Modern Portfolio Theory and US Spot Bitcoin ETFs Beat Expectations

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

[00:00:06] confidence you need to succeed in the markets hosted by Braden Dennis and Simone Beylange.

[00:00:15] The Canadian investor podcast welcome into the show.

[00:00:19] My name is Braden Dennis.

[00:00:21] As always joined by the extraordinary C-mont Bill

[00:00:25] Anjay.

[00:00:26] Today, we're talking flywheels.

[00:00:31] We're talking modern portfolio theory.

[00:00:34] And then we have a special update on a launch that

[00:00:39] was widely talked about in financial markets.

[00:00:42] So make sure you tuned in to stay on the pod for that.

[00:00:46] Simone, I'm having one of those days where running startup

[00:00:51] is just really hard.

[00:00:52] And some days you're just like, man,

[00:00:56] why did I sign up for this?

[00:00:58] Like some days, man, I'm having one of those days,

[00:01:01] but I wanna keep the reason I'm telling you that

[00:01:03] is because the

[00:01:05] podcast is just like the one I always come back to of like how much I love doing this.

[00:01:12] Like this is the one project where I just I've never felt super, super burnt out.

[00:01:17] Maybe I only a handful of times and I just love this project.

[00:01:21] So I hope the listeners appreciate that.

[00:01:23] Yeah.

[00:01:24] I mean, it's not easy to run a podcast for so long,

[00:01:27] but there's definitely a lot less moving parts

[00:01:29] that I can imagine with FinChad.io.

[00:01:33] Probably with 1% of the moving parts

[00:01:37] for the podcast compared to that.

[00:01:38] Yeah, and that's why it's so beautiful.

[00:01:40] You know, like when you run a company,

[00:01:43] there's so much beauty and simplicity in this podcast

[00:01:46] It is a business as many of you know you guys hear the ads you guys, you know

[00:01:51] You know it's sponsored show, but it's just so there's such little moving parts and it's just beautiful like it just works

[00:01:58] But on that here's a quick plug for fin chat

[00:02:02] You know all that said we did just launch earnings call, audio,

[00:02:08] earnings updates and updated UI,

[00:02:09] investor day, presentation, slide decks,

[00:02:12] press releases, company reports.

[00:02:14] So you can actually listen to the earnings call

[00:02:17] right after the call concludes

[00:02:18] right on the FinChat platform.

[00:02:19] So I know I was sending you screenshots,

[00:02:22] but it's live now.

[00:02:24] Yeah, no, and I texted you.

[00:02:25] I was actually a few days before, because, you know, we've said it before.

[00:02:29] I invested in FinChat as well, but I'm not like, you know,

[00:02:33] involved on day to day basis at all.

[00:02:35] So a couple of days before you texted me, I'm like, Oh, it'd be nice if it was like all,

[00:02:40] you know, slide decks, audio and all the financials, right?

[00:02:45] In one spot, cause I always found myself like, you know,

[00:02:48] as good as FinChat was, I still had to go on the IR page

[00:02:53] and just like listen to the audio

[00:02:55] or using other apps that cater just to that.

[00:02:57] Yeah, that's right.

[00:02:58] And every investor relations page is different

[00:03:01] as investors know, like like especially once you leave

[00:03:06] like North America

[00:03:09] Like this once you go kind of international emerging markets dude

[00:03:13] there's no standardization on investor relations pages and

[00:03:17] It can be a bit of a nightmare. So so we make that a little bit easier. All right, so you got our first topic of the day

[00:03:24] modern portfolio theory, MPT.

[00:03:28] And I'm pumped to hear what you have to say.

[00:03:31] I certainly will have my hot takes here and there, but let's just get into it.

[00:03:36] Yeah, it's funny because I, as I was researching that, I'm also listening to an audiobook that

[00:03:41] goes over like a lot of MPT and the drawbacks and downsides

[00:03:48] of it.

[00:03:49] There's definitely some good things that came out of it and I just kind of figured, I don't

[00:03:53] think we ever talked about that on the podcast.

[00:03:56] Maybe we mentioned it quickly, but I cannot recall.

[00:03:58] I mean, it's been what 360 episodes close to that, so maybe we did, but I just can't

[00:04:04] remember.

[00:04:10] There are certainly aspects of it that we've talked about in extensive detail, but maybe not like in its origins and how it's came to be.

[00:04:17] Yeah, and that's exactly it.

[00:04:18] And the audio book I'm listening to and when I'm done listening to it,

[00:04:22] I'll definitely do a summary and I can talk about it on the podcast.

[00:04:26] But what's kind of nice is this author is looking at it on a historical basis.

[00:04:31] So it gives a lot of historical context, which I really like to hear now.

[00:04:35] And PT, the reason I mentioned that because it did come after, you know, it came about

[00:04:42] after the crash of the 1929 and then the 1930s, obviously that followed

[00:04:48] with the depression and investing really kind of putting some numbers into investing and

[00:04:55] having more of a, I'm not sure how to put that, but of a system for investing that came about,

[00:05:01] I think Benjamin Graham, his first edition of the Intelligent Investor

[00:05:07] must have been in the 1930s, 1940s around there.

[00:05:11] You remember when that was?

[00:05:12] That sounds right, I'm gonna look it up.

[00:05:14] Yeah, sounds about published.

[00:05:16] That sounds about right, I know it's 49, okay,

[00:05:19] that's actually later than it.

[00:05:20] 49, okay.

[00:05:21] I thought it was like a year or two after the war ended.

[00:05:24] Okay, but yeah,

[00:05:25] still in the 40s. But that's about the time period where there was a lot of progress in investing

[00:05:30] and a lot of people putting forward kind of theories to, you know, help people invest and not just

[00:05:36] people institutions as well. So it started all the way back in 1952 with Harry Markowitz in an essay for which he later won the Nobel Prize in

[00:05:46] economic sciences, ensure the idea behind MPT is to maximize your potential returns, given

[00:05:53] a certain level of risk. And that's really important. It's really about maximizing returns. But

[00:05:57] it's always based on what you're comfortable in terms of risk. And based on this, if you have two portfolios

[00:06:05] with expected returns of 7%,

[00:06:08] you should be choosing the one with the lower risk profile,

[00:06:11] therefore maximizing your returns on a risk-adjusted basis.

[00:06:16] And the idea is to construct a diversified portfolio

[00:06:19] around assets that are negatively correlated to one another,

[00:06:23] which essentially moves means asset

[00:06:26] that move in opposite direction. So if one goes up, the other one goes down and vice versa.

