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As we do at the beginning of each year, we channel our inner psychics and reach out to the spirit world to determine precisely what to do for the next 12 months. (Hashtag sarcasm.) Jokes aside, Josh & Colin take some time to discuss what they think may happen in 2023, and they've got a pretty decent track record. To make these predictions, they use a combination of experience, credentials, and historical data. Tune in for the ins and outs of 2023.
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.
Announcer:
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.
Colin White:
All right, so this is going to be our first podcast maybe of the year. I'm not sure if Kathryn is going to make it the first podcast, but yeah, this could be the first podcast of 2023. And in order to try to keep up with everybody, we're going to predict things, or make fun of predictions, or make you think we're giving you a prediction and then not really give you a prediction. I'm not sure. As always, Josh has got the bullet points we're going to work from. So Josh, what are we going to do?
Josh Sheluk:
Well, we had fun doing this last year, Colin. I made 10 predictions at the start of the year. Some were a little silly, some kind of came true, some didn't come true, some kind of came more true than I wanted them to come true, as we recapped it on our last podcast. So I'm excited for this year. I got nine, actually. I'm going to leave space for you to put one in there. So we'll have 10 more predictions for this year.
Colin White:
See, and this is our problem. Let's just editorialize for a second. The reason we're not exciting to listen to is exactly how Josh answered that question. We're maybe kind of, somewhat right, maybe a little bit on that one, but not as right on this one. And it's nuanced. And this is the podcast that's not afraid of being nuanced at the risk of being less listenable. So for those who can stay with us through the nuance, there should be some stuff here to learn.
Josh Sheluk:
And as always, this is just an extra disclaimer for everybody. These predictions are not investment advice for you. So take them for entertainment purposes.
Colin White:
Entertainment purposes only.
Josh Sheluk:
All right. I'm going to kick it off here with my first prediction, Colin. And when I say you in this situation, I'm talking about the collective you, not you specifically. You will be surprised this year, and you will be surprised about being surprised. So this is a two-parter. I heard this quote this week on a podcast, and the quote was that, "It's okay to be surprised when investing finance related. It's not okay to be surprised about being surprised." So we should know that surprises are going to come our way this year. We're not going to be able to predict the future. And by knowing that, by accepting that, by planning for that, we can put together some actual sensible financial recommendations for people.
Colin White:
Well, I think that dovetails nicely with the whole conversation we've had in the past about how confidence is dangerous. And the old quote from The Big Short that's attributed to Mark Twain, it's not what you don't know that's going to hurt you, it's what you think you know for sure just isn't so. And this is exactly that. You're right. It's okay to be surprised. Being surprised about being surprised means you had too much confidence. And you all need to sit down for a second.
Josh Sheluk:
Yeah.
Colin White:
Take 50% off there, big shooter.
Josh Sheluk:
Yeah, great. So we're on board with that one. Now, number two. Now this is a real prediction. Bonds will do better than they did last year.
Colin White:
Whoa. Now again, see, I know how you game this, Josh. You haven't said what specific bonds or what specific currency or whether you're talking high yield or government or duration. And I am sure with your vast amount of skill and intuition, you will be able to find some way, regardless of how the year plays out, to declare victory. So kudos for how you put that forward.
Josh Sheluk:
Give me some credit, I don't game it that much. When I say bonds, I mean broad market bonds. We can look at the Canadian broad market bond universe or the global broad market bond universe, and look at those. I do truly think and believe strongly that they will do better than that. And the reason I say that is because we just had the worst year in recorded history for these bonds. So I'm may be not going out on that far of a limb. But I do strongly believe, especially with interest rates where they are today, that we will have a better year for bonds than we did the year before. I will not guarantee it, but just like last year when I predicted worse returns for stocks coming back down to earth from a massive high, I'm now predicting better things for bonds coming up a little bit from a very low position.
Colin White:
Oh, watch, Josh has just introduced the halo effect. I was right one year. Therefore, you should listen to me this year. That's dangerous.
Josh Sheluk:
Okay. Let's move on before we have to dig into that one at all. My third one here, the terminal interest rate will not be what is currently projected by either the US Federal Reserve or the Bank of Canada, take your pick.
Colin White:
Oh, no, again, that gets into some of the games played by the central bankers to talk a tough game and use their voice to change direction of things without actually having to do anything. So I do think that, and I love the term, terminal interest rate. It's the terminal velocity. I mean, come on. It's not that exciting. What they're talking about it how high they're going to have to take interest rates before they have the desired effect. Terminal interest rate, come on. I've never seen a group of people more interested in being exciting or cool. Everybody's watching them now, right? Central bankers, nobody's been watching them. So now it's pretty soon there's going to be an interest rate cyclone or something, an interest rate vortex. They've hired marketing people. They must have.
