Trump’s Meme Coin Frenzy, Tariff Drama, and Canada’s Inflation Breakdown

[00:00:01] 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 back for Thursday news and earnings with Dan Kent, who had to take a little break last week because he wasn't feeling great. Especially your voice was having a little bit of issues there, so we had to keep you fresh for this week. So welcome back, Dan. How are you feeling?

[00:00:33] Yeah, pretty good now. I mean, it was one of the strangest sicknesses I've had, but yeah, I just completely lost my voice. And I've toughed it through a few of these, but I just knew I could not make it through that one. But yeah, glad to be back now. I'm glad to be, you know, healthy. Yeah, yeah, exactly. It was a different experience to do one solo, but I still had fun. I was a little nervous at first, but turned out pretty well. Just a different experience, a lot more prep when you're

[00:01:02] solo, harder to catch your breath to. A lot more talking, yeah. A lot more talking, but it was still fun overall. A lot of good feedback from people, so at least it's good to know that we can always do that in case we're in a bind. But we have a pretty jam-packed episode. We'll talk about Canadian CPI that just came out today. A little bit of news from down south with Trump being inaugurated yesterday. So we're doing this on Tuesday in terms of a bit more clarity slash uncertainty with tariffs.

[00:01:32] Trump launched also a meme coin, as well as Melania Trump just a couple days before inauguration. You'll talk about the BlackRock earnings that happened last week. Hindenbin researched a famous short seller that is being disbanded. We have a couple of Canadian names in Code Gecko, as well as Richard Your Hardware. So pretty jam-packed episode. A little bit of a mix, I think. Some stuff for a bit everyone there. So we'll get started.

[00:01:59] You want to tell us what it looks like in terms of CPI for the month of December. Yeah, so it seems like overall a pretty good CPI print. It came in at 1.8% in December. So this was a tad lower than expectations, but not by much. A big chunk of this was due to that GST break. So StatsCan says inflation would have come in around 2.3% versus the 1.8% if there was no break.

[00:02:26] When we look to the places that were targeted by that. So food inflation, it was 0.6% in December compared to 2.6% in November. Alcohol, tobacco and recreational cannabis, which I think the only thing they did GST holiday on that would have been the alcohol. I don't know if they did tobacco and cannabis. I highly doubt it.

[00:02:46] They came in at 0.7% versus 2.7%. And in November, clothing and footwear continued to decline. So it declined 4.5% versus 3.8% in November. But I think the only thing that they did the break on was children's clothing and that actually declined something like 11%. Oh yeah, you got it on the screen. Yeah, they actually added a table. So the price fall for indexes impacted by the GST, HST holiday from December.

[00:03:16] So yeah, they put four main categories, food purchased from restaurants, alcohol, beverages purchased from stores, toys, games, excluding video games and hobby supplies and children's clothing. So those are the categories that they broke down for that GST, HST holiday. I can't fault you for being confused. I was very confused as well in terms of some of the items that were allowed or exempted from the GST, HST holiday.

[00:03:45] I think a lot of businesses impacted by it were confused themselves. I saw a lot of that happening where you had restaurant owners, sometimes not quite sure what was exempt or not, store owners. But it's interesting to see that they are acknowledging that it did pull down inflation because of those lower prices. Yeah, I mean, I definitely I was in BC this weekend and I definitely felt it on that front. We went out to eat. I mean, they obviously have much higher rates here in Alberta.

[00:04:14] You don't really feel it as much, but I mean, it's it's quite a big savings. One thing that like I don't understand, though, so they said it only impacted about 10% of items on CPI. But I mean, if you look to the 2.3% versus 1.8%, if there was no break, like that seems like a huge gap to me for like it really not being all that many items. But I don't know, kind of seems weird to me that it impacted it by 50 basis points.

[00:04:42] But there's not when you think about it, it's, you know, restaurants, children's clothing, thing like that. So that was kind of a bit confusing. But but the the other thing to add there, too, is that it's only for I think it stops mid-February, right? It's only two months, right? Mid-December. So they expect like January is going to be another month of like, you know, lower just because of that break. And then I think mid-February.

[00:05:09] So you're going to get a weird month in February and then March, it'll probably tick back up. Exactly. So you're just you're creating a temporary lower inflation environment and then it'll tick back up. And it'll be interesting just to see the month over month change between January and February, for example, or December and January versus the year over year.

[00:05:31] So the year over year, I think we'll probably have a bigger drop as a month over month, because then you'll be comparing two months where that break was in place. Although one partial month, it'll probably start leveling off already in January. Yeah, I mean, it's like 2.3 percent isn't really all that bad when you think about it, even if you, you know, factor out that break. I mean, it's it's down to nearly their target. So, I mean, it's looking pretty, pretty good.

[00:05:59] And median CPI, which pretty much takes the median, the middle number of inflation came in at 2.4 percent. CPI trim, which would exclude the extreme numbers on either end. So I would imagine that like right now, it probably maybe shelter costs because that would be one of the higher ends. And then on the lower end, it would be probably something like like clothing. I would guess that would be one of the largest on the other end that came in at 2.5 percent.

[00:06:24] And then CPI common, which takes the overall trend of CPI and I believe isolates those out, came in at that, you know, isolates things out that don't necessarily follow the trend, came in at 2 percent. This is this is one that I've never really been able to. It always kind of confuses me. But I mean, you're not alone.

[00:06:43] The other two, I understand well, although the one when you look at the trim, the only confusion I have regarding that one is it only one item that they removed on each end or they remove, you know, a portion. Let's say the bottom 5 percent and the top 5 percent type of deal that I'm not 100 percent sure on. But at least it's easier to understand than yes. Yeah. Common. I don't I usually just glance over it and I focus more on the medium and the trim. Yeah, it's definitely the most confusing one.