[00:06:30] So that will balance the portfolio. And that's the diversification idea behind it. In terms

[00:06:36] of an example, a classic example of the of MPT is a concept of the good old 60 40 stock

[00:06:43] bond portfolio, the ideas that when stocks are down,

[00:06:47] there is going to be a flight to safety, two bonds, especially I would say typically

[00:06:52] treasuries, US treasuries, which will mitigate the drop in stocks. And according to MPT, on a

[00:06:59] risk adjusted basis, there is a case to be made that the 64D portfolio has performed better

[00:07:07] than a traditional just stock portfolio.

[00:07:11] Not in absolute terms.

[00:07:13] Obviously, total returns will have been better if you put money in the SMP 500, for example.

[00:07:18] But on a risk adjusted basis, it has provided better return.

[00:07:22] And one of the measures for that is the sharp ratio, which compares the return of assets

[00:07:26] compared to the risk-free rate.

[00:07:29] So US treasuries, for example,

[00:07:32] while factoring in the volatility of the asset.

[00:07:34] And to be clear, again,

[00:07:36] it doesn't mean that it's outperformed

[00:07:37] on a total return basis, just on a risk-adjusted basis.

[00:07:42] And I found this blog that was done by a professor professor and I'll put the link in the show notes. I just don't have it open to me. But essentially, he studied and got some data from 1961 to 2021. And according to the data that he got is that the stock portfolio. Yes, did indeed perform better in annualized return, but on the risk adjusted basis,

[00:08:06] the 6040 portfolio performed better.

[00:08:09] But in total returns, obviously the stock

[00:08:12] portfolio as performed better.

[00:08:14] Before I go on anything you wanted to add in?

[00:08:16] The only thing I think really worth discussing

[00:08:21] on this topic around the difference in the performance and what are they're calling

[00:08:27] risk adjusted returns.

[00:08:29] And it comes down to how you define risk

[00:08:34] because if you define risk as volatility,

[00:08:39] okay, that's fine, I'll circle back to that.

[00:08:41] I define risk as losing money.

[00:08:43] Risk to me is losing permanent loss of capital,

[00:08:47] poor decisions, destruction of value.

[00:08:50] Companies you buy become intrinsically less value

[00:08:54] down the road and you eventually lose money on them.

[00:08:58] When the investment business discusses risk

[00:09:03] around volatility, beta, sharp ratios.

[00:09:08] They're defining it as risk because it's really a risk to their business.

[00:09:13] If you have a lot of volatility and your clients don't like it, guess what?

[00:09:19] It is a risk that they will move their money somewhere else. And so it's just always important to think about

[00:09:27] how people are defining risk around price action

[00:09:31] versus real actual risk.

[00:09:33] And stocks have outperformed the 6040

[00:09:36] on the annualized return.

[00:09:37] So it's just, people throw in little words, right?

[00:09:40] It's like outperforming on a risk adjusted basis.

[00:09:43] And it's like, well, in your your little definition sure like I can bend stats

[00:09:48] Anyway, I can even make stuff up for my narrative right like and that's kind of the problem with these kinds of things

[00:09:54] I think it has merit and I understand it

[00:09:57] But you know and I'm sure you're getting to that here, but maybe that's a little appetizer for for

[00:10:05] Yeah, well, that's exactly what my next point would be. But it's

[00:10:09] all good. I didn't mean to steal your your thunder. No,

[00:10:12] that's all good. And that's one of the big issues in criticism

[00:10:16] with MPT is that it focuses on variants to define risk or

[00:10:20] volatility. These are all synonyms. So how much an asset

[00:10:24] will actually move in price? And the more volatile or volatility, these are all synonyms. So how much an asset will actually move in price.

[00:10:26] And the more volatile it is, like you mentioned,

[00:10:28] the more risky they will consider the asset.

[00:10:31] Now, the problem with that,

[00:10:32] it's the very, very narrow view of risk.

[00:10:35] There's, you know, we've talked about it.

[00:10:37] There's all different kinds of risks before,

[00:10:39] but using volatility, I think, is not my,

[00:10:43] I agree with you, it's not the correct way

[00:10:45] of doing it in my view.

[00:10:46] That's because I think it's much better

[00:10:49] to look at downside risk.

[00:10:52] So that's another way that you said, right?

[00:10:54] Like of permanent loss of capital.

[00:10:56] So that's your downside risk.

[00:10:58] I think that's a way better way of measuring risk,

[00:11:00] but that's not what they do.

[00:11:02] Because the problem with asset volatility too is if you're trying

[00:11:05] to build a portfolio with using that as a risk definition, does do you need to adjust that?

[00:11:14] Because one of the things that's interesting is typically people view bonds as less risky,

[00:11:21] right? In the finance community, bonds will be viewed as less risky. Well,

[00:11:26] the issue, and there's a chart that our joint TCIs listeners will be able to see, but for

[00:11:31] those listening, feel free to go on, you know, just on the Google machine and just type in

[00:11:36] the move index. So it's M O V. And you can look at kind of the last five years since

[00:11:42] 2018. And basically the move index is just to measure bond volatility.

[00:11:47] And you'll see that volatility has actually shot up specifically in the last 4 years or

[00:11:54] so, 3 years, let's say, where it was much lower the previous 3-4 years and now it's

[00:12:00] much higher.

[00:12:02] So you'd have to constantly adjust your risk guess, your risk profile based on that.

[00:12:07] But I haven't seen a lot of people that would go with these kind of 60-40 portfolios saying

[00:12:14] that bonds have become more volatile in the last three years.

[00:12:18] Although the data is clear, they have become a lot more volatile.

[00:12:22] That's right.

[00:12:23] I mean, there's no perfect asset.

[00:12:26] Like, there's no asset that exists that checks every single boxes.

[00:12:32] Unless you found that infinite money glitch, hit me up.

[00:12:36] Still looking for it.

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[00:13:35] offer for our listeners. One of the solutions at least is what was put forward is what's called

[00:13:42] post-MPT, so post-modern portfolio theory.

[00:13:45] And this addresses the volatility criticism.

[00:13:50] It's not very widespread.

[00:13:51] It's kind of hard to find a lot of information on it,

[00:13:53] but instead of using volatility,

[00:13:55] it uses downside risk.

[00:13:57] So what we were talking about,

[00:13:59] aside from that, it seems to be very similar to MPT.

[00:14:03] And some might argue, like I said before that the

[00:14:06] 6040 portfolio over the last 30 years is an example that MPT does work very well. It's

[00:14:12] hard to disagree. I mean, it's done quite well even when you compare it to stocks, it's

[00:14:17] pretty close. But the problem is that going in that period of time, we literally have seen interest rates gone decreased steadily since the 1990s.

[00:14:28] And 2022 is a prime example here of stocks and bonds

[00:14:34] performing pretty poorly.

