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Slip into something more comfortable and delve into personal finance with Josh Sheluk and Colin White, experienced portfolio managers at Verecan Capital Management. Each episode demystifies complex financial topics, stripping them to their bare essentials. From investment strategies and financial planning to economic headlines and philanthropic giving, delivered with a blend of insight, transparency, and a touch of humour. Perfect for anyone looking to understand and navigate their financial future with confidence. Subscribe now to stay informed, empowered, and entertained.
Verecan Capital Management Inc. is registered as a Portfolio Manager in all provinces in Canada except Manitoba.
Welcome to Barenaked Money, the podcast where we strip down the complex world of finance to its bare essentials with your hosts, Josh Sheluk and Colin White, portfolio managers with Verecan Capital Management Inc.
Josh Sheluk:Welcome to the next episode of Bear Naked Money. As Colin has been referring to us, the OGs, Colin and Josh here, coming at you with some news in the past couple weeks. What's been catching your eye, Colin?
Colin White:Oh, well, there's the Canadian GDP. There's the seeming reversal of the tech stocks because NVIDIA is off $1,000,000,000, Josh. Like, is is it worth anything anymore? I mean, that was a headline that caught my attention. A billion's a lot.
Josh Sheluk:Is that a 1,000,000,000 in, like, the last minute or a 1,000,000,000 in the last week? Or
Colin White:why I don't know. I just it was just a big headline. Yeah. NVIDIA being down a $1,000,000,000, that's news, isn't it?
Josh Sheluk:Well, when you're a 3 $1,000,000,000,000 company, a 1,000,000,000 is kinda like, a pimple on your ass, I think. So not too bad.
Colin White:Well, I certainly have run out of fingers. Not sure. Watching the the federal reserves, both Canada and the US make their comments, seeming inflation, believing inflation's under control. Canada still got some positive GDP numbers. We do seem to have seen a bit of a reversal or, I think, as you described it, an inflection point in the markets over the last month.
Colin White:There's all all kinds of things that are guaranteeing us a soft landing. Right, Josh?
Josh Sheluk:Well, that's why do you say that? Well, we did our soft landing podcast a couple weeks ago, so we'll move on from that a little bit. But the inflection point thing, I think, is is quite interesting. So we're sitting here recording at the end of July. Throughout most of July, it seems like pretty abrupt, I guess, inflection on some of the leadership that's been out there for markets so far this year.
Josh Sheluk:So it's been large cap companies, predominantly speaking. And when I say large cap, like, the largest of the large. The largest companies are really driving the bus. Some of the very tech focused companies have been doing extremely well so far this year. NVIDIA, you mentioned that's one of them.
Josh Sheluk:And the anything really related or tangential to AI has been really going great guns this year, and all of that seems to have turned over the past few weeks. I've been hearing a lot more anecdotally about maybe these companies are investing too much. Maybe the boom's not gonna be quite as as much as as we've hoped. And, also, just seeing the market action, some of these tech companies have sold off pretty aggressively. It's only a couple week trend, few week trend maybe at most, but it's interesting to observe in the real time anyway.
Colin White:Well, to the fossils who are listening to this, we may be entering the pets.com phase of the dotcom bubble where it all just kinda crumbs crumbling down because we're starting to see some of the similar commentaries coming out now. Is AI really a bust? You know, anything with AI has got all this money, you know, how do you possibly get this many 1,000,000,000 of dollars of investment back out of something? You know, what is the business model here? Who has the business model?
Colin White:Is there a business model? Hey. There was a business model here a minute ago. You know, the kind of the the the same moment that I think that the Internet hit at a certain point after it went through its bubble phase. Now, again, is this is this that inflection point?
Colin White:I I would draw some similarities, but as to how it plays out or the magnitude of how it plays out. But I really do get a sense that somebody the adult entered the room and said, where is your business model? And there haven't been resoundingly positive, answers to that question.
Josh Sheluk:Yeah. Well, it's it's another one of those things that we'll probably only know years from now whether this was a true inflection point or just a pause to hire things because that's so often how these these trending I'll call it trending investments will go. You'll look at them one day and you'll think, wow. Finally, that that craze is over. And then 2 months from now, it just we'll have shot to higher heights.
Josh Sheluk:So you never know. It's it's this is the the really challenge thing with challenging thing with bubbles specifically is you don't know when that that burst is gonna happen. And as the saying goes, the market can stay irrational longer than you can stay solvent.
Colin White:Yeah. The I think the issue is that you have technology that's absolutely going gangbusters. It's a fascinating story. It's a very compelling story and money chases stories. Capital chases stories.
