YouSaid · the spoken record

Martin Pelletier

lines on the record: 76
first: 2023-03-03
most recent: 2023-03-03
sittings or episodes: 1
sources: podcast

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“Private real estate market. There's a lot of private real estate funds in Canada offering private mortgage investment corps, that sort of thing. I'm not a fan of them because there isn't the transparency that I'd like. And also, you don't get the price discovery. And so we had public REITs sell off 30% last year. And then you had the private navs of these private mortgage investment corps with no change. And they're being marketed as a low correlation asset class. Well, simply because you're not marked to marketing those assets. And so I was advising people if you had a private mortgage fund sell it at nav and buy a public read at a 30% and owning some real estate portfolio is not necessarily a bad thing, especially when it's down 30% or 20%. Now they've come back again US home builders in the US have done phenomenal, but that's the way I look at it real estate.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I don't think Canadian real estate market is in a bubble. There are periods of euphoria, segments of the market that's euphoric. I mean, I don't know if you guys have been to Vancouver, but it's a pretty awesome place. And everybody wants to live there and whistler's right there. It's just a world-class destination. And as long as the immigration continues, that'll provide support. I always look at real estate as a non-investment component of your total wealth. And so what I mean by that is, you know, you find a place to live. And if you can afford it and you can run your long-term mortgage raise at 5%, you can afford 5%, then maybe that's the new mean reversion. I don't know, but if you can afford five and it goes down to two or three, whatever, then you're that much ahead. You can pay down your mortgage faster. But from an asset class perspective, I look at the”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“They needed more hikes, they could just add more hikes, more 25 basis point hikes later in the year. I think shifting again from 25 to 50 is probably not necessary. And there's really no reason for that. An extra month or so doesn't really change too much. So the Fed does think very slowly and very carefully after signaling very clearly in their last statement that they wanted to shift down the 25, it's very unlikely that they would just change that suddenly. More likely is that the dot plots for March will be higher than they were in December and during the Fed conference, Powell will guide towards that. So there will be more hikes projected just more 25 basis point hikes rather than just another 50, in my view.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So, as I've been mentioning throughout the year, that it seems like the market was way too optimistic on inflation and way too dovish on what they perceived the Fed to be. So I think that right now, finally, the market is becoming more in line with what the Fed's adopt plots are. But about 50 basis points in the next meeting, I think that's very unlikely. So the Fed shifted down from 50 to 25. If they thought that”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So we do run SMAs for family offices, so we only have 60 large family offices significant that we manage. And then we also run a OM offering memorandum pool fund for our family office clients and those who want to join up with us. We have a fiber track record on that, which is outstanding. And so we're looking at taking that to more of a public vehicle. So hopefully we'll get that going in the spring. So please watch out for that. And that'll be available to broader investors.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“She says, I didn't lose any money last year. I'm so happy, and I was a little worried about Christmas dinner, and now I don't have to worry about Christmas dinner. So there's huge value in having those kinds of conversations. Yes, and my.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“that upside. And so, but most of our clients don't care. We'll have an offsetting 60% position long against that with the 30% in those notes. So we'll get some of that upside participation. So for example, in the market rocketed in 2021, we participated in 75% of the upside. And then in 2022, we protected 90% of the downside. And so clients like that. They like knowing that they look up their statement. And like I had a perfect example, I'll leave it with this is my mom called me and she called me in at the end of December and I managed her portfolio. They sold all of their real estate and their renting for different reasons. They put that money into with me. I put it in structured notes. She called me crying. My mom, is everything okay?”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Even going back, I don't think it ever has, but there's a tail risk. So if it goes depth minus 29% in two months, you get your coupon payment. You keep it in your coupon payment. Keep getting your coupon payment until the end of the year five, if it makes it there because they'll have a callable feature in six or 12 months if they're 10% above the par price to get called away. At the end of year five, If it's down 25%, you would have got your coupon payments the entire five years at 9%. And you get all your money back. If it's down minus 31% at the end of five years, you lose 31%, but it would have been offset by all the 9% coupon payments, much better than an equity position. However, if the market comes roaring back and you have a 20% move in the S&P, that's where they'll underperform. They get called away. Maybe only get six months of coupon payments or 12 months of coupon payments at nine. So you're giving away all.