Dealing with Investing Biases and Will Open Banking Increase Competition?

[00:00:00] This is the Canadian Investor where you take control of your own portfolio and gain the confidence you need to succeed in the markets

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

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

[00:00:20] My name is Braden Dennis as always joined by

[00:00:24] The wonderful Simon Belanger and you know the two of us are absolutely battling right now

[00:00:31] I sound like I smoked a couple packs of darts and you are just the

[00:00:37] proud parent of a of a daycare child so the the boys are absolutely battling today

[00:00:43] But we got a good show on the docket today. I'm going to talk about some bias in investing and

[00:00:50] When is it too much if when is knowing the company too well

[00:00:54] Become a net net negative and then we have a listener question that you're going to talk about which I think is actually

[00:01:01] Something that we get questions on quite often and I think is a worthwhile topic

[00:01:06] So when I just came back from Abu Dhabi. I had never been in the region before it was

[00:01:13] I opening a little bit was that it's court your honor place. Yeah, I got off the plane and

[00:01:19] So when I'm on a plane you want to dress

[00:01:23] Warm with the ability to shed layers. You know how in the middle of a flight

[00:01:28] It randomly gets freezing like you you realize that the thing's been

[00:01:32] He like wake up and the air above you's just been peppering you and you're freezing and then all of a sudden like

[00:01:38] It was like everyone has like a blanket around the middle of the flight. You know what I mean?

[00:01:42] Oh, yeah. Yeah, I know. I know exactly it's so it gets so cold in there and you probably get out and it's like 40 degrees outside

[00:01:48] Yeah, so i'm all bundled up and it was I think it was 38 degrees celsius

[00:01:53] It's like 2 p.m. And I think I think it might have touched 40, but it was it was scorching cool place though

[00:01:59] Yeah, does it get cooler at night though?

[00:02:01] Like I feel like those kind of desert places tends to get like really hot at night in the day

[00:02:06] But then gets cool much faster at night

[00:02:10] No, no, okay

[00:02:11] Okay, it's it's hot and then hot without the sun out. Okay the fly the fly agrees with you

[00:02:17] I can see a fly

[00:02:20] This is mark this down as the fly episode

[00:02:24] Because there is a fly

[00:02:26] Just all in my my stuff right now. So our buddy will be joining

[00:02:32] Joining the sick boys on the show today. All right, so now first topic of the day

[00:02:35] It's meant to be a discussion. I don't have much to present here open discussion and I think that uh

[00:02:41] You'll have some thoughts here, but before that

[00:02:44] Finch at v3 is live use code tci if you want 15 off finchat that is finchat.io

[00:02:51] Is the company i'm the founder of company simon is an investor in

[00:02:54] Finch at dot.io use code tci for 15 off. All right bias with companies, you know and love

[00:03:01] Is it a net positive or a hurtful bias?

[00:03:05] And where does that break? So let me set the stage here simon

[00:03:10] I struggle with this internally a lot in my mind you and I

[00:03:15] Endlessly talk about how important it is to deeply understand

[00:03:18] companies you know or are thinking of being a shareholder in

[00:03:23] So that when the market reaction and sentiment shifts of a business you're able to dispel between

[00:03:30] Is this a long-term fundamental issue?

[00:03:33] Or a short short term opportunity

[00:03:36] It's kind of the core of the peter lynch

[00:03:39] One up on wall street book

[00:03:41] Where individuals can kind of achieve market beating returns

[00:03:45] Create wealth creating, you know life changing wealth from buying and holding companies

[00:03:51] You know and understand that you're intimately familiar with

[00:03:54] The idea of a channel check it's like you're at the mall and you're like

[00:03:58] Popeyes chicken has a line out the food court

[00:04:02] And every other place is empty like is is there something here that the market's not yet rewarding just to use an example

[00:04:09] And I wonder to myself with companies. I'm a big fan of maybe i'm a customer

[00:04:13] Maybe I just i'm in the industry

[00:04:16] Am I fly is is there a flying too close to the sun bias?

[00:04:20] Or is this ultimately a net positive where you got to be in the weeds you got to understand the business

[00:04:25] So do you have any kind of hot takes on this? I struggle with this personally internally quite a bit

[00:04:31] Yeah, I mean it's

[00:04:33] No, I mean it's a great question. I'm kind of divided on my sentiment

[00:04:37] I do get the sense that and I mean I've battled that personally as well

[00:04:41] sometimes you have a company have conviction and you kind of

[00:04:47] You're you're a bit biased right you you essentially dismiss any kind of argument that goes against it

[00:04:54] And I try very hard and that's always what i'm trying to do is not dismiss those arguments

[00:04:58] Actually, you know that go against my thesis at least acknowledge them understand them and then make a decision

[00:05:04] whether they work well or not

[00:05:06] And I think just the comments I see from people on fin twit

[00:05:10] I don't know if it's the investing population in general, but I think

[00:05:14] I don't know. I feel like it can be a detriment for a lot of people

[00:05:18] I mean, I've seen it just in discussions. I've had on twitter for dividend paying stocks right for

[00:05:24] kind of you know companies that everyone knows in canada and

[00:05:29] I've noticed that a lot of them people will just dismiss outright

[00:05:34] like

[00:05:35] Glaring data that goes against their thesis because they kind of just rely

[00:05:40] I think the typical argument is uh

[00:05:42] Well historically they've been good for like 50 years 100 years whatever it is

[00:05:46] So they'll be good for the next 20 30 40 50 years. So yeah, I think I don't know I'm divided on that as well

[00:05:52] Yeah, it's difficult and especially when you're like such a fan of the business maybe as a customer, right? You're like

[00:06:01] Your your bias starts to kick in right and and there's more things at play to being a shareholder and to to generating like high

[00:06:09] IRRs you got to pay you got to pay a reasonable price

[00:06:12] The market has to agree with you the business has to continue to execute

[00:06:17] And uh, you could overlook structural issues because you're like look I just

[00:06:22] You know, I'm gonna buy the product regardless and and the reality is is like you don't represent the market in in terms of

[00:06:30] Their customers. You're just one

[00:06:33] One customer of potentially thousands or hundreds of thousands or millions

[00:06:37] And so I think it's really important to kind of disseminate those two

[00:06:40] and my final thought here is

[00:06:43] It is mandatory to

[00:06:46] I I think table stakes are to know the company well

[00:06:49] I think that we can agree on that if you use the product great if you know the company inside out

[00:06:55] Great if you know about the the company and industry dynamics because maybe you work in it

[00:07:02] Wonderful. I think I think that those things are all really good

[00:07:07] But think hard and be critical and maybe check bias at the door for lack of a better term

[00:07:13] And ask yourself because of my involvement in the company

[00:07:18] Or emotion am I still able to think critically as an investor?