Colin White:So when you have something that's legitimately an interesting story, legitimately a transformative story, the tsunami of money that can chase it distorts it. Like, you know, you end up pushing a bunch of money where it maybe does or doesn't belong. It gets inefficient. You know, rather than letting the technology just kind of go go along in the normal path at whatever speed it can get, it gets distorted, and that distortion leads to more money and then it ends up getting trapped. Because again, I don't think there's a really clear understanding of what the business model is.
Colin White:There's lots of business applications for this. Like I think AI has got it's going to be transformative in a lot of different industries, but it's going to be incremental. I guess I'm not sure how much of its own industry it's creating, but it is going to be transformative to many other industries, and we're all trying to figure that out. We're playing with it right now, you know, and I I think there's a whole bunch of FAFO going on as people try to figure out what to do with this, but I haven't seen any firm compelling answers that justify the amount of money that's chasing, you know, where what these amazing answers might be.
Josh Sheluk:Yeah. I think we're mostly on the same page with this. It is gonna be transformative in some way. We just don't know, you know, what what's the what's the Facebook of the AI era. Right?
Josh Sheluk:Like, the Internet started, and you're like, wow. That's gonna be cool. I can email my friend. Well, okay. But you have whatever 5, 10 years later after the real, proliferation of the Internet, and then you have Facebook and a company that's ballooned into one of the largest companies in the world.
Josh Sheluk:So I don't know if we and it's it's I think it's gonna be impossible to really identify in advance, like, what's what's gonna be that company, that that real winner, that real business model. It's probably something that doesn't exist today, and it's gonna be very creative when we'll look back and say, yeah. That was so obvious. Because if you look back at some of the stuff that's really excelled through the Internet proliferation, it's like, yeah. No shit.
Josh Sheluk:But a lot of things along the way, it probably wouldn't have been so obvious. I was listening to a podcast the other day, and it was talking about they were talking about during the Internet, bubble, how there's a company. I can't remember the name of it, but it was a grocery delivery company. And Mhmm. It went belly up.
Josh Sheluk:And what do we have now? We have all kinds of grocery delivery options all over the planet. You can go anywhere and get your groceries delivered, fast food delivered, all kinds of stuff delivered. So it's it's it's really hard to know what's gonna be successful.
Colin White:It's impo no. It's impossible to know. Like, let's just call it impossible. It is impossible to know with certainty, which is why and listen to some if anybody wants to take away one point from all of the podcasting we've ever done, is that a transformative idea in the real world does not make a good investment. Yep.
Colin White:But the the they're not the same thing. You know? Just disavow yourself of the idea that the next best thing is the best investment. Now, Josh, bear me out on this. Our best investments have not been exciting.
Colin White:Like, if we look back at where our best investments and our best returns have come from, Have they been our most exciting ideas? Have they been transformative?
Josh Sheluk:Transformative? No. I think without a doubt, transformative would would be no. Have they been exciting? Maybe to me, maybe to you, to your average person.
Josh Sheluk:I I don't know. Like, I think coming back to some of our most successful stock investments, you think like a rental company, like construction rental equipment. Like, that's not
Colin White:Chicken.
Josh Sheluk:Yes. Chicken farms. Chicken was chicken was a good one. We have manifested in a chicken farm. Like, we did have one automation company in there that did really well for us, but that was, like, manufacturing automation.
Josh Sheluk:It's not it's not something that would typically be considered sexy for your average person on the street. Like, hey, I can automate a conveyor belt for you. Does that sound exciting? Well, not not so much. So, that's that's our approach to investing and are a little bit more grounded and and thoughtful and rational, if I'll call it, approach to to trying to to make money.
Josh Sheluk:And we're typically gonna stay away from the ideas that are priced transformatively. Like, we are gonna make this company extremely expensive because it could be transformative. Well, you've kind of squeezed all the juice you can out of that lemon before you even got there.
Colin White:You go to the office and the guy working next to you, John, tells you you should invest in NVIDIA. It's probably too late. Yeah.
Josh Sheluk:You know,
Colin White:prob probably all the money's already gone into NVIDIA and, you know, you know, you can might still make money at it, but it's gonna be more by good luck than good management. You know? But, again, this is still this thing because these two things go together. You know, people get attracted to a new idea, and if people's attention is there, somebody's gonna try to launch an investment product that, you know, tells them they're gonna get rich off of it and they're gonna and people are gonna go for it. Yeah.
Colin White:Because there's that whole appetite and get rich quick. Again, the demand for our old seeds is a supply, but that doesn't keep people from trying to provide a supply.
Josh Sheluk:Yep. So just coming back to your point, there does seem to be somewhat of an inflection right now. The largest companies are starting to underperform. Some of these high flying tech companies starting to underperform. Some of the small cap companies starting to to have a little bit of a rally.