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So you can do different types of notes. And so we do a monthly autocallable note. So what we mean by that is let's say we did one, we could do one on the S&P in US dollars that pays almost 9%. It'll pay that monthly as long as the S&P doesn't fall more than 30% and stay there. So what we mean by that is, okay, let's say we did that note today and the S&P crashed 30%. We have another 08 type of or March of 2020. It has to stay minus 30% for the entire five years for you to not get those coupon payments, which is, I don't think has ever happened, has that ever happened before?”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Wow, Martin, if you look back at certain trades and analyze their timing, that seems like an excellent trade to have gotten clients out of long duration U.S. Treasury 20 or 30-year treasury instruments and replaced that fixed income exposure with synthetic structured notes that yield a higher rate that don't have the duration risk. However, those notes do get into trouble because they're basically paying off their short volatility that the S&P 500 goes down 30, 40 percent, as you mentioned. And even though it was a bear market for the 60-40 portfolio, worst 60, 40 portfolio year on record, I think. And it was bad for stocks and particularly individual stocks, the market, I think the S&P 500 was only down at max like 25%. So, yeah, so what is, so I guess the only way, the real setback of that strategy, Martin, is if the S&P 500 crashes 30 or 40%. So how are you?”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“There for the entire term. And so, yeah, there's ups and downs, but we have a built in downside put protection involved in the note. And the clients are getting that 8 to 12 percent taxes income, yes, but still well within your target returns.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So, what we mean by that is you enter into that contractual obligation, maybe five years, three, five, seven year term on that note. The note will pay you a coupon payment annually, monthly, quarterly, depending on an underlying index. Or in some cases, if you want to do it towards interest rates, we've been doing more of the equity component. So we took our fixed income down to 10%, replaced on a 60-40, replaced 30% of our 60-40, 30% in total with structured notes with coupon payments of 8 to 12 percent as long as the, and I'll pay that out monthly, as long as the index doesn't fall more than 30 or 40 percent, and it's already down 10 or 15 or 20 percent, depending on which index you're looking at or what segments you're looking at. And so our clients are getting paid monthly an 8 to 12 percent annualized coupon as long as the underlying index doesn't fall 30 in state.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Situation the Canadian banks are very well capitalized, very conservative despite some of the lending concerns on the housing market. They still have maintained their prudence and we have a whole shadow banking market, which can be a whole different discussion. That means that the Canadian banks are not exposed to the higher risk debt as they've offloaded that off their balance sheets. And so from a counter party standpoint, if you're doing Bank Montreal or national bank, royal bank,”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“We can run up to 50% in structured notes. Structured note is a derivative instrument. We traded derivatives for about 10 years. We did an option overlay on top of our portfolios. It became the taxation of derivatives is very different in Canada than the US and it could be quite cumbersome and involved redoing your taxes. And so from that standpoint, a structured note wraps it all into one investment product. Now it's an investment product not unlike a bond. It's actually taxed as a bond in Canada. And it has the counterparty risk, which can be significant if you're not aware. And there have been some problems in Europe with these notes. The Canadian banks are very safe, as we saw during the”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So when we look at our portfolios, managing our portfolios, everything's a goals-based return. So it'll vary by individual, but most of our clients are probably targeting 6% to 7%. And so we want to minimize the risk level to get there. Obviously, inflation is going to play a role in our returns and our goals and those sorts of things. But having said that, we want to look at investments that are going to be able to minimize the volatility, have some downside protection, and be able to generate a decent rate of return in this kind of uncertain market environment so that you don't have to make a bet on interest rates. And portfolio doesn't have to isn't going to perform based on what a Fed's going to do, right? And it gives you a lot of a peace of mind. And so one of those investments, and it's actually in our balance fund, it's about 35% of the portfolio, some newer clients.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“That brings up a good point. If we have inflation, everyone's wages continue to go higher. We're eventually all creep into a higher racket and that in effect raises taxes on everyone, right? So, you know, eventually we'll all be the rich who gets taxed more.