Josh Sheluk:
They must have, yes. The reason I bring this one up is because as much as we follow what central banks say is going to happen with interest rates, history tells us that they are not that great at actually predicting where interest rates will go. They have some... And these are the people that control the interest rates, and they are not that good at predicting where they will go. So this doesn't tell you that they're bad at their jobs or that you shouldn't listen to them at all. But what it does tell you is that again, you, we, none of us should be confident about what's going happen in the future. Even the experts and the people controlling these things do not have that much influence or accuracy in knowing where things are going to go.
Colin White:
You know why, right? You know why?
Josh Sheluk:
Tell me.
Colin White:
Because they take in information in real time. They process the information, then they react to information. They don't set the interest rate policy for the year and go on vacation. They sit there, and look at actually what's going on in the world like we want them to do.
Josh Sheluk:
Yeah. That's right.
Colin White:
It's not like they formed an opinion and then, well, I can't change it. Why will I said it? No. The human condition wants that. I need to understand and predict my year. No, these are the people we want looking at what's going on in real time and reacting to it. That's the whole job description. To expect something other from them, no, I don't want that. It's like a politician. Well, you said this before. Well yes, I have new information, so I've changed my mind. Oh, we can't vote for you. Why? Do you want to vote for a guy who never changes his mind ever? Come on. Sorry. You hit a nerve.
Josh Sheluk:
Already a couple rants, we're only three questions in. Wow, I'm on a roll here. Oh, this one's going to get you a little bit ranty, Colin. Number four, Elon Musk will do something stupid this year. I need to have an Elon Musk prediction in here. Elon Musk will do something stupid in this year, but it won't be nearly as stupid as spending 50 billion on a company he didn't want. How about that?
Colin White:
Well see, the problem with defining stupidity is it's very subjective. And I think it'll be difficult for him to make a more questionable financial decision this year based on scoring it on magnitude for sure. But I do think there's some unexplored potential on the lunacy of some of his ideas. It's been truly epic to watch the unspooling of a once proud ish functioning organization and somebody who has a half baked idea on how to make it better. And it's sort of like having a bunch of thoughts running through your head and having the capacity just to fling them out into the world, and act on them before you really fully considered them or listen to anybody else. There's a reason that you want people around you who call you stupid because it keeps you from going too far with ideas that are stupid.
Josh Sheluk:
Yeah. Bonus prediction time. What are the chances that Elon Musk gets banned from Twitter?
Colin White:
Well, I think he just banned himself because he let Twitter vote. So I have no idea. I don't even have words.
Josh Sheluk:
All right, let's move on to number five here. Inflation will not hit last year's peak, but it will still really matter for long-term financial decisions.
Colin White:
Wow. So you're saying there's not going to be any kind of an echo to what we've seen. You know what? I'd probably score that an 80% probability and largely because the interest rate hikes have gone into the end of the year and the effect of those can be depending where you look 90, 120 days out before you actually see the impact of the change in the fiscal policy. So the stimulus or the lack of stimulus, the anti stimulus, the de stimulus. Wow, what's the opposite? Anyway, the changes that have been made I don't think have reverberated completely through the economy. So I think that there's a significant amount of that to work its way through. So I'll give an 80% chance on that because I tell you that is, a nightmare is a bad word, but that would be a scary scenario if we saw a resurgence of inflation given the amount of attention and effort that's put into it. And I don't think I can handle back on getting any more excited about or passionate about his goal to reduce inflation. I don't think I can handle that.
Josh Sheluk:
Yeah, I wanted to add the piece in there about it mattering for the long term because I think this is a year where maybe it's sort of refreshed in people's minds, especially some of the younger folks out there that hey, inflation, it does really matter for my financial circumstances, especially when you start compounding some of that over the long term. And when we have one and a half percent inflation for 12 years, it may not be sort of that slap in the face that this year is to wake you up and say, hey, you need to grow your money over time. You can't just leave in the bank because this is going to be, for most people, this is going to be a wealth destroyer over long periods of time for you.
Colin White:
Well, you're right in that people have fallen asleep. It was interesting. You put together a slide there one time showing how the interest rate, even with the most recent increases has still only averaged little better than 2% over the last 12 or 13 years.
Josh Sheluk:
That's right.
Colin White:
So this anomaly that we're kind of going through really has brought things back up. So you did a financial plan 15 years ago and assumed 2% inflation, you're probably pretty much bang on, that just happened all if you hadn't. But 12 years of really low inflation have kind of taken it out of people's minds. And a lot of people are thinking that all my pension is indexed to inflation. Some of them are, some of them aren't. It is something that goes into and out of your pension from time to time. Hey, look, if inflation's at one, 1.5%, you know what? You're not going to notice that much of the difference year over year.