[00:07:23] Because anecdotal evidence while it might be useful

[00:07:26] You still have to be able to think critically as an investor unemotional

[00:07:31] You know here are the facts here are the numbers here are its prospects and here are the risks

[00:07:37] So

[00:07:38] You know i'm torn. I leave this I leave this conversation still torn and I think you know my takeaway maybe is

[00:07:46] It's it's important and it's table stakes, but

[00:07:49] It's a question for you the listener to to think about that with some of the other companies you own as well

[00:07:54] Yeah, and I think I would add to that also make your own opinion

[00:07:57] I think apple the recent quarter is the best example

[00:08:01] I mean I was very critical on the episode that was released last thursday about apple's results

[00:08:07] Because the markets loved it because they they announced a hundred ten billion dollar buyback

[00:08:12] But then you start digging into numbers and it was absolutely not a good corner by apple

[00:08:18] Like revenues were down iphone sales were down 10 percent services were up

[00:08:22] It's pretty much the only bright spot that happened and I think a lot of investors are blinded by the fact that

[00:08:29] The stock was up right they haven't even dug into the results and

[00:08:34] Get into the question. Okay, like is this more temporary slowdown for apple?

[00:08:39] Or is there more of a

[00:08:41] Serious question to be asked like where will the growth medium to long term actually be coming from for apple

[00:08:48] Obviously i'm not saying they're going anywhere anytime soon, but I mean

[00:08:52] Just look at the results over the last five years like the business as

[00:08:56] lack of better word kind of stalled like it's not like

[00:09:00] It's not like it's growing, you know, they're buying back shares. That's great

[00:09:03] But earnings are not really growing they're growing per share because they're buying back shares

[00:09:08] What a divisive topic share buybacks can be you know, it's it's it's such an important topic for investors to kind of have

[00:09:17] some level of

[00:09:19] understanding of

[00:09:21] the business in terms of

[00:09:24] You know deciding for yourself if a buyback makes sense

[00:09:27] There's companies that buy back lots of stock and have

[00:09:30] Generated wonderful shareholder returns as a result of that and there's some companies that have just outright destroyed value

[00:09:38] by doing so

[00:09:39] And you're right. I mean

[00:09:42] If the bit if that business doesn't grow from here ever

[00:09:46] You're not gonna have a good time like it's you will see eventual

[00:09:50] multiple compression

[00:09:53] Faster than the company can cannibalize all the shares from my view even though even though maybe

[00:10:01] Apple is generating gobs and gobs of cash. So it's

[00:10:05] It's a tough example, but you got to have some sort of opinion on that I think no exactly

[00:10:10] But I think it was just a good example where people's biases were I think positive biases towards apple

[00:10:16] Were he reinforced and you know all the headlines was like the 110 billion dollar buyback

[00:10:22] Obviously some articles mentioned the iphone's decline in sales and so on but at the very least if you're a shareholder of apple

[00:10:28] Just to finish there like I think there's some

[00:10:31] You need to ask yourself like where do you think the business is going the next five years?

[00:10:36] And I think that's a legitimate question and I I personally don't know. I just don't know where they're going

[00:10:42] Yeah, and that's and that's totally okay. You know many listeners might have a strong opinion one way or another

[00:10:48] And you don't so you don't own shares, right? Like that's a totally like that

[00:10:53] I own some through my

[00:10:55] Through my index finds and my my wife. Yeah, my wife her portfolio that I managed for her has some shares

[00:11:00] So I do have some exposure. Yeah

[00:11:04] Okay, fair enough. All right. Well, that's that's good disclosure too

[00:11:09] I think this is actually a wonderful segue into

[00:11:12] Discussing tech broadly in you know, large u.s

[00:11:18] Tech and the rationale for that is you mentioned

[00:11:22] Look, I mean apple's got net

[00:11:24] Net revenue decline year over year on the recent quarter iphone stagnating services are up. Sure, but it's it's it's tough to grow off this massive base

[00:11:34] However, there's a couple of tech companies that are growing at startup rates and I want to highlight two segments

[00:11:40] between them that are just

[00:11:43] bonkers the first one is advertising

[00:11:46] so we saw a bit of a

[00:11:49] 2022 hard comps on the advertising businesses for google

[00:11:55] And meta amazon stayed relatively

[00:11:59] Solid through that time with their advertising business

[00:12:02] But that's coming off a much lower lower base compared to the giants in digital media like

[00:12:08] Metta and google. So you had a bit of a like post covet growth hangover through

[00:12:15] q1 to q

[00:12:18] q122 to baby q1 of of 23

[00:12:22] And since then you've seen a fantastic acceleration

[00:12:26] In the most recent results you had

[00:12:29] 14 percent for google search at 21 percent for youtube year over year

[00:12:35] 24 growth for amazon advertising and a whopping

[00:12:40] 27 percent year-over-year growth for advertising revenue coming out of meta

[00:12:44] So, you know reels are popping off

[00:12:48] Usages popping off our poos popping off

[00:12:51] So things are good for these companies right now and they are growing extremely fast

[00:12:57] So I guess that's another counter to like the apple, you know story. It's like you have these multi trillion dollar gorillas

[00:13:05] And you got something like microsoft azure

[00:13:09] Growing at startup growth rates. It's it's very very impressive

[00:13:15] So to go there you had azure google cloud

[00:13:20] And amazon web services all

[00:13:23] Accelerating again in terms of top line revenue growth amazon is now a 100 billion dollar

