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Kathryn Toope: Welcome to Barenaked Money, the podcast where we strip down the complex world of finance to its bare essentials with your hosts, Josh Schallick and Colin White, portfolio managers with Verecan Capital Management Inc.

Colin White: Josh and Colin coming at you with the next installment of the podcast, We’re Making Money, or maybe this is just gonna get used as just general flutter. We sit here on the other side of the abyss. The election has occurred. It is over. There has been a victory, has been declared, and everybody wants to know what we should do.

Josh, what should we do?

Josh Sheluk: Well, let me ask you first. Are we on the other side of the abyss, or do you think most people would say we’re in the abyss? I I don’t know.

Colin White: Well, the the the this is the next chapter of an ongoing story. I I I guess, you know. We know we’re in this room now and, you know, so there’s some certainty. And if hey. Look.

I, for 1, celebrated a little bit that there was certainty when I got up the next morning. Like, this this could’ve this could’ve been something that drug out a long time and was a continuous distraction. So at least the Band Aid has been ripped, and, you know, we we know what we’re well, we think we know. We have an idea. I don’t even know how to say that.

We don’t know what we’re in for for the next 4 years. We we know who some of the players are gonna be over the next 4 years, but I don’t think we know. And I think that’s a great segue into our conversation about what investment ideas have come out of this election outcome, Josh. Is that a better way to ask the question?

Josh Sheluk: Well, that’s a good good way to posit it for sure. I think it’s worth mentioning that we’ve been intentionally mum about the election running up to it. We haven’t recorded 1 podcast. I don’t think we’ve mentioned the election on a podcast in months, to be quite honest. And that was somewhat intentional, but also somewhat thoughtful on our end because, yeah, do do do does do they really matter?

Are they predictable? Can you make investment decisions off of it? Those are a lot of good questions. But I wanna ask you this, over the last 2 days since the election, because it’s been about 2 days since we sit here recording today, how many fund companies or research shops have sent you an email that says, here’s your Trump trade ideas?

Colin White: Yes. All of them plus a few that I didn’t even know existed.

Josh Sheluk: It’s like dozens. Right? It’s dozens. They all have Trump trade ideas. It’s crazy.

Colin White: Well well, they do because, again, everybody wants activity and everybody’s trying to motivate somebody to do something. And to your point, Josh, I mean, we we haven’t played this game because we’ve taken a pretty detailed close look at it from pretty much every angle, and there’s nothing investable here. Like, there’s no there there’s no real insight that can be gained on guessing what’s gonna happen next. The the the economic situation, yeah, it’s gonna cause some short term volatility for sure, probably up and down. And maybe some of that’s gonna give an opportunity to to initiate a position in something that, you know, was maybe trading too expensively before.

But as far as, you know, trying to determine, you know, what Trump tariffs are gonna do, well, you’re assuming Trump is gonna follow through with that. You’re assuming he’s gonna be able to implement them, and then you’re assuming what how long it’s gonna take to reflect anything in the economy. And all of that is is just completely unknowable. And if you’re getting into trade ideas, high matters. Like, you know, if you’re early on a trade, after a while, you’re you’re wrong, you know, because it it just the the opportunity may be too far out that you’re not gonna profit from it.

So I think everybody if we if we came on this podcast and said, hey. We have the Trump trade, a lot of people would tune in. Like, that that is that’s that’s an earworm. Everybody wants to hear what that is. How many ideas got thrown at the at the wall?

Like, I think we threw all of them at the wall, didn’t we?

Josh Sheluk: Yeah. I think so. But here I do have one real one for you. Here here’s a real idea for you. I’m just gonna read an this is a snippet from an article.

Big banks are also rising amid an uptick in interest rates and on hopes that Trump will follow through with promises to dial back the Dodd Frank regulatory reform. JPMorgan Chase or nearly 5%, hit a new lifetime high while Morgan Stanley surge 7%. So US Banks, trade idea?

Colin White: In in light of some of the

Josh Sheluk: Oh, wait. Wait. Wait. Wait. Wait.

Hold on. My mistake. That was November 9th 2016. Oh, wrong article.

Colin White: Wow. You played.

Josh Sheluk: No. I’m sorry. I’m sorry. I totally, I pulled the rug out for money here, but I did that intentionally because the exact same thing happened this time around, and I think probably the exact same words were written in some way, shape, or form this time around. And guess what?