[00:07:11] I think for the trim, I seen 20 percent. I don't know if that's 10 percent off either end or 20 percent total. But anyways, I mean, it all points to just inflation being being lower overall. All these numbers are are pretty solid. Shelter continues to be a bit sticky, but it's stickier at a lower level. It rose 4.5 percent December versus around 4.6 percent November. Rent still remains high. 7.1 percent increases year over year.

[00:07:39] Mortgage interest costs are up 11.7 percent. This number seems insanely high, but it's actually the 16th straight month of declines on a month over month basis. So obviously rent and mortgage costs are starting to come down. I know Alberta is still having a really big problem when it comes to rent just because of how many people are are moving here. I think we have the highest inflation out of any province, even though it's going down. It's still it's still relatively high.

[00:08:09] Mortgage interest costs. Yes. I'm not surprised just because when you, you know, for people to visualize a little bit, if you think on most people will get five year fixed mortgages. So these mortgages are starting a bunch of them have already renewed in the last couple of years. There's going to be more of these super low rates mortgages that will be renewing this year and next year as well.

[00:08:31] Then you factor in people that in the last two, three years that may have renewed around the highs that took a one, two, three year fixed. And those people will be renewing potentially at lower rates in the next couple of years. So you're mixing all of that together. Yes, it still provides a pretty substantial increase, but I'm not surprised that there is some deceleration just to base on the way.

[00:08:54] Just based on the time that's a last since the the rates were super high and the rates were extremely low. So that's I'm not super surprised at seeing that kind of what I would have expected. Yeah, I mean, I still know some people that are on, you know, sub two percent fixed rate mortgages. So they're going to be hit with. Yeah, I'm on the opposite to be. Yeah, soon to be four point three. But yeah, exactly. Yeah.

[00:09:24] Gasoline prices continue to fall. They fell zero point six percent month over month in December. And again, just as I stated before, if we isolate out the temporary GST break, two point three percent is relatively reasonable level of inflation. I mean, certainly enough to warrant the Bank of Canada to cut rates by 25 basis points. I believe the next meeting is late January. And from what I've been reading this morning after the CPI print, the market is pricing in around an 83 percent chance of a cut.

[00:09:53] Hey, got to go. Got to go ahead and cut and hedge for those tariffs. Right. Yeah. Yeah. I mean, speaking on the just the Canadian dollar wise, it's gone absolutely bonkers. I mean, we'll talk about more than that in the tariffs. But yeah, it's it's been crazy, the volatility in the Canadian dollar. Yeah, exactly. I think it went up yesterday when news came out that Trump was not going to impose tariffs.

[00:10:20] And then when he said he might impose some on February 1st, then it just plummeted. Went back down. Exactly. Well, before we move to tariffs, anything else you wanted to add for CPI? I think you covered most of it. That's it. Yeah. The last thing I'll just add, it's the services component, one that I've been paying close attention to. That one is still relatively high. And it's important because that will be a lot based on wages, the cost of wages.

[00:10:49] And that one is still 3.5 percent year over year, but only increased 0.1 percent month over month. I think we've got to keep an eye on, especially if the labor market starts being tighter and there's less people that are coming to Canada. So there's less workforce available out there, which could potentially put upwards pressure on wages. So that's something that people will want to keep an eye on for now.

[00:11:19] It's too early to tell, I think. But that's one I like to look at. Aside from that, I think we covered a good job covering it. So we'll just move on to tariffs. So like I said, Trump's inauguration was yesterday. He said that he would not be imposing any tariffs. I think he mentioned specifically Mexico, Canada and China as of the first day, like he had tweeted, which brings me to what I had been harping on. And I think we talked about that. You and I a little bit.

[00:11:48] I did as well with Brayden and you had mainstream media freaking out or fear mongering that tariffs would be coming on the first day. And I said, look, they may be coming on the first day. But even if they do come on the first day, it may not be 25 percent, might be 5 percent, might be 10 percent. Trump has a history of doing this kind of stuff. And when you negotiate, obviously, you're not going to put out the offer, the first thing

[00:12:15] that you want to offer in terms of a deal right off the bat. If that's the deal you want, you're not going to put that out there because then that's your starting point for negotiations. And you're likely not going to get that deal. So you want to start on the extreme and then get back to the middle from that extreme. And Trump, for the most part, I think this is what he was doing. He floated the idea of having some tariffs on February 1st. Whether that happens or not, we will have to see.

[00:12:45] I still think he's using this a lot as leverage to be able to get some concessions from Canada. I believe he was saying that the borders were an issue. Fentanyl, the drug trade were an issue. That's something else he wanted to see. He's been harping to on the trade deficit with Canada. Again, we'll have to wait and see. But it's too bad that mainstream media was really freaking out Canadians on this when

[00:13:12] the reality is no one really knew what was going to happen. And there's just a variety of different outcomes. So that's why I think it's important to take this with a grain of salt and not freak out when you see these kind of thing. Trump says a lot of stuff and he's bombastic. Whether you like him or not, doesn't matter. He will say a lot of stuff that he ends up not doing.

