The Best Ways to Convert CAD to USD and Investing at All-Time Highs

[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. Hosted by Braden Dennis and Simon Belanger

[00:00:14] Welcome back to the Canadian Investor podcast. I'm here with Dan Kent. We're doing our regular news and earnings episode, but given it's a bit or like a bit lighter on the earnings front, we'll be doing a couple earnings

[00:00:27] and then we'll switch over to some listener questions. Before I get started, Dan, we're recording on July 2nd, so happy belated Canada Day. Yeah, I woke up to fireworks. They set off the fireworks at like 11.30pm last night. It was crazy.

[00:00:44] Oh yeah, that's past my bedtime for sure. Yeah, exactly. We were going to stay up and then it's like, oh, they'll be going off at around 11 or 11.30 and I'm like, well, I'm not staying up for that. I got a podcast to film in the morning.

[00:00:56] There you go. Yeah, that's it. So we appreciate your dedication missing out on the fireworks, but we'll get started. I think the episode will be a bit longer than we probably initially thought, but I think there's some good discussion items, some good questions we got.

[00:01:10] So we'll start off with two earnings kind of in this similar category. We're talking about that. So it'll be general meals and then you'll talk about alimentation, kush-taw.

[00:01:20] The reason why we were talking and I think there's some similarities is because the consumer's pulling back and for those not aware general meals, you have a company here, it's a consumer staple.

[00:01:33] So typically they should do well in a tighter environment because they do sell goods that are typically more essential in terms of the brands that they have.

[00:01:41] If people are not familiar, they will definitely know the brand. So Cheerios, Betty Crocker, Blue Buffalo Pet Food, Green Giant, Liberté Yogurt, Dunkaroos, Haggin' Dazs, there's tons of other, but these are some of the brands that they own.

[00:01:56] For the most part, I think a bit more on the premium side, I would say at least compare with the private label brands. But I think it'll be interesting comparing both and what management said during the calls, especially in their earnings release.

[00:02:12] Anything you want to add before I get started here? I just didn't even know they still made Dunkaroos. I haven't had Dunkaroos for like 20 plus years.

[00:02:20] I used to love those as a kid, obsessed with them. I didn't know they still existed. I haven't seen them in stores forever.

[00:02:27] I haven't looked for them. I feel like my daughter will probably be asking us for something when she starts school because we wouldn't proactively get them, but I'm pretty sure she'll see someone else having them and then we'll want them. But basically what crackers with icing?

[00:02:44] Yeah, pretty much. I might have to go on a nostalgia trip and go buy a pack of them, see how they are. Yeah, I think they also make Pop Tarts. I'm not 100% sure, but I think that's one of their brands as well.

[00:02:57] Which by the way for people interested in Pop Tarts, there's an interesting movie I think directed by Jerry Seinfeld on Netflix. I think it's based on a true story, but very loosely of how Pop Tarts were made.

[00:03:12] But it's a good cast, kind of easy watch if people are looking to be entertained during the summer. Just sugar injected breakfast food pretty much. There you go. Tastes awesome, reduces your life expectancy by a few years, but at the moment it's quite good.

[00:03:28] So the results were not great for general meals during their fourth quarter. It's not super surprising if you ask me despite being a consumer staple company. Lots of their brands have in-store brands alternative, so private label brands.

[00:03:42] So let's just take the yogurt. For example, I like Greek yogurt. When I go to the grocery store, I don't really care what brand of Greek yogurt it is. I usually buy 2% plain Greek yogurt.

[00:03:57] So whichever brand it is, as long as it's the best kind of price and obviously it's not expired, I'll go over and... Or at least I have like a few days until the expiry date. I'll usually go with that one.

[00:04:11] So I think that's probably one of their issues is they don't have that much pricing power. And management definitely reflected that during the call saying that the increased popularity of private label brands because of the value they offer impacted them.

[00:04:26] They talked about consumer challenges during the call and also increased the value proposition for consumer to compete with those value brands. So that is interesting because their sales were down 6.3% year over year to 4.7 billion. And it's actually a bit worse than that if you compare quarter over quarter.

[00:04:46] And typically, you know, they have goods that shouldn't be too cyclical, maybe Haggin' Daz. It's a bit more a summer type of treat. That's fine. But for the most part, you know what they sell should be pretty kind of consistent regardless of the time of the year.

[00:05:02] And almost every segment was down with the exception of their Canadian segment and their North America food service revenue. For those, the increase was actually very marginal, minimal, a couple percentage points. They did make some progress with their expenses which resulted in operating income being up 2%.

[00:05:20] Some other good news is the margins were up. Gross profit margins were up 130 basis points and operating profit margins were up 160 basis point. Now, the problem here is this may be short lived because I just talked about it.

[00:05:35] They want to be more value proposition in terms of being able to compete with those private label brands. So if you're going to be more value proposition, you're probably going to have to lower your prices and that's going to impact your margins.

[00:05:51] So yes, you may kind of increase your, you know, your sales based on volume but that's something that will be very tricky for management. And just to round this out here, EPS earnings per share was down 5% to 98 cents per share

[00:06:06] and the good news is the for the full year free cash flow was up 21% to 2.5 billion but again, something to keep an eye on because that's the full year. So we'll have to see you know in the next 12 months how it looks but not a great quarter

[00:06:22] and it's interesting to see how it's starting to impact and it's a discussion we've had you and I right where a lot of people are going more to the value alternatives for grocery stores.

[00:06:34] So going to an independent, you know, a super store, whatever it is, you know, food basics like whatever the more cost effective grocery store you'll see more and more people going to there.