Financials, one of the worst performing sectors over Trump’s first presidency term. So maybe we don’t know what’s gonna happen over the next 4 years even if we know what policy decisions Trump has talked about.

Colin White: And and that’s a really unpopular opinion, and we consent we continue to sit here being unpopular. But I I would rather just admit that it’s chaotic and behave accordingly rather than have some beautiful theory that fits every 5 or 6 years, and you could print the same article and have the same theory even though they haven’t worked out. You know, everybody’s looking for something to do right now. And the the worst part about this is is is Trump and Biden and everybody. They they stand up and say, you know, well, inflation was his fault or unemployment was his fault.

The the inflation was a global thing. Like, that wasn’t a US thing. That was a global thing. It it wasn’t the president happened to be sitting in the chair when it happened. But did the president cause it?

No. Contribute to it? Maybe. But cause it? No.

And by the same token, did anybody any one president fix it? No. This is just an economic cycle it goes through. You and I joked a long time ago when Bank of Canada first stood up and they were gonna kill in inflation. And again, inflation can on its own run its course.

But for sure, a bunch of people are gonna stand up and declare victory when it comes to an end. Now, the argument is or the discussion is how much anybody really impacted it or whether this was just the natural cycle. But, yeah, everybody’s gonna stand up and blame a politician for it and then give them credit for something that really it it wasn’t on their desk at all.

Josh Sheluk: Yeah. It’s just hilarious and ridiculous that we go through the same thing over and over and over again. And what this is what the definition of insanity as they say, but that the banks thing is just such a a clear and obvious indication that again, even if we could predict the policy changes and here’s a a shocker, I might shock you with this, but sometimes the campaign promises don’t actually come to fruition when the person is in term, believe it or not. I know that’s shocking. But if we just go back to when Trump was elected the first time, and this is not a Trump thing, it’s an anybody thing, anybody who’s elected, they’re they’re they’re based off of promises and and ideas and things will get thrown around, and they come into power and everybody thinks they know what’s gonna happen when that person’s in power.

And we just don’t. And the the example that I use when we chatted earlier this week is the energy sector when Trump was elected the first time. I think he said drill, drill, drill sometime recently, and it’s like, okay, well, that’s gonna be a clear benefactor of a Trump presidency. Right? Wrong.

It was down 40% over his first term. And it’s not his fault. It’s just there’s a whole lot else going on other than what he can do for the energy sector. So again, by by far, the worst performing sector during his from, his first presidency was energy, which nobody would have predicted at the start of that term. So it’s, like, unpopular to say we just don’t know as much as we think we do.

Colin White: Let’s even take it further, Josh. I want you to take a voyage into assumption land for a second. Let’s assume for a moment that Trump is going to reduce the regulatory regime on the US financial services sector. Let’s assume he does that. Let’s assume that there’s a very positive market reaction to that and the shares get bid up.

The inevitable outcome of reducing regulation is at some point you’re going to increase the likelihood and magnitude of a blowup of some description, which will cause new regulations to come in place and the cycle will start over. Because all of these things go in cycle. So even if you bought into the fact that he was gonna reduce regulations and you bought into the fact this is gonna be positive, the rest of that sentence is for now until one of them screws it up and forces the regulator to come in and put more regulation back in place. Because we constantly go through the cycle of, oh, that was a problem that’s regulated so that problem doesn’t happen. And then we get relaxed about it.

Those regulations are holding us back. You pull back on the regulation and something bad happens again. It’s a cycle. So even if you assume all that to be true, it’s still not a reliable thing. Like it’s still not something that you can count on as a long term investing strategy because cycles and regulation in in any industry ebb and flow based on the most recent experience of the public and how much they’ve demanded for change to happen.

Josh Sheluk: Yeah. And the fact, as you pointed out when we chatted earlier this week, that even if the policy changes happen exactly the way that we think, the economic and fundamental outlook for those businesses or those sectors or whatever are going to trump, pun pun intended, the anything that that can happen on the policy side.

Colin White: Josh, let’s let’s you and I right now as men sit here face to face and say we are not gonna use that pun for the next 4 years because if if we if we use that for the next 4 years, it’s gonna get really old.

Josh Sheluk: Yes. Yes. You’re right. Okay. Agreed.