[00:14:36] Like anyone holding a 60-40 portfolio,

[00:14:39] I can guarantee you they did not do well in 2022.

[00:14:43] Whether they did better than someone holding stocks, I guess it depends on the kind of

[00:14:46] stocks a person was holding. I think the returns were probably

[00:14:50] quite similar as the S&P 500 without having the data right

[00:14:54] in front of me. But that's a good example that it's not always

[00:14:58] easy to get assets that are negatively correlated. And

[00:15:03] sometimes some assets will be negatively correlated until

[00:15:07] they aren't anymore. And that's something to keep in mind and going forward, who knows what

[00:15:13] interest rates will be like. So it'll be hard to see whether bonds will perform well or not. I mean,

[00:15:20] even if central banks reduce rates, that's only the short end of the curve. The market tends to dictate what the long run of the curve is.

[00:15:28] Obviously barring any massive quantitative easing or yield curve control.

[00:15:33] Both of these are just ways where the central banks will intervene and buy assets, typically

[00:15:39] government bonds.

[00:15:40] So what it'll do is only increase the demand for those bonds.

[00:15:43] Therefore increase the price of the bonds and lower the yield.

[00:15:46] And yield curve control is basically a more, let's say, aggressive way of doing

[00:15:51] that and making sure that the yield stays within a very tight target.

[00:15:55] But that, again, will probably cause some longer term macroeconomic issues

[00:16:01] with the markets without going into too much detail for that today.

[00:16:04] So I guess my to sum it up here, MPT is a good or bad. economic issues with the markets without going into too much detail for that today.

[00:16:05] So I guess my to summit up here MPT is a good or bad.

[00:16:09] I think there's some good and bad things to take away from it.

[00:16:12] Diversifying assets, classes, not a bad idea, but I think it's important to identify which

[00:16:17] asset class will do best.

[00:16:19] Even if you try to build a portfolio around assets that have historically been negatively

[00:16:23] correlated.

[00:16:24] Like I just mentioned, correlation can change over time, depending on market dynamics.

[00:16:29] And again, the measure of volatility of risk that they use, I think it's flawed in a very

[00:16:36] big way.

[00:16:37] Measuring risk with volatility, it just doesn't make sense in my brain.

[00:16:42] I don't know why the finance industry has done, used it for so long.

[00:16:46] I think your answer is probably the right one for that because it's much easier for

[00:16:52] them to retain clients as they don't have big drawdowns.

[00:16:57] That's right.

[00:16:58] I mean, if you're saying you're managing a bunch of family money, like you have, say,

[00:17:02] 40 families, million dollar plus investment required.

[00:17:07] You run like a long only type family office.

[00:17:11] Your clients, you're in like probably the wealth protection.

[00:17:15] You're going to have a mix of like young families with money to older families to like straight

[00:17:22] up seniors that you're holding onto their money that is gonna eventually go get and get passed down.

[00:17:27] Like these are the clients that are in these types of funds.

[00:17:31] And the last thing that they want

[00:17:33] is to get their statement and see volatility

[00:17:36] because they don't know that they could be holding,

[00:17:39] you know, the next big, the next Nvidia here in 2024

[00:17:45] and it's been bumpy the whole way, right? next big, the next Nvidia here in 2024.

[00:17:48] And it's been bumpy the whole way, right? And so the incentives drive everything in our world.

[00:17:53] And that's, that can explain a lot of the metrics

[00:17:57] that are used, you know?

[00:17:59] Like the numbers that are used always correlate

[00:18:02] with the incentive or outcome that people are looking for on a long enough time horizon.

[00:18:07] That's just literally how this works.

[00:18:11] Yeah, no, I got no other better explanation.

[00:18:13] Like, no, no, I mean, I don't think I don't either.

[00:18:17] So, and I think it's interesting to talk about it because that's the MPT is the basis of, you know, a lot of investments, even when

[00:18:27] you think about insurance companies, how they invest their money with these premiums that

[00:18:30] they collect and so on.

[00:18:31] Like it's all around you.

[00:18:33] You probably interacted with it in one form, another without even knowing it.

[00:18:38] Let's talk about businesses with competing incentives.

[00:18:41] So I have this note where I have two brainstorming

[00:18:46] methods for the podcast. I have this note on my phone or I

[00:18:50] text him on one of the two. I was I was in Miami for a

[00:18:55] conference a couple weeks ago for FinChat. And I was walking on

[00:18:59] the beach after the conference, you know, taking a solo long

[00:19:02] walk on the beach. And this is of course what I'm thinking about because I'm a complete nerd.

[00:19:07] So I text him on, I'm like, dude, let's do a topic on businesses with competing

[00:19:12] incentives.

[00:19:13] There are many businesses.

[00:19:15] We were kind of going back and forth on that meet this criteria.

[00:19:19] And I'm going to talk about this, but I want to set I want to set the stage

[00:19:22] for what great looks like first and then talk about the opposite of this, but I want to set the stage for what great looks like first and then talk about

[00:19:26] the opposite of this, which is business with competing incentives. So the business model with

[00:19:34] great incentives has what most people call a flywheel. A flywheel is a mechanical device specifically designed to efficiently store rotational energy in the form

[00:19:47] of kinetic energy. The idea here is that when the flywheel resist changes in speed and momentum

[00:19:55] by their moment of inertia, which is like I in this formula, meaning that if they're in motion,

[00:20:02] they're difficult to slow like spin bikes work like this.

[00:20:05] Traditional spin bikes work on a flywheel. And it's very old piece of technology that goes

[00:20:12] way, way back to ancient times. And it's an important concept in business because it means

[00:20:19] just exactly that. Is that there's a positive feedback loop, AKA flywheel, that creates a company with so much inertia

[00:20:28] that it becomes difficult for competitors to stop it.

[00:20:33] And it also becomes a snowball

[00:20:36] because you have this positive feedback loop,

[00:20:39] you have compounding of the outcome that you're looking for.

[00:20:42] And there's many examples of flywheels,

[00:20:45] particularly well-known around network effects.

[00:20:48] Think of like Visa, more merchants who accept the cards,

[00:20:51] create more customers who hold the cards,

[00:20:54] which creates more merchants to wanna have the cards

[00:20:57] and so on and so forth.

[00:20:58] You get this like amazing network effect.

[00:21:00] Or Uber and Airbnb, any social network with Airbnb, think about like you have this

[00:21:06] two sided network effect flywheel, more hosts create more options, which creates a better

[00:21:12] product for travelers, which creates more usage and more traffic on Airbnb, which then

[00:21:17] drives more hosts to sign up because there's a market opportunity, so on and so forth.

