Latest Episode: Bold Financial Predictions for 2025
In this episode of Barenaked Money, hosts Josh Sheluk and Colin White, portfolio managers at Verecan Capital Management, discuss their predictions for the financial markets in 2025. They debate the plausibility of certain outcomes, including Trump’s efficiency claims, public understanding of tariffs, bond market performance, economic trends, market corrections, and the risks of leveraged single-stock ETFs. Additionally, they touch upon the resurgence of day trading and the overconfidence of DIY investors. Tune in for in-depth analyses and forecasts that could shape your investment strategies in the coming year.
00:00 Introduction to Barenaked Money
00:14 Predicting 2025: Accountability and Expectations
01:18 The Nature of Predictions: Risks and Rewards
02:48 Josh’s Predictions: Politics First
03:22 Trump’s Efficiency Promise: A Deep Dive
06:59 Tariffs and Public Perception
10:32 Market Predictions: Bonds and Economic Trends
18:24 Market Correction: Not Trump’s Fault
20:59 Stock Market Predictions for 2025
21:42 The Myth of Average Returns
22:24 Managing Client Expectations
23:29 The Reality of Market Predictions
24:56 Understanding Randomness in Markets
27:09 Leveraged ETFs: A Risky Bet
33:26 The Return of Day Traders
40:32 Conclusion and Final Thoughts
Episode Transcript
This transcript has been automatically generated
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 Sheluk and Colin White, portfolio managers with Verecan Capital Management Inc. Colin White: Welcome to the next edition of Bare Naked Money, and this will be one of the episodes that's gets played forever into the future, Josh, because we're gonna predict 2025. So we are going to be held accountable for what we talk about in the next, 30 to 60 minutes. So I hope you're ready for the pressure. Are you are you ready to live up to the the future's expectations of us? Josh Sheluk: Well, that's where you're wrong, Colin, because with these predictions, podcasts, articles, whatever, the beauty of it is the commentators can never be held accountable for their predictions. This is how the world works. There has never been somebody that's been held accountable for their predictions, so that's why we do these. We we are totally all scot free even if they're totally outlandish and, come to be 0% true at the end of the year. Colin White: You you have a different friend group than I have, so let's walk you. We'll we'll leave it to that. My personal group is going to look for everything I've ever said that was wrong and hold me accountable forever. It's kinda how they show their love. So maybe that's just a very, you know, very specific to me. So maybe you're right. Maybe we're fine. We can say whatever we want. Josh Sheluk: Well, I do say that a bit tongue in cheek. And all of these predictions that we do are a bit tongue in cheek, quite frankly, because we realize the limitations and the silliness, quite frankly, of doing predictions like this. So ours are always a bit off the wall and can only be taken, like, 80% seriously, most of them. Some a little less. Colin White: But but the upside is pretty big if you're like doctor Michael Burry and you get one thing really, really right. Like, for the rest of your life, people are gonna call you up and ask your opinion, like, forever based on being right one time. So Yes. There's there's a asymmetric risk here, because this could set us up for life, Josh, if we say the right thing. Josh Sheluk: Yeah. There there's a very high reward for making out an outlandish claim and being accurate with it, or I should say being right. Maybe not accurate, but being right. And there's very little downside to throwing out 10 predictions that totally turn out to be completely wrong because we can always come back and say, well, we knew that that probably wasn't gonna happen. Colin White: I can't wait to see where we go with this. As as always, Josh has got his list. I have a list in my head, and we haven't compared lists. So I'm gonna let Josh go first with the fear that everything I'm thinking Josh has already thought about, but I'm confident I'll be able to find another angle on something that Josh is about to introduce Josh Sheluk: to us. So Yep. So as usual, we don't follow the normal convention. So I have 7 predictions that I've come up with, which is a totally random number based on something that I thought was interesting. But, I have to apologize. I do have 2 that are loosely or directly related to politics. So I will ask you, do you want me to lead with the politics ones, or do you want me to end with the politics ones? Colin White: Let's let's let's flush the toilet early so that we we get it out of the way. And then, before you begin to speak, I'm very disappointed in you. Now we'll see if that changes based on the content of what you talk about. But the fact that we're talking about politics is disappointing me, Josh. Josh Sheluk: Yes. No. I I I'm disappointed in myself, Colin, if it matters. Colin White: It does it does okay Josh Sheluk: good so first prediction here Trump will not find $2,000,000,000,000 in savings through his Department of Government Efficiency so if our listeners recall one of the Trump's campaign promises was that he was going to make the government a lot more efficient than it is today. And he's brought in the the brilliant, the genius, the, politically savvy Elon Musk to to deliver on this mandate, and the 2 of them are are off to the races already. So their claim is that they're gonna find $2,000,000,000,000 in savings for the government. Let me tell you why I think that's not going to be the case, and I'll just give you a little bit of a tidbit from our friends at BCA Research who