time, we're looking at rate cuts here, the probability for a rate cut in September of in the high 80s. And prior to this speech, it was in the mid 70s.

[00:08:54] So clearly, after the speech, the market interpreted that as the Fed more likely to do a rate cut in September, even though it was for the most part already priced in. Yeah. And I think a lot of the like most of the Canadian banks, when they post earnings, they post like their predictions on policy rates and that like pretty much every single one of them thinks that they're going to come down a quarter point in December as well. And then I think they said like another quarter point like early on in in 2026.

[00:09:23] I mean, I think it kind of justifies it. But what is it like unemployment in the states? Is that like 4% or something? It's crazy low. Yeah, yeah, low four. I think 4.2, 4.3 around there. Yeah. And we're near, I think we're near 7%. Yeah. In the high six, if I remember correctly. Yeah. I mean, it's pretty tough job to be one of these, one of these policymakers right now. It's, it's just the overall situation. I mean, I think they are right that tariffs should really be a one time shock.

[00:09:50] I mean, prices implemented now will probably stick and kind of be absorbed over, you know, the next few years, but unless they change, of course, which they seem to change. The tariffs keep increasing in percentage and this, they, I couldn't be more and more price shocks. But I think for the most part, that seems to be the consensus. And then markets after the speech were way up. Yeah. So the S&P 500 was up one, around 1.5%.

[00:10:15] And as that closer to 2%, Bitcoin and Ethereum had some significant jumps, although even more so Ethereum than Bitcoin, but they've given back most of it since, if not all for Bitcoin specifically. Gold also had nice jump on the news, but contrary to stock and crypto, the gains have actually stuck for gold.

[00:10:35] So I'm not surprised that gold is probably faring a little better here because the markets are seeing monetary condition potentially easing in the coming months and years. And there's also a strong demand now for gold as a safety asset, especially as, you know, major central banks around the world are trying to diversify away from the US dollar.

[00:10:57] But as there is potentially more liquidity into the markets and the financial conditions are easing, it is a potential tailwind for rising inflation as well. So people want to hedge against that and that are more traditional would not want to go into something like Bitcoin. Gold becomes very attractive, especially if they're not too keen on holding longer term US treasury bonds that would be beyond, let's say, 5, 7, 10 years.

[00:11:26] So that's what the markets are doing. But I think it just shows that it is quite important to just keep an eye on that because it does move markets. So we'll have to see. Markets have been pretty, I think, pretty stable ever since, but they're still quite elevated. And I think we'd still have to be careful because it just takes like one unforeseen event and you could take, there could be some pretty, pretty big movements to the downside with the markets here.

[00:11:56] Yeah, definitely. I don't have anything to add there. Yeah. And then the last thing before we get to some earnings here, and actually we'll finish, let's start off with Scotiabank. And then the next one here, I'll talk a little bit more about what's happening with the US, taking some equity stakes in companies and what Trump is doing with the Fed.

[00:12:21] And again, what kind of influence it can have on the markets because it's important because it can have a big influence on stocks that you own or you may own. Yeah, definitely. I mean, for Scotia, it was a pretty, like, it was a surprising quarter. And I think the surprising element of it is that earnings were actually really good. I mean, Scotia's had a pretty rough patch for, I mean, five plus years now.

[00:12:45] And a lot of, I think a lot of Canadian bank stock fans kind of go into it with the idea that you can't really go wrong owning any of them. But I mean, you're still posting, like, reasonable returns with something like Scotia, but they've lagged pretty much all the major indexes and all the other big six banks by quite a wide margin over any sort of long-term time period. But this quarter was actually, it was pretty good. Earnings were up 15% year over year, revenue 13% year over year.

[00:13:14] And kind of the story kind of remains the same here as it has for many years. The Canadian arm of the business does, you know, reasonably well and has to kind of pick up the slack for a lagging international market. So on the Canadian side, loans were up 3%. Mortgages drove most of this. I think they were up 5%. Personal loans actually fell 1%, which is really not all that surprising, just considering interest rates overall and just, you know, people scaling back on costs.