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Well, in Canada, you're classified as rich when you're over $150,000. Like the tax, the marginal tax is much, the threshold is significantly lower. So if you're running, this is why inflation can have a huge impact on the Canadian consumer because if you're making 100 grand and the average house, the single family house in Toronto is 1.2 million. In Vancouver, the average single family house is 2 million. I mean, how can you do that? And you're told that you're at the highest wealthiest person in the country, 150,000. Well, you don't feel very wealthy when your house is 10 times your income.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“In the US, it's really hard to change task code. You need one party to have a tremendous majority in Congress. And that's very difficult to do. So I know the Biden administration obviously wants to raise taxes on the rich, which is everyone who is not them. But that's a hard thing to do, really, in the US. Well, in Canada.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“The Fed being part of the federal government, it has to be responsive to the wishes of the elected representatives. And so that was the culture then. And it wasn't until the culture shifted when people got really sick of high inflation that we could have a conversation of maybe less fiscal spending and higher interest rates and endure the pain to get back to a less inflationary regime. And today, I think we're very far from that culturally. I don't see anyone, I don't hear anyone mentioning physical restraint or anything like that. So in terms of the inflation cycle, I think we are probably towards the middle or early innings.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Of raised interest rate significantly, totally crashed the US economy and brought inflation under control. But I didn't and I couldn't because the politics of the time was for the government to do all sorts of fiscal things to help the people who did not have a lot of money just to basically to give money to everyone.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“US government can always afford its debt full stop, right? If you have a fiat currency system, you have a money printer, you can afford it. If you rewind back 100 years ago when you're under the gold standard, yeah, you can run out of gold. You can definitely not afford it. But when you have a money printer, affordability is never a problem. The problem is always if you keep doing this, do you create significant inflation and does that have political implications? So that's one of the reasons why I think significant inflation for the next decade is very likely. The politics today is simply very inflationary. If you think back to what happened during the 70s, Arthur Burns, who was fed chair then, the story is that he let inflation go out of control. But afterwards, after his tenure as Fed chair, he wrote a speech called The Anguish of Central Banking. And in it, he says that, you know, I could have stopped inflation anytime I wanted.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“And Joseph, so in the wake of the great financial crisis, the US ran what at the time seemed like large fiscal deficits, but they were actually cheap to run because interest rates were short-term interest rates were at zero and long-term interest rates were at. Can the federal reserve US federal government afford that? Will it put pressure on the federal government to make budget cuts? What do you think happens?”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Concerned about things like this, and also at the end of the day, they could always have the Fed by it. So there's never a problem with people not wanting to buy the debt. The constraint, of course, is inflation. So if you have huge amounts of debt, interest suspense goes higher, just have the Fed come in and buy it all, then you are creating even stronger inflationary impulses.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“I think, Mari, you bring up a very good point. One thing that's different today compared to the 70s is that the debt-to-GDP ratio is a lot higher. That means when the central banks hike interest rates, that has a much bigger effect on the deficit because the stock of debt is higher. So when you hike interest rates even a little bit, the interest expense goes up a lot. And as many people have pointed out, that's obviously not sustainable. Let's say, for example, in a few years, we have a debt-to-GDP of closer to 200%. When you do that, just small increases in the interest rate will increase interest expense significantly and thus make the deficit go even higher. I haven't heard anyone here in the government be concerned about that. I think what happened over the past few decades is that government spent so much and nothing happened. So there's not, it's not in the cultural zeitgeist.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“I'd like to ask you maybe we get a playback of the 70s, for example, it finally puts pressure on these governments as debt servicing costs. And so the debt servicing costs in the US are going to be quite large. And same in Canada. And so are central bankers going to put pressure, sorry, our government's going to put pressure to Biden or Trudeau governments. Do you think they can put pressure on these central bankers to really stop the rate hikes because it has to put pressure on them to service those debts?”