who, brought this information to life for me. So gonna talk about the Department of Education. Department of Education in the US spends about 200,000,000,000, per year. Now a lot of this efficiency, so called efficiency that we're going to find, or the US is going to find is by calling the, the masses of public employ employees that are not very efficient at their jobs, I guess. Of the 200,000,000,000 that the Department of Energy spends, do you know how much what percentage or what amount of that 200,000,000,000 is actually spent on employee salaries? Colin White: No idea. That should not surprise you. I don't know that. Josh Sheluk: No. I I I'm not surprised. Take a guess. Take a random guess and a totally uneducated guess. Colin White: 1 1,000,000,000 of it. Josh Sheluk: Oh, okay. So you obviously know a whole lot more than Josh Sheluk: you think because that's exactly the right number. Colin White: I'm a genius. Josh Sheluk: You you you Josh Sheluk: you are a genius. So the Department of Education has 4,000 employees, and they have about a $1,000,000,000 in salaries. So that means that 99.5% of what they spend is not on employments or salaries or these inefficient public employees. It's on other things like entitlements, like student aid and things of that sort. And, actually, if you look at the the broader US budget picture, about 80% of what they spend is on what is considered nondiscretionary or defense spending. 80%. And I think they the that their their total spending is about $6,000,000,000,000. So if you're telling us that you're gonna find $2,000,000,000,000 of savings, you basically need to cut that entire 20% of discretionary spending 20 overnight. Good luck. Colin White: See, Josh, time time for school. Because I'm gonna go on the other side of this and guarantee that he is going to be able to declare victory. I will guarantee that he will be able to save $2,000,000,000,000 because you are making the same assumption that many people make when they hear something like this and you ignore accounting. When governments talk, you know, they didn't say I'm gonna save you $2,000,000,000,000 this year. They said I'm gonna save you $2,000,000,000,000 So they're gonna institute programs now that don't come into effect until after they're no longer in power that cause savings to happen, including cuts in defense spending, and then do a present value calculation of that and announce victory. It's how accounting works. And, you know, the the problem with looking at what he's saying and trying to interpret it as as you would think you should interpret it, he'll be able to declare a victory. It's not gonna be that tough. He can announce stuff that will never come into effect and accomplish this goal and be able to tick the box. Welcome to accounting. Josh Sheluk: Okay. I should have consulted with the Sage accountants in this conversation before before I made that prediction, so thank you for that. So my second loosely political prediction is that in North America, there's at least 5,000,000 people that are in favor or will be in favor of tariffs without actually understanding what tariffs are. Colin White: Only 5,000,000? Where did you get 5,000,000? Josh Sheluk: I just made it up. It's like all of these predictions. Colin White: No. No. No. Thin air. I'll I'll I'll I'll go higher because I think of of the people who voted for Trump, which is roughly 50% of the US population, 35 to 40% of that 50% are whatever Trump says absolutely. You know? And it it's the biggest argument against the democracy. It was like the number one Google search after Brexit. You know? What is the European Union? I mean, people voted for it and, you know, removed themselves from the European Union. And then the day after it happened, Googled what it meant. So, yeah, absolutely, people are in favor without having any clue what it means. And it it's funny. I was I was talking to a manufacturing operation, and they've got operations here in Canada and in the states. And he said, yeah. This is probably gonna have exactly the effect he wants because we've got a couple of contracts we were gonna build here in Canada and ship to the states that we're gonna have to now build south of the border in order to be safe. That's exactly the effect that Trump's looking over by talking about it. So he's already won. This this rhetoric has already caused shifts in how companies are behaving. Yeah. So that's where the win is. But you're right. Nobody understands what a tariff is. And the number of TikToks and YouTubes and other videos of people trying to embarrass other people about how little they understand, and even they have it wrong, it's anyway. Josh Sheluk: Yeah. Colin White: But people are a favorite. Josh Sheluk: Yeah. Well, it's funny because, like so sometimes I think just the way that things are branded or marketed makes a massive difference as to how they're perceived. So if all you all you have to do is change the word tariff to tax, and people are diametrically opposed to it. And so if we just remove the word tariff from the English English language and said instead taxes on imports, are people gonna lose their fucking minds? I think so. Right? Colin White: Yeah. Well, if you think death tax, estate tax, capital gains inclusion rate, well, those are, like, 3 different ways of talking about something relatively similar, And each of them would evoke a different visceral response from the electorate who don't completely understand what's being talked about. So naming things is 90% of it. Like, absolutely 90% of it. But what Trump is doing very effectively is picking a fight. And if you have a leader that picks a fight with somebody and is winning the fight, yeah, my team is strong. The this is