[00:06:48] I know on the Quebec side, not far from Ottawa, they are converting their Prévi Gopre land so it's basically the law of laws equivalent but on the Quebec side they are converting those to their Maxi which is the value alternative.

[00:07:02] So a lot of these are being converted. So I think you're seeing that more and more with the consumer and make sense that it's impacting a brand like General Mills that is priced at a higher price point than the private label brands.

[00:07:15] Well yeah, especially one of the most notable you'll see is Kirkland. Like they're starting to come out with so much different stuff. That's all we buy in terms of yogurt. We used to buy brand label yogurt but you can buy Kirkland yogurt.

[00:07:29] It's probably a third cheaper and it's almost the exact same. I'd be curious to see, I know they paid a whole bunch of money for Blue Buffalo what was probably like seven, eight years ago now but I know that food had a lot of controversy around it

[00:07:46] how it really wasn't all that good and it cost a fortune. So I'd be curious to see how that acquisition has worked out for them thus far. I don't know if they like separate those numbers individually.

[00:07:56] Yeah they do have this segment so I can pull it up here so they have it under there. I feel like that's most of their pet revenue here so we can get it. You would think it'd be mostly all of it, yeah.

[00:08:07] Yeah I think it's either the majority or all of it so you can see it's kind of... It had a nice little increase. I'm gonna attribute that mostly to COVID because a lot of people I think it's well known got pets

[00:08:19] and a lot of people that probably shouldn't have gotten pets got pets. Just for I guess I get it to some extent people were feeling lonely, stuck at home you know having a pet gives you a companion. I mean I have a dog so I totally understand it.

[00:08:34] I'm a dog person, I do like cats as well but it's kind of stagnated so I would say yeah it had a nice little jump up until I would say end of 2021 and then it's been pretty much sideways so sales kind of peeked around 650 for the quarter ending

[00:08:57] in May of last year so actually more 2023 where it peeked but hasn't been that high since. Yeah so they paid $8 billion for it in 2018.

[00:09:09] So I mean they paid quite a bit of money for it and I don't know I just kind of haven't really ever heard good things about it I know like the brand was really strong for a while and then it kind of died off when they had some...

[00:09:21] I think it was some issues that it was giving dogs like heart problems and stuff. I don't know if that was yeah. Yeah it faced like a lot of like you said I have a few dogs and they both have like ridiculous food allergies

[00:09:34] so we've had to like research a bunch of food and Blue Buffalo's always kind of been like the not so good brand but yeah I mean okay it's evident everywhere I mean people are kind of...

[00:09:46] For the most part off-brand stuff is almost the exact same as brand name stuff like the quality is virtually the same you're paying for the name and like people just don't really have a lot of money right now to pay for the name

[00:10:00] so they're starting to trim down it's really not all that surprising. Yeah one that I'd be interested at looking at is you know CanVue the spin-off of J&J which is the consumer so J&J Johnson and Johnson's that's the big pharmaceutical company

[00:10:17] so they spend off CanVue which is their consumer arm I guess, consumer goods so they make I think they own Band-Aid, Tylenol all these brands right that people are familiar with I'd be interested because when I go to the store and say I buy Tylenol or Advil

[00:10:32] I don't buy Tylenol or Advil I buy acetaminophen sorry yeah that's the word I have a lot of trouble with I buy Ibuprofen I buy the you know private label because it's the exact same thing

[00:10:45] it's just 200 or 400 milligram of either one right so I would be very interested maybe we'll do that and you know at some point in the next few weeks just kind of see where their sales are going because I can see them being impacted as well.

[00:10:58] Yeah like anything medication wise like Ibuprofen acetaminophen Yeah there you go you said it yeah so next time I need to say that word I'll ask you and then any time you need to say alimentation Couch-Tar you can Exactly yeah

[00:11:15] I think we talked enough about general meals here so let's do alimentation Couch-Tar so we have enough time to do some of those listener questions Yeah so Couch-Tar second quarter I would say of pretty weak earnings Revenue of 17.59 top expectations but earnings per share of 48 cents came in

[00:11:36] a couple cents shy of what was expected and just year over year decline so the companies earnings are down 32% on a year over year basis and total sales are down it looks like around 1.7% the main contributor in the reduction in overall earnings

[00:11:52] the company states is fuel margins primarily in the United States in addition to this there was one less week in the quarter compared to last so that's definitely going to result in a bit of a decline too

[00:12:04] apples to apples so the company reported same store sales declines on a merchandising basis of 3.4% in Canada half a percent in the United States and 2% in Europe and when we look to fuel same store sale volumes they declined similar in Canada 3.5% 1.5% in the US and 1.7% in Europe

[00:12:26] and the company did mention that fuel pricing volatility should normalize in the back half of the year and they said they should see margins stabilizing and in a way it does make sense that Canada is witnessing probably the largest amount of weakness

[00:12:39] we probably have the weakest consumer financially relative to the European countries and the United States and many people may be putting off particular trips travel related activities and just you know paying for the convenience of a convenience store

[00:12:56] they may find it you know a bit more cost friendly to make that extra drive to a grocery store rather than you know pay the like outright ridiculous prices that are that are in convenience stores

[00:13:07] but really the main way Kustard gets people into the stores is first to fill up on fuel and then you go in and grab whatever snacks items anything else you need so if fuel sales fall like you'll probably no doubt see merchandise sales fall

[00:13:24] the company bought was good wanted to add something quick actually have a question for you so yesterday it was Canada that was walking with my daughter my wife wasn't feeling great