You can adjust your life quite nicely to it. You start to see it running at this, it can be material over 10, 20, 30. So yeah, this is something that needs, always has been important, but I think it's going to be easier to get people's attention on the conversation about projecting inflation forward in a plan. And it does put more pressure on your assets if you were to... I've talked to people. They have enough money in the back account to live the rest of their life and they'd never have a problem, even if they never make a nickel, whatever assumption you make. But the bar for that has gotten higher. It's less likely that you are in that situation now. You have to find... You don't have to, there's going to be consequences if you don't find a way to take an appropriate level of risk to fund for long-term retirement goals.
Josh Sheluk:
Sure. So similar or different, good segue into the next one here. Number six, GICs will not be the best investment for most people this year.
Colin White:
Yeah. Yeah, I think that I'll give 75 to 80% on that. On any one year basis, it's hard to talk with confidence. But see, the issue with GIC is you're giving up access to your money. And listen when I'm making recommendations to a client, liquidity is certainly part of the equation. If you're going to give up access to your money, you should be rewarded for that. And you should be rewarded at a certain level. And if you're giving up access to your money to get a rate of return you could get in the market with daily liquidity, no, that doesn't make sense. If you're getting a better rate of return, okay, now yeah. Sure, let's have that conversation. And interest rates, I'll give you a lock in a five year GIC right now. And are we still inverted, Josh? Is that still a current thing?
Josh Sheluk:
Yep. Yeah, right now we're inverted firmly actually on both bonds if you look at any type of bonds and on the GIC scale as well. So I was looking earlier this week, if you lock into a five year GIC, you're in the mid to low 4% range. Whereas a one year GIC, you get around 5% right now.
Colin White:
Yeah. And that's a material signal, like a real economic signal that things are unsettled and going to change. There's expectations into the system that are going to cause volatility. Now listen, if it's you just need to sleep at night, and you don't want to ever listen to another podcast or care what goes on in Ukraine, you know what? Ukraine, GICs can buy you that for sure. And whether or not it's going to impact your long-term ability to maintain your expectations of your finances, time will tell. But it can buy you piece of mind. That's what. The other point that I think that we can use GICs for and maybe more freely now. If you've got an obligation that happens every year and you want to take money and lock it up 1, 2, 3, 4, 5 years so that you've got liquidity exactly at the moment you need it, well now you're getting paid in a interest rate rather than something less than 1%.
Now you're actually getting paid in interest rate. So GICs can play a role like that for sure, and they're more in the conversation than they were a year ago, for sure. There's more efficacy to using them for that purpose than there would've been in January, say. But you think it's purchasing power, we're growing your wealth this year using GIC. No, I'm not optimistic on that.
Josh Sheluk:
Now, changing tune a little bit. None of the celebrities being sued in the crypto fallout, including Tom Brady, Madonna, Jimmy Fallon, the Biebs, none of them will lose sleep about the class action lawsuits or the money lost by crypto clients for stuff that they were promoting.
Colin White:
I don't know that they're going to lose sleep. I mean, some of them, they'll lose sleep over it, but they'll get over it. This again calls out... And you made me go back and listen to what we talked about last time and this whole listening to celebrities thing. You kept Mr. Wonderful when he got paid $15 million to him on crypto, and he lost a whole bunch of money. And so these guys are getting paid to talk about things that, again, they're not experts on. They're not the smartest people in the space. They've got a conflict. They're getting paid very heavily to talk about it. So it's kind of the worst possible person to listen to. My favorite's still Matt Damon.
Josh Sheluk:
Yeah, I haven't heard his name mention in anything. So maybe he's skated through scot-free. I'm not sure, but good for him.
Colin White:
Fortune favors the adventurous or whatever the hell he said.
Josh Sheluk:
I think he said fortune favors the brave.
Colin White:
There you go. I was, come on Matt.
Josh Sheluk:
Yeah, yeah. Good for him. Okay, number eight here. There will be more pain for borrowers. Now, I'm not saying that interest rates will go higher necessarily, but I do think that as mortgages renew and loans renew, I don't see that near term fall off the cliff for interest rates that are going to really save people come to the rescue for their renewals.
Colin White:
No, I don't see the interest rates reversing course in the next year. And yeah, I think that even if they do, they'd have to reverse a lot in order to.
Josh Sheluk:
That's the bigger thing for me is you need to have such a dramatic reversal to get people back to a 2% mortgage rate like they were getting two years ago.