[00:13:31] Run rate business in in arr. So that is pretty remarkable. So they did 25 million

[00:13:38] Sorry, sorry 25 billion

[00:13:42] In the most recent quarter

[00:13:43] So 100 billion on a run rate if you if you multiply that out growing still exceptionally fast

[00:13:50] Albeit, of course slower than three four years ago. I mean, I think that that makes sense

[00:13:55] But I just wanted to highlight these companies because

[00:13:59] Yes, we talk about them a lot

[00:14:02] but there are

[00:14:04] segments inside of them

[00:14:07] That just can't seem to be stopped at this point like

[00:14:11] Where we are going in this economy all the

[00:14:15] You know catalysts that they have

[00:14:17] It seems to me more and more

[00:14:20] That the big growth drivers in computing

[00:14:25] And you know digitization

[00:14:28] They had that capex build out

[00:14:31] In the last 10 years

[00:14:33] That was just basically impossible for anyone else to do

[00:14:36] And so you get something like microsoft, which is probably the greatest, you know modern enterprise maybe ever created at this point

[00:14:45] Just able to build out that capex

[00:14:48] And now I mean things are absolutely humming

[00:14:52] They did four billion in revenue on

[00:14:55] LinkedIn in the quarter

[00:14:58] LinkedIn

[00:14:59] Is

[00:15:00] Going to be a 20 billion dollar a year revenue business inside of microsoft

[00:15:07] In the next year or two like

[00:15:09] This is no joke man. These these companies are really just

[00:15:13] It feels like more of the same going into this decade and i'm curious if you have any hot takes on that

[00:15:20] Yeah, I mean obviously I think they spend the money and they were not making any money on those

[00:15:26] So it was definitely a lot of capex that didn't really materialize until I think now they're starting to see the

[00:15:33] You know cut that come to fruition. I mean the next decade will be interesting

[00:15:37] There's just so many things that could happen. I I think there's so many different outcomes even for those companies

[00:15:43] I think the one that comes to mind

[00:15:45] That's a bit of a wild card is do governments start

[00:15:49] You know putting more pressure on these companies because they're so large

[00:15:53] There's been already cases of that in the us. It's almost impossible now for any of those companies

[00:15:59] I guess with the exception of microsoft to make

[00:16:03] Acquisitions with the exception of microsoft

[00:16:05] Yeah, with they must have a pretty strong lobby in washington dc

[00:16:10] But I think there's that part that's interesting the whole ai space how it will evolve and

[00:16:17] Also the the power that it consumes right where are they going to be sourcing that power?

[00:16:21] There's been so much emphasize on getting overall greener power

[00:16:26] We saw the the deal that they had with brookfield renewable partners for that. Do you guys talk about the brookfield?

[00:16:31] Yeah, yeah, we did so the 10.5 gigawatts. So I mean there's just a lot of different moving parts

[00:16:38] I mean google is also an interesting play will ai kind of disrupt the the google search or will be a compliment to that

[00:16:46] You know what's happening with google as a whole business, right?

[00:16:51] There's kind of things that are coming out that a lot of employees are not super happy now

[00:16:55] There's just a lot of different things going on

[00:16:57] I think it could be a lot of the same like you said

[00:17:00] But I think there's just a bunch of different outcomes that could happen and I just find it fascinating

[00:17:05] Like it's hard to know where it's gonna go. That's that's my point of view on it

[00:17:09] Yeah, it certainly is it feels to me like microsoft is just the easiest long

[00:17:14] Ever right now. It's just

[00:17:17] So easy to own and I wonder if that's

[00:17:20] That that's that's it's usually a bad signal to me. Yeah, but with this one

[00:17:25] It's just it's just like an absolute slam dunk

[00:17:29] Of course, you're not going to get world changing returns at this size, but still

[00:17:33] Yeah, dana had an interesting take for google search engine results because he's well into the SEO right search engine

[00:17:42] optimization for stock trades dot ca and he knows that stuff well and apparently

[00:17:46] There's been some big changes and it seems like a lot of people are starting to say that the results are not as good for

[00:17:55] When you search through google because they're trying to

[00:17:58] You know, you know put the results or the ranking more as a way to

[00:18:03] Like that will help the revenues with ads

[00:18:06] So I don't know to what extent that's true or not

[00:18:10] But something to keep an eye on because I was talking with them and I said look, you know

[00:18:14] I go to google because for the most part. I know i'm gonna get quality but if at some point

[00:18:20] I see that quality diminishing

[00:18:23] There is enough options out there. It's not six years ago when it was like being the only other option that was completely

[00:18:30] You know terrible now. There's enough good options that I think google has to be really careful how they thread that

[00:18:35] between maximizing profits and

[00:18:38] Rooting the quality of their search engine

[00:18:41] Yep, absolutely. All right, let's kick it off to the last segment here before that

[00:18:46] We've been sharing lots of graphs here already on the show. You can see our beautiful face. You can see the fly

[00:18:51] That um

[00:18:53] Is terrorizing me on the pod here

[00:18:57] Join tci.com

[00:18:58] We do our monthly portfolio updates as well as you can see our beautiful faces for radio

[00:19:04] You can see I I actually bought a canadian stock

[00:19:07] Recently in my portfolio and just close that on join tci.com. I'll just say it here on the show

[00:19:13] I am now a shareholder of tarra vest

[00:19:16] Dude, I just gotta

[00:19:18] As soon as I do stocks on my watch list

[00:19:21] I just have to purchase it immediately because

[00:19:25] I have been so hot on that segment and that's not me padding on my myself

[00:19:30] Yeah

[00:19:30] That's not me padding myself on the back because I haven't always owned all of them

[00:19:34] But this one I did purchase very quickly after so I learned to not be such a goof and it is already up

[00:19:42] Monster since then so that is tarra veste Canadian stock

[00:19:47] I'm glad I pulled the trigger because it's already been

[00:19:50] It's already up 25. I was gonna say it's already a five bagger. No

[00:19:55] No, no, no, but it is up

[00:19:58] If I compact if I you know if I average this out over the year

[00:20:01] Yeah, I've done like, you know

[00:20:04] If you ever see brokerages, they do that you own a stock for like a day