[00:13:33] so after a nap and everything or most of the stores are closed right but there was a circle K open and I'm like I'll give her a little little ice cream treat right so I go in by a

[00:13:45] Klondike like you know that the actual cones I think yeah you know the Klondike ones and guess how much that was nine bucks eight bucks okay no not no not that high no just the one

[00:13:58] cone it was it surprised me but maybe I'm just not used to it was five dollars that is pretty high I guess yeah it's a very single serving yeah like I found that pretty crazy

[00:14:11] I was kind of surprised but I just wanted to mention that as a real life example well the only reason I said like eight nine dollars is I went in my wife was sick the one time

[00:14:22] I had a sore throat so she wanted ice cream and I didn't feel like driving to the store so I went to the 7-eleven and there was a little container of like Ben and Jerry's

[00:14:31] it was probably like maybe the size of like a small Dairy Queen Blizzard and it was it was 850 yeah I think those would typically be a bit more expensive so yeah that makes

[00:14:42] ridiculous how expensive it was like as soon as I got there I'm like well I'm already here now but I'm never like I'm driving to the grocery store now I didn't realize it'd be

[00:14:53] that much money yeah it's even a bag of like Doritos like if you got people coming over something you want to go buy some chips or something they're like six six plus bucks whereas you can go to Walmart and they're like maybe three fifty four dollars it's

[00:15:09] exactly you're like I said you're you're paying for convenience and when money gets tight I mean you know less people will pay for that convenience they'll make the extra you know mile or two drive to the grocery store but the company bought

[00:15:26] back more than 300 million in shares on the quarter and it is stated it is in a bit of preservation mode right now so they're trying to kind of scale back expenses especially when profitability is lower so operating expenses declined by 1.7% and

[00:15:41] they said you know they could be trimmed even further until the economy starts to strengthen so the most notable piece of news probably on the quarter is the company CEO Brian Hanash is retiring so Kustard it's been around for 45 plus

[00:15:55] years they've only had two CEOs so I don't really I didn't really get the low down on why he's leaving outside of the fact that he's just retiring he's been doing it for quite a while so I don't really think anything major is going on

[00:16:09] behind the scenes by the sounds of it he will be an advisor for a little bit to the company's new CEO which is Alex Miller who is currently their CFO their CEO chief operating officer and just overall quarter was pretty weak

[00:16:24] again probably the second straight quarter of weakness however most of this is just macro headwinds company can't really control whatsoever it's I mean in my opinion still a pretty high quality company I don't really have all that many

[00:16:38] doubts that it'll it'll get back on track once the environment improves but yeah that's about it for Kustard maybe decided to leave because he's like okay this not gonna be an easy couple years I'd rather just you know

[00:16:51] bow out and just leave now but what I have on the screen here for joint TCI listeners and subscribers is since 2013 so basically in the last 10 years they've seen their share count decreased by 15% so I just wanted to give some

[00:17:07] more context so they've definitely been aggressively buying back shares and I'm pretty sure this is this would have to be split adjusted because I'm pretty sure they've had a few a few stocks splits right in the last

[00:17:19] decade or so I'm not sure I think they had one I don't know if they had a few but okay pretty sweet one so yeah and you can kind of tell that the buybacks got more amplified like post COVID kind of stayed relatively flat until 2020 and

[00:17:37] then and then they started buying back a ton of shares yeah definitely like the buybacks and that's not a that's definitely a good point because most of this I would say would probably be like since 2019 so yeah since 2019 actually

[00:17:52] it's they've decreased the share account by 15.21% actually more than the 10 years because the front portion of that 10 years they actually increased it a little bit I think I think they had acquisitions around that time so that makes sense

[00:18:08] but just interesting to know you'll probably be getting a decent chunk of your returns if you buy this just because of the money that's being returned to shareholders via buybacks and the dividend yeah I mean even though they're

[00:18:21] what like a 70 billion dollar company I mean it's a very fragmented market like gas stations service stations there's a ton of them so I mean I think they still got quite a bit of room to grow but they need a bit of a turnaround in terms

[00:18:34] of consumer spending yeah no exactly but I think this was a definitely a good overview I think similar issues plaguing those two companies just by the fact obviously there are different companies one convenience store the other one

[00:18:47] consumer staples but I think they're being impacted by a consumer that is more reluctant to pay a premium on certain items that they can get cheaper elsewhere or cheaper alternatives and I think it'll just be interesting how things go forward for each of them but one last question

[00:19:06] actually on that amount has some kushall like isn't a big risk for them a big spike in oil prices because yes it may improve their margins potentially but wouldn't it be a big hit on people traveling and then impact the

[00:19:23] rest of their sales more I mean to a certain extent I guess I mean people need it would probably help them in the fact that you know a lot of people need fuel regardless of fuel prices but on the travel end and like the leisure

[00:19:36] end definitely I mean you're looking at like if you're looking to you know go camping or something you're looking at like 200 plus dollars to fill a truck to tow a trailer and you're probably looking at a fill there in back so it's like

[00:19:50] 400 plus dollars right now so if you know fuel skyrockets fuel prices go up my god I can't even imagine what it would cost for something like that yeah because that's something I've been reading up on a little bit and a lot of

[00:20:04] macroeconomies that's what they say right they say okay there's a point where demand for oil or gasoline just kind of stops right there's a price at which people just like they completely change their habits even with commuting to

[00:20:21] work and things like that and they change it to really what is absolutely absolutely essential now no one really knows exactly what that point is but I think it's just a good reminder because I know Alimantre Saint-Cousteau is

