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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.
Speaker 1:
You're about to get lucky with the Barenaked Money Podcast, the show that gives you the naked truth about personal finance, with your hosts, Josh Sheluk and Colin White, portfolio managers with WLWP Wealth Planners, iA Private Wealth.
Josh Sheluk:
The next episode of Barenaked Money coming at you right now. Colin, I don't know if you've heard. A bank failed in the US. You heard about this?
Colin White:
Really? No, I've been concentrating on the NBA and my Call of Duty hobby. So Josh, maybe you can bring me up to speed, and maybe I'll learn something this podcast.
Josh Sheluk:
Well, we're not going to go through all the details on why the bank failed and the technical aspects of it. I'm sure everybody here has read a million articles by now about what's happened and why, and if not, there are a thousand other podcasts out there that are explaining all this. But Colin, I have some questions for you. You've been through something like this ... I'm going to use that term very loosely ... before. So I want to dive into some things with you, and I want to start by asking you one question. You told me you're already bored about this story. Why?
Colin White:
Well, okay, to be clear to our listeners, I've never worked for a bank that's gone under. I've never been in the vicinity of a bank that went under, but I was giving financial advice in 2008 when there were banking failures in the US. So just to be clear, no, I've ever actually taken a bank under personally. And this is probably why I said I was bored, because this is even on a smaller scale than what we saw in 2008.
Josh Sheluk:
I hope so. I hope so.
Colin White:
Absolutely. And you could see the writing on the wall for how these things resolve themselves. And it's the same tug-of-war that happened in 2008. So history doesn't repeat itself, but it does rhyme. So you see a failure, and this is not on the same scale that happened in 2008. But the US banking system is very fragmented, and some of it's very niche. So these things happen.
And of course, the big conversation about the contagion kicks in. It's like, well, who are they going to take with them? How bad is it going to get? And at that point, I can write the rest of the story. If it looks like it's going to be too bad, then there's going to be a bailout, and then there's going to be hand ringing over the moral hazard from bailing everybody out. And then it'll all calm down in a few months, and we'll move on, maybe a little bit wiser, maybe a little less certain of things. I mean, it probably has hurt people's feelings and hurt people's expectations, but it wasn't going to be allowed to turn into what the doomsday-sayers were saying it was going to be.
Could it be made an example to satisfy the moral hazard thing? Potentially, but again, I'm not invested in Silicon Valley. We don't have client assets exposed in Silicon Valley. It's not a game that I remotely have ever been interested in playing. So yeah, I've spent my time doing other things. My Call of Duty's getting really good.
Josh Sheluk:
Okay, so you said a couple things there that I think made our listeners just poop their pants a little bit, because you said you can kind of see the roadmap from 2008 playing out here, and the roadmap in 2008 was a 50% downturn stocks. So is that what you're talking about here?
Colin White:
No, no, no, no, no, no. Wow, you got there in a hurry. You must have been in a fast car. No, in 2008, what we saw was the global monetary system at a very fundamental level be challenged. And the question was, can we have enough cooperation amongst the superpowers in order to stabilize everything? Because when you deal, as the naysayers may say, a fiat currency, which is their disparaging way to refer to our currency system, it's all based on trust. It's based on two people agreeing that something's worth something and being willing to trade in it. So I'm strictly speaking on the monetary side of things.
Now, there's a whole bunch of other things that played into 2008. So there was a different causation for the financial collapse, if you want to use that word, or the financial stress that was caused, which helped lead into, I think, some of the stuff from the stock market for sure. So that part's not nearly as clear. I don't see ... Now, I think that there's a number of ways that it can play out from here. So I'm not convinced that the stock market is going to react the same way as it did in 2008. I think the monetary system will heal itself. And there'll be hand-ringing, and there will be concern. And for a while, maybe they'll start to regulate the banks a little more strictly.
We humans. We don't learn. Every four years, we have amnesia, and there's a new administration in power, whether it's federally, on the state level, provincially. But we take out all of the good safeguards are put in place when we learn lessons, and then bad things happen again. And we put the safeguards back in again.
Again, yeah, maybe I'm too old, Josh. Maybe that's just it. I've seen this play out whether there's Dodd-Frank in the US or even in Canada, the rules getting relaxed and then tightened and relaxed and tightened because we tend to not remember things very long.
Josh Sheluk:
Right, okay. So yeah, just to be clear, right now, I think you and I are both totally on the same page with this. It doesn't seem to be ... There's definitely some stresses, obviously. When you have a bank failure and a large bank failure, there's definitely some stresses, but it doesn't seem to be sort of a systemic issue the way that we had in 2008. Time will tell, but there's no hints right now that this is something that's going to, again, freeze up or collapse the entire monetary system as we were worried about in 2008.
Colin White:
But I also think, to me, that was one way to look at this where it's a tremendously good sign because it is evidence of the effect that the change in monetary policy is causing some of the risk to come out of the market and some of the speculation to come out of the market and some of the slowdowns that they're trying to make happen, although again, they're not being all that ... They don't seem to be all that successful at it. But this could be a real live smoking gun that, yeah, it is having an effect out in the margins in a material way.