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“And then actually fiscally, the federal government was not in as rough a shape, not nearly as rough a shape as a consumer household. And then we had the Trudeau government come in and change that quite rapidly. The deficit spending was among the highest in the G7 as a percentage of GDP during the COVID shutdown. And so we're still running very, very large deficits. And so the only safe component of the country was the fiscal situation, and that's being rapidly deteriorated from the existing government. And so the same kind of thought is we need to protect the average person from inflation by giving them money. And that's going to exasperate and make the situation even worse. And where it gets really interesting just.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So, in Canada, household debt is look at total debt is the worst in the G7. It's worse than the Japan. And it's actually worse in Greece. So the level of consumer debt in Canada is quite high. And that's defended by the high asset prices in real estate and saying, well, it's okay. Our asset prices are high, but tend to forget that when asset prices fall, your debt doesn't fall with it.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Of the secular forces that we've been mentioning, of course, as Martin mentioned earlier, is that we have an aging workforce. So structurally speaking, the labor supply is either not growing or slightly shrinking as time, depending on the country. I think monetary policy definitely has a big impact on the demand for labor. Let's just think about this. So whether or not the Fed, how high the Fed has to go to actually see declines in unemployment, I really don't know. And I think the question, I think what's clear right now is where we are doesn't seem to be high enough. And the reason I say that is because even though we're at almost 5%, we're having gangbuster growth, having gangbuster job growth, and the consumer seems fairly healthy and resilient. So whatever that number is, it seems like where we're at now is not there yet.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“With a shortage of doctors and nurses and huge immigration, that's taxing the healthcare system. So it is a really good policy, but you also have to have a plan around these other factors. And so you have to have that balance. And in my opinion, the US is not doing enough immigration and Canada is probably doing too much from the services and supporting standpoint. And so how do you find that balance?”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“That's an excellent point. I'm a proponent of immigration, and especially for a country the size of Canada, we need to diversify our workforce. We need to bring some of the innovation that we're witnessing in other jurisdictions. But at the same time, we have to balance it against housing and the shortage of housing. People need to live somewhere. We need to look at there's severe restrictions on their backgrounds. So, for example, I was watching on the weekend, there's a young student from Canada who has to go to Scotland to get their medical schooling, and they can't come back to Canada and practice medicine because we won't recognize the education that they had over in Scotland. And so there's some challenges there. And then there's healthcare challenges because we run a public healthcare system. And so”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“I agree completely. But one thing I thought was very interesting when I think about Canada and the US is that if you listen to what Chair Powell talking about, they're always talking about labor shortage, labor shortage. And there's the same shortage in Canada as well, but they're doing something very different in Canada, like we just mentioned earlier. They're importing enormous amounts of immigrants. And that seems like it will likely have some big impacts on inflation going forward since if you're importing so many people a year, you probably won't have the same level of wage inflation as the US, whereas the US is not doing that. So there could be some potential for divergences in monetary policy going forward.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So now you have two jobs for every person looking for a job available. Now, they may not be the best jobs you're looking for, but there's still that kind of availability. And so that's going to put up work pressure on wages. And so there's all kinds of dynamics that are at play here that people are ignoring, saying that we're going back the way it was before.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“2008 was a structural shift. And then what happened following quantitative easing? 2000 was a structural shift with the greenspan and rising rates and the bursting of technology. And I think that what we witnessed in March of 2020 was a huge structural shift. How can you say it wasn't? You had a shutdown of the global economy. And so now we have work from home. We had baby boomers that left the workplace. I'm a huge fan of Charles Goodart and his book, The Great Demographic Reset, where you had, and Joseph has done some excellent work on this, looking at the labor dynamics. So we had an oversupply of labor, and that was putting, you didn't have a lot of price pressure to raise wages. And now you had baby boomers. They're like accelerated their retirement. Now they're gone.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So there are, I mean, you have to ask yourself when there's big structural shifts in the market and segments of the market and be willing to question that and be open to it. Because if you don't, it's going to be a world of trouble for you. So for example, in 2014, I was running an energy hedge fund. It was one of the top hedge funds in Canada for performance. And then the OPEC came in and aggressively targeted US shale and I said this is a game changer. So we closed down the fund and gave the money back to investors because it was just not a good place to invest in. And if you're running a long only energy fund and you're not very bearish on energy, well, it's hard to tell people to sell energy when you're trying to raise capital for your fund. And so that was a structural shift. And thank goodness we did that because it was been awful since then until more recently.