[00:20:34] loved by a lot of dividend growers people that are into dividend growers stocks in Canada and I think they tend to look at this company as having you know they have a very strong record I'm not gonna deny that it's performed

[00:20:48] very well but I think that's definitely a significant risk that's overlooked I haven't heard a lot of people talk about this specific risk before where what if there'd be like a major oil spike in prices what would that do for their

[00:21:03] business and the ripple effect on the rest of the business yeah like it would not only hit the fuel end but it would also hit the merchandising and no doubt because as I said like the bulk of the sales from merchandise are gonna be from

[00:21:15] people fill in at the pump and then running inside it's not like gonna be somebody who just randomly you know drops in to a convenience store to buy goods doesn't really happen all that often it's but yeah it's if fuel prices go higher

[00:21:29] I mean I can't imagine people are doing much leisure travel especially at like camping things like that just crazy crazy prices electric cars baby yeah exactly you wait 45 minutes to charge your vehicle here you go

[00:21:46] it's cheaper yeah that's it well let's move on to the listener questions here so the first one is a question from on Twitter that I got from ad diamond road six and he was asking if I still buy I taught ETF every Friday so I thought is

[00:22:03] the US the I share US total market ETF very similar to the S&P 500 the main difference is that obviously it's a total market but the top names that you seen the S&P 500 are also the top names there so it's gonna be pretty strongly

[00:22:19] correlated because of what heavy weighted has in terms of market cap weighted to the S&P 500 but so well first of all I was never buying it every Friday so it was every two weeks that I was doing that I did switch over to another

[00:22:35] once I still own I taught but for about the past year give or take I actually actually switch to X AW. teal which I buy every two weeks I also buy an almost identical fun with my DC pension defined contribution pension at work the reason

[00:22:53] why I prefer that is because a X AW is excluding Canada so it's like kind of a total world but it excludes Canada and I've been pretty pretty vocal on that on the podcast saying that you know I don't want too much exposure to

[00:23:09] Canada because my income is tied to Canada a lot of my expenses as well but also I want as much as possible exposure to the US but also the rest of the world I mean my exposure to Canadian companies is still probably higher

[00:23:24] it's definitely higher than what it should be as a percentage of the total investable stock market globally but for those you know that are currently on joint TCI here you'll see that the it's quite different in

[00:23:39] terms of looking at the ita or S&P 500 so the top holding is actually an S&P 500 ETF of X AW. teal 54% and after that you had European focus fund while European Africa and Middle East I believe which is

[00:23:58] 24% and then you have an emerging market at 11% and then some other US exposure with small caps and mid caps as well so a bit more diversification but I do like that it excludes Canada so that's the reason why I

[00:24:13] switched over to that and actually just restarted doing a dollar cost average because I had a couple of large expenses that happen we had enough money in our emergency fund to cover those expenses but I would

[00:24:26] have had to replan as the emergency fund anyways so instead of digging into it I just decided to you know pay for these expenses help my dollar cost average at least for my money that I voluntarily put in I

[00:24:40] continued doing it for my defined contribution pension and now as of last week I restarted doing it because it's at a level that I'm comfortable with so that's kind of the long answer to if I still

[00:24:53] buy I thought so I don't but again I'm still dollar cost averaging in an index fund yeah I used to own X AW it made up a huge pretty big chunk of my portfolio so what I would do I would just own X AW

[00:25:08] and then I had just individual Canadian holdings I ended up selling like X AW entirely when the Canadian dollar got really high and I converted all of it to US so I don't know I don't own it anymore but I

[00:25:23] took a huge chunk of my portfolio and converted that over when the when the Canadian dollar got way higher in what would it be lay probably mid to late 2021 yeah and from a currency perspective it's actually worked out quite well it as a result I ended up

[00:25:40] buying a bit of US stocks at the peak but which hurt for most of the year 2022 but it's looking pretty good now but yeah I it's a solid ETF I mean if you're looking to buy you know individual Canadian holdings

[00:25:54] rather than index like a Canadian index and you can you can avoid a lot of the you know cyclical areas of the stock market in Canada by not indexing in Canada but that's X AW is a pretty solid fund for

[00:26:09] somebody who goes that route. Yeah and it's around 20 basis points fees I think it's slightly more I just don't have it in front of me right now I close that window but you know it's reasonable fees obviously

[00:26:20] you can get lower if you go for an S&P 500 but this one is definitely more diversified and if you wanted you could even do a two you know for some people might make sense you have like 90 95% of your holdings

[00:26:32] and this one and then 5 to 10% into an index fund that follows the TSX right and then your waiting makes a lot more sense where as something like VQT or XQT they have pretty high Canadian waiting they have like 25 30% Canadian waiting so they're supposed to be a

[00:26:50] diversified index fund for the whole world but their waiting is actually much different than you know in my opinion it's too heavily weighted to Canada Canada is like around 3 to 4% I would say of the investable stock market globally so you have to keep that in mind

[00:27:06] there's nothing wrong to be over-weighted but you just have to be aware that you're kind of putting more risk into the Canadian economy and the Canadian stock market so I think that's enough for that question

[00:27:19] I'll go with the second one and I'll do the second one as well but I know you have some stuff to add there my part will be a bit shorter and I think what you'll add is very

[00:27:28] definitely will bring a lot of value here now given the question is given that the US stock market gives you greater exposure to a wider market what is your preferred method of converting Canadian dollars to US dollars so for me it's pretty simple it's Norbert's Gambit

[00:27:45] so I don't believe it's possible for all brokers and reading what you had said I think you can confirm that that you cannot do that for all the brokers no you can't like well simple trade you can't do it pretty much everywhere else