[00:13:36] Whether he wants to provoke people or whether it's a negotiating tactic, it is what it is. And I think we have to approach things a bit that way and wait and see and not panic. Yeah, it's pretty much been the same answer that I've provided everyone who's been asking me. And a lot of people have been asking like, oh, what's going to happen? What's going to happen? Well, you have no idea what he's going to do. So you don't really know what was happening. I remember watching an interview with him and they were, I think they were talking about like

[00:14:06] retaliatory tariffs, Canada to the US and they were talking about lumber. And he said that, don't worry about that. Like if we have to, we'll remove the protections on some of our forests and we'll get lumber. We'll mine, we'll cut down trees from those. And I was just like, oh my God, like he's just, he's got no filter. Like it's, you just never know what he's going to do. And he says a lot, he talks a lot and, you know, who knows if he's going to, you know, walk the walk in this regard.

[00:14:36] I mean, obviously he didn't do it first day and there was, if you, like you said, if you were to look to any media outlet, it was pretty much almost a guarantee that he's going to, he was going to slap that on the first, first day. And that's why, as we mentioned, the crazy movement in the Canadian dollar, like it was down leading up to it. And then he said he wasn't going to impose tariffs and the dollar went up and then, you know, what would it be here? About four hours later, it bombed back down to where it was when he said they were going

[00:15:05] to be put in place on the first. So, I mean, it's, nobody knows. Yeah, exactly. So I think it's just important. And we've said that time and time again, try to think in probabilities and different outcomes instead of, you know, he's gonna impose 25% tariffs on the first day, which did not happen. Will it happen on February 1st? Maybe, maybe not. Maybe it's going to be two months from now. Maybe it's going to be a year from now. Maybe it will be February 1st and it'll be 5%.

[00:15:35] And then you'll say, I'll slap on another 5% or 10% in a couple months if I don't see any change on A, B, and C. If Canada doesn't increase their military spending, whatever his demands are. But it's important to not overreact and just think about probabilities. And then when you start thinking about these probabilities, then start thinking about your investments and how they could potentially be impacted in a variety of scenario. And then you try to assign some probabilities.

[00:16:04] Obviously, it's not a perfect science. But at least with that, you can build a little bit of a framework and have a game plan for whatever company that you own that may be impacted by these tariffs. And we've seen companies that have been shifting now or looking to shift their production. There's been some retailers. I think Lululemon mentioned that they were looking at their supply chain. Obviously, if they have clothing that's being manufactured in China, any company that has

[00:16:34] items manufactured in China, they're definitely being nervous right now because if there's tariffs imposed, it's safe to say that according to what he said, there's going to be higher tariff imposed on China. And what I've been hearing from Trump and the Republicans and the US in general, their biggest focus in China, Canada is not that big of a focus for them. I think at the end of the day, you're starting to see a little bit more where, yes, they view

[00:17:04] Canada as an asset. And they're just trying, I think, to use these tariffs to try and get some concessions. But the reality is, is we export a whole lot of energy products, whether it's gas and oil or you have hydro coming from Ontario and Quebec going to the States. The US is dependent on Canada as well. Maybe not as much as Canada, but I don't think it's the primarily focus.

[00:17:29] And it's important to know that just understand what type of exposure the company that you own may have to these tariffs. But again, don't take it for granted that it will be 25%, 50%, whatever it might be. Just understand what the impact might be and the different probabilities that can happen and then have a strategy, build a strategy accordingly.

[00:17:54] But if the market freaks out about a specific company or industry, it may also be an opportunity to potentially buy companies on the cheap because the market is overreacting. Well, yeah, I think we had that type of situation with Stella Jones. Remember, we talked about Stella Jones and we talked about tariffs and everything. And they kind of fell a bit on earnings and news of those tariffs. And then I actually did the podcast on it, speaking on the tariffs. And then I listened to the conference call afterwards.

[00:18:23] And most of their stuff is manufactured in the United States. So you'd make the assumption a lumber company like Stella Jones, they might be at risk. But I think they said, you know, less than 5% of their, you know, actual production manufacturing comes from up here. So, I mean, it's who knows? There's so much speculation here as to what's going to happen. And I mean, the point is just don't don't freak out. A lot of people are freaking out.

[00:18:49] Like I said, I've gotten so many questions on this over the last month or two, which is like it's it's not wrong to ask questions. But I mean, it's just when you don't really know what's going to happen, it's difficult to make any sort of moves or anything. No, exactly. Well put. Now, we'll continue with the Trump team here because he launched a meme coin right before inauguration, which, oh, my God, I don't know what to say here on January 17th. So I'll explain what happened on January 17th.

[00:19:19] Trump launched the Trump meme coin on the Solana blockchain. Solana is a smart contract type of blockchain. I think it has a lot of similarities to Ethereum, but some differences as well. Lower fees typically from what I know. I don't know this blockchain very well, but I know of it. As of this morning, it had the market cap of 8 billion USD. There will be a total supply of 1 billion tokens and 20 percent of it is available to

[00:19:48] the public, while 80 percent will be controlled by insiders with the earliest unlocking of tokens within the next three months. And then there is unlocking every three months. If I remember correctly, there is more information here on get trump memes dot com. It shows the allocation, how it's going to unlock. The problem is we don't really know who is going to be benefiting from that.

[00:20:16] But if Trump's pass is any indication, it's probably going to be his family and friends that are pretty close to him. Without being too cynical here, I think this is probably safe. And what I'm showing here for joint TCI is just the unlocking that you're seeing. So yes, three, six, 12 months is when you're seeing most of the unlocking.

[00:20:38] Unfortunately, what's probably going to happen is that when the unlocking happens, they're going to start dumping these coin on the retail investors, on the Trump supporters that bought this and people will be left holding the bag. Clearly, there's a lot of ethical question on on doing this just a few days before the inauguration.

[00:21:03] Based on Trump's pass, I'm not surprised that he would do that. But I am at the same time. It is just because it's so flagrantly bizarre from an ethical standpoint. I'm trying to be as nice as possible. And then Melania Trump, the first lady, also launched a meme coin the day of the inauguration again on the Solana blockchain.