[00:13:41] The strength of the Canadian arm, though, like combined kind of with a weakness internationally, left deposits up just 2% and loans effectively flat. Because when we look on the international side, they had loans, they fell by 3% and deposits were flat. Capital markets revenue increased by 54%. I mean, that's really not all that surprising considering the activity of the markets overall. And provisions ended up dropping by a bunch. And we'll probably go over this when we go over like all the banks on an episode.

[00:14:10] But outside of like national, a lot of these banks are posting like big declines in quarter over quarter or sorry, sequential provisions. So they fell by 43%. So compared to Q2 of 2025, they fell by 43%. They booked a bunch of performing loan provisions last quarter. And it looks like they've kind of scaled a lot of that back right now. Performing are just in like quick explanation. Performing is loans that are being paid right now. Like they haven't gone into default yet.

[00:14:40] But the bank figures, you know, they could potentially go into default if, you know, the macro environment worsens or, you know, like the situation changes for the consumer has a loan. And the company, they seem to be making some efforts to prune out a lot of like low quality international banking operations because of the time, money and effort the company has put into international focus. I mean, this is kind of the only way you can get back on track.

[00:15:04] And they did mention on the conference call that the pruning is done and they should be able to return to a focus on growth in 2026. The only thing they mentioned is that it's going to be quality in terms of, you know, building the international loan book, not quantity. For me, this is kind of like, you know, I'll believe it when I see it situation. The international arm of the bank has pretty much been a drag on the business for so long. I'm really not ready to kind of change my opinion on Scotia after one quarter.

[00:15:34] And then as I had mentioned, they just put their outlook on rates. They expect Canada to maintain rates through to March 2026 before making another 25 basis point cut. And then they expect a 25 basis point cut for the U.S. in December and an additional 25 basis point cut in March of 2026. This isn't really like, I guess this wouldn't be their predictions, but it's kind of like what they build, you know, their provisions on. Their base case. Yeah, exactly.

[00:16:00] So this isn't exactly what they're predicting, but they're kind of putting their outlook based on these policy rates. But yeah, it was a good quarter. I think they went up 5% or 6% after this. So yeah, it's definitely, it'll be interesting to see if it's a turnaround here. I think they still have the highest, like provisions fell, but I'm pretty sure they have the highest allowance for credit losses. Like they're almost at one basis point, which I think is the highest out of the big six. 100 basis points. Yeah. Or yeah, sorry. 100 basis points. Yeah.

[00:16:30] One basis point would be very good. Very good. Yeah. Yeah, exactly. Or 1% for those that are not as familiar with that. And yeah, if you go and do the investor deck of Scotiabank, I'm currently showing that for joint TCI and you'll see they actually have a slide for macroeconomics scenario. So they give the base case. They give alternatives optimistic, alternative pessimistic, and alternative very pessimistic. So that's what they do.

[00:16:58] And they'll provide the unemployment for Canada and the US, the overnight, the interest rates from the Bank of Canada and the Fed, the CPI inflation for both countries, and then the GDP growth that year over year changed. So you can have a look for those interested. You can go. It's available on their investor relations side. But yeah, I mean, the very pessimistic is definitely very pessimistic. What is it? A 4% decline in GDP? That would be... Yeah, that would be... Yeah, for the US and Canada. That would be very ugly.

[00:17:28] Yeah. But yeah, I'm sure they would probably like... I'm sure there's notes somewhere where they explain in more detail. But yeah, if you just look at it, and again, it's very pessimistic. So they do have a base case and that's what they use to make most of their assumptions. Yeah. That's kind of what they... Yeah, they base a lot of their provisions moving forward and just overall outlook on that. But yeah, it was a good quarter. It was definitely needed from them because they haven't had a good run over the last while here. Yeah.

[00:17:58] No, exactly. So let's move on. That was good. Thank you for the update. I was kind of showing stuff and listening attentively. So it'll be interesting to do the recap of all the banks just to try... I like to look at big kind of trends that we're seeing for the banks. Because yes, even if let's say four out of the big six are going one way, there's two going kind of slightly the other way or not doing as well.

[00:18:25] You always have to be careful on the next quarter because what we've seen over the last year, year and a half, it kind of switches back and forth. So there's some banks that will do, for example, the provisions for credit losses. They'll kind of do a big chunk in one quarter. The other banks won't. And then they'll do less the following. And then the other banks will actually ramp that up. So it'll just be interesting to see the trends. Obviously, they don't want to draw too many conclusions just for one or a couple of earnings either. Yeah. We've seen that with CIBC.