[00:28:00] you can do it I think with like something like interactive brokers they have some of the best conversion fees so I don't even know if it's worth it to do it but I'm not a hundred percent sure on that front

[00:28:12] but no well simple you can't yeah and so how it works it's quite simple so first of all you would go in your online brokerage first thing you do is you buy DETF DLR.TO

[00:28:24] and then you contact your online broker whether you do it in a chat email whatever it is you know just get in touch with them and then you ask them to journal your shares to DLR.TO so the DLR.TO is in

[00:28:41] USD and the DLR.TO is in CAD so once these shares are journaled which typically takes a few days you then have everything in USD and you can actually sell that ETF and guess US dollars and by doing that you actually

[00:28:57] bypass those conversion fees but you do have to pay the fee of buying and selling the DETF depending on what is charged by your broker something to consider is because you know you're saving on forex fees at forex exchange fees

[00:29:13] you'll still pay some fees depending on what online broker you're using so that's really important because that will impact whether it's worthwhile or not if your broker for example charges 10 dollars for buying and selling you'll want to make sure that you're converting enough CAD to USD so

[00:29:29] that it's cheaper to do it with Norbert Scambic versus paying the exchange fees my rule is that I only do it when I have at least a thousand dollars to convert since I have to pay five dollar fees with Questrade when I sell the ETF only

[00:29:45] when I sell it so obviously if it's a lower amount then that'll typically just pay the fees because there's a time component to it as well so yes I may save a little bit if I do 750 but at that point it'll be

[00:30:01] a few dollars and at the end of the day if I want to invest in something right now there's still going to be a delay of a few days for the transaction to settle when they do the journaling of it so that's something to take into account

[00:30:13] as well clearly if you have a broker that charges 10 bucks to buy 10 bucks to sell then it probably doesn't make sense to do it unless you have like two to three thousand dollars right depending on what the exchange fees are so

[00:30:29] something to keep in mind and you should be able to also do it the other way around I've never done it but it's basically if you have USD you buy dllr.shoe.to you contact them ask them to

[00:30:41] journal it to dllr.to then once it's journal you sell it and you get Canadian dollars yeah and there's a few I can speak on Qtrade just because I know you have to when you buy dllr.to and you do journal it

[00:30:57] you also have to make sure because Qtrade has separate Canadian and US dollar accounts so if you if you mess up and actually sell once you've journaled it and you sell and you think you get US dollars if you sell it into

[00:31:13] the wrong account it'll convert it back you've had that done a few times and it's a nightmare too because you pay just you know you'll pay that gap and it'll just auto convert your money back they're good enough on like the customer

[00:31:29] service end that they've like kind of close that off and haven't charged me anything but it's still it's kind of a pain because it takes a few days and then you accidentally sell it the wrong way and it converts it back I know

[00:31:41] I don't know if RBC still does this but with Royal Bank used to be able to journal so you could buy say Fortis in Canadian and journal it to US and it would be almost immediate and then you could sell the US dollar version of say

[00:31:57] Fortis and have your US dollars there I don't know if they still do that I imagine they do but yeah that was another way Before they created that DLR and DLR well DLR ETFs I think that's how most people get it right they would pick a dual listed

[00:32:13] low volatility stock that's listed in Canada and the US and then they would just do it that way yeah yeah it's the one thing about a lot of these brokerages a lot of people kind of rag on well

[00:32:25] simple in a way because they charge 1.5% to convert but a lot of the brokerages are actually more than that if you just outright convert it like if you go to a place like a lot I don't know I don't want to name any

[00:32:37] individual brokerages because I don't know the exact fees but exact one a lot of them are over 1.5% if you were to just convert the money right away so but yeah it's I guess the lesson here is be

[00:32:49] aware of what the fees are right exactly ways whether you're buying selling the ETF or converting straight up make sure you're aware of the fees because that's going to determine whichever way makes the most sense for the

[00:33:01] dollar amount but as a general rule I would say the more money have to do so if you're looking you know now in the like five figures and your broker allows Norbert's gambit yeah I think

[00:33:13] at that point it's a no brainer to do it like I think that's you know the higher the dollar figure you kind of have to yeah because that a straight across currency exchange you'll you'll pay a ton of fees I mean for

[00:33:25] for me I use a combo of of EQ bank and well simple trade so I exchange every single week so I pretty much you know I make weekly deposits I take half of my deposits so I'll be on EQ bank

[00:33:41] I'll take half of my money that I want to deposit into my brokerage account and I'll convert it at EQ bank and then I have it set up to direct deposit in US dollars for at well simple trade so

[00:33:53] it does save me a bit of money it's not really all that much I ran numbers on $1000 in currency conversion so you'd pay 15 bucks one and a half percent well simple trade but I think with EQ bank it's anywhere from 1150

[00:34:09] to $12 so I mean it does save you a bit of money and it also depends I think on what the spread is at EQ bank so they don't charge you any fees to convert but you'll pay

[00:34:21] you'll pay a spread on the currency for sure they have to make you know some sort of money in that regard Q trade didn't have free commissions I used to be with Q trade so to perform Norbert's gambit it would cost me around I believe it was around $17

[00:34:33] in commissions plus any I think there's a bit of a spread between DLR and DLRU or maybe it's true conversion I'm not exactly sure well if you also you know if you do that with EQ bank a few times that's like you can get a Klondike cone

[00:34:49] yeah it's a convenient store two conversions that's a Klondike cone three conversions a tub of Ben and Jerry's there you go that's how you get ahead in life I mean like with well simple like they got the fractional trading and they have