Josh Sheluk:
Right, so we'll put you on record as good thing that the Federal Reserve caused a massive US bank failure.
Colin White:
Actually, you know what? Yes, I'm going to jump right up and down on that, and I am going to say that because if we weren't seeing this kind of outcome from the current monetary policy, the monetary policy was going to get more severe in order to make this happen. So we better start seeing some bad news economically because the stated goal of the Fed is to get rid of inflation or bring it back within target or whatever words they're going to use. So if we don't see shit start to slow down, then yeah, it's going to get way worse before it gets better.
Josh Sheluk:
So I have some follow-up questions for you. And what you're talking about there, I think, is ... I'm kind of on the same track. It's a good segue. I want you to answer this question directly and not sort of deflect, but why should we care about the story? Why should we care about the story?
Colin White:
We should care about the story because it's evidence of monetary policy doing what it's expected to do. We should care about this story because without boundaries, without the proper reaction from the regulators involved, it could get a lot worse. So I think it's an important canary in the coal mine for both of those issues.
Josh Sheluk:
Okay. Thank you for playing my game. So again, another question. Why shouldn't we care about the story?
Colin White:
Because it's a transitory issue that's going to affect markets more in the short term than it is in the longer term. Longer term, other things are going to matter more. The true inflation numbers are going to matter more. The war in Ukraine's going to matter more. There's lots of things that are going to matter more going forward. This is a blip on the radar, if you will, a meaningful blip. It's an incoming bogey. We should probably take a quick look at it, make sure that it's benign, but move on. I don't think this is a signal of the coming apocalypse or anything of that nature.
Josh Sheluk:
Okay, great. So last question then. What should we do about it? As an investor, what should we do about it?
Colin White:
Oh, as an investor, nothing. There's nothing investible here. This doesn't ... Again, we talk about news, and things get [inaudible 00:08:23]. This is fraidy-cat territory. These are big numbers. This is a bank failure. And then you say bank failure. They say bank failure, and you say bank failure. That's going to grab attention. So this is scaredy-cat news. Now this is going to attract eyeballs, and that's the game that gets played. How scary can we make it?
Some of the typical commentators ... I won't name them, but there's certain people that show up in The Globe and Mail who are always afraid of things. And they're writing commentaries now about deflation and all kinds of other apocalyptic type things. But if you look at them, they pretty much write that article every two or three months for one reason or another, so it gives them a little bit more sunlight, if you will, for them to talk about it.
But no, to be afraid of these things or to think of what comes next ... and that's the big thing. And that's what I always come back to when it comes to an investible idea. Yeah, something has happened. Do you think you know for sure what comes next? The honest answer is no. It's not clear entirely what this means in the short, medium, and long term, but it is certainly a sign, again, that monetary policy's working.
And you know what? Oversight is limping along. It could have been better if they hadn't taken off some of the safeguards that had been in place previously, but the fact that we're now going to have that conversation ... and we're going to do what we normally do, put some safeguards back in place, hopefully, so that exactly the same thing doesn't happen again for a while until somebody else can get votes by saying, "Oh, this is unnecessary. It's making business too difficult." And we'll go back in the other direction, and I'll be alive next time that we have one of these. I'm more than convinced of that. And I'll just kind of nod up and down, and I'll be bored again.
Josh Sheluk:
I think a lot of US bank execs would argue that they haven't actually retracted or relaxed any of the safeguards since 2008, but maybe that's a podcast for another day.
Colin White:
Of course, they would. That's their lobby position. Oh, we're so hard done by.
Josh Sheluk:
Yeah. Thanks for indulging me today, Colin.
Colin White:
No worries, Josh.
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Speaker 1:
This information has been prepared by White LeBlanc Wealth Planners, who is a portfolio manager for iA Private Wealth. Opinions expressed in this podcast are those of the portfolio manager only and do not necessarily reflect those of iA Private Wealth Inc. IA Private Wealth Inc is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. IA Private Wealth is a trademark and business name under which iA Private Wealth Inc operates.
Speaker 4:
This should not be construed as legal, tax or accounting advice. This podcast has been prepared for information purposes only. The tax information provided in this podcast is general in nature, and each client should consult with their own tax advisor, accountant, and lawyer before pursuing any strategy described herein, as each client's individual circumstances are unique.
We've endeavored to ensure the accuracy of the information provided at the time that it was written. However, should the information in this podcast be incorrect or incomplete, or should the law or its interpretation change after the date of this document, the advice provided may be incorrect or inappropriate. There should be no expectation that the information will be updated, supplemented, or revised, whether as a result of new information, changing circumstances, future events, or otherwise. We're not responsible for errors contained in this podcast or to anyone who relies on the information contained in this podcast. Please consult your own legal and tax advisor.