[00:21:23] You get this nice feedback loop. And I like to think about a flywheel of compounding value

[00:21:30] that actually flows back to customers.

[00:21:33] And this is not like a, it's kind of like a network effect,

[00:21:37] but it's more like economies of scale.

[00:21:39] And this is what I'm gonna focus on for this segment

[00:21:41] and then also the reverse of it.

[00:21:43] So easy examples of this, you can see on the doc here, this is the famed flywheel illustration

[00:21:51] that Jeff Bezos put on one of his annual letters.

[00:21:54] I forget what year that annual letter is, but you can just Google it in two seconds.

[00:21:58] Just Google Amazon flywheel and you'll see his little sketch that he put on one of the

[00:22:04] Amazon annual reports.

[00:22:06] And essentially what is, it's two loops. There's more traffic, creates more sellers,

[00:22:13] creates more selection, better customer experience. So there's that flywheel. And then

[00:22:18] intertwined with that, you have more sellers, lower cost structure, lower prices, better customer experience, more traffic.

[00:22:26] So it works together in this kind of almost double feedback loop.

[00:22:30] But the idea here, roughly, is that you drive a better customer experience,

[00:22:38] you know, that customer obsession model that Jeff Bezos has talked about for so many years,

[00:22:42] which drives more traffic, drives more sellers, low cost-structured, lower prices, more selection,

[00:22:47] that all feeds back into the customer experience

[00:22:50] and then the loop starts again.

[00:22:51] So this is a flywheel that creates what people refer to

[00:22:55] as economies of scale.

[00:22:58] What that really means is more sales volume

[00:23:01] creates lower prices, creates more customers,

[00:23:03] and now we're back to more sales volume.

[00:23:05] Costco has like probably the most well-known version of this.

[00:23:09] They charge like, you know, 12% gross margins, but everything's fed back to customers in the form of savings.

[00:23:15] I've talked about it extensively on this podcast.

[00:23:18] So I'll try to throw another example here.

[00:23:20] Netflix is another one that benefits from this example.

[00:23:24] More customers, more money for creating hit content and a better product, a better library,

[00:23:30] and hopefully better content, you can argue with about that on Netflix, leads to more customers.

[00:23:35] So overall, you come up with an ideal situation that I think we can agree on that Flywheel

[00:23:42] is compound value.

[00:23:45] But these types of Flywheel's compound value

[00:23:47] back to stakeholders of the company, customers,

[00:23:51] and shareholders, you get this customer base

[00:23:54] that's very sticky and it grows it.

[00:23:57] And then overall, these are good businesses for society.

[00:24:01] They are equal for stakeholders.

[00:24:04] What you're getting here is a lot of people benefiting

[00:24:07] from economies of scale.

[00:24:08] So any other examples before I get to like the opposite

[00:24:12] of this, which is like businesses we have

[00:24:15] with competing incentives?

[00:24:18] No, I mean, not on top of my head,

[00:24:20] I'm sure I could probably think of a few

[00:24:22] if I had a few minutes, but not on top of my head head right now fair enough. I mean like the Costco ones the most

[00:24:29] Thanks, yeah in Etsy maybe kind of a platform like that a lot of platforms are like that right where you get

[00:24:36] Kind of a lot of sellers people that join in and then you know it reinforces each other. Yeah every two-sided network marketplace

[00:24:46] reinforces each other. Yeah, every two-sided network marketplace, they can benefit from

[00:24:52] network effects and a flywheel and also economies of scale and a flywheel. Usually, if they go hand in hand, you end up with these mega-scale type companies.

[00:24:56] So what's the opposite? There's a subset of businesses that have, I have great hesitation

[00:25:04] to own as a shareholder because they have

[00:25:07] conflicting incentives.

[00:25:08] So let's work through some examples.

[00:25:10] Match group comes first to mind.

[00:25:13] Their flagship assets being Tinder and hinge, the dating apps, hinge slogan is literally

[00:25:20] quote, designed to be deleted.

[00:25:23] Meaning if you have success in the relationship on Hinge,

[00:25:27] you stop becoming either a free user or a paid customer

[00:25:31] on their paid premium paid subscriptions,

[00:25:33] which they have a lot of, they disclose them

[00:25:35] on their cues and case.

[00:25:38] And so Tinder even has this like 500 a month

[00:25:42] extreme paid product

[00:25:45] for if you are extra desperate, I guess.

[00:25:47] The reality.

[00:25:48] Yeah.

[00:25:49] You're extra desperate.

[00:25:51] They should rename that product to you.

[00:25:53] Extra desperate.

[00:25:55] This one's 500 a month.

[00:25:56] So there's a competing incentive for the company

[00:25:59] and what the company and their customers

[00:26:01] are hoping to achieve, right?

[00:26:03] Like maybe not Tinder because

[00:26:05] I think everyone's just like permanently hooking up and maybe not. But you know, let's look

[00:26:10] at the more serious ones like match group or they own all of them.

[00:26:13] Yeah. Hinge designed to be deleted. One of the other ones. I guess match.com is the one

[00:26:18] I was thinking of. Dude, there's a ton. If you go on.

[00:26:21] Yeah, there's so many.

[00:26:22] If you go on match.com's IR, you can see all of their brands.

[00:26:26] And they have all the niche ones, like for every type of like race, religion, subcategory,

[00:26:33] sub niche group, like there's one for you and they own it.

[00:26:38] And if they don't own it, they buy it within the next, you know, however long.

[00:26:42] Like I did use some dating apps when I was in my younger days and single, but I say,

[00:26:47] I like, I don't know.

[00:26:49] I do, I am a little bit old fashioned.

[00:26:50] I do like meeting, you know, girls in person and just interacting like that.

[00:26:56] And especially now, you know, they, especially now is a married man.

[00:27:00] I love now.

[00:27:01] I'm just kidding.

[00:27:01] No, no, but especially like I find because like dating apps are so prevalent,

[00:27:05] like it's actually like a nice surprise

[00:27:07] if you just kind of randomly start interacting

[00:27:10] with someone you're interested in just, you know,

[00:27:13] at a coffee shop or on the street, it's like, oh my God,

[00:27:16] like I'm actually talking to someone

[00:27:18] without going through an app.

[00:27:19] Yeah, it's almost like, it's like ballsy now.

[00:27:21] Like, you know, I think, dude, there's all these like,

[00:27:25] I don't know if you noticed this,

[00:27:26] but now when you like tap a phone, like together,

[00:27:29] have you seen this?

[00:27:30] Have you tapped your iPhone together?

[00:27:31] You like exchanged contact information?

[00:27:33] Oh yeah, yeah, I've seen that.