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“discussed. And so I'm not as bullish on the Canadian economy as the US economy. Having said that, I'm more bullish on Canadian equities versus US equities, again, for some of the reasons that we just discussed. And the TSX, for example, has a much higher weighting to energy, double the weighting than the S&P does. And so I like that. And don't forget, I'm not always a permanent energy bull. At one point in time, we had like two or three percent waiting in energy. And now we're up to 15 to 17% waiting to energy, which is quite significant for a diversified fund manager. And so that's the way we're positioning. I think the Canadian economy is going to have, is going to react. Much quicker to rising rates than the U.S. will. And so that's going to slow things down here.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So it's important to start off by making the distinction that a good economy and the outlook for the economy doesn't necessarily mean the same kind of relationship in the stock market. You can see some economic. And so what I mean by that is I'm bearish on the Canadian economy versus the US economy. I think the US economy is a much stronger economy than the Canadian economy. It's a much more diversified economy. It's an economy that is much more productive. If you look at the productivity level of labor in the US, where it is in Canada, we need that 75 cent dollar to compete. And that hasn't changed. We've gone all in on a segment of the market that is a non-producing asset like real estate for a number of reasons that we just.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“No, they're not. But there's no capital gains tax when you sell your home. And so people have made a ton of money on house flipping. I mean, millions of dollars, houses that five years ago were $800,000. People are selling them for one and a half million dollars now. And so there's that against the lack of deductibility of your mortgage.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“For I think a few years ago, mortgage rates in Canada are about 1%, right? So you have basically if you have to renew your mortgage every four to five years, that means basically 20% of the people are getting this huge interest rate hike from 1% mortgage and renewing it to 4%. So that's a big jump. In Canada, our mortgage interest deductible, tax deductible like they are in the US.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“All we're all saying is just exercise a little bit of caution. Look at your sensitivity to interest rates and run the numbers so that if they stay where they're at, even if they hold, I mean, I don't think people are saying they're thinking they're going to hold. I think the pervasive thought is they're going to drop. But if rates stay at four and a half for 12 months, what does that mean to your balance sheet? And can you sustain that?”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“And so the pervasive thought among consumers is that rates are going to stay where they're at or fall back down again. And then you have had a drop in housing prices in some of these cities like Toronto and Vancouver, like 25, 30 percent. Now that was from the highs. Don't forget, I mean, if you look at, if you back it up again, you expand your time horizon, it's not that much of a drop compared flat from where it was two years ago. So all of the excess from the COVID startup again has been gone. And so, again, as Joseph had mentioned about investors in the U.S. going back to thinking that we're going to be back in 2020 terms with asset inflation, with text stocks, the same kind of thought is here in Canada in the real estate market that we're going back.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“So, the Bank of Canada is hiked to 4.5% pretty much exactly in line with the Fed, whereas the Fed's 4.5 to 4.75. And there's been rumors of a Bank of Canada pause. And once the rumors of the pause come in, that gives way to rumors of a cut coming in. So what's the vibe like in Canadian financial markets about where the forward rates are going to go and how does that affect sentiment and asset prices?”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“I'll give some context of those numbers just for a little bit. So Canada is about the size of California, and they're getting about half a million immigrants Year, the US is obviously much, much bigger. The U.S. gets about a million legal immigrants a year. So, you know, the immigration rate in Canada is just huge, huge, huge. And that can obviously put upward pressure on housing”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“I think it's 7% or 6% US. And so we'll have more sensitivity there simply because of the shorter term and the greater impact on the economy. And so everybody, there's been a surge in housing now because of the bank of Canada's latest statement. Everybody's thinking that we're going to see a rate cut in the second half of the year. And so it's time to go all back in into housing. Same thing about what the US investors are doing on tech. Fed pivot, Bank of Canada pivot. They're just playing it through real estate.