[00:20:07] And then it'll give you like the time waited return of like, yeah, you've made 10 bajillion percent. No, no

[00:20:13] I've never seen that

[00:20:15] May like 35 bucks and they're like wow, you're a genius. I'd be like that's so stupid

[00:20:20] I would like just kind of even if I saw it. I'd like just move away

[00:20:25] All right, let's move to the last topic of the day here simone

[00:20:29] Yeah

[00:20:30] Yeah, and the last topic because we do have an interview coming up

[00:20:33] So I did an interview with mahima podar who's the senior vice president of

[00:20:39] Personal banking with eq bank primarily focused on open banking really interesting topic

[00:20:45] I did a lot of research. There's some stuff that came up in the recent budgets

[00:20:48] I do encourage everyone to to listen to it. Mahima is great. She's very knowledgeable

[00:20:53] So that'll come after this segment now on this segment. It's a question like we alluded to from thomas

[00:20:59] I'm all summarized a question here

[00:21:01] You wanted to know our thoughts on using stop limit orders to protect against losses in our portfolio

[00:21:08] Especially given that the markets are currently trading at high multiples

[00:21:12] So it's hard to disagree that the market are trading in pretty high multiples right now

[00:21:16] But it doesn't mean that it can't go higher as well

[00:21:19] Before I give my take on this, I'll do a quick overview of the three main types of sell limit orders depending on your broker

[00:21:26] There might be some variances in terms of what's available and whatnot. I think wealth simples has

[00:21:32] Only one of these types. I don't use it personally, but that's what dan told me

[00:21:37] So the first one is a sell limit order

[00:21:40] So you said this if you have a certain price in mind at which you want to sell

[00:21:44] So say you own shares that's that are $50 you might sell your tell yourself, you know what if it reaches 60 dollars

[00:21:52] I want to sell so in that case you'd put a sell limit order at 60 dollars and when it once it it's that

[00:21:58] It would execute and sell the order

[00:22:01] The next one on the list here is the stop limit order with this

[00:22:05] You said the price at which you sell your sell order is activated

[00:22:09] So for example, if you own a share of a company that's trading at $50

[00:22:14] You can put a stop price at

[00:22:16] $45 if it reaches that price then your sell order is activated and then converts it to a limit order

[00:22:23] So in this example, you could put a stop price of

[00:22:27] $45 and the limit of 43

[00:22:29] So the 45 dollar would trigger the limit order and it would be executed as long as the prices

[00:22:36] fall below $43

[00:22:38] And the last one is kind of one that moves and that's a trailing stop limit

[00:22:44] So it's a variation of the stop limit order

[00:22:47] It basically adjusts the stop limit order based on how the stock is performing. So for example

[00:22:53] Say you have a $50 stock

[00:22:55] With eight trailing stop limit of five dollars. So if the stock doesn't go past 50

[00:23:01] And goes down 45 dollars, it's activated same as the stop limit order that I just mentioned

[00:23:07] However, if the price climbs to 60 dollars

[00:23:11] For the share then the new stop limit is actually adjusted to 55 dollars because there is a $5 trailing stop limit

[00:23:19] So that's in a sense how it works. Um, there are pros and cons for all of this

[00:23:24] And then I'll give you a chance braden to like kind of give your thoughts on it pros and con

[00:23:30] It's good if you want to limit your losses or take some gains off the table

[00:23:34] And I think it's important here to mention some gains off the table

[00:23:39] It doesn't have to be an all or nothing. You could just set it for part of your position

[00:23:44] You don't have to do for the whole thing. You could but you don't have to

[00:23:48] The stop loss helps you protect your downside while benefiting from the upside of a bull market

[00:23:54] Assuming of course that the shares don't drop beyond your trailing stop loss

[00:23:59] If you put this on a high quality company or an index ETF with the goal of buying at a lower price

[00:24:05] It's possible that you sell the share and it dips only momentarily and never gets back down again forcing you to decide whether to rebuy the shares

[00:24:14] At a higher price and missing out on some gains

[00:24:17] Or not investing the company or in in the ETF at all

[00:24:21] And then one of the cons is that it might actually not work

[00:24:25] So I'll take the most obvious example here

[00:24:28] Say you put the order on a bitcoin ETF bitcoin is

[00:24:33] I'm notoriously volatile and it trades 24 seven

[00:24:37] Whereas the ETFs only trades during the regular hours

[00:24:41] So it's very possible that the price drops quickly by a large amount while the markets are closed

[00:24:46] And that the order does not get activated once the markets have opened because it's actually well below the price that you had set

[00:24:53] So this could happen of course to stock too, especially if there's bad earnings released after hours

[00:24:58] For example or bad news when the markets are closed

[00:25:01] So that's another con where the stop limit orders might actually not even work in those situations

[00:25:09] Stop losses are a

[00:25:12] tool for

[00:25:15] A game that I do not play

[00:25:20] No, I mean

[00:25:22] Look, I think we talked about this briefly because we we we saved it for this episode

[00:25:27] And and i'll restate my my sentiment here, which is

[00:25:32] Know what game you're playing. So I'll I'll say which game I'm playing

[00:25:37] And then we can decide if that's conducive to this kind of tool, uh, which is stop losses or

[00:25:44] The three scenarios how you can use them the game I am playing is to

[00:25:50] buy

[00:25:52] hold

[00:25:54] let compound

[00:25:56] High quality companies for as long as I can okay, and so if my goal is to like sell

[00:26:02] As little as possible

[00:26:05] Then then i'm going to not set up systems to to sell when my winners win

[00:26:10] Or when they temporarily stumble

[00:26:14] Because it's my job to know

[00:26:17] If that's a long term

[00:26:19] You know structural decline or a short term issue

[00:26:24] And

[00:26:25] stocks are crazy volatile like this is the game

[00:26:31] You and I sign up for not as much as bitcoin

[00:26:36] Not as much as bitcoin. Yes, I you sign up for that game a little more than I do

[00:26:41] Let's it's it's an example

[00:26:42] We've been talking about I've been using a lot because I I still think