Colin White:
Yeah. I like to figure hope, although I've seen numbers contrary that people have the ability to do things like change amortization and other methods to maintain their situation a little bit. But yeah, there's got to be pain in that world for sure. Listen, if you take nothing else out of what's going on, and again, I've talked about this before, react to your environment. A year ago, a 1% five year GIC made no sense. This year a 4%, five year GIC doesn't make no sense. It may not make the best sense, but it's now in the conversation. And the second thing boring money. That's the, hey, money's really cheap. Yeah, I'm going to behave a certain way. Well, money's expensive. Okay. Don't keep behaving the same way. Take a look at your situation and say, how should I react to this? Because not reacting to stimulus, no. Planets move to follow the sun. You need to adjust your expectations and what you're doing in the environment you're in.
Josh Sheluk:
Yep. All right. Number nine. Similar to number seven, actually. There will be about 9,000 stories about billionaires this year, approximately. And their wealth, and not one of them will help you make smart financial decisions.
Colin White:
The halo effect again, here we go. Warren Buffett this, again. The best way I've kind of explained it is that's like, hey, this is how Sidney Crosby works out. You should do it. No, I shouldn't. I just, no, it's not going to work for me, right? And billionaires, if they lose a billion dollars, they probably still have enough money to live on it. So no, just stop. It's entertainment. It's nice to listen to. I mean, the folksy advice that comes from Warren Buffett, ah, it's very inspiring and all that kind of stuff. But just stop listening to those examples.
Josh Sheluk:
Yeah, I don't know why this has become such a fascination over recent years, but I'm seeing over the last week how much money the billionaires have lost this year. Last year it was how much money the billionaires had made. Over time, it's been how have the billionaires invested, or how does this person make their money? It's not useful for the average Joe, like us. I don't have anywhere near a billion dollars. How is this going to help me? If Elon Musk lost a $100 billion, it doesn't really matter for him. If he spent $50 billion on something stupid like Twitter, it doesn't... Actually, that kind of matters, but maybe not that much.
Colin White:
Well, it's understanding what's entertaining, what you need to pay attention to make decisions. Like we've talked about it on this podcast, interest rates, yeah. The fact that interest rates are different to pay attention to that, that should change. It should be part of the variable that's in your decision-making. What Elon Musk has for breakfast, or what time Mark Wahlberg gets up in the morning or any of the other stuff, that's entertainment. And look, if it motivates you to be a better version of yourself, that doesn't involve getting up at 4:30 every morning, a bit more human, fantastic. For those of you who believe the Rock is all natural and is not on steroids, hey, listen, whatever you need to believe to make yourself feel good about yourself, that's fine. But just don't get too tied up in it, please.
Josh Sheluk:
So number 10, Colin, the floor is all yours. What do you want to add to the predictions?
Colin White:
Well, this is foreshadowing. This is a little self-serving, but I'm just going to say that 2023 is going to be a remarkable year for the team here at WLWP. Now, we've been working very, very hard under very, very difficult conditions over the last couple years. Super proud of the team how it propels some of the smartest and best people I've ever had the pleasure of working with. I think that we're going to be very newsworthy 2023, and it's going to be a spectacular year for all of us. So I'll just leave it with a little bit of da, da, da or shadowing, maybe Cath will put a sound effect in there or something.
Josh Sheluk:
Yeah, we'll look forward to that. As always, we need that button on the table here where we can make some sound effects to add some drama. But yeah, it's been obviously a challenging couple years. And as you said, we've built what we think is one of the best businesses and teams in the business, so we look forward to continuing to push for bigger and better things.
Colin White:
And again, thanks to our listeners, and if you have ideas for us, please share. There's probably not a lot that we can't talk about or find an interesting angle on. So treat us kind of like improv, just throw ideas at the stage. And let's see if we can turn it into something.
Josh Sheluk:
And also looking forward to what we called a prosperous 2023, right, Colin? Can we say that?
Colin White:
Well, yes, because prosperous could be spiritually prosperous or there's other versions of it. But yeah, I think that it's interesting that we had emergency low interest rates for such a long time that we now actually have real interest rates. So there's now bullets back in the chamber of the guns for governments to manage things a little bit. So we're entering more normalized times, and maybe we can see some more stability going forward after the current year we've gone through. So yeah, I'm cautiously optimistic we'll have a prosperous 2023 for everybody.
Josh Sheluk:
And once again, all the best for the new year everyone. Thanks for listening.
Announcer:
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.
Colin White:
We've noticed something. It seems there are a lot of people who would rather try to figure out their lives with an online calculator than air your finances to a human. Stop doing that. You need to talk to someone who can help direct you, tell you where to start with what you've got to make the biggest impact on your future. You can't figure that out at do I have enough cash.com? But you can figure it out by chatting with us. Call us. It'll be okay. You'll see.
Announcer:
The content of this presentation, including facts, views, opinions, recommendations, descriptions of, or references to products or securities, is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy or an endorsement recommendation or sponsorship of any entity or security cited. Although we endeavor to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it. This should not be construed to be legal or tax advice as every client situation is different. 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.
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