[00:21:26] So the last thing here I'll mention, it's probably a sign that we could be approaching a market top. I think it's a weird one when it comes to Trump because of the pull that he has and a lot of loyal supporters that probably know nothing about crypto that are just buying the Trump meme coin because they hope it's going to go up because of the president. I think he's probably going to make a lot of money doing that as a most likely outcome.

[00:21:53] A lot of people will end up losing a lot of money. I encourage people to look up CoffeeZilla because he focuses a whole lot on these kind of meme coins that are pump and dump. And I don't know for sure that this will be a pump and dump, but it has all the indications that it could be that. And he couldn't believe it himself. And so I encourage people to go and view the video. It's just very, very weird.

[00:22:19] He had launched some NFTs earlier this year, earlier in 2024, and I think even in 2023. So it's not surprising in itself, but it's just surprising the timing of it. And then the unlocking will happen while he's well into his presidency. I mean, I guess at least there's unlocking. I mean, was there any locked in from that Hawk to a coin? Probably not.

[00:22:44] I think there was some that were locked in, but a lot weren't. So they just ended up dumping it on the retail investor pretty much minutes after the launch. Yeah, I mean, I don't know what it's going to take for people to just avoid celebrity-backed coins. I mean, I'm sure there's a lot of people who've made money from this. Don't get me wrong.

[00:23:07] There's definitely people who've profited, but I mean, there's probably a lot of people who bought it when it was $75. And now it's $40, what, two days later? And just who knows where it's going to go. I mean, this was really... I haven't looked too much into this. I knew it existed, but I mean, this is really, really weird. Like, I would expect, you know, the Hawk to a girl to maybe launch a coin. I wouldn't expect the President of the United States to do it. Yeah, exactly.

[00:23:37] So you can see here what you were saying. It's a little bit on the uptick. But again, as supply unlocks, who knows what will happen with the price. I think what's going to happen, what will it take? Probably something similar to 2022, where a lot of these mean coins just crash and never recover. I think it's probably going to take something like that for people to learn the lesson. If you want to gamble a little bit, and I think this is pure gambling, sure, throw some money at it.

[00:24:07] But it's not something I would touch with a 10-foot pole. I'm more than happy missing out on whatever gains. It just... It doesn't smell good. I'll just say. Yeah, I mean, that's exactly what I was going to say. If you're treating this money like the equivalent of money you would take to a casino, that's fine. But I mean, if you're putting portions of your investing portfolio into this, I mean, there's massive, massive risk here. I mean, it's... Yeah. There's celebrity-backed coins.

[00:24:36] How many celebrity-backed coins have actually worked out? Has there been a single one? Maybe? I don't know. I have no idea. You got to call it fart coin. That's what you got to call it. Yeah. Oh, man. Oh, man. It's just like everything we talk about, it just smells like market top. Yeah, exactly. It's just... The more we talk about it, the more it scares me. So, we'll move on to some actual earnings. Yeah. So, from companies that are actually doing pretty well.

[00:25:06] So, you'll go over BlackRock here that reported last week. Yeah. So, BlackRock is... They're definitely benefiting from the popularity in the equity markets. So, revenue came in at $5.7 billion and earnings per share of $11.93. So, both of those were around 23% increases on a year-over-year basis. And both of them came in ahead of expectations. So, the bulk of the growth came from growth in base fees and securities lending. So, those grew by 23% as well.

[00:25:36] Operating margins, they dipped on a quarter-over-quarter basis. But they're still seeing some pretty strong growth year-over-year. They sit at 45.5% versus 41.6% in the fourth quarter of 2023. Assets under management are now at $11.55 trillion. So, this is up 15.41% from... I have last quarter here written, but I imagine that's last year. That would be a pretty crazy quarter-over-quarter increase. So, probably on a year-over-year basis.

[00:26:04] So, ETFs saw quarterly inflows of $142.64 billion. So, to give you an idea on these inflows, they were $103.9 billion in December of 2021. So, that would have been the last time the markets were this popular, I would guess. And this is also substantial growth from the $87.7 billion in inflows in December of 2023.

[00:26:29] So, institutional inflows came in at $53.3 billion versus outflows of $16 billion in 2023 and inflows of $43 billion in December 2021. So, total inflows came in at $281 billion. And the crazy thing here is most analysts had inflow expectations of around $198 billion. So, they came well above what was expected. In terms of organic inflow rates that came in at 6%,

[00:26:59] a lot of people who might be BlackRock bears will often say the company can't really grow organically anymore because of its size. And, you know, although this organic rate is well below what it used to be, it's still pretty solid. I mean, I think new innovations on the ETF front should allow them to continue to fuel growth. I mean, we look no further than IBIT, which I believe it was the most successful launch in ETF history. Like, I think it had like so much inflows.

[00:27:31] It's up there. I'm not 100% sure. I think you might be right. I know it's up there. I think it's one of the most successful, maybe the most successful launch, but it definitely surpassed expectations. Yeah. I mean, there was so much pent-up demand for people to buy, you know, Bitcoin that didn't really want to go through the confusing process of possibly, you know, opening up a wallet or opening up a crypto exchange account and buying it.

[00:27:57] But an ETF, especially when it could be tax sheltered, I don't know how the US works. Like if these US ETFs can be tax sheltered, I don't know if they qualify for that or not. But I think that was a huge, you know, popularity boost among that. And then they just released IBIT in Canada. So they have a US dollar version and a Canadian dollar version. And they came in with the lowest fees. I think it was 32 basis points.