[00:27:35] Like I've had it a couple of times

[00:27:36] where I've like, my phone's like touched,

[00:27:39] like a buddies or something and then I'm like,

[00:27:40] whoa, what is that?

[00:27:41] Like your phone vibrates.

[00:27:42] It's like, which is weird because we already have

[00:27:45] each other's contact info.

[00:27:47] Like this happened at lunch on the weekend.

[00:27:49] Anyways, dude, there's all these like features now

[00:27:51] where it's like Apple's like trying to make it easier

[00:27:54] for y'all to meet in person.

[00:27:55] So just shoot for it.

[00:27:57] My young kings just go out there, shoot your shot.

[00:28:01] As long as you have an iPhone.

[00:28:02] That's right.

[00:28:03] Yeah.

[00:28:04] Yeah, you won't be able to find a you have an iPhone. Yeah. Yeah. Yeah. You won't you don't be able to

[00:28:05] find a date with an Android. So there's a competing incentive there, right? Like the

[00:28:12] customer lifetime value instantly drops off a cliff unless you're paying 500 a month for

[00:28:17] Tinder to just travel the world and be single. Why is why is this a London stock exchange

[00:28:24] company?

[00:28:25] It's a FinTech service.

[00:28:27] I am a huge fan of personally,

[00:28:28] I use it for my business for converting curvencies,

[00:28:32] moving money.

[00:28:33] No, this is not sponsored.

[00:28:34] I legit just use the hell out of it.

[00:28:36] Paying contractors abroad, et cetera.

[00:28:38] It's an amazing platform.

[00:28:40] The rates are so low.

[00:28:43] I move tons of money and the fees are like very low or free.

[00:28:47] And they've made it very clear that their mission is to make spread zero.

[00:28:52] And I'm like, yeah, like, there's a mismatch between what their mission is and like them being like more profitable.

[00:29:01] Now, I have to look more into this because take rates are actually increasing very very steadily

[00:29:07] So that's also interesting right like maybe you know watch as they say watch as I do not as I say

[00:29:13] So maybe I got to do more digging on that, but I do know that they have been a

[00:29:21] Huge mover and shaker in the space by moving rates down next to zero.

[00:29:27] Fascinating business overall,

[00:29:28] and it's growing like a weed.

[00:29:29] So I know I've had it on my watch list

[00:29:31] for segments on this show.

[00:29:33] So you can check that out.

[00:29:34] It's on the London Stock Exchange.

[00:29:35] Robin Hood, here's another example.

[00:29:37] Remember the giant fiasco payment for order flow,

[00:29:40] GameStop, spreads on commissions went down to zero, like all this stuff, right?

[00:29:47] Their customers don't want them to monetize them. Their customers do not want them to do

[00:29:52] payment for order flow. Their customers do not want to pay spreads on commissions or pay,

[00:29:59] you know, options, fee contracts are going lower and lower and lower as competition increases.

[00:30:06] Really hard business competing out of way all the margins and your customers hate you if you

[00:30:12] monetize them with order flow. So there's all these examples there where the stakeholders,

[00:30:19] if they're not all winning, it just doesn't feel like good business. It doesn't feel like a Charlie

[00:30:25] Munger business. Like a Charlie Munger business when you hear him talk, typically, like he

[00:30:31] talks a lot about that. He talks a lot. Well, for one, I mean, Costco was the biggest part

[00:30:35] of his portfolio for a long time. He's been on the board for a really long time. That's

[00:30:39] like a, that's like a Munger type business where the stakeholders of customers, shareholders, and

[00:30:47] employees and the business overall benefit together as one cohesive unit.

[00:30:53] And that's a materially different way to do business.

[00:30:57] Yeah, I agree.

[00:30:59] Especially I think, especially the employee sign, because the customer, you see that more

[00:31:04] often, where

[00:31:05] customers and the business benefit, but oftentimes it comes at the detriment of employees and

[00:31:09] having all three definitely helps them kind of sustain the business a bit longer term.

[00:31:15] Because if your employees are not happy at some point, it's going to impact your customer

[00:31:20] or it will impact your bottom line one or the other or both, right?

[00:31:24] Yeah, that's right.

[00:31:25] And try to think of other names that would...

[00:31:29] I'm just googling around.

[00:31:30] Like, I don't think competing incentives, my word here is a topic people are writing

[00:31:37] about on Substack.

[00:31:39] But I'm sure there's more examples that people can think of and think through in their portfolio if

[00:31:45] there's a name, thinking of buying.

[00:31:48] Ultimately, the reason is not because, oh, I think, you know, such a good guy only by

[00:31:54] businesses that are great for humanity, so on and so forth.

[00:31:58] That's not what I'm saying.

[00:31:59] What I'm saying is customer lifetime value matters a lot. Customer lifetime value matters a lot.

[00:32:05] Customer lifetime value matters a ton.

[00:32:09] And the companies that have executed customer lifetime value to the highest extent have

[00:32:14] made shareholders gobs and gobs of money.

[00:32:19] And I can think of very few examples in the contrary where that has happened.

[00:32:23] Yeah.

[00:32:24] No, I think that's a really good point.

[00:32:26] I'm sure we'll stop recording and we'll think of some examples.

[00:32:30] Exactly.

[00:32:31] That's usually how it goes.

[00:32:32] Yeah.

[00:32:33] No, I think that was great.

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[00:33:29] details of this offer for our listeners. Now I guess we'll move on to the last segment

[00:33:34] here I think you alluded to it. I wanted to have a look back at just a spot Bitcoin ETFs

[00:33:41] the launch it's been seven weeks almost two months. How have they done?

[00:33:46] I mean, clearly the price of Bitcoin is doing pretty well since the start of the year.

[00:33:51] And a lot of people are attributing this to the SPOB Bitcoin ETFs.

[00:33:56] How well is done?

[00:33:57] Bitcoin is up 28% since the start of the year and 22% since the SPOB Bitcoin ETF.

[00:34:02] I'm looking here.

[00:34:03] I always, I don't know about you, but I always think about like the Bitcoin price in USD for whatever reason. I never think about it in Canadian dollars.

[00:34:12] Yeah, me too.

[00:34:12] So, yeah, so it could be a little bit different. But I did a bit of research. Really interesting. There seems to be a lot of demand being driven by the spot Bitcoin ETFs and how they need to buy as they're more fun flows

[00:34:25] that are coming in.

[00:34:27] And let's dig a little bit more about

[00:34:30] how the fun flows are looking.

[00:34:32] So fun flows are just the money that goes in and out of funds.

[00:34:35] And inflow is money like overall,

[00:34:38] as money that's going in,

[00:34:40] outflow is money going out.