this. And like I said, I've I've spoken 1 on 1 with with with companies that have said, yeah. Like, we're we're making plans to do exactly what Trump wants to see happen because from a business perspective, that just makes now other companies are trapped. The one side or the other is gonna negatively affect them and all the rest of it. But the blather that he's talking about right now is actually moving the needle whether you wanna bend it or not. Yeah. And and just wait. Wait. That sounded way too sympathetic. I am not endorsing Donald j Trump or any of his antics. I am just making observations. You see, gee, Josh, this is why we don't talk about politics. Josh Sheluk: I'm sorry. I didn't I didn't I tried not to use the word Trump in any of that, but, anyway, let's move on. Let's move on to some real market predictions. And this one is going to sound familiar to you because I've made the same prediction for the last 2 years. 1 of them being right, one of them being wrong, but I'm gonna bring it back again. Bonds will outperform last year's returns. Colin White: Wow. That's a very definitive alright. So let's be clear. Short term, long term corporate government, or just the bond universe? Josh Sheluk: So the Canadian aggregate bond universe, which last year in 2024 returned 4.15% on the year, I'm gonna suggest we are going to see an outperformance of that, for 2020 5. Colin White: So is that based on a stagnant interest rate environment, or do you think the long end is coming down? I mean, I think the current yield to maturity would beat that, so a stagnant market would give you a win. Right? Josh Sheluk: Yeah. So the current yield to maturity on that is 3 and a half about 3. Right? So we need to see a little bit of a decrease in interest rates in aggregate for, that to to come true but not much. You're talking about like half a percent or something like that will get us pretty close to that number. So yeah. So so, again, I I I made this prediction last year, because 2028, sorry, 2023 was a pretty good year for bonds. I think they're up about 7% if I remember correctly. And I thought last year we could see something better than that predicated on on interest rates coming down. Now interest rates interestingly did come down for most of the year, and and we are looking really good on that prediction until about September, October time frame where things kind of leveled out. And in the US especially came back up, in Canada a little bit less so. But yeah. So that so that's where we we are now. And I I think we could see a little bit of a decrease in interest rates continue through this year. Now today, we're reporting this on Friday 10th. Today, jobs numbers economically, things are looking a little bit rosier. So maybe I'm fighting an uphill battle with this one. But again, I I think it's it's not an outlandish prediction at this Josh Sheluk: point. I Colin White: was gonna say carefully using the word we there, Gangadim. I mean, this is your prediction. I'm I'll comment on it, but it's your prediction. Josh Sheluk: Oh, you're already distancing yourself from it. Okay. Okay. I see how it is. Colin White: True shit. I was looking I look after myself. And listen. I I just we I started it, and you continue. We geeked out. So what you know, for our listeners, what we're talking about is, you know, you hold a bond and it's it's got an, you know, there's an interest rate on it. So just holding it into the bond doesn't move in valuation for the year, that is your expected return. So I was assuming it was slightly higher than what Josh's prediction was. Josh has just informed me that no, actually the yield to maturity is below that, which means there's probably more government in there than I would have given credit for. But, you know, so in order for Josh to win, the interest rates are gonna have to decline a little bit. Not a lot, but a little bit because that increases the present value of a bond. So there's 2 different things we talked about there that I think was a little geeky. I caught myself being geeky. I apologize. I let us into geekdom, and Josh doodlefully followed me. So, hopefully, that clears it up a bit. Maybe put some notes on the podcast too so people can click on and have a more of an explanation on that. Josh Sheluk: So are you when you're distancing yourself from that, are you saying that that's unlikely to come true, or you're just enough on the fence that you don't wanna be Colin White: Recency bias, man. I I saw that jobs number today. I mean, recency bias. Like, I'm I'm seeing that. I'm going, yeah, we're we're living through a no landing. And, you know, I'm getting more and more confident in saying that. And Yeah. In that environment, if it persists, and again, I'm fully giving credit to recency bias for this. That was the last thing I read before I came on the podcast. Yes. That's kinda that's kinda where my head is right now. But the beautiful thing is one of us will be right, Josh. Right? Like, it's almost like a boat runner, so the firm will be fine. Josh Sheluk: Yeah. If if you take the opposite of every every one of my predictions, we could say collectively at the end of the year that we were a 100 percent right on everything. Colin White: That's how math works. Right? Josh Sheluk: Yes. Josh Sheluk: Exactly. Alright. So continuing, along here, my 4th prediction, the economic trend will not continue in 2025. Colin White: Okay. Define trend. Josh Sheluk: So so so okay, yes, this is a little bit of an abstract, prediction. But what I would say characterized 2024 in terms of economic trend was slowing but still positive economic growth and I think we can say that by about just about every country on the planet slowing but still positive every every