[00:28:26] Who knows what the total fee will be after the year? You know, the total management expense ratio. The expense ratio is typically for new funds. They won't know right off about what it will be. They need at least a year to get an idea of what it'll be. And the expense ratio can vary from year to year. It's never going to be the exact same, but you can get a good idea if you're looking at the previous year.

[00:28:49] And something I didn't touch, but I touched about the new IBIT ETF is that just a few days after Fidelity announced that it was reducing its fees for its Bitcoin ETF to match that of BlackRock's. So I think competition is a beautiful thing. It's about time. I think they are realizing we talked about it when we were doing ETF reviews. They were seeing last year, it was one of the few ETFs that was seeing outflows for the whole year in Canada.

[00:29:19] It was those Canadian Bitcoin ETF because they were high, you know, probably around 1% in terms of fees. And then you look down south in the US. Yes, you had to buy them in USD, but it was a quarter of the fees. So clearly people were switching over and now it's going to give people an option to buy some of these funds with Canadian dollars, which I think it's a good thing. And more competition will probably mean more fee reduction.

[00:29:47] It might end up settling in the 20 basis point range, maybe a year or two down the line. Yeah, I mean, competition in the ETF space is only a good thing. I mean, fees are just getting lower and lower and lower as more, you know, funds are launched like this. I'm curious to see what happens with Ibit south of the border. Like, I don't think the Canadian market drives a ton. You know what I mean? Just if like people, you know, they want to convert it back to Canadian dollars.

[00:30:14] I really don't think there's going to be a huge impact there just because our market is so much smaller. But I mean, now you can own it. You don't have to exchange currencies. A lot of Canadians like holding Canadian dollars. So iShares, I mean, they're the first ones to break into that with a pretty low fee ETF. I mean, as I mentioned, like BlackRock is benefiting from the frothy markets.

[00:30:39] I mean, they make the bulk of their revenue comes from some sort of fee, whether it be, you know, base fees, performance fees, distribution fees, things like that. I mean, the more money that flows into their products, the better. And obviously, you know, active equity markets, even fixed income markets, things like that. It's definitely going to fuel results. And what I'm showing here, just to put an exclamation point on what you were saying, it goes both ways.

[00:31:05] So for the people watching on Joint TCI, and I will explain it for everyone else, if you look at 21 in 2022 and then 2023, the interesting thing that happens is in 2022, you actually see the fees that they generated across the board. So whether it's retail revenue, ETF revenue, institutional revenue, across the board, those fees decline in 2022.

[00:31:31] Why? Because markets decline, and therefore asset under management also declined during that year. And that's the risk with BlackRock is they will go along with how the market goes. So if there is a sharp market correction for a lot of the assets that they'll have products in, then their fees will go lower because it's usually a percentage that's applied on the asset under management.

[00:31:58] So people thinking, oh, it always goes up. Just be careful because we do have the example here, 21 from 2022, and then obviously with 2023 and increased again. But it just goes to show that these fees can fluctuate. It's great when the markets are going up, but BlackRock will struggle when markets are going down.

[00:32:19] And when I say markets, I'm talking about broad markets here, whether you're talking about equities, fixed income, alternate assets like crypto, real estate, and these other assets. Yeah, it's definitely like it's a cyclical stock, but to the point like, you know, it's cyclical based on market activity. Not necessarily, you know, how well, like if you think of a railroad that is cyclical based on, you know, the economy. I mean, the stock market is not the economy.

[00:32:47] I mean, the stock market can be doing great while the economy is kind of in the tank. So it's cyclical, but in a different way. It's okay. They can always print, contact Jay Powell, ask him to print a bit more money. Exactly. Get more flows. They'll be fine. A little bit of asset inflation. Never heard BlackRock. Anything else you want to add here for BlackRock until we move on to some other news? Nope. Go ahead. Some big news came out.

[00:33:14] So Hindenburg Research announced that it was being disbanded. Nate Anderson, the founder of Hindenburg Research, announced last week that it was being disbanded. Hindenburg Research was a successful short selling firm. For those who are new to the podcast, short selling just means that you're betting that a stock will go down instead of going up. Without going into detail how the process works, that's what they do. If it does go down, then you profit from your short position.

[00:33:44] If it goes up, then you are facing losses. It's a bit more complex than it is, but if you're new to investing, that's the gist of it. They had short reports on pretty well-known companies, including Supermicro, Adani in India, Equinix, and Nikola. I think these were all very well made. Their short reports are always well made. I find that they are pretty easy to read.

[00:34:10] Obviously, if you have the knowledge of investing backing you, they're pretty easy to read. Sometimes it's a bit hard because they'll do some interviews with employees that are anonymous or former employees where it's information you can't really validate.

[00:34:28] But oftentimes with their short report, there will at least be some information that you'll be able to validate yourself by looking at older financial statements, older supplemental information provided by the company. And I read the full letter that Nate Anderson published explaining his decision, and it really comes down to the fact that he's accomplished what he wanted to do with Hindenburg Research. It looks like he wants to spend more time with his family, which I can completely understand.

[00:34:56] I found the letter very inspiring because he did not have it easy on the launching Hindenburg Research. He had to really power through. He was sued multiple times as well. He was on the brink. And it's really a nice story, regardless of what you think about short selling. It's a nice story about perseverance. And I encourage everyone to read the letter.

[00:35:23] And I think it's too bad because my view is that there's an important place for short selling in our markets. I know they get a lot of bad rap. I know Elon Musk has a tendency to rail on short sellers. But the reality is short sellers are important because those are the people will typically uncover fraudulent activities in the financial markets. And sure, some are not the most ethical. They will publish reports. Sometimes they're half ass reports.