[00:26:47] There will be many case studies written

[00:26:50] about Mark Zuckerberg

[00:26:53] And facebook in the era of 2021 to 2023

[00:26:58] Where you had a company worth a trillion dollars lose 75 percent of its value

[00:27:03] And then again reach all-time highs 12 months later like that is

[00:27:09] bizarre and extremely insane

[00:27:12] And the whole time the fundamentals were strong. Yes, the sentiment massively shifted around what he was saying around spending

[00:27:20] Around capex for the metaverse around virtual reality headsets that aren't really panning off

[00:27:27] Yet you have this core business in advertising just chug chug chug talked about at the beginning of the show here

[00:27:34] and so

[00:27:35] If I was a shareholder and I had the long term thesis of that chug chug chug and everyone's addicted to

[00:27:41] their instagram and whatsapp here internationally

[00:27:45] and

[00:27:46] You know facebook blue is just

[00:27:49] The boomers absolutely love by the way

[00:27:52] And so all of these things are are quite solid and intact

[00:27:56] and if I had a stop loss instead of

[00:27:59] Thinking hey, I'm going to continue to buy more and more shares. This is a huge mispricing

[00:28:05] I could have made a lot of money and so that's the game that I'm trying to play if done effectively

[00:28:10] I do that version of it if I do it ineffectively. It's like I

[00:28:14] I panic sell when I see a drawdown of 25 percent, which by the way you sign up for

[00:28:21] When you own individual equities

[00:28:24] So I think it's kind of just like what game are you signing up for which one are you going to be able to play

[00:28:28] Correctly and do for a really long time and and double click on doing it for a really long time because that's the table stakes to compound for a long time

[00:28:37] Yeah, I mean for me. I have probably a more nuanced view. So I think it's a really good tool for traders

[00:28:43] So clearly if you're trading stocks, yeah

[00:28:46] It's a tool you should learn about know how to use and use frequently because that's the name of the game there

[00:28:51] I I'm definitely more on your end of the spectrum, but I use it

[00:28:55] I see it more as a hedging tool

[00:28:58] I would say so I use it very rarely

[00:29:01] I think I've used less than five time in the last 10 years. That's how rarely I use it

[00:29:06] So not very often. I used it a bit recently on asml company

[00:29:11] I used to own I had put it around that it was a thousand dollars and the main reason is I had

[00:29:18] Not necessarily lost conviction on the actual company

[00:29:21] But I just questioned the valuation which I think is

[00:29:24] The market is just seeing everything AI and just pumping everything that's AI right now

[00:29:29] And disregarding any risk and I think there are some major risks with asml

[00:29:35] Like there are with taiwan semi conductors

[00:29:37] Why like there are for nvidia and apple because of their china exposure

[00:29:42] So I kind of used it that way as I came to the situation where I was sitting on a lot of gains and

[00:29:49] I just felt to see the upside and probably the next like two to five years for asml

[00:29:54] That's that's my perception. I could completely be wrong

[00:29:57] And the other way is just you know, I'm thinking back of my tele-dog days when you know valuations were

[00:30:03] crazy expensive and in hindsight is clearly

[00:30:07] I should have put some stop limit orders on to at least hedge part of it

[00:30:11] And that's why I was getting too earlier is I think it's a good tool

[00:30:14] Especially if the position becomes like very large and you're starting to get maybe a little bit nervous

[00:30:20] I think it's actually a good tool in those situation where you can put a stop limit loss on

[00:30:25] You know a portion of that position

[00:30:27] And you still get to enjoin the gains and then kind of cap your downside for part of your position

[00:30:33] So those are kind of the ways I see it, but for me, it's more of a hedging tool

[00:30:37] I would say that's it that I use very rarely

[00:30:41] So I'm definitely more on your end of the spectrum, but I do use it from time to time. Yeah fair enough

[00:30:47] Okay, I mean there they exist for a reason

[00:30:50] Especially for traders. It's quite

[00:30:53] Quite a useful tool, but yeah enough for me

[00:30:56] No, but it's true

[00:30:57] But we I said it right there are pros and cons and like I think you would agree with

[00:31:01] Some of the cons is you could end up putting one on and then you end up missing out on a lot of gains

[00:31:06] Because you never pulled the trigger back to buy back the company and I think that's one of the probably the biggest issues for people

[00:31:14] Yeah, I think that just generally I'm very hesitant. I guess that's maybe that's where we differ

[00:31:19] I'm very hesitant to sell a position because it may be reaching like overstretched territory

[00:31:24] That's fair because if I want to own it

[00:31:27] I struggle to come up with any sort of game plan on

[00:31:31] Buying it back later when I think it's

[00:31:34] You know like it's it's difficult. It's it's really difficult to pull off correctly

[00:31:38] Yeah, there's a little bit of luck involved and there's a little bit of

[00:31:43] Extra work required I think as well

[00:31:46] And so it's it's not that one method is wrong or right

[00:31:49] I'm just very avert to selling

[00:31:52] Something I want to still own no business wise

[00:31:55] No, that's and I think that's the main reason I did it for asml, right? It's

[00:32:00] I think I love the technology that the only ones that they do but

[00:32:04] I get nervous when I see like about a third of their revenues coming from china

[00:32:08] Like literally I get nervous and then you see revenues stalling this year and that china while it's

[00:32:14] It's literally a wild card and I just I don't really understand the market right now. They're kind of

[00:32:19] You know, it's

[00:32:21] It's like everyone's concerned about china

[00:32:23] But not if you invest in a company that does business in china

[00:32:26] Then people kind of forget about the china risk altogether

[00:32:29] And semis is just yeah the taiwan thing. It's it's

[00:32:34] It's a risk. It may it may not pan out like me maybe nothing happens

[00:32:39] But I just my point is that I think the market is just disregarding the risk

[00:32:45] Net bookings are

[00:32:47] Down to 20

[00:32:48] billion from 30 billion at the end of

[00:32:52] 2022 year ending where everyone's kind of sprinting to

[00:32:56] Get that kind of build out that was required. Maybe there's that huge chip slowdown