[00:35:05] and they have you know free commissions so even paying these fees I mean I find myself making way more transactions like when I was with Q trade I never used to make weekly buys because the commissions I mean I didn't really ever make a purchase until

[00:35:21] I had a couple thousand dollars in there just because I mean you're paying commissions so you kind of want to make that you know a little more worth it whereas well simple I mean it's easy I don't have to pay anything if I ever did have a

[00:35:33] large sum of money to deposit I would definitely be using Norbert's Gambit though it ends up saving you quite a bit of money yeah definitely I mean that's why I use it so great question so now we'll

[00:35:45] move on to the next one forgot to put the name on here so our apologies but here's a question and I will let you go ahead and I can give my thoughts at the end here so what fixed income product

[00:35:57] would you recommend if someone doesn't like bond ETFs but once higher returns than high SOS or high interest savings ETF like cash or H-Sav now just to be clear this is not investment advice I know Dan will talk about

[00:36:13] different possibilities you know there's a lot of good options for I would say most of them are close to 5% in terms of yield and there's little tradeoffs right I think depending on which option you're taking some will offer a bit less yield but

[00:36:29] maybe it's a bit more convenient I'm gonna probably add a few in there that you didn't talk about but I think it's just making being aware what you're looking for and you know in terms also of the potential tradeoffs yeah there's definitely like

[00:36:45] all of these kind of look the same on the surface but they're definitely like they're very different investments I mean even the HISA ETFs like cash or H-Sav compared to like a money market fund or like a T-Bill fund like they're very they're constructed very differently

[00:37:02] I mean I just did like a simple search on an ETF screener and most non bond fixed income ETFs that are not those high set ETFs are gonna give you you know net yields of anywhere from 4.7 to 5% except the U-Bill like the US 0 to 3 months

[00:37:23] yeah because Canada lowered their policy rates whereas the United States is still a bit higher the U-Bill is paying more I think what do you say it was 5.25 yeah yeah depending on the month I would say cuz they typically one month of distribution

[00:37:39] will be tiny tiny bit lower than the next but on average right now for the past like 12 plus months it's been paying like an annualized yield net of fees I would say like between 5.1 and 5.15 on average is probably where that you're right around

[00:37:56] yeah so I would say that's gonna be you know a non bond fixed income ETF that's probably gonna be one of the higher yielding ones at this point most of those high set ETFs like I know GlobalX is cash and H-Sav but like Purpose has them

[00:38:11] similar yields and what those funds do is they pretty much go to banks and they have large sums of money so they get institutional savings rates so they deposit that money into those savings accounts at the banks and in return you know it accrues interest

[00:38:28] and they pay it out to you so the one advantage the money market fund would have over a high interest savings ETF is I can't say for sure but I'm almost most of them are CDIC insured I believe like the money market funds one of the main risks

[00:38:47] really I thought they weren't they might not be but they I'm not 100% sure I always thought money market funds yeah weren't CDIC insured yeah they might not be I mean that yeah that might level off you know it to be almost

[00:39:02] equivalent risk I mean the one thing about those high set ETFs is so they'll go I'm not really sure I haven't checked like where the money is held in the last like six months but most of the time I believe they were holding it at National and CIBC

[00:39:17] so the big risk with those high set ETFs would be would be if like say you go to CIBC and buy a GIC that would be CDIC insured where the point where if CBIC were to get into financial trouble you would have insurance

[00:39:32] on that up to you know $100,000 whereas with these high set ETFs they don't have CDIC coverage so if you know National or CIBC or wherever else they held the money or to get into trouble you would not have coverage I didn't I thought that the money market funds

[00:39:50] might be fully insured but they might not be one of the highest typically I think would they'll be segregated though so for people like just that they're aware is the way money market funds will work is you have an asset manager but if the

[00:40:05] asset manager goes bankrupt typically what you know laws in Canada the US is they will have the funds segregated into almost a separate entity yes they manage it but if they go bankrupt they can't go and take those funds and this we can actually make a parallel with

[00:40:23] I don't have my FTX risk management hat right on but that's one of the things that did not happen with FTX and people were saying that this should be the case going forward for legislation for cryptocurrency is ensuring that it's required

[00:40:38] by law that the funds be completely segregated and that's one of the issues why they actually mingle the funds and then the bankruptcy you know everything that happened with the bankruptcy and it's different than actually the money market funds so in that way

[00:40:53] there is some safety where the funds are segregated and the underlying asset like you were mentioning may not be as safe because there's not this CDIC insurance component behind it yeah like most of those money market funds will be commercial paper and treasuries pretty much

[00:41:11] commercial paper just you know short term loans issued to corporations they find that short term liabilities like they're very secure loans the one money market fund the highest yielding money market fund that I could buy is find is purposes cash management fund

[00:41:29] I think they were about the same around well actually no net yield so they have a 0.2% fee they're around a net yield of around 5% and they're 85% commercial paper and the remaining is just treasury bills this is probably what you're going to get on most money market funds

[00:41:47] and in terms of like ultra conservative this is T-bill funds they're just 0 to 3 month treasuries the Canadian one like we said is lower it's got a net yield of around 4.7 which is 10 basis points higher while U-bill is again yielding north of 5% due to just the higher policy rates

[00:42:08] the one thing about those high set ETFs is they used to have way more attractive yields but regulators the big banks complained because I believe there was a lot of money flowing out of you know their sort of savings type funds and