[00:35:52] I've seen some reports where I was like, wow, you are. Yeah. You're putting that out there. Clearly, you're just putting that to put the stock down so you can profit quickly. And there's no fraud or anything mischievous happening. But there are some good short selling firms. And I would consider Hindenburg Research as one of them. And I think it's a big loss for the investment community.

[00:36:16] And hopefully, his team will be able to provide valuable insights with other firms or with new firms that they'll start themselves. But I thought it was too bad. I know some people will have some mixed feelings, especially if they own some of the names that they targeted. I mean, I owned Equinix and I ended up selling it in big part because of the short report. Because I was able to validate a lot of the information they were talking about with Equinix.

[00:36:46] And Equinix is still a good business. But there are some concerns that were raised. And I did not feel comfortable owning that business anymore. And I did not have the same level of confidence in the management team. And I decided to sell the shares. I've had short reports from other companies, but other firms that issued short reports where I read the short. But I'm like, okay, this is a nothing burger. I'm not selling my share. But this is one of them that I did sell my share following the short report.

[00:37:16] Yeah, I think, I don't know. I've kind of seen a lot of them, a lot of the smaller ones at least. I mean, they target a lot of Canadian companies as well. I think, I don't know what the reasoning for that is. But I mean, if we look to, I mean, the most notable one I can remember, and it's because I own the stock, would have been Shopify. I can't remember the company that issued the short report on Shopify. But it ended up bombing after they issued it. I ended up holding on, which obviously worked out quite well because I believe that was in like 2019.

[00:37:46] But I mean, they've went after, there's multiple ones. They've went after Brookfield, Dollarama, Shopify. And I mean, if you look at all those companies today relative to when they were, when the reports were issued, I mean, there's really not most all of them are higher than they are now. But the one thing I'm curious about is, so he stated that he wanted to spend more time with family and kind of step away from it. I'm just wondering why they didn't give it, you know, somebody else take the helm, I guess, instead of shutting it down. I don't know.

[00:38:15] Yeah, I don't know what the structure was. So I really don't know the reasoning. That's his decision. I'm sure he has a valid reason to do so, but I'm not quite sure. And I agree with you. I think short selling reports, it's important to not outright dismiss them. Take notice of them. Read them if you own the companies and then make a decision. The Equinix one that I talked about, one of the other reasons is that there was also an investigation happening with the U.S. federal government into the company.

[00:38:43] I think it was actually the Department of Justice. And there were definitely smoke. And that made me nervous. And I just decided it's not something I wanted to have in my portfolio. And I sold. But I know there was, we talked about it, you and I, Brookfield Infrastructure Partners. There was a short report on them. And one of the things I remember seeing about that short report, which I own Brookfield Infrastructure Partner, was that he was talking, the guy writing the short, I can't remember who it was,

[00:39:13] was talking about Enercare. And what he was saying about Enercare, I'm like, clearly you don't know Enercare. Like, it was clear that he was out in left field because he was saying that it was not an infrastructure business. And they were just, I can't remember the exact thing. But he was, you didn't mention a bunch of different sources of revenue for Enercare, which is easy to validate because they used to be publicly traded. I think it was like five, six years ago before Brookfield bought them.

[00:39:42] And we own, we rent our furnace from Enercare too. So I know some of the services they provide. And it was completely off. So that was one of the things when I saw that. A lot of the stuff he was saying, I started to say, okay, a lot of the stuff you're saying cannot be validated. And the stuff that can be validated, like the Enercare business, clearly you did not do your research because it was easily obtainable. And you're completely offside there.

[00:40:11] So that's just an example of why it didn't sell. This was not Hindenburg Research, like I said, was just another short selling firm or guy that issued that. It was to me a nothing burger. Yeah. From what I remember for that Brookfield short, they were pretty much saying that Brookfield was booking value on assets that should be worth nothing. From what I remember, like I think that was a big chunk of it. But I mean, yeah, these reports generally will be absolutely massive,

[00:40:38] filled with so much information that it just becomes overwhelming. And obviously, I mean, obviously they put them out. Their intention is obviously they want the stock to go down. That's the only way they make money. So confusion, things like that, it's going to drive a big factor of it. Yeah. No, well put. So now we'll move on to the next piece here. Some more earnings. You have Kogeco Communications. Not a company that I remember really talking about on the podcast.

[00:41:07] It'll be interesting to see what you have to say. Have a few charts as well that we'll be able to share with people just to give them an idea of what it looks like a bit visually. Yeah. So it's a pretty slow time on the Canadian front. But I mean, Kogeco reported and I'm not going to lie, I don't really follow this company too much. But the first thing I noticed when I looked it up is it was trading at something like, it's like at like 5x earnings.

[00:41:35] And I was like, why is this company this cheap? But there's a few reasons why, I mean, after I looked into it, why I think it is so cheap. But they reported earnings of $2.82 in revenue of $764 million. So both of them fell short of estimates, but not really all that much. And again, the company seems abnormally cheap at this time. But when I looked at forward projections, I can kind of get an idea why.

[00:42:01] I mean, earnings are expected to decline from the $9.35 reported in 2024 to $8.10 in 2025. And then projections out to 2027 would be $7.65. I mean, obviously, 2027 earnings are ridiculously hard to predict. But just the overall trend in that regard would be a bit concerning. The one thing is, though, the dividend does look to be well covered at least.

[00:42:29] $291 million in trailing 12-month free cash flows and around $155 million in dividends paid. And the one thing is, the reason I mentioned this is it's in kind of stark contrast to many of the other big three telecoms at least that are struggling to get free cash flow high enough to cover those dividend payments. Just a quick note here. Do you want to give a few seconds to the CEO of Bell so he can take some notes on how a dividend can be actually paid and covered? Yeah, and covered.