[00:18:54] They struggled, I believe it was back in 2022 and 2023. They were way higher provisions than everybody else. And then they eventually scaled those back. And I think like right now, I haven't looked at Nationals quarter yet, but it looked like the provisions came in higher, which is like a complete reverse from every other bank here. And they did have the lowest provisions, I think, in terms of like allowances set aside out of any bank. So you might see them playing a bit of catch up right now. Again, I haven't looked at the quarter yet. We'll go over that next week.

[00:19:23] But yeah, there's a lot of underreporting, overreporting, which every single one of these banks tends to go in their own way. And just they can get hammered if they underreport and they can kind of do very well if they overreport. So it's kind of a scale. Yeah, and through National Bank, it'll be interesting when we look at it to see like what kind of impact on those provisions. For example, Canadian Western Bank acquisition. So there's a lot of moving parts. But let's move on.

[00:19:52] Before I lose my voice, I'm just coming out of a cold and I'm feeling it a little bit now. So we'll try to power through here and not go on for too long. So back a little bit to the Fed. I know it's a Canadian investor podcast, but I think it's really important and will have some implication here in Canada and internationally as well. So it's just what Trump is doing here and the attacks he's having on the Federal Reserve in the US. So it's definitely worth keeping an eye on.

[00:20:20] And I'll just explain a bit more why it's so important. So Trump clearly has his eye on the Federal Reserve. He's looking at ways to find, put people in place that has his views that rates should be lower, even though Powell gets all the attention. And obviously he's been very vocal on social media, hammering Powell constantly. He's not the only one that makes the decisions for the rate. They tend to fall in line with Powell.

[00:20:47] But if there is enough voting members that actually vote for a cut, even if Powell doesn't, they would end up cutting. And now Trump on Monday said, and he, I guess it was a truth. He truthed. Oh man, every time I say that. Truth. I have a truth. He truthed or a truth that he was firing one of the Federal Reserve governors, whose, her name is Lisa Cook. She was appointed during the Biden administration.

[00:21:17] Now, the president can only fire a Fed governor for cause. And the cause that the president is claiming is that she performed mortgage fraud. Essentially, they're saying that the allegation is that she applied for two mortgages on two different properties and said that both properties were primary or primary residence, which would qualify, I guess, as mortgage cross fraud. Cook is pushing back on the firing. She said that she did nothing wrong.

[00:21:43] And now this is most likely going in front of the courts and will likely end up in front of the Supreme Court. So it's another judicial showdown in the U.S. And I know it's macro, but it's really important because markets may be wanting more rate cuts. And that's definitely what Trump wants. But the fact that he's really pushing the boundary on the Fed's independence, it's really, it's pretty dangerous.

[00:22:10] And in reality, I think you're living in fantasy land if you think that the central banks are independent. Yeah. They're supposed to be. I think for the most part, they try to be, but they get pressure from a lot of different political people in power, whether it's political elected officials or whether it's powerful business people, they will get a lot of pressure.

[00:22:37] So the fact that they are independent, I think there's definitely a perception that they try to be. But in practice, it's probably a little bit different than that. But the fact that Trump is being so out there and trying to clearly put people in place that follow him, it really could damage the market's confidence in the Fed, not that they had a lot of confidence to begin with,

[00:23:01] but it could damage the confidence, the fact that politics could influence a lot what the Fed is doing, or politician elected officials could essentially try to dictate what the Fed is doing, or the central banks. We could be at risk of that in Canada as well. Who knows? Maybe not right now. Maybe not the next prime minister who's elected, but maybe down the line.

[00:23:24] And you're seeing it oftentimes in, lack of better words, like banana republic, these kind of fake democracies that hold elections, but clearly there's a dictatorship in place for lack of better words or author. Anyways, I'm not going to try to say that word right now. Authoritarian? There you go. Thank you. Thank you, Dan.