Josh Sheluk:Some of the things that were a little bit unloved. Interest rates, have gradually come down over the past couple months and seems to be given a a little bit of support to to companies that are a bit more interest rate sensitive as well.
Colin White:Yeah. And again, the the GDP number coming out of Canada, again, firmly out of the recession territory. It's still positive, not hugely positive, but it it's not showing those kind of signs yet. Now there are other indicators that are are more worrying looking forward, so we might not be out of the woods just yet. But certainly the current numbers being reported are not reporting anything that's that's too too dangerous.
Colin White:I mean, again, the the needle we're we're trying to thread here is to get interest rates down enough so that all these mortgages come and do, people can afford and, you know, not have the economy go into recession, you know, and causing job losses and stuff like that. If we can keep the economy gradually growing and bring interest rates down and hit that sweet spot, that's really the best we can hope for. Now I still think there's pain to be felt, and there's pain being felt in Toronto right now in the in the condo world. I still think that there's not all the pain has been felt. But from an economic indicator perspective, they're starting to seemingly line up a little bit, notwithstanding the personal trauma being suffered by some very real people in in the real world who either overestimated what's gonna happen or just were in the wrong place at the wrong time.
Josh Sheluk:It doesn't feel like we've we've had enough pain in Canada for how much debt we've taken on over the last 20 years. Right? That's when you say there might still be pain to to be felt. If we got out of this, like, relatively unscathed or just feeling the pain that we felt over the past few years and things kinda continued on with the soft landing and we landed on a nice pillowy bed somewhere. I don't know.
Josh Sheluk:I'm a little bit skeptical.
Colin White:You know, you seem worse. You seem offended. You seem to think that people need to be taught a lesson. Like, it's Oh. They need to they they they need to feel more pain.
Colin White:They we've we fucked up so bad that, you know, I think part of you would like to see us feel more pain.
Josh Sheluk:I don't wanna say that because I think people have been struggling with there there's been some real reasons why debt has climbed to the level that it has in Canada, specifically. Right? Real estate has appreciated at such a high clip over the last 15, 20 years where it's not I can't really blame people for wanting to buy a house and to and for stretching to get into that house, especially when interest rates were low. So we can blame people for maybe being a little bit less forward looking than they should have been. But when that house is in front of you and you're saying, I really wanna buy a house, all I've seen over the last 15 years is real estate prices go up, and I can buy that house right now.
Josh Sheluk:Maybe you sacrifice a little bit or or, like, take that for looking part of your brain and just, like, stomp it, stomp on it and and just buy that. I was like and I I can't totally blame people for that. So I I don't I don't wanna say that people should feel pain because they took on debt. Because I think a lot of people that made reasonable decisions to take on debt at the time are going to feel pain nonetheless, and that's not right either. So I just don't think we can escape from this debt binge collectively without feeling more than, like, a pinprick, that we've felt so far.
Colin White:Well no. And and, again, you're you're describing the rational middle, which is, as I said, some people, you know, just found themselves in circumstances beyond their control. Right? But there are people who are riding the ragged edge of glory who are, you know, flaunting, you know, all rules and and all normalcy and spending 10% more of what they have. You know, that crowd does need to get get smacked a little bit, I feel, in order to knock them back in line.
Colin White:But you're right. The pain that's going to be suffered is going to affect people who weren't that. Like, we've we've entered a point where those people, unfortunately, are gonna have to suffer pain for the greater good. The alternative is that we let inflation continue to run at 9%, and we all feel pain, which I don't think is is the right outcome. So, you know, we're we're sacrificing a few for the for the good of the many.
Josh Sheluk:Fair point.
Colin White:So but it's it it continues to be interesting to watch. Well, you and I were discussing the other day because we're now 2 years over 2 years into the interest rate inversion, which I believe has never been seen. Are we at a new all time high for interest rate inversions?
Josh Sheluk:For an inverted yield curve, I think we're nearing it. I I don't wanna say convincingly that we've been we've had an inverted yield curve for as long as we ever have without a recession, but it certainly is getting into the the longer days of that that
Colin White:Yeah. Well, again, it goes back to you. Don't be certain about a whole lot. You know?
Josh Sheluk:Yeah. And we never are.
Colin White:But yet somehow we're still useful. Go figure. If you're breaking a sweat trying to figure out what your financial advisor's talking about, you're not getting the service you need. You probably hate trying to get an answer from them, but you also think moving your accounts will be a headache, and it might be. But working with don't rock the boat wealth planning dot com or dot ru isn't exactly stress free, is it?
Colin White:Call us. We will demystify the world for you.
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