[00:42:54] I got some other interesting things here on Bell 2 just because of Kojiko's actual business structure as well. So I will be mentioning Bell. The company repurchased… It was too easy. Oh, it's often too easy. But they've repurchased 16% of shares outstanding over the last five years. So they return a ton of money back to shareholders. However, the difficulty here is over the last five years, the share price has tanked by over 43%.

[00:43:21] So I mean, those buybacks, at least right now, don't really look like they've been the best use of capital. I mean, at five times earnings, it just seems… I mean, it seems like it would be a good deal. But it's really difficult to value this company. Revenue has effectively stagnated over the last three, four years. And the company is going through a pretty big transformation as it plans to enter the Canadian cell phone market.

[00:43:49] So it looks like it's going to… And this is the thing. I don't know anything about Kojiko. I didn't even know they didn't offer phones. But I'm going to tell you right now, the Canadian cell phone market is ridiculously… I mean, look at the big three. They own 93% of the market. The infrastructure, all that type of stuff. It just seems like quite a task. They're going to start rolling it out in Quebec and Ontario. It's a bit of a hybrid player as it's around half of its revenue is in the United States where it does offer cell phones.

[00:44:19] The difficulty here is there's been next to no growth anywhere in the business. So U.S. revenue has actually declined for two straight years. And this is kind of what I want to mention in regards to Bell because Bell just made that big acquisition. But was that for… I can't remember if that was for like internet or cell phone offerings. I think it's for broadband internet. So I mean… Yeah.

[00:44:42] Because they were referencing fiber, how it still will require a lot of investment in that new business to bring up their fiber offering. And the U.S. being behind Canada in terms of those offerings. So that's why they saw an opportunity on the West Coast. I can't remember what the company is, but that's why they saw an opportunity on the West Coast between investments and a market that's underserved by fiber. Yeah. Yeah. I mean, it's a different story.

[00:45:10] But I mean, the main thing is here is, I mean, the U.S. market is crazy competitive relative to Canadian markets because our… I mean, let's face it, our big three telecoms are protected by a lot of regulations that make competition, I mean, borderline impossible. But in terms of, you know, debt structure and things like that, I mean, the story is much the same as the other big three telecoms. I would actually say that Kojiko is in a worse position.

[00:45:37] Interest expenses have more than doubled since rate hikes have escalated. And I mean, I may be completely off base here as, again, I don't know the company that well. But if they're planning significant wireless expansion here in Canada, I would imagine that would come at the expense of capital expenditures. So pretty much all of the big three telcos, at least, are expecting capital expenditures to decline as they kind of come out of a heavy spending environment when the debt was cheap during the pandemic. On the flip side of things, Kojiko is increasing capital expenditures.

[00:46:06] I mean, in terms of their guidance by around 14% in 2025. And as a result, free cash flows are expected to be flat in a best case scenario and worst case scenario declined by 10%. It's funny, they don't issue any sort of revenue. So they issue like numerical guidance on a lot of things. But in their revenue guidance, it just said stable. So I don't know what that means. Whether that means, yeah, like small decline, small increase, flat, I would say. Similar, yeah.

[00:46:36] I mean, the company has a mountain of debt, $5 billion on a market cap of $2.6 billion. So if we compare this to something like BCE, which we've criticized on debt levels as well, they have around $40 billion on a market cap of $31. So in terms of leverage ratios, however, in terms of it would be adjusted EBITDA to debt, I believe. It comes in at 3.4x versus BCE's 3.7x. However, I mean, these are adjusted leverage ratios.

[00:47:05] So they can be effectively whatever the company wants them to be. So it's hard to say if BCE versus Kojiko, if that's an apples to apples basis or if there's some different adjustments in there. And I mean, overall, the US side of the business seems to be struggling pretty hard, which again, I mentioned, you know, BCE is expanding down there. Obviously, a different model. I don't even know if Kojiko offers internet in the United States, but I know for sure they do offer mobile plans.

[00:47:33] BCE, probably a much larger player, so it can probably navigate it a little easier. But it's, I don't know, it's a weird company. It seems so cheap. But then when you look at, you know, the underlying numbers, you're kind of like, okay, that makes a little bit of sense. There's effectively no growth here. And they're having to take, as I mentioned, I mean, they're going to try to tap into the Canadian cell phone market, which I mean, there's no guarantee that that's going to be profitable in the long term. And I would imagine it costs a bit of money too. Yeah.

[00:48:00] And what people can do just to get back to those leverage ratios, because oftentimes the companies will use adjustments and it's hard to figure out whether you're comparing two companies in the same sector, whether they're using the same adjustments or not. It's not very hard to just do the calculations yourself. So instead of using adjusted EBITDA, you just use EBITDA straight up for both companies. And then you're measuring apples to apples. So that's an easy way to be able to measure apples to apple.

[00:48:29] Oftentimes it's best to do that yourself instead of taking what the company says. So you actually have a better idea because sometimes the adjustments are a bit ridiculous to make their numbers look better. And they're not official. They're not like GAP or they're not IFRS. So the companies can basically do what they want. And they will usually explain what it is, but sometimes the explanation is pretty confusing.

[00:48:54] So you can always just use calculated yourself and just use non-adjusted numbers. Yeah, that's definitely the best way to go about it. Because I mean, a lot of companies, almost all companies have some sort of adjusted figures, which sometimes like you look at them and they make a lot of sense. Like say like an acquisition or something, there's one-time costs that aren't going to impact the business for the foreseeable future. But there's also a lot of weird adjustments. I mean, adjusted earnings, adjusted EBITDA.