[00:23:44] But you see that happening in those countries where they'll literally fire the head of the central banks to put people that will do what the person in power actually wants to do. So I think it's a dangerous thing, and it could really start shaking the markets up if they perceive Trump as telling the Fed what to do. And again, it's all about perception, and I totally understand that they're likely not that independent to begin with,

[00:24:13] but it's pretty concerning to see what they're doing in the U.S. and other countries may feel emboldened to do something similar now seeing that Trump is doing that in the U.S. So we'll have to see how it plays out, but I find it a little bit concerning, to be honest. Not that I had a lot of fate in our central banks, whether it's Canada or the U.S. or other ones. Yeah, I mean, this kind of stuff happens all the time.

[00:24:40] It's just usually behind the scenes, and Trump just kind of likes to make it public, right? So it's a lot more out there, and he's a lot more aggressive about it. Like, he's probably more aggressive than you would see that stuff goes on behind the scenes. But, I mean, they're supposed to be independent, but they're definitely not. He's just making it really, really open that he wants to start influencing them, which is not something that has happened a lot. Yeah. No, exactly.

[00:25:08] But the fact that he's really, like, basically saying he's firing her, that is the dangerous part, because they have extremely long-term to try the idea behind those long-terms. And the same thing for the Bank of Canada. I believe it's seven or eight years. I don't remember exactly. In the U.S., it's even longer. For some of these governors, if I, yeah, like Lisa Cook, it's even longer. I think it's like 10, 14 years. But the reason why there are these long terms is they want to minimize the potential for political influence.

[00:25:38] So that's the reason behind it. So, again, it will likely end up in front of the Supreme Court. So we'll probably have a resolution. I would think they'll try to speed things up for that. You don't want to leave this in limbo for too long. But regardless, I mean, I think Powell's term is ending next year. So regardless, there's going to be someone in place that will likely have a much more similar view than Trump at the head of the Federal Reserve. So we can wrap it up at this.

[00:26:08] You want to move on to Dollarama earnings? And then we'll talk about what happens if the government starts buying the company you own. Yeah. Dollarama, pretty good quarter. I think it's down, which I'm kind of surprised. It was pretty much what they've been reporting for the last couple of years now. It's just been crazy for this company. Revenue was up 10.3%. Earnings up 13.7%. And I kind of looked back.

[00:26:37] Dollarama has not missed earnings expectations for going on three plus years now. So every time they've came over and above what has been expected. So they've done quite well. Comparable sales jumped 4.9%. This was due to a 3.9% increase in transactions and average ticket price increased around 0.9%. Average ticket price is pretty much just what people spend when they come through the door. It's not necessarily like prices are going up. It's just cart value essentially would be their average ticket price.

[00:27:07] Gross margins jumped to 45.5% versus 45.2% last year. And they had mentioned the bulk of this is just due to some investments it's made into its logistics network that are now eventually reducing costs. The company's acquisition of the reject shop had a bit of a drag on margins due to just kind of initial integration costs. But I doubt this is going to have a long-term impact. That is the dollar store chain they bought in Australia.

[00:27:36] And since the acquisition in late July TRS has generated around $25 million for the company and they paid around $208 million for it. They have around 395 stores. The company is separating out its Australian results and you can kind of go down to their they have specific statements that kind of basket them separately. I mean obviously with this being the first quarter of the acquisition you're not really going to see anything in terms of growth or anything. It's just the underlying numbers that they've reported since they bought it in July.

[00:28:05] And they don't factor in Australia into comparable sales just yet. So they kind of isolate that out and just do the Canadian. Well they basket it as Canada but it's actually Canada and their Latin American segment. So that would be, I don't know why I can't think of the name yet, the Latin American one they have. Yeah, yeah. It's a dollar city. Yeah, dollar city. Sorry, yeah. So that's basketed in with Canada. So when you see those same store sales, it won't include the reject shop yet.

[00:28:35] I'd imagine like you're going to start seeing this, you know, after a year or so. I would imagine they start to include it. And they opened their first store in Mexico. And I thought this was a bit early because they had been mentioning they planned to open their first store in Mexico in 2026 as a pilot project. But now I'm thinking they might have meant fiscal 2026 because this is their fiscal 2026 earnings. But yeah, they're planning a pilot project of dollar city down in Mexico. They don't have any exposure there. So I imagine they're going to run a few stores, see how it goes.