[00:33:01] Not it you couldn't even get a car because it was just like

[00:33:04] Sorry, no chips. Yeah, but that's still doubled off a base of 2020

[00:33:10] So it's like you had this huge run up and now it's back to still very elevated a nice growth rate levels

[00:33:16] So time will tell I think I'd like to buy more of it

[00:33:20] Yeah

[00:33:21] Time will tell

[00:33:22] Yeah, no, that's it. But I think that's it for what we had to say today

[00:33:26] I guess uh, you okay if I sign off this one. I know normally you do but uh because we had

[00:33:31] Yeah, we had a great interview. I'm uh, mahima and I um, I do encourage everyone to listen to it

[00:33:37] There's a lot of good information in terms of just understanding what open banking is the current situation with our banking system with the

[00:33:45] Big six canadian banks. I had a great discussion

[00:33:48] We even touch a little bit on you know, cd. I see insurance and why hasn't changed since 2005

[00:33:55] So we'll probably have her back on at some point, but uh, I think everyone will enjoy the uh upcoming interview

[00:34:01] Hey an ecu bank

[00:34:03] Speaking at you guys love you guys

[00:34:06] Make make a business banking available for me as quick as you can that'd be great

[00:34:11] I think that that's a huge opportunity for you guys. I would be your first

[00:34:16] Power user of it. Thanks for listening folks. This is uh, the episode with simon and mahima

[00:34:22] Okay, so I'm here with mahima poedar

[00:34:25] Who's senior vice president and group head of personal banking at ecu bank?

[00:34:30] Mahima welcome to the podcast very excited to have you here and talk a bit about open banking and

[00:34:36] Bring more awareness

[00:34:37] Thank you so much for having me. I'm really glad to have the platform to talk about open banking

[00:34:42] Yeah, and before we start on open banking

[00:34:44] Do you want to just give us a quick overview of what your role is with ecu bank and how long you've been with them?

[00:34:50] Absolutely. Um, so I am eight years at equitable bank

[00:34:54] My role is personal banking. So any business that touches the end consumer

[00:34:58] So we have a large mortgage business. We do reverse mortgages lending against life insurance

[00:35:03] And most recently a payments as a service business

[00:35:06] And then on the other side of the balance sheet, uh, I manage ecu bank, which is our direct to consumer digital

[00:35:14] Platform, which I think is absolutely the best way to bank in canada. So I would suggest the audience checks it out

[00:35:20] Yeah, I mean, uh, I think brady and I are and even dan our new co-host as well

[00:35:25] like we're big big fans of ecu bank because uh, yeah, it's so easy to use and uh, you know

[00:35:31] It just feels so painful with the big five incumbents and I'll just say the big six because I feel like national bank tends to

[00:35:39] No, it'd be forgotten there

[00:35:40] But just how easy it is with ecu bank just opening an account takes minutes compared to

[00:35:45] You know having to go in person for a lot of the big banks. It's just uh, I don't know why but it's so painful

[00:35:51] And to go kind of transition to open banking

[00:35:54] So can you just explain for our listeners what it is how it's different from the current state?

[00:35:59] Which people are probably not super familiar but typically if they are signing up for different services that will connect with their bank

[00:36:07] They'll do something that's called screen scraping. So you want to explain the differences and what the benefits would be for uh,

[00:36:13] Yeah for for our listeners and consumers in general

[00:36:17] Absolutely. So it's a simply put

[00:36:19] Open banking gives you the ability to share your banking data through secure connections

[00:36:26] Which the purpose as you suggested is usually to access innovative financial services

[00:36:32] So today in canada

[00:36:34] Only you and your bank can access your financial data

[00:36:38] And the reality is that the bank that you're working with actually owns that data

[00:36:44] so the big

[00:36:45] Kind of unlock with open banking is that it gives you the ownership of your actual data

[00:36:51] And gives you the ability to consent to share that financial data with another financial service provider

[00:36:57] So what this means is that with open banking you can now use your own banking data for your own benefit

[00:37:04] today, uh because we don't have open banking yet the

[00:37:08] The way that this is happening in canada is through screen scraping

[00:37:11] So I know most people are not familiar with screen scraping

[00:37:14] But over four million canadians are actually engaging in screen scraping to share the data

[00:37:19] And so it's actually quite prevalent

[00:37:21] and so what screen scraping involves is

[00:37:26] You would enter your banking login information and password

[00:37:30] So that you're effectively logging into your bank account

[00:37:33] And then the screen scraper is essentially scanning and storing the data elements that you would see on online banking

[00:37:41] To get the information that you want to share and potentially more information

[00:37:46] So the challenge with screen scraping is that sharing your password

[00:37:51] Actually breaks the terms and conditions that you have with your bank account and that can get

[00:37:56] quite contentious because if something goes wrong and there's a fraud attack on your

[00:38:01] Bank account or somebody gets a hold of your banking credentials

[00:38:05] You aren't necessarily going to be protected by

[00:38:08] Your bank because you've shared your password and login information through screen scraping

[00:38:13] And the other challenge I'd say with screen scraping is that it's not

[00:38:17] particularly reliable because obviously this type of

[00:38:21] Technology is a bit of a hack to get to the information. So banks can try and shut it down

[00:38:27] And every time the bank on the other end makes a change to their

[00:38:31] web pages or the layout or the data structures

[00:38:35] The screen scraping is likely to break and so again like not a very reliable way to be sharing information

[00:38:42] And I guess with open banking it would just be like a one-stop shop where you'd have like companies that have been credentialed

[00:38:50] specifically for that and you're able to kind of go into their

[00:38:53] API and then look at different services that might be you know

[00:38:57] Work well for you whether it's looking comparing different credit cards different budgeting tools stuff like that

[00:39:02] My understanding that correctly. That's exactly right. So with open banking and an open banking regime

[00:39:08] What you'll likely see is that every bank has to participate in this data sharing and data provision

[00:39:15] the connections are through secure apis and only

[00:39:18] accredited members of open banking can participate so you have the security

[00:39:24] and standardized framework of sharing information

[00:39:28] Most of the applications for open banking have been around

[00:39:32] cost-saving measures, so

[00:39:34] It's usually like a a fintech or an innovative financial services company that comes in and does the cost comparisons

[00:39:42] for you and will actually do the switching on your behalf so that you can save money

[00:39:48] by comparing different accounts or or

[00:39:51] Figuring at what different features are across a whole bunch of different providers

[00:39:55] Okay, no, I think that's a great overview and speaking of frameworks

[00:39:59] So the federal government released with the budget the consumer driven banking framework

[00:40:04] I guess they use consumer driven banking as a synonym to open banking there

[00:40:08] And it states in the framework legislation that will be released in two parts

[00:40:13] So the first part being this spring and the second this fall

[00:40:16] Have you gotten any concrete day because I mean I live in Ottawa

[00:40:21] So, you know, I am very familiar with red tape and how governments the wheels of governments can turn very slowly at times

[00:40:28] So does ecu bank have like a general idea of when these open banking services will start being available for Canadians?