[00:49:22] I mean, some companies even report adjusted free cash flow. It's better to dig into the numbers, figure it out yourself and see if the adjustments make sense. Yeah, totally agree. And now we'll finish here with, were you aware of this company? Yeah. Richelieu Hardware? Yeah. Okay, okay. I mean, I had heard the name. I wasn't aware that they were publicly traded. So I was looking in terms of ideas to do in terms of Canadian companies and I came across that.

[00:49:50] So for those not familiar with them, they manufacture and distribute cabinet hardware, furniture hardware, architectural hardware, and more types of hardware. They serve a wide range of customers, including cabinet makers, kitchen manufacturers, furniture manufacturer, renovation professionals, and designers. It's a company that I, like I said, I was pretty familiar with, but never dug into them. They have a market cap of $2.3 billion.

[00:50:19] They just released their Q4 2024 and full year results. I'll just go over a few numbers here, mostly on the full year results, just because we haven't talked about them a whole lot. Their sales were up 2.5% this year after the decline of 0.8% last year. It was up 5% for Q4 alone, where it gets tricky and probably some warning signs here for the business. Not warning signs, but not a business that's growing overly quickly.

[00:50:48] As you can see, revenues for the most part of the last two, three years have really stagnated. Not surprised that it went way up from 2020 to 2021 and then 2022. That was probably a big, it was probably a big benefactor from the pandemic. Housing.

[00:51:05] People spending on, yeah, exactly, on housing and people spending on things that were not experienced or, you know, things like furniture, like redoing their homes because they couldn't go out and travel. So a lot of people had excess money. So I'm not surprised that had a trickle down effect here to a company like Richa, your hardware. But going forward, where is the growth going to come? I'm not quite sure.

[00:51:30] In terms of the underlying number, their gross margins were down 190 basis point to 11% while operating margins were down 225 basis point to 7.23%. So not things you want to see declining margins. I'm suspecting that they probably had to do some discounting. I tried to listen to the conference call, but it was not, the link wasn't working on the website.

[00:51:56] So, so I, I, I tried to just, the link was just a broken link. I don't know if they fixed it, but that's what I think is probably happening, but I could be wrong here. Net income was down 23% to 86 million. Earnings per share was also down 23% to $1.53 and free cash flow was down 56% to 103 million. So not tendencies that you want to see with a company.

[00:52:22] Things being down some of the important metrics, including margins, earnings, free cash flow, all trending down. It is not trading super cheaply either. So trading at evaluation of 27 on a 27 P on the trailing 12 months.

[00:52:38] So not cheap on a Ford earnings basis, which is a little bit confusing that they think earnings would be increasing that much, but 22.7 on the Ford looking basis in terms of P. So it's not super cheap, still interesting, larger than I thought at 2.3 billion market cap.

[00:53:00] So I wasn't, I was surprised that they're this big of a company, probably a company that's more, that can become more interesting. If we really see a downturn, a continued downturn for lack of better word in the housing market, both in Canada and the U S. If there's really a bottom, then I think it may be a company that would be interesting then, because then you'd be betting on the housing market and picking back up in the years to come.

[00:53:28] I'm not quite sure we're there yet, at least with the valuation that they've been trading at. Yeah, it's kind of, I looked up just new housing starts in Canada over the last 10 years and pretty much like their, their chart kind of follows it. Yeah. Like in 2017, when we started, you know, hiking rates 2017, 2018. Stock price bombs, if you look to housing starts, those dip too. And then obviously COVID was a, was a huge, you know, situation there.

[00:53:55] I would imagine both on the renovation front and the new housing front. But yeah, I find there's a, there's a lot of companies like this. I mean, we have where you just wouldn't think they'd be publicly traded. I mean, we have, we had sleep country and you're like, oh wow, they're a public company. You had Leon's furniture. You're like, oh wow, they're a public company. And then this hardware, this hardware company as well. Yeah. And there are just companies that you don't always think about. And one thing I forgot to mention here, they are paying a dividend.

[00:54:24] I believe it's more than covered in terms of payout ratio, whether you look at earnings or free cashflow. Yeah. I think the, on the earnings front. Yeah. It's only about 39%. So that's very well covered. I don't have the numbers for free cashflow. So at least that it's good if you're looking for a little bit of dividend income. But again, I'm not sure you're going to do all that well from a total return standpoint, at least for the next couple of years. But it may be worthwhile.

[00:54:52] Obviously, this is not investment advice, just what we see. But yeah, not surprised that this company was publicly traded. I was aware of the name just because I've heard of them before, but wasn't aware of them being publicly traded. Yeah. Yeah. When I was much younger, I used to do cabinet making for a few years and they were pretty much our main place to go for like handles and all that type of stuff. But yeah, it's going to be a cyclical company for sure.

[00:55:20] No, I think that's a good point to end it at. Great episode. Welcome back then after a week hiatus. And thank you everyone for listening. We do appreciate your support. If you haven't done so, it's really appreciated if you take a few minutes. To go on Apple Podcasts, Spotify or whichever platform you listen to us on and give us a five star review. Helps other people discover us.

[00:55:47] If you want to follow us, interact with us, Twitter is always a great space. I am at fiat underscore iceberg. And then you're at stocktrades underscore CA. Okay. I haven't said in a while, so I wasn't sure I didn't want to mess it up. But thanks a lot for listening, everyone. And we'll be seeing you next week. The Canadian Investor Podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast.

[00:56:16] Always do your own due diligence or consult with a financial professional before making any financial or investment decisions. Probably anotherожалуй you You Delete Let's go.