[00:29:04] And I would imagine that's like an untapped avenue for them if they decide to expand there, if the pilot goes well. Guidance remains unchanged. 70 to 80 new stores, 3% to 4% same store sales growth. Gross margins at the high end would come in at 45.2%. And sales and administrative expenses come in at around 14.7% of revenue.

[00:29:27] But the thing is right now, like Dollar Am has reported a couple quarters in 2025, and they've come well ahead of these numbers on pretty much every front. I mean, you have the joint TCI chart here from fiscal 4.9% same store sales growth for the last two quarters. Their SG&A expenses have come in in like the low 13% range, so they're well below that. Gross margins are higher than the top end of their guidance.

[00:29:52] So I'm kind of wondering if they're, you know, probably just, you know, underestimating over delivering maybe because or unless they expect the back half of the year to slow down a bit. But I'm not exactly sure. And this guidance wouldn't include anything from the reject shop either. And they bought back 174, around $174 million in shares on the quarter. And it kind of said like every quarter, I kind of sit there and think, you know, whether or not it's a good idea for them to buy back shares. And they just continue to do it.

[00:30:21] And the price just keeps going up. The stock keeps going up. It just keeps going up. But yeah, I'm not exactly sure. The conference call, I think it was done, but it wasn't reported or sorry, put on fiscal yet when I went to read it. So maybe something was said in the call because it's down around 4%. But it seems like a really good quarter overall. I mean, they haven't had a bad quarter in a very, very long time. No, I know. And they're up surprisingly. I mean, year to date, they're down a bit today.

[00:30:50] Maybe the market, like you said, was expecting a bit more here. But if you're looking here, like year to date, they're up that 33% total return. So could have done worse owning this one. It's always looked relatively expensive. But I wish I would have bought it when I first started looking at it in like 2019. I'd be crushing it right now. But you got to be at ease with regret when you invest because there's going to be some good moves and bad moves.

[00:31:18] Or sometimes you will wish that you put a larger position into a big winner. But at the end of the day, you just have to be comfortable with not making always the right move all the time. As long as the sum of all your moves is beating the market. That's the way I judge my things. Yeah, and I mean, I kind of took the Loblaw route. Just kind of the thesis there being, I mean, you know, a lot of discount shopping due to like scale back spending.

[00:31:48] And Loblaws has done just as well over the last five years. So, I mean, I guess in that area, I was kind of right in the fact that a lot of people were going to start going to these discount grocers, discount, you know, obviously dollar stores. They've both, like those two companies have both just crushed it over the last five years. Especially a company like Loblaw. You're talking about like a defensive grocer. Same with Dollarama. And they're both up like 250, 270% over the last five years.

[00:32:17] Just based on that massive shift in spending. Yeah, no, exactly. So, I know that's a good overview here. Let's move on to the last segment here. So, I alluded to it. So, the U.S. government is starting to take equity investment into strategic company. Which is pretty wild for an administration that's been preaching or a party that's been preaching like the free market. And those kind of actions, I don't know.

[00:32:43] My perception of these kind of actions were always seen more as like countries that were sure capitalist. But had a bit more of a socialist bent in terms of how they view managing society. Even though they might still be a capitalist society. So, it's kind of interesting to see that. So, for those who have been living under a rock.

[00:33:03] And have not seen the headlines that the Trump administration has been taking stake into companies that they view as national, strategic on a national interest basis. They did it for U.S. Steel a few months ago. Which included this. Do you remember this golden share? No. Which gives. So, this golden share. Of course, it's golden. Because Trump. Oh, my God. Very nice. Trump. Trump is Trump. Right? This golden share. Maybe he wants it to match his face.

[00:33:33] But no, I digress. It was orange. No, it was too easy. I digress. So, it gives the U.S. government veto ride despite not owning a majority stake in the company. I think they own around like 10% of U.S. Steel. So, they can actually veto. And I'll talk a bit more about that. Which, yeah, it is weird. It would make me like I would not want to own a company where the government has veto power. So, they can veto even with 10% ownership? Like that share gives them the right to. Oh, my God. That's crazy.

[00:34:02] I didn't know about that. Yeah. So, obviously, they. In exchange for the equity they invested in the company. Don't get me wrong. But I would be very nervous owning a company where on a limb the government can decide to veto a move that would be much. That would be good for shareholders but probably not good for them in terms of national strategic priorities. The U.S. government through national defense also invested in MP material.