[00:34:42] So if there's total net positive inflows,

[00:34:44] then it will be that there's more money going in than out.

[00:34:47] And if there's total outflows,

[00:34:50] it means the opposite where there's more money going out.

[00:34:53] Now I wanted to have a look at this

[00:34:56] because it's been a decent amount of time.

[00:34:59] The dust has settled a little bit

[00:35:00] from the hype from the launch.

[00:35:02] Now the early trends, and that's really interesting.

[00:35:05] So the market share volume here is what I wanted to look at.

[00:35:10] So this is just a trading volume for each of the spot Bitcoin ETFs.

[00:35:15] Now GBTC which was the grayscale Bitcoin trust before it got converted to an ETF.

[00:35:22] Well this one is losing market share pretty quickly. So when trading of the ETF started,

[00:35:27] GBTC was kind of different than all of the other ETFs.

[00:35:30] That's because it got converted from a close ended trust

[00:35:33] to an ETF.

[00:35:35] So it already had assets under management.

[00:35:38] And when the trading started,

[00:35:40] it had more than half of the trading volume.

[00:35:44] So all the volume happening, selling, buying was resulting from GBTC.

[00:35:49] And now it's down to 30%.

[00:35:51] And that has actually been outpaced by our good friend, Larry Fink,

[00:35:56] at BlackRock with the IBIT ETF.

[00:35:58] So this one is definitely the one that's capturing the most market share.

[00:36:03] IBIT as now the largest market share in

[00:36:05] terms of trading volume with 40%. Now, the biggest reason here is for the shift in asset on their

[00:36:11] management and fees when the ETFs launch, like I mentioned, they already had assets under management

[00:36:18] for GBTC and they were charging a 2% fee. So when they converted to the ETF, they reduced it to 1.5%. The reasoning behind

[00:36:28] this is I think they had close to 30 billion in asset under management is that they would

[00:36:33] lose some asset under management, but they would keep a high revenue coming from that

[00:36:39] 1.5% because comparing to the other ETFs, literally it's a 125, 130 basis point higher

[00:36:48] in fees than the other ETF.

[00:36:50] So there's a big, big difference.

[00:36:52] You're comparing like 1.5% versus like 0.25, 0.2 for the other TFs.

[00:36:58] The main reason that there's still a lot of money in the GBTC.

[00:37:03] So it's gone down to, think a 2122 billion now in asset

[00:37:07] under management. So I was lost a decent amount. But the main reason is that people are sitting on

[00:37:12] profits and that if they sell GBTC to buy one of the other ETFs, there could be some tax implications.

[00:37:19] So that's one of the reason that there's still quite a bit of asset under management here. Now, before I continue anything you wanted to mention,

[00:37:27] I'm just thinking all this competition and pressure in ETF management expense ratios is a good example of companies that are facing extreme downward pressure on take rates for the benefit of their customers.

[00:37:43] This is another another kind of example

[00:37:45] is the asset management business.

[00:37:46] But no, I mean, look, like this is a space

[00:37:48] where the big dogs are seeing money to make, right?

[00:37:54] Like there's money to make here,

[00:37:55] whether you like the asset, whether you dislike the asset,

[00:38:00] whether you buy it hand over fist,

[00:38:02] or whether you think it's rat poison squared.

[00:38:04] You know, these guys are gonna make money on it, right? And ultimately here, right? like the asset, whether you buy it handover fist, or whether you think it's rat poison squared,

[00:38:05] these guys are gonna make money on it, right?

[00:38:07] And ultimately here, right?

[00:38:09] Like fees are coming down,

[00:38:11] so I think it's net, net good for customers.

[00:38:13] Yeah, exactly.

[00:38:14] Like I, for one, I had a little bit in a Bitcoin ETF.

[00:38:18] That was listed in Canada,

[00:38:19] because we had spot Bitcoin ETFs in Canada,

[00:38:21] and I transferred it to,

[00:38:23] I think it was a bit wise one that I

[00:38:25] choose. So one of for those on joint TCI, this would be the one I'm over right now.

[00:38:31] But essentially, yeah, there's been in all there's been more inflows and now flows, even

[00:38:37] if you factor in the money that has left GBTC. So there's been more than six billion in total

[00:38:42] inflows for the spot Bitcoin ETFs and you have GBTC right now

[00:38:46] That's around 23 billion. It started around 30 like I mentioned earlier

[00:38:50] I bit is the top one of the new ETFs that it ones that were not converted

[00:38:56] It has around 6.5 billion in asset under management. So that's a black rock fidelity 4.6

[00:39:02] Then you have arc at 1.6 and

[00:39:05] The bit wise the one I have my money in at 1.2 billion the rest

[00:39:09] I mean they're pretty small I compared to that but it's still pretty

[00:39:14] Impressive to see the total inflows that have have happened in such a small amount of time

[00:39:20] Especially considering that GBTC has seen about

[00:39:27] especially considering that GBTC has seen about $7.4 billion in outflows since the launch. It's pretty amazing to see that there's still been more money coming in.

[00:39:32] And like I said, I think that will... It'll be interesting to see where it ends up at the end of

[00:39:38] this year when there's a full year behind it, what level it'll be for GBTC. I'm assuming there might be a lot of selling

[00:39:45] towards the end of the year for people trying to lock in gains or losses. We'll have to see. But

[00:39:51] I think from what I've read ETF experts, it's been one of the most successful launches in history

[00:40:00] as a kind of asset class of ETF, if you'd like, because clearly you're getting exposure to the same

[00:40:07] asset, whichever one ETF you're choosing from.

[00:40:10] But to have $6 billion in inflows in such a small amount of time is pretty impressive

[00:40:16] for the Bitcoin ETF launch.

[00:40:18] I think it's fair to say that it's been, at least at this point, a pretty big success.

[00:40:23] You did a segment on, so last Monday release we did four companies that are on our watch

[00:40:29] list, E-Thru and BlackRock in there.

[00:40:32] We talked a lot about the ETF business, the rise of iShares, nearly what?

[00:40:38] 4 trillion plus AUM under that business for the ETFs.

[00:40:45] The ETF business has been one of the saving graces of the asset management industry in

[00:40:54] terms of equities.

[00:40:57] The mutual fund business was melting Ice Cube for a really long time.

[00:41:03] People, investors and consumers were getting smart.

[00:41:06] They were getting educated.

[00:41:08] They were getting smarter about the fee structure.

[00:41:11] They were getting smarter about their options.

[00:41:14] And then the technology converged for them to be able to

[00:41:17] DIY it or educate themselves.