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“A lot more sensitive to interest rates simply because we've gone all in on real estate. And there's a number of different reasons for that, but immigration is being one of them. We have one of the loosest immigration policies internationally. And from the existing government. And so we're having half a million people come into the country and there isn't any housing for them despite the landmass because they're going into big cities like Toronto and Vancouver. And actually now in Alberta, we had 55,000 people come into the province last year and half of them were international and half were from other provinces. And so there isn't the supply of houses. And so people have been making a lot of money on speculating on real estate. And real estate is actually a significant component. I think it's 12% of our GDP versus...”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Now, I had a really good conversation with Joseph about this, and I really remember it quite well about 30-year-term mortgages and how the sensitivity to rising rates isn't as strong as it would be in Canada. Most people in Canada, we have a five-year, most people three to five years terms. And so there's a little bit of a leg there in regards to having the impact on the average Canadian. But we're probably get there sooner than a lot sooner than the US, so because we're only one year into that. So if you give it another year of maintaining rates, that's going to have an impact. And so we're seeing just what we're witnessing, we're also our economy is.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Martin, returning to the Canada. How sensitive is the Canadian economy and Canadian financial assets, stocks bonds, everything to rate hikes? There are a lot of folks in America who are saying there's no way the Federal Reserve can hike to 3% because the economy can't take it, but it proves that the American economy has been at least so far much more resilient to rate hikes than many people expected. Is it somewhat different in Canada? You know, I know in Europe, there's a lot of variable rate mortgages where mortgage payments or rates go up with rates. Mortgage rates go up with interest rates, whereas in the US, it's a fixed rate. What is the environment look like in Canada?”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“And international players have left. And so they'll have land dominance, a huge inventory to drill from, and excellent well economics. And so then you've got the currency. So these producers get paid in US dollars and they're cost basis in Canadian dollars. And so if the Canadian dollar stays where it's at, don't forget we're at par before with the currency. Now we're not. And so these producers are getting paid in US dollars under cost basis and Canadian dollars, which is lower. So they have even larger margins. So we're sticking close to home. We will pick away at a couple of international players for diversification. But for the most part, there's some outstanding companies right here in my own backyard.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Good question. And so we've had a lot of consolidation in Canada among the producers. And so we have higher vacancy rates downtown Calgary than other places. It's like 30% vacancy rates. And we have a tower called the Nexon Tower that's, I think it's 45 floors is completely empty. And so the tie into the Canadian producers is that we've consolidated. And so there isn't as much competition. And there's a lot more control over pricing. And so they're operating costs are quite low so they can make money in a lower priced environment for longer. And then there isn't as much competition. So as a result, they can secure some very excellent world-class plays in the Western Canadian sedimentary basin that the U.S. producers have left, for example.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“These oil stocks did move down as much this year. So everybody was highlighting that gap and saying, well, oil prices are down. Oil stocks are not down as much. You should sell that. And I'm just saying, well, let's just back things up a little bit and look at five years instead of one year. And then you'll see that the gap really isn't that wide. And so I think the same kind of situation is playing out for natural gas and natural gas producers, natural gas stocks. And I'm actually looking at natural gas stocks, even though you're right. They are some of them are losing money, but low cost producers are able to sustain themselves through this environment. And then they have huge torque upside when natural gas prices recover. And so I'm not there yet, but I'm seeing some best in class up here in Canada, some best in class.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT
“Inventory and supply was rapidly able to build out because of that big drop in demand. Now who knows what the weather is going to look like next year or the year after. So I don't like investing based on weather. It gets to be too difficult to look at. not long-term gas prices sustainable? Probably not looking at where they'll normalize or mean reverts probably higher. And so energy stock investors are always hedging their bets a little bit. So what I mean by that is Fiona Oil Company, they're generating tremendous cash flow. And so they were reflecting a $50 to $60 US apparel oil price when the oil prices were $100 a barrel. And then so when you saw the oil price correct.”
2023-03-03 · Forward Guidance · Navigating A "Structural Shift" In Markets | Joseph Wang & Martin Pelletier · IDENTIFIED FROM THE TRANSCRIPT