[00:34:32] A bit more recently, a rare earth material company in the U.S. ticker MP. Rare earth materials are predominantly produced in China. I think it's around 80% the numbers I saw and used in a variety of high-tech products including some used for national defense. So, it's very critical. MP material is the only rare producer currently located in the U.S. But there are more mines and more companies that are looking to come and ramp up production in the coming years.

[00:35:01] The most recent one announced is a $8.9 billion stake into Intel. Yes, Intel, the once dominant player in the semiconductor space. It would be roughly a 10% stake. The $8.9 billion investment is a combination of new money and previously awarded grants under the CHIP Act that have not yet been paid. So, it's kind of a combination of that.

[00:35:26] Now, there's also talk that the U.S. government is looking at getting equity stakes into some defense contractor like a Lockheed Martin. So, I'll ask you what you think. I know you own Lockheed Martin. It's part of your portfolio. So, how would you feel if the Orange Men had a, let's say, 10% stake in Lockheed Martin? Well, especially if there's a golden ticket. I don't know if there'll be a total golden ticket. But, yeah. I mean, I don't know.

[00:35:56] It's just, it seems kind of wrong if you're thinking about a capitalist society. I mean, if you get government intervention, like government ownership in these companies, I mean, it kind of shifts from, well, it could potentially shift from doing what is best for shareholders to kind of doing what is best for the government. You know what I mean?

[00:36:17] Like, there could be a shift away from the focus on the bottom line of the company and just what is best from a political standpoint. I mean, I think you should have the government kind of providing the framework and the system for a free market, you know, making sure it's regulated and everything like that. But, I mean, that's probably where it should stop. I mean, there's a lot of potential conflicts here.

[00:36:42] And, I mean, there's also the case, like, just from a living there perspective, I guess, there's also the case that the standpoint could start to tilt from a regulatory perspective to companies that the government owns. You know what I mean? Like, there could be regulations put in place that benefits, you know, those companies that the government has stakes in where it might not be the best situation for the population. Yeah.

[00:37:08] And there's also the other fact that is, like, if you get the government taking positions in these companies, like, they're probably in the event of, you know, a financial disaster are probably going to bail them out. So, I mean, that can kind of lead to companies probably taking a bit more aggressive stances in terms of growth or something like that, probably mismanaging capital. And in this situation where they're like, okay, you know, the government has a 10 to 15% equity stake in our company. They're probably going to bail us out if we get into trouble anyway.

[00:37:39] So, I just think it's, I think it's weird. I don't think it's something that should be done at all. I don't know what I would do with Lockheed if they ended up taking a 10% stake. It would actually. Yeah, and Lockheed's interesting because, like, you can make a case that without ownership in Lockheed, the U.S. government still controls it so much because, like, most of its revenues will come from the U.S. government. So, I think Lockheed is an interesting one.

[00:38:05] But these other companies, I mean, it would make me very nervous also because not the Trump administration and Trump does not have the best track record of doing stuff that will do, give him personal gains or gains. Use the office of the president to, yeah, take action that will benefit him personally or people close to him.

[00:38:29] And I could see him trying to push that even more for companies that he owns, maybe try to do it subtly. But that is something that I'd be concerned about. Lockheed Martin, like I said, to me, it would be less concerned just because the U.S. government will have so much influence and power regardless on them. But it is one thing that more and more, a year and a half, two years ago, I started listening and reading.

[00:38:55] This guy is called Michael Avery or Michael Every, sorry, Michael Every. And he calls it, and he's been saying this for years, apparently, that this is like statecraft. So statecraft is basically more and more you have the U.S. government trying to, you know, they have a big vision in mind, even though sometimes it doesn't feel like it. But they have a big vision in mind that, you know, the ultimate goal is to contain China, for example.

[00:39:23] And they have a vision in mind of what the U.S. should become. And they will use their power and different investment in companies like we're seeing to actually push those goals. So it may favor some industries and it may add the detriment of other industries. But their goal is actually to push that greater view for the U.S. society, for example.