[00:41:21] This is a perfect example of just like

[00:41:28] the asset managers looking at a space as hot as Bitcoin and throwing up ETF. The players that have been crushing it in asset management

[00:41:38] have been having winning ETF products. Vanek, BlackRock, Vanguard, Fidelity.

[00:41:47] Fidelity is a good one of you.

[00:41:48] Yeah.

[00:41:49] Like the ones that have adapted and moved with this asset class have really been the stars.

[00:41:56] This has been the instrument.

[00:41:58] I think that has defined the last like 10 years.

[00:42:02] And so any, and then if you're late,

[00:42:06] you're, what are you gonna do, right?

[00:42:07] You can't, you're not re-inviting.

[00:42:08] Private equity.

[00:42:09] What's that?

[00:42:11] Private equity.

[00:42:12] Yeah, exactly.

[00:42:13] That's what they do.

[00:42:13] If you're late, what are you gonna do?

[00:42:15] And so this is a perfect example of like a new thing

[00:42:20] that these asset managers are able to spin up

[00:42:22] in terms of an ETF and get new inflows

[00:42:24] and stuff they're jumping all over it. And we're seeing that.

[00:42:28] Yeah. Yeah. And this speaking of Charlie was in a fan of Bitcoin,

[00:42:32] but he also was in a fan of private equity.

[00:42:34] I've heard him like quite a few times rip private equity,

[00:42:39] shred them open, especially for the fees.

[00:42:41] I think that was his big thing. Just not.

[00:42:44] I mean, it's one thing to

[00:42:45] charge fees to me like, you know, if you want to charge high fees, whatever, that's fine. But it's

[00:42:51] a transparency aspect that I have a whole big issue with, because if you're going to charge higher

[00:42:57] fees, okay, just make it transparent. If people think they'll you'll outperform with high fees,

[00:43:03] it's their money, right? They can choose to invest it. That's completely fine.

[00:43:07] But the biggest thing I have issues with is when those fees are very, they're not very transparent or just very complicated to understand.

[00:43:15] And I think unfortunately a lot of regular people, but also you have like endowments, pension funds that even fall prey to these high fees when you're looking at

[00:43:25] private equity. But for individuals, mutual funds, sometimes it's just hard to understand

[00:43:31] the different kind of fees that you'll be paying for someone that's not really well

[00:43:35] versed in this kind of stuff.

[00:43:36] A lot of the biggest PE firms are public. I'm just looking at it here. Like KKR, Blackstone, Carlisle, Vista, I think Vista might be, I forget.

[00:43:51] It's great if you're an owner of the business.

[00:43:53] It's not as good if you're a client typically, but yeah.

[00:44:00] I'm just looking at this.

[00:44:03] Well, you know, I'm a big fan of the asset management,

[00:44:07] the business, whether or not you think it's good for their investors.

[00:44:14] The business is fantastic.

[00:44:15] You get recurring revs, amazing margins, sticky customer base with upside too.

[00:44:22] So it's a pretty good business.

[00:44:25] Blackstone, I saw some news about Blackstone,

[00:44:28] and I forget what it is already today, but that's okay.

[00:44:31] How are we doing on time?

[00:44:32] Maybe we're here at 45 Men's.

[00:44:34] I got nothing more to talk about.

[00:44:36] The only thing I wanted to quickly hash on is

[00:44:42] there is a lot of optimism in the markets.

[00:44:46] I know I'm not doing the Thursday episode with you.

[00:44:50] Have you and Dan been talking about the rise of NVIDIA to trillion

[00:44:55] market cap?

[00:44:56] Have you been talking about the air that feels like it's under this market?

[00:45:01] Yeah, we talked about an NVIDIA.

[00:45:03] We had a fun discussion about it.

[00:45:05] I mean, the market is I was joking.

[00:45:07] I'm like, Oh, market is up and video

[00:45:09] must be up. But it's it's kind of market

[00:45:12] is down and video must be down.

[00:45:14] That's kind of what seems to be happening

[00:45:16] right now. I don't know. Like there's

[00:45:18] a lot of a lot of weird stuff. It seems

[00:45:21] like it's happening. I mean, there's

[00:45:23] just a handful of companies that

[00:45:26] seem to be pulling the market. It's like we're continuing from last year, I'll do. I mean,

[00:45:31] it's starting to look like a magnificent five, maybe more than a seven. It's an

[00:45:38] NVIDIA leading the way. It's just been interesting to follow. I'm definitely, for me, I think you

[00:45:44] know me and you know my portfolio.

[00:45:45] I do have a little bit of cash on the sideline that I'm happy to be getting 5% on just because

[00:45:52] there's a lot of business I like, but I just don't love the valuation right now.

[00:45:56] I think it sums that up pretty well.

[00:45:57] Yeah, that's a good point.

[00:45:59] And I mean, there's other stuff doing really well.

[00:46:02] I find when there's when there's something like an Nvidia that's just like stealing the show it steals the you know

[00:46:10] CNBC's doing like countdown to their earnings all day like it's no

[00:46:15] Yeah, like it's new year like the balls about to drop a New Year's Eve like one of those types style broadcasts

[00:46:21] you know

[00:46:22] the business aside like that's when things get pretty kind of frothy,

[00:46:27] for sure. And one thing I just wanted to throw out there is when these types of stocks get

[00:46:34] so exciting in terms of their performance. A lot of retail investors, a lot of people

[00:46:41] who might listen to the show forget that other stocks exist and get laser

[00:46:47] focus on just a few names.

[00:46:50] We've seen this happen with retail investing communities with Tesla through the years.

[00:46:55] There's a cult following around Palantir stock.

[00:46:59] I swear 99% of the investors can't even tell you what Palantir does. There are a lot of other names doing extremely well.

[00:47:12] If I just pull up a screen of year to date, everything that's over 10% year to date, let's

[00:47:20] even do 10 billion in market caps, So like large caps that everyone would know.

[00:47:25] I just pull up that list.

[00:47:26] It's 123 names just in the US alone.

[00:47:29] So that's large caps doing extremely well on the year.

[00:47:33] Like there's a lot of stuff out there

[00:47:35] that's not named Nvidia.

[00:47:36] And this is not a knock on video at all.

[00:47:39] Like that's not what this is meant to be.

[00:47:42] And two discuss Nvidia really quick. And to discuss in video really quick,

[00:47:45] if you're a shareholder, one, congrats,

[00:47:47] the rise has been historic and amazing to watch,

[00:47:52] and execution has been legit,

[00:47:54] and they're gonna do real absurd amounts of cash flow,

[00:47:58] and they can probably see this kind of demand

[00:48:00] for like three more years.