Agreed. But but the the point stands, the the economic situation is gonna matter a whole lot more. For for banks coming back to that example, if the consumer starts spending stops spending rather, and the US economy goes into recession, guess what’s gonna happen to banks? Doesn’t matter how much you you loosen regulations. They’re gonna go down.

It’s gonna be a challenging time for them.

Colin White: Yeah. No. Absolutely. I mean, the interest rate, what happens to the movements in interest rates, which is a market driven thing, it’s gonna matter. You know, what the the debt level of various populations is gonna matter.

You know, is inflation gonna stay where it is? That’s gonna matter. Those things are all gonna move the needle far more than what any politician’s gonna say when they stumble up to a microphone. But this is just so unpopular. I don’t even think anybody’s listening by now.

I think everybody’s tuned us out, Josh.

Josh Sheluk: They’re all looking for the next Trump trade.

Colin White: Well, yeah, anybody who came here looking if if we could convince everybody that there is no Trump trade, just go on with your day. Think of the amount of time that I think that it would be a measurable increase in in productivity for the entire economy if we could get everybody to stop talking about this. Yeah. I think we’re doing God’s work here. Like, we we could make the average worker more productive if we could get them to stop talking about this.

Josh Sheluk: So here here’s some pushback to that idea. Look at how many different sectors and stocks and parts of the economy moved in dramatic ways on Wednesday this week after the day after Trump was elected. So how can you say there’s no Trump trade if that’s happening?

Colin White: Well, let me push let me ask, I mean, answer a question with a question. Why did the market rally that day?

Josh Sheluk: As Matt said yesterday, I think it’s it’s very much an animal spirits thing. That there there may be there’s maybe not a whole lot of of real long term thought put into some of those market moving investment decisions?

Colin White: Interesting. I would I would pause at the opposite. I would I would pause at that. There’s a whole bunch of people holding back on allocating because they didn’t know which direction the wind was gonna blow. And it was the the release of the uncertainty.

The fact that we had an election that was called and settled decisively and we didn’t have all of the other disruptions that were perhaps feared. So I don’t know that it was the outcome as much as the fact is there was an outcome And Right. Peep people can go back to business as usual. But you know what? We could study this, like, 20 years from now and and and spend thousands of hours and probably still not completely understand why the market did what it did.

Josh Sheluk: Yeah. And that’s fair. Similar question then based off of that. Do you think if there was a conclusive outcome either way, Democrat or Republican, do you think the market rallies?

Colin White: I think so. I think I think it looks different. I think that it would be different companies would have rallied, you know, because I think that there there is a vested interest in certain industries and one party or the other being in charge, for sure. You know? So I think you would’ve seen it take a different shape.

And I think that that’s where the true traders were were were taking bets. You know, it’s because I I would suspect that it would be dramatically different if the Democrats could have because they would spend money differently. They would allocate resources differently, but there would be winners in in in that as well.

Josh Sheluk: When you say that, it sounds like there is a trade here to be made if so and so would allocate the money differently. But I think one of the things I wanna emphasize is, again, even if we know where money’s gonna get allocated, people can make knee jerk reactions and and throw investment money at those sectors, but that doesn’t mean it’s actually gonna come to fruition. It doesn’t mean you know anything more than anybody else in the market. It’s all sort of sort of speculation. And oftentimes what we think is gonna happen ends up being the exact opposite.

It’s maybe not material enough to to make an investment decision off

Colin White: of. Well, the the other thing that I I say all the time is that, listen, if we got this right 19 times in a row, like, we we actually were able to figure this shit out and we got our shit dialed and we were right 19 times zero, and then we miss it once. You undo potentially all of the good that you’ve done. Like, you know, the the you you can wipe out an advantage that you’ve accumulated over time by continuing a risky behavior. It’s sort of like staying at the casino longer.

The longer you stay at the casino, the more likely you are to pay it back. Yeah. And the magnitude of those misses can be astronomical. So the key to long term wealth creation is just not blowing your money up. So if you can stay out of scenarios that you are gonna cause yourself material harm, that’s the key to long term winning.

It’s it’s not about getting something right, not about guessing this election or guessing this interest rate, you know, announcement or or or guessing anything. It’s about staying out of that game entirely. Yeah.