[00:40:34] Yes, so nothing has been formally committed to but the well kind of believed

[00:40:39] date is 2025

[00:40:41] The industry has gone as far to say that it won't be the beginning of 2025, but it'll be 2025

[00:40:47] The other kind of call out for open banking is that it's going to launch in phases

[00:40:52] And so the first phase

[00:40:54] Is around read only so that the data will be you'll be able to share it, but you won't be able to

[00:41:01] Write data for example and the biggest part of that is around payments initiation

[00:41:05] So the second phase of this is likely to include payments initiation where

[00:41:10] The fintech or another entity that's part of open banking can actually instigate a transaction on your behalf

[00:41:16] Okay, really interesting and I guess for me the biggest

[00:41:21] Positive here is just

[00:41:23] Hopefully it's one part of increased competition right in the banking industry in Canada because I don't think it's

[00:41:29] Any surprise to any Canadian? I think as a as a society, I feel like we tend to favor

[00:41:36] Like oligopolies. I will call it because there's just a small number of big banks in Canada

[00:41:41] It's very concentrated. Do you think on the first hand that the adoption will force large banks actually

[00:41:46] You know be more

[00:41:48] Competitives themselves because I you know, I own a business

[00:41:51] I bank with one of the large banks for for our business

[00:41:54] But it's so painful compared to what I'm you know using with ecu banks

[00:41:59] So do you think open banking will actually force them to you know be more competitive and obviously create some

[00:42:06] opportunities for new entrants or while newer or smaller players like ecu bank in this space

[00:42:11] I think the biggest advantage is going to be on the ladder

[00:42:15] So this idea that new entrants will enter the space because they're going to have access

[00:42:21] To create innovative products that just there's no platform for

[00:42:25] Today, I think what you've seen in the uk

[00:42:29] In particular that's had open banking for many years is that

[00:42:34] again, the biggest win has been around

[00:42:37] innovations where the customer can save money and so

[00:42:41] Because you're making the comparison and the information asymmetry disappear with with open banking

[00:42:47] That is what's going to cause the bigger banks to get more

[00:42:51] competitive and

[00:42:52] And innovative innovative you could say I think one of the biggest

[00:42:56] Wins with open banking is going to be around access

[00:42:59] So for example, you mentioned small businesses right now

[00:43:03] There's many small businesses in Canada that don't have access to great credit

[00:43:09] What?

[00:43:09] Open banking can do is give

[00:43:12] Alternative lenders or fintechs

[00:43:15] Access to the underlying transaction data of a small business in a bank account from the bank account

[00:43:20] And so now you have much better information to underwrite a small business on and provide them credit

[00:43:26] Versus relying on a credit score, which is really the only like mechanism that exists in Canada today

[00:43:32] So there's there's going to be quite a

[00:43:35] few

[00:43:36] Benefits that should arise from open banking and as the big banks see these

[00:43:42] groups of customers defer deflect to

[00:43:45] Fintechs and smaller fIs. I think it's inevitable that they too will get more competitive and

[00:43:50] You know try and come to market with similar offers

[00:43:54] Yeah, a little less complacent. It's not you saying it it's because I you know, I've dealt with them from businesses

[00:43:59] I'll be honest. It's just very painful like it is literally sometimes you have to like book a half date to like

[00:44:05] Do something that should probably take less than 15 20 minutes

[00:44:10] 100% agree with you. We we've seen the exact same thing. It's

[00:44:14] Small businesses are the cornerstone of the Canadian economy, but they're so underserved in Canada

[00:44:19] So actually I'm small on a ecu bank. We've just launched small businesses

[00:44:24] sorry small business banking and even

[00:44:28] The notion of doing 100 digital onboarding is something that's novel in Canada and doesn't exist

[00:44:33] So we're really trying to attack those pain points

[00:44:36] That that exists in the market

[00:44:37] But unless there's somebody that's starting to eat away at the market share, which I hope ecu bank does

[00:44:42] The big banks aren't really going to change the way

[00:44:45] They're operating because they have these huge legacy tech stacks

[00:44:49] And it's quite expensive to actually move the needle and then

[00:44:53] There is a there is a cost of security and you know

[00:44:57] Your fraud protections need to be that much stronger

[00:45:00] When you're fully digital and so they've got to absorb those costs as well

[00:45:04] No, that's great. And I guess the last question here I have for you

[00:45:07] It's actually a little different than open banking, but I think it goes hand in hand with competition

[00:45:13] I we're talking about this a little bit before we started recording. So since 2005

[00:45:17] I'm sure you're aware of it the cdic limit has not you know changed

[00:45:21] It increased from 60 to 100 thousand in 2005

[00:45:25] Inflation adjusted. I was like crunching numbers with I think the bank of canada inflation calculator would be

[00:45:30] About 150k for today

[00:45:33] And I know ecu bank has been kind of you know, the advocate for increasing that to 200 000

[00:45:40] And I think to me that's a big part to increase competition because we saw what happened the u.s

[00:45:45] With the regional bank crisis last year is there started being a

[00:45:50] Outflow of deposit from small regional banks to the big large us national banks like a jp morgan for example

[00:45:57] And you know, I think ecu bank has done some research on that and found that

[00:46:02] That is a determining factor for some people

[00:46:05] Especially businesses to have that additional cdic because

[00:46:09] If not, there's I think just a conception that is just safer to be with these large