[00:48:02] The thing I want y'all to recognize is there is a massive

[00:48:08] compute build out happening. The large tech players that own this cloud computing, you

[00:48:14] know, they own and operate these data centers, the actual data retentants, they are in a land

[00:48:20] grab for H 100s. And we've seen land grabs like this happen for new technologies.

[00:48:25] How sustainable is that build out?

[00:48:28] NVIDIA can be a fantastic business, but it's not going to grow 80% sequential quarters

[00:48:36] forever, right? And just recognize that the margin of safety might be gone. And so just

[00:48:42] to think about that, right?

[00:48:44] Yeah. might be gone. And so just to think about that, right? Like, yeah, I'm not saying sell the stock.

[00:48:45] I'm actually saying congrats. But I'm also saying like cater your expectations here.

[00:48:52] Yeah. And that's pretty much what we said too, when we talked about NVIDIA is just,

[00:48:56] you know, I think right now I was listening to, I think it was BNN and there was a senior portfolio

[00:49:01] manager and literally E-Brrosh off any concern about

[00:49:05] Nvidia going forward.

[00:49:08] Only talked about like basically everything going well and none of the downsides and

[00:49:11] whenever I hear stuff like that, the alarm bells go on for me because there are some

[00:49:17] risks for Nvidia.

[00:49:18] Obviously, valuation is not cheap right now.

[00:49:21] You know, one thing that's never talked about, it seems like, is the fact that most of their

[00:49:26] chips are produced by a company located in Taiwan and that there's still some geopolitical

[00:49:33] risk, but apparently it's completely gone now.

[00:49:36] That's not going to happen.

[00:49:37] That risk seems to be very selective on the, you know, who they assign it to, right?

[00:49:42] Yeah, exactly.

[00:49:43] It's very selective.

[00:49:44] I've always said that about Apple.

[00:49:46] Like, the Apple Bears,

[00:49:48] Bulls never will be quick to point out the risk of TSMC,

[00:49:52] but forget that they make all their chips.

[00:49:56] Yeah, and that's always what I'm like,

[00:49:58] when I start seeing this kind of stuff,

[00:50:00] to me it's like, okay,

[00:50:02] I'm happy to see what happens on the sideline.

[00:50:04] And also,

[00:50:05] you talked about large customers. They don't name their customers. But I think we can say that,

[00:50:11] you know, all the big cloud providers are the top customers. I mean, they literally say in their

[00:50:16] financial statement that one of them represents 19% of their revenue. One customer. If you tell

[00:50:22] me that's not a risk, I mean, I don't know what is, but...

[00:50:25] And I know it's one of two companies. It's one of three. It's one of Amazon,

[00:50:29] Meta, or Microsoft. 100%. Yeah, exactly. So it's, you know, and it's funny because of the senior

[00:50:37] portfolio manager literally brushed that off like it was a zero risk. And that's the kind of stuff.

[00:50:42] And I know for retail investor, I was, I don't

[00:50:45] know where I read this or heard this, but I think it was the best thing I could say about

[00:50:49] Nvidia is fear is a hell of a drug. And fear goes both ways, fear of losing capital, but

[00:50:57] also fear of missing out or FOMO. And I think just remind yourself of that. I mean, look, we don't know what's gonna happen.

[00:51:07] Maybe weigh your position accordingly.

[00:51:10] It's fine to not invest in video too.

[00:51:14] Or do like me, I have a little bit of a position

[00:51:17] because I own the index funds

[00:51:19] and they own Nvidia market cap weighted.

[00:51:22] So there's different ways to approach that too.

[00:51:24] Yeah, and just think about like what kind of investor you are, right? Because we know there's a sprint

[00:51:28] to compute build out. And we know that Nvidia is able to forecast demand for H100s for probably

[00:51:34] two, three years out. And they're saying, Hey guys, it's looking great, by the way. And I'm sure it

[00:51:40] is. And I think Jensen's probably the best, one of the best guys to be able to capture this

[00:51:45] opportunity leading in video. But eight years down, nine years down, the compute build

[00:51:52] out will slow down. That's how these things work. And so you can do fantastic with Nvidia

[00:52:02] for a long time. It's just that when that kind of sentiment shifts,

[00:52:07] or all that compute build-out's gone,

[00:52:10] and you have something pent up to $2 trillion in market cap,

[00:52:15] and orders start to slow down.

[00:52:18] What happens?

[00:52:19] There's a lot of money. Really quick.

[00:52:21] Even if they are building the best chips for this purpose,

[00:52:25] three years down the line, they're better than your competitors. There also comes a point where

[00:52:31] customers may say, okay, AMD, sure, their Chipper is not as good, but they're also way cheaper,

[00:52:39] and they're good enough for what we need. We don't need to spend to buy yours. So then,

[00:52:43] Nvidia becomes in a situation where they're like, okay, do we need to We don't need to spend to buy yours. So then Nvidia becomes in, in a situation where they're like, okay,

[00:52:47] do we need to cut our margins down to make this more affordable

[00:52:51] for our customers or they keep the price as is, but then end up

[00:52:55] losing business. I mean, I know you were younger, but thinking

[00:52:58] 1520 years down the line, like back and Intel processors were

[00:53:03] always better than AMD.

[00:53:06] A lot of people still bought AMD because they were cheaper

[00:53:09] and they got the job done.

[00:53:10] Maybe not as well, but good enough.

[00:53:12] And I think for a lot of businesses at some point,

[00:53:15] it's gonna be a bottom line thing

[00:53:17] and it's gonna be good enough for cheaper alternatives.

[00:53:20] That's another risk as well, I think, for Nvidia.

[00:53:23] Yeah, good point.

[00:53:24] And we'll leave it at that because I know you've got to run. But this is not

[00:53:30] me being bearish on NVIDIA or anything. I mean, the compute network operating income segment,

[00:53:38] which encapsules the data center business. In the April 23 quarter quarter April 2023 quarter ending was at 2.1

[00:53:47] Billion

[00:53:48] It just closed up at nearly 13 billion three quarters later not three years three decades later

[00:53:56] Three quarters later. So don't hear what I'm not saying the execution and the demand for this stuff is amazing

[00:54:02] The CUDA compiler is world-class.

[00:54:05] They have the best in-class product.

[00:54:08] But to just be thinking about the downsides,

[00:54:11] because you will not hear people talk about the downsides on CNBC.

[00:54:15] It's too hot of a name.

[00:54:18] They're doing countdowns to earnings, dude.

[00:54:21] They're doing the ball is about to drop on q4 like who like that's

[00:54:27] usually a concerning time to be a whole turn but who's to say thanks for listening folks

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[00:55:16] The Canadian Investor podcast should not be taken as investment or financial advice.

[00:55:21] Braden and Simone may own securities or assets mentioned on this podcast.

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