Josh Sheluk: I have 2 more questions for you. First one, can you think of another political event in recent history where more ink has been spilled than this one? Both on the investment, the finance side, the social side, all of that.

Colin White: Well, you know, it’s so funny you’re using the word ink, because I don’t think much ink was used at all, but I get I get where you’re going.

Josh Sheluk: Metaphorically. Well,

Colin White: if you if you go back through history and take a look at the Cuban missile crisis, you know, you go back and take a look at, you know, the Watergate, you take a look at, you know, the Gulf War, you know, weapons of mass destruction in Iraq and stuff like that. Those are all very, very hot political, and one could argue more meaningful, political stresses in the US where where presidents were, you know, in the crosshairs. Again, we came they came off of close to nuclear war in Cuba. I mean, that that that was a really real that was a a serious as a heart attack. You know?

On that scale, what we’re going through now, a bunch of people are way more upset about it, I think. There’s a lot more emotion involved, and we can talk about it a lot more, and people can get into an echo chamber and get into their tribe and get really worked up about it. But we’re not plus or minus nuclear missiles falling somewhere in the US. Like, that’s that’s not the magnitude of what we’re looking at right now. So I don’t think a sustained argument can be made that this is truly worse than any other time in history.

The country has always been divided, perhaps more divided, perhaps more extreme now than it’s been in a while for sure. But I don’t think an argument would stick that this is some kind of a historic anomaly. If we really want to get political about this, my observation would be that, you know, the average American has completely lost faith in the system. You know, the approval rate of Congress, the approval rate of the House, you know, how little public opinion actually affects any of the laws or regulations that are passed. You know, it’s a broken system.

So to have outrageous outcomes come out of it or seemingly outrageous outcomes or seemingly completely irrational outcomes come out of it. That that that to me speaks to, like, they need to earn trust back in the traditional system because it’s been lost.

Josh Sheluk: Yeah. I I guess I I totally agree. I don’t think just in terms of general impact. I don’t think it’s as impactful as some of those other events you mentioned. I do feel like, and I can’t go back to the Cuban missile crisis and all that because that’s far before my time.

But I do feel like more than any other political event I’ve ever seen in in again in recent history, in recent memory, put it that way, that there’s been more written about it. There’s been more discussion about it and maybe unnecessarily so as you talk about what the impact actually is. And sort of on that point, my second question was gonna be sitting here in Canada. Do you think there’s been a more visceral response to this outcome, to this political event than anything else that you can remember over the last 10 or 20 years?

Colin White: I think there’s more despair because the the what is being put coming out of the US and what’s expected out of the US is is very antithetical to what the majority of Canadians believe to be right and proper.

Josh Sheluk: Yeah.

Colin White: So I think that there’s more despair here in Canada and it’s misplaced despair. I mean, we’ll plan a privacy hedge along the border. We’ll be fine. But people are really, really deeply troubled and they really think the world’s stumbling to an end here. I don’t think that’s warranted, but I do think that that visceral reaction in Canada probably is more palpable.

And hey, look, this is actually probably the point of this whole rambling half hour that we’re recording here. I don’t think that it’s beneficial at this moment in time to throw your hands up and go, okay, this is what’s going to bring the world to an end. I’m going to behave as if the world is ending, which is where some people have screwed themselves into a hole. That’s how they’re feeling. Like Trump’s obviously going to destroy everything.

He wasn’t that competent his first 4 years. I’m pretty not too sure he’s gonna be much more effective this 4 years, but

Josh Sheluk: Yeah.

Colin White: I’m I’m certainly not counting on it.

Josh Sheluk: Yeah. I certainly, it’s a bit distressing to me when I talk about talk to our clients, and they they say how distraught they are over the outcome, sick to their stomachs or those types of things.

Colin White: Losing sleep then.

Josh Sheluk: Yeah. It’s like, you know, just relax a little bit. Just a little bit. It might may do something good for you. Well, I I told you this story, the other day, but I was talking to someone earlier this week, and their 8 year old son was talking about how worried he was about the Trump election.

And she said to him, why why are you so worried? And he said, well, what if he makes freezies a $1,000? And so this is an 8 year old that obviously is picking up the general vibes around him about how distressing this type of event can be. And I don’t think it’s something an 8 year old should be worrying about for sure. I I get the the despair about the freezy situation, but I think we’re gonna be okay.