[00:39:47] So I think that's probably what we're seeing right now is they have some bigger goals in mind. And they're starting to take actions that will serve that long-term goal, whatever it is. But it seems like they want the U.S. to have a... I'm not quite sure what they want, but probably have more power over the Western world, for example, versus China, maybe just staying more in Asia. And the U.S. actually has more power there.

[00:40:16] So I don't know exactly where it's going, but I find it a bit fascinating, but also worrying as an investor. I'd be pretty worried if the U.S. government took a equity position in a company I own. Yeah, because like you had mentioned, they have an ultimate goal that could. And, you know, it might not necessarily be maximizing the profits of the company that you own. So, I mean... Exactly. It may not align with your interests as a shareholder whatsoever. So you have to keep that in mind.

[00:40:46] And sure, I guess the advantage is that they could be pumping more money into the company. So that's not necessarily a bad thing on favorable terms. So that could be a good thing for a shareholder. But they could also prevent a company like the Rarer Material Company. I'm just losing. I'm trying to look at my notes here. MP Materials. They might look to prevent them from doing business elsewhere, which could hurt their overall business, but will benefit the U.S.

[00:41:16] So there are things like that, I think. I guess there's pros and cons, but ultimately I'd be a bit worried. I think there's more cons. At a stake. Yeah. Because where do you draw the line eventually? Mm-mm. I mean, yeah. And I mean, I get like a lot of people were saying, well, you know, they took, you know, there's equity. It's like say during the financial crisis, but these like often have, you know, if they do this, there's like predetermined exit dates where they're going to move out and things like that.

[00:41:42] But I don't think that any of this is, I don't think there's anything in stone here. Like I didn't think, is the Intel thing official or is it just a rumor now or did it actually happen? No, it's, I think it's official. I mean, it's posted on Intel's like website and everything. So I don't think it's a rumor. It sounds like it is official. Yeah. Yeah. Yeah. I don't know. It's weird. I don't like it, but. Yeah. I mean, it's funny because it's official.

[00:42:06] They posted it, but then Intel on the Monday were like, oh, like it could hurt part of our business from countries that may not, you know, want to necessarily purchase from Intel because now the U.S. government has a stake. So it's kind of funny. They're taking the money, but at the same time, they're like, well, you know, it may not all be that great. To me, it also probably shows a little bit of the desperation that Intel is in right now. Yeah. They just don't have that much leverage, to be honest.

[00:42:33] Like they're, they're just not in a great position in the semiconductor space right now. Yeah. I don't know. It's, I don't really like it all that much. It's, I just don't think the government should be, should be owning equity in publicly traded companies. I think you should kind of leave that outside of, of government presence. Yeah. I think so too, but I'm sure some people would disagree and there might be some examples that work pretty well. I think Airbus, I don't have it in front of me. That's just my general knowledge.

[00:43:02] So feel free to correct me if I'm wrong, but I think there are some European governments that own part of Airbus. I'm not sure if it's the French government, but you know, they, it's not the first time that governments would. Yeah. There you go. So I guess. Well, I mean, it's quite a wide, right? Like even Germany owns Germany, Spain owns a bunch of it. Yeah. Yeah, exactly. So it's not the first time, but it's just the fact that hits happening so quickly one after the other.

[00:43:32] It's also that part that I find a little bit concerning. They clearly have something in mind and they're clearly, you know, it's also as a Canadian investor, keep in mind that if they're doing that in a company you own that's listed in the US, they don't really care about you as a Canadian investor. They might look after US investors a bit more, but their clear goal is US interests first.

[00:43:54] And if you can benefit that as an investor in the company, that's great, but they don't care whether you benefit or not. If it's a win-win, that's great as long as they also win. Yeah, definitely. That's a good point to close it up for today. Really appreciate everyone listening, bearing with me as I'm still coming out of a cold and sometimes I find pronouncing some English words for me gets a little harder when I'm all stuffed up. But we still powered through, did the setup at the cottage.

[00:44:23] Hopefully it sounded okay overall. Yeah, thanks for listening, everybody. It was a fun episode. Looking forward to doing the banks next week. Yeah. Yeah, tune in for next week. So we've got some more stuff coming. Thanks again, everyone, for listening. The Canadian Investor Podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast.

[00:44:49] Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.