[00:42:26] money market funds and they were flooding into these you know high set ETFs because at one point I think the yields were around 60 basis points higher so you'd still be looking at you know 5.3% probably for something like cash but regulators stepped in and there was something

[00:42:44] to do with you know how they had to allocate the savings and pay out of those funds so the yields ended up getting hit by you know 0.5 or 0.6% there's not as big of an advantage to holding them anymore especially you know like I said like the chances

[00:43:02] of CIBC and national getting into financial trouble like the risk is not zero but the risk is still it's relatively low and you know you can probably step in in some form or fashion I think maybe it's yeah

[00:43:20] I feel like there is no chance the government would not step in I mean people may think that I'm not saying that to say it's not like you know it's super safe or something because if the government were to step in you create there's consequences to whatever

[00:43:35] you know to doing that kind of stuff and there's very strong arguments that some of the stuff we're seeing right now with markets and exuberance is a byproduct of how the US government stepped in after 2008-2009 and maybe should have left some of those

[00:43:53] financial institution actually fell yeah yeah I mean if the government needs to step in there's probably a lot of other issues involved it would be a pretty nasty situation but I mean like the risk the risk is very low risk with those savings

[00:44:11] ETS but the risk is not zero I guess whereas something like the Treasury Bill funds I mean there's effectively next to no risk there at least no risk on your prince or very low risk on your principal because exactly and that's why I own these is because ultimately

[00:44:32] they're backed by the Canadian federal and US government and it would be very unlikely that they would not you know pay the money on that when they come do so and that's why I own those yeah and the last thing I guess is like

[00:44:47] don't expect the yields to be maintained so if rates start coming down these funds will not pay as much as they do right now so I mean we've already seen it they've scaled down the yields of those high CETFs and if the bank of Canada

[00:44:59] continues to lower rates those are going to come down for sure yeah and I guess the one that you didn't mention and I'd be remiss because they are a sponsor of the podcast but I do think they offer quite a good product here and it's pretty innovative

[00:45:14] when it comes to Canada is the notice savings account from EQ Bank so they do offer 4.5% for 10 days notice and 5% for 30 day notice the way it works here is pretty simple is you put in these accounts and then if you select the

[00:45:32] 10 day notice whenever you need to take the money out you have to basically redeem it and you are able to redeem the money but you have to wait 10 days and then the same thing for the 30 days you select to redeem it and then you wait 30 days

[00:45:47] to actually redeem them so that's a pretty good option obviously the downside compared to the ones that Dan talked about is they are much more liquid so you are talking about being able to give the money within a few days versus 10 or 30 days depending on

[00:46:03] here so it is a trade off but one of the advantage here is it is CDIC insurance so that's something that you gain in terms of that provides more flexibility than a GIC as well so that's an option if you think that whenever

[00:46:21] you need the fund you don't mind waiting that notice period then it is definitely an interesting option here. Yeah it's a pretty cool account even like 10 day notice if you deposit into a brokerage buy one of these Heisa ETFs by the time

[00:46:39] you sell it withdraw your money it's going to take 3-4 days whereas you could have a 10 day notice you wait an extra 6 days but you are getting much the same rate and if you have money that not necessarily you need immediately I mean 5% for just a 30 day notice

[00:46:57] you obviously give up some liquidity but not really all that much Yeah so I thought I wanted to mention I use it so I have it for 30 day notice the reason I use it is mostly for our emergency fund because for the most part

[00:47:15] if there is an emergency we can slap it on the credit card and then before the bill comes do you pay it off within the notice period so that's kind of the reasoning behind it but again it really depends what your use is

[00:47:30] Yeah because I guess for your first one as soon as you make a purchase on the card your interest free for a month so I mean with a 30 day unless it's a cash advance that's like immediate but so I mean if you need it

[00:47:44] I didn't even think of it that way but yeah you can get away with running a credit card for the first month and then by then you can get your money and pay it off Yeah exactly even like if you have a repair on your house

[00:47:55] or car repair or something if you know it's coming up sometimes your appointment is not for like a week or two you can already do the redeem and then by the time you actually pay on with your credit card you only have 20 days left of the notice period

[00:48:11] and then you're more than fine to pay your credit card off and not have to pay any interest Yeah they definitely they're making a lot of accounts like that are crazy like I can't wait till they open their business account I will be migrating from Royal to Equitable

[00:48:28] extremely fast but yeah Same for us but I think we'll finish with this last question here I'll chime in again but I'll let you kind of take the lead so this one is how do you guys approach investing at all time highs? This is a good one

[00:48:45] so I mean the answer is pretty straightforward for me and it's just I continue to buy if you take a long term approach to your portfolio buying at all time highs will largely be irrelevant but this the one thing for me is

[00:49:00] this is coming from somebody who's fully invested and just contributes you know smaller amounts on a weekly basis I could like some of my purchases will be made at all time highs yes but as somebody who just buys every week I mean some of those purchases are also

[00:49:14] going to be made at 52 week lows I find where you know a lot of people get into trouble as they try to time things I knew plenty of people who avoided the all time highs during the pandemic but then you know in 2022 when we finally get that massive

[00:49:28] correction then they start second guessing themselves again you know whether the market will continue to lower exactly so I mean I as I had mentioned earlier in the podcast I bought quite a big chunk of US equities near the start of 2022

[00:49:42] with some excess capital I had from selling off that XAW not at all time highs but it was pretty damn close and 2022 it felt awful like I took a D I was deep deep in the red on a lot of those purchases because of that correction

[00:50:00] but again throughout 2022 I continue to just buy every single week now most of those positions I purchased near those all time highs along with you know just continual ads on the lows they're pretty green at this point the one thing that gets difficult is for people