Colin White: Well, this is something I can address from a little bit of personal, experience. So, you know, my son at the same age was the same kid. Like, he was plugged into politics.

Josh Sheluk: He was worried about free freezies?

Colin White: No. He was plugged into politics, and

Josh Sheluk: he wanted to be

Colin White: a politician. He wanted to be prime minister because, you know, he was gonna go you know, he had ideas, and he was gonna go fix things. So he was completely plugged in until he was about 12 and realized that it was all fucking pointless, and none of it really mattered. So he was disillusioned with it by the time he turned 12 or 13, and he put it in his place and left it in a corner and never cared about it again. So this kid’s on a good arc.

Like, if he could

Josh Sheluk: put if he if

Colin White: he could put this behind him by his early teens and and not have that level because the problem is if you don’t have that level of angst as an 8 year old, you’re gonna have that level level of angst as a 40 year old.

Josh Sheluk: And Interesting.

Colin White: And then it’s, you know, you’re not gonna get past it. Now this kid, he’ll be past it. As soon as his freezies stay where they are for the next 4 years, he’s gonna go, oh, okay. This isn’t a big thing.

Josh Sheluk: Yeah. Okay. Good point. Good point.

Colin White: So no. I I think that, you know and again, I and we don’t talk politics. You know? I I agree with some politicians. I disagree with others.

There’s no one politician I agree with entirely. And there’s there’s a human side to all these issues that are gonna be hashed out in in the zeitgeist to meet people who are gonna talk about things. But we’re here to give financial advice, and that’s what people rely on us for. The economy is gonna find a way forward. The global economy just came through a pandemic.

The the globe just shut down for a couple years, and the the the economy found a way forward. That’s what economies do. The economy is the sum total of the globe’s effort to make their lives a better a materially better place, and it’s gonna find a way. You know? So regardless of who thinks they’re in power or what policies they put in place, there’s gonna be a path forward.

And I I believe that, and I, you know, I I’ll argue with anybody about that because there’s just been so many things we’ve overcome. We keep missing, and I keep bringing it up. Well, Iran just launched a 1,000 missiles at Israel. Like like we’re we’re living in times where huge monumental things seem to be happening on the regular. Global economy just kind of moves a bit to the left, moves a bit to the right, and finds a way forward.

And I don’t ever seeing that being materially disrupted for an extended period of time. Yes. Are we going to see a bear market? Absolutely. Yes.

Could it persist for a year or 2? Absolutely. That absolutely is gonna happen. But we’re not gonna know when it’s gonna happen. And when it does, there’s gonna be a recovery.

Yeah. And I don’t think that there’s any there’s any way to dispute that. So all of the despair, perhaps misplaced despair over how bad the human condition really is right now and the condition of democracy is not not best attributed or not isn’t going to affect your investment decisions if you wanna be successful.

Josh Sheluk: Can’t say better than that.

Colin White: Oh, look at that. I left Josh speechless. If you’re breaking a sweat trying to figure out what your financial advisor is 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

Josh Sheluk: RU

Colin White: isn’t exactly stress free, is it? Call us. We will demystify the world for you.

Kathryn Toope: For more information on the subject of today’s podcast or any other financial topic, please visit us online at Verecan.com. That’s verecan.com. There’s plenty of information there, or you can reach out to someone on the team. Thanks for listening. Please note, the information provided in this podcast is for general information purposes only.

It is not intended as financial investment, legal tax, accounting, or other professional advice. Our discussions are not a solicitation to buy or sell any securities or to make any specific investments. Any decisions based on information contained in this podcast are the sole responsibility of the listener. We strongly advise consulting with a professional financial adviser before making any financial decisions. Listeners should be aware that investing involves risks and that past performance is not indicative of future results.

Barenaked Money is produced by Verecan Capital Management Inc, a licensed portfolio management company in Canada. We operate under the regulatory framework established by the provincial securities commissions in the provinces within which we operate. The views expressed in the podcast are our own and do not necessarily reflect the official policy or position of any regulatory authority. Remember, at Verecan Capital Management Inc, we focus on aligning our goals with yours, prioritizing integrity and transparency. For more information about us and our services, please visit our website.

Thank Thank you for listening, and let’s continue to challenge the norms of the financial services industry together.