[00:46:15] You know, whether it's gsib like a td or rural bank or dsib

[00:46:19] The the rest of the big five banks. So yeah, you want to elaborate a little bit more on that how important that is to

[00:46:26] Have that increase. Hopefully in the next few years. Yeah, I mean that is absolutely right like when we look at

[00:46:33] 2005 numbers at 100 000 it's just not sufficient to meet today's customers needs

[00:46:40] And then also if you look at the provincial

[00:46:43] insurance that's available to credit unions for example, it's considerably higher than the

[00:46:48] federal insurance and as a smaller

[00:46:52] Bank or a medium-sized bank the

[00:46:55] notion of trust and security that cdac provides is absolutely

[00:47:02] fundamental to our

[00:47:04] success as a as a business what we are seeing though is that

[00:47:08] Even when customers have more than 100 000 to invest they

[00:47:13] They understand the importance of the insurance and so they're only keeping 100 000 with us in each category of cdic insurance and so

[00:47:23] There is a unfair advantage here with the bigger banks or the dsibs because you have that implicit

[00:47:31] Trust and knowledge that they're too big to fail. So increasing

[00:47:36] cdic helps to make the playing field a little bit more equal in that the average consumer is

[00:47:43] You know can rely on the trust that cdic provides first thing it's having to build that trust on their own

[00:47:49] Which can obviously be like a daunting task

[00:47:52] Yeah, I totally agree and i'm obviously just uh what happened to us

[00:47:55] I think that kind of solidifies that view right if you don't have that trust and people sometimes will

[00:48:00] Just go with the the larger banks because you just said it right they're too big to fail

[00:48:04] So people will kind of stick with them with svb svb

[00:48:08] It was a created run on the bank and if there was that confidence of security through insurance

[00:48:14] It would have been a really different outcome

[00:48:17] I will say that ecu and equitable though we manage our liquidity incredibly differently where we would never have an svb

[00:48:24] type situation but

[00:48:26] cdic has done a good job in ensuring that customers will get access to their cash within 24 hours

[00:48:32] And so it's actually a fantastic protection and should be extended

[00:48:37] Further to help the innovation and competition lens in the country and like just for transparency each bank is paying for their cdic insurance

[00:48:45] through premium. So it it's a

[00:48:48] self

[00:48:49] Ineable model in that it's the banks themselves that will pay for the additional insurance and so there shouldn't be a cost to the broader

[00:48:57] constituency in in canada

[00:48:59] Yeah, I mean to me. I just think it's a no brainer

[00:49:01] Just based on the fact that the amount has been the same since 2005 just based on that alone

[00:49:06] I guess the last thing we'll finish on is the government started looking into open banking in 2018 and early 2019

[00:49:13] They did consultations on open banking. Do you have a sense why it's taken so long to finally move forward?

[00:49:20] Is it because of you know, the incumbents just lobbying efforts is just because the government just moves very slowly

[00:49:27] Like what's your perception of that coming from ecu bank?

[00:49:30] I think one of the big challenges is that the customer awareness around this is incredibly low and so there is

[00:49:39] No real political will around this because there's no

[00:49:43] It's not going to win votes. You combine that with as you mentioned, this is a huge

[00:49:50] Tech investment on behalf of the dsibs and so there has been

[00:49:55] quite a bit of pushback in getting to open banking because of the investment that's going to be required plus

[00:50:03] There's not much to gain for

[00:50:05] A big bank here. It's actually more likely to cause risk to to market share

[00:50:11] Say those are two factors the third one is for the department of finance the focus is

[00:50:18] largely on stability and security of the

[00:50:21] banking industry

[00:50:23] And I'd say

[00:50:24] Much more important than competition or innovation

[00:50:28] and so the big banks have leaned into stability and security risks as a way to

[00:50:33] Delay open banking and then generally there's this government perception of not introducing

[00:50:39] anything that would risk the stability and security of of the

[00:50:44] Of the financial sector

[00:50:46] so one of the big

[00:50:48] Kind of lynchpins are the reasons that this has moved forward is actually because of the risks

[00:50:54] of screen scraping and the need for an alternative and

[00:50:58] So I'm glad we're here because it's been a long time

[00:51:01] but

[00:51:02] I would say it's really around this whole security angle and the fact that screen scraping is becoming so prolific

[00:51:09] That open banking is being pushed forward because it is actually a much better solution for

[00:51:14] For data sharing. Well, that's great. I appreciate the context and I'll definitely mark my calendar for let's say uh,

[00:51:21] July 2025

[00:51:23] Hopefully by July 25 we'll start uh seeing kind of that being rolled out

[00:51:28] I think and I mean from what dq bank has done and as a user myself. I think uh

[00:51:34] Everyone there is doing a fantastic job like the product offering is great and even my parents will live on the kebeck side

[00:51:40] We're really excited to get it one

[00:51:43] Yeah, we're

[00:51:45] we're um

[00:51:47] Really excited by the new products that are coming to market and honestly

[00:51:51] What open banking is going to be able to allow us to do in terms of

[00:51:55] Bringing more insight to customers showing them what their net worth position is across all of their financial

[00:52:01] institutions is such a powerful

[00:52:04] infrastructure piece to drive innovation

[00:52:06] In in the canadian landscape that yeah, we are very excited

[00:52:11] Well, I mean this was a great conversation. Mahima. Thank you for coming on if people want to help out with

[00:52:18] This initiative. I'm assuming they should probably reach out to their rep their mp's

[00:52:22] Representing them. Is that the best way are there other avenues that they can kind of voice that they'd like to see this sooner

[00:52:28] Rather than later. I mean if they can get in touch with their local government

[00:52:31] I think that would be fantastic to help create the demand around open banking and the speed at which phase two comes

[00:52:39] As well. Okay. Well, that's great. Thanks a lot for joining us. Mahima. Thank you so much

[00:52:44] The canadian investor podcast should not be construed as investment or financial advice

[00:52:50] The host and guest featured may own securities or assets discussed on this podcast

[00:52:56] Always do your own due diligence or consult with a financial professional before making any financial or investment decisions