[00:50:17] who have a huge sum of money right now that's uninvested it's like I said it's easier for me to sit here and contribute a couple hundred you know maybe a week and and buy stocks but if somebody's sitting there you know with

[00:50:32] hundred thousand dollars it gets a lot more daunting to just dump it in to the markets at all time highs the S&P 500 in particular is is pretty expensive highest level of concentration we've seen in history there has been plenty of studies that do highlight

[00:50:49] you know regardless of market prices lump summing capital in the markets has outperformed dollar cost averaging but I think there's a bit of a human element an emotional element there you know that isn't really factored into those studies

[00:51:03] and just how big of a mental toll you know say a 20 or 30 percent market correction would take on somebody who just dumps it all in at once so I mean that's something to consider it's really a personal decision yeah I think that's a great

[00:51:18] point because I think a lot of these studies disregard the psychological aspect and the reality is everyone reacts differently some people will panic and sell and even though they had this right strategy to begin with if there's a significant correction they might panic

[00:51:36] and sell and then it ends up being way worse outcome because if they would have dollar cost average they would have just stayed invested because they kept buying you know low high and all of that for me I probably would say I do a hybrid strategy

[00:51:51] right now just because I do know like I mean I've been pretty vocal on it that the markets are very richly valued I mean it's not equally richly valued I think that's a good point to make is you have you know the S&P 500 you mentioned it's

[00:52:06] extremely concentrated right now highest in history with names like Nvidia, Microsoft, all the big tech and there are some names that I've been adding to that are more better valued but it's sectors that are a bit out of favor right now

[00:52:21] so that is what I'm focusing my energy a bit more on is adding to those but I'm also dollar cost averaging with my Define Contribution pension at work every two weeks when I get paid and like I mentioned earlier in one of the

[00:52:36] question I restarted with XAW.TO but having said that when I add in some of the money that I do on a regular basis to my investment account I put roughly about that voluntary money that I add I put about a third

[00:52:52] into cash so in those in that U-bill ETF because I want to be able to buy aggressively if there is a massive correction that happens whether it happens or not it will probably happen but it may be you know tomorrow it may be in ten years

[00:53:11] and maybe in five years like it will happen at some point but again I'm leaving probably some returns but I'm very comfortable with having a you know decent cash allocation not crazy big and getting more than 5% on my cash because most

[00:53:26] of it is in U-bill I'm very comfortable with that on top of the equities and Bitcoin investments that I have but that's what works for me obviously if it was yielding 0% or 0.5% my cash I probably have a bit of a different approach but given the current market

[00:53:44] and evaluations and I think probably double click on valuations right the exact all-time high number is different than what the valuations look like so I think always keep that in mind but for me that's what's been working is I'm trying to just

[00:53:59] hedge it a little bit and just having more ammunition if there is a correction that happens. Yeah that's the one huge benefit right now is if you were to kind of use that strategy and well actually anywhere from what 2011 to

[00:54:14] up to the pandemic like you would earn next to nothing on that cash whereas now you can hold that cash and earn you know five and a quarter points so it's a lot more attractive to do it from that standpoint so holding cash is never a bad thing

[00:54:29] I mean again it really all boils down to you know personal preference if you have a huge chunk of money to invest a lot of the professionals will tell you over and over again from a historical standpoint the best way

[00:54:44] to do it is to just dump it in but I mean it's not going to be the best for everybody and if somebody had a huge sum of money to invest and they told me they're going to buy a certain amount every month for

[00:54:56] 15 months or something I mean that's it helps you you know because like you said it only takes you know you lump sum that money and you panic sell that decision it quickly erases all of the benefits of you know investing it all at once

[00:55:14] so yeah it's yeah exactly it's up to you really you'll read a bunch of studies but those studies like they're in a vacuum there's no you know there's no human or emotional element there there's no yeah it all depends

[00:55:29] and I think it just maybe we'll wrap on this is just you know it doesn't have to be an all or nothing exactly right I think we just showed that is for me that's what works but notice I'm not

[00:55:41] putting all my money in cash like I'm still dollar cost averaging I'm just dollar cost averaging and putting this portion into cash like it's not all or nothing and I've been I've talked about it on the podcast my cash allocation right now my target is 10 to 15%

[00:55:56] I'm within that target I intend on staying within that target unless there's a significant correction and then I have names that I'm following that I would like to buy that I'm hoping gets cheaper than I would put the trigger but if not I'm still benefiting from the market

[00:56:14] going up maybe to a slightly lesser extent but that cash is still getting me 5% so I'm more than happy with that the worst-case scenario here but I think it was a fun episode I mean at first we weren't sure if we'd have enough content

[00:56:29] but I think it ended up being quite a good episode with the listener questions that we had we were supposed to record a bit earlier but had a little bout of vertigo and I had to push that back which

[00:56:41] is not fun if anyone has had that before but feeling much better now and I think we had a very good episode so we appreciate everyone listening if you haven't done so if you can give us a 5 star review it's always appreciated on Apple Podcasts, Spotify whichever platform

[00:56:59] you're using you can also find us on Twitter at CDN underscore investing for the podcast Twitter and for myself at fiat underscore iceberg and then at stock trades underscore CA yep I get that correctly you did there you go vertigo is cured

[00:57:17] there you go I got it right so on that happy belated Canada day everyone hopefully you enjoy the summer and you find some time to listen to our upcoming episodes while you enjoy the nice weather yep thanks for listening everyone

[00:57:44] always do your own due diligence or consult with a financial professional before making any financial or investment decisions