developed country for for that matter. So what I'm predicting here is that that that it's not gonna be 1 of 2 things is gonna happen. Either we're going to see a reacceleration in growth or we're gonna see it be slowing and negative, not slowing and positive anymore. So this is it's not a really profound idea or anything like that. But I think we we got comfortable last year and markets, everything did really well last year, I think, just kinda cruising along on that trend towards, I guess, we would call it a soft landing. And maybe what I'm saying is there'll be a no landing or a hard landing. It won't be soft. Colin White: So what you're telling our audience is that the year that Donald j Trump becomes president, that things are likely to be shaken up and not be the status quo. Is is that a way to paraphrase what the What's your No. No. No. No. Josh Sheluk: I I told you. I only had 2 political predictions. This is not Josh Sheluk: I know, but I Colin White: you're right. I'm bringing it into this one. And and I'm playing into the hysteria around various events that are anticipated to happen. And the juxtaposition of you saying, hey, it's not gonna be smooth sailing next year. There's a whole bunch of our listeners are going, well, no shit, Sherlock. And they're lining up, you know, all of all of what's the the the big events that are expected to disco bobble things next year. Josh Sheluk: Well, you you are very much feeding into, I think, the Canadian narrative on Donald Trump, and to to to to, sort of twist my words a little bit. But you can you can take any event from this year and say, this is gonna be a year that shakes it up. You could true Trudeau resigning. Colin White: Oh, yeah. This could be Josh Sheluk: a year that Trudeau resigning that shakes it up. The like, there's there's political situations in every country around the world pretty much that are kind of a mess right now quite frankly. You can look at any one of those and pick pick up any one of those. Colin White: South Korea South Korea, Europe, there's all kinds of stories going on. Yeah. Josh Sheluk: Yeah. Exactly. So I I don't think this prediction doesn't have anything to do with the political situations. It just has to do with economics don't trend exactly in the same direction for that long. Colin White: Oh, yeah. No. Well, listen. Josh Sheluk: Irrespective of what's happening. Colin White: Yeah. Yeah. My tongue is firmly in my cheek. I'm not buying into it, but I'm just saying that our listeners will interpret what you're saying. It's like, oh my god. You've just given them credibility almost for all of the various outlandish things that are out there in expectation land. I'm not buying into it. I'm yes. I understand exactly what you're saying, and I probably agree. It's kind of floating in a in a an equilibrium right now in an odd kind of way unexpectedly, and those tend not to persist historically. It would be interesting if it did. If we begin to if this is where interest rates belong, like, nobody's talking about that. This might be where they belong right now. Sure. We're always talking about the trend. It's gotta go up or it's gotta go down. It's gotta do shit all. Like, it could just sit there. Josh Sheluk: Yep. I'm actually kinda glad you brought Trump into the last one because I do have his name in this one even though it's not exactly a political prediction. It's kind of an anti political prediction. But my prediction here, number 5, there will be a significant market correction this year, and it won't be Trump's fault. And I'll throw in it won't be Trudeau's fault, and it's not gonna be South Korea's fault, and it's not gonna be Russia and Ukraine's fault or Israel's fault. It's not gonna be anybody's fault. There's just gonna be a market correction this year because, really, that's what markets do. Colin White: Okay. So define it. Are you talking about about a 20% sell off in the S and P? Are you talking about a 15% that persists for a period of time or a one day event? I mean. Josh Sheluk: That that's a bonus prediction. You gotta pay extra for that, Colin. Colin White: I have to pay extra for that. Josh Sheluk: Yeah. Sorry. This podcast is free. Anyway, well, let let let's add some context around it. So the average over the last 100 or so years, the average drawdown in a market from peak to trough throughout a calendar year has been about 13%. That's the average. Some worse, some better. Last year 2024, I think the peak to trough in the S and P 500 was about 8 percent. So it was a pretty stable low volatility year, all things considered. And so I think it would be almost certainly more, more volatile and and more significant of a correction than that. Is it 15? Is it 20? Is it 25? I don't know. I think that depends a lot on the economics, but I would say regardless of the economic environment that we find ourselves in in 2025, I'd expect that there's gonna be a pretty a material and a correction that an uncomfortable one. Something that people feel, you know, a lot get gets their stomach going just a little bit. Colin White: Yeah. No. That's true. I mean, it's funny because, you know, it's interesting how often it's come up in this conversation and the previous conversations we have about how middle of the road it's been. Like, the it's almost like it's in an equilibrium and, you know, less volatile than usual and not without stimulus that could have generated some volatility. But the mark the market seems to have just kinda drifted through it, which is kinda eerie. Like, you're drifting down a river and you're going, I thought this was white water rafting and where's the white water? And, you know, then there's nothing here. And I'm like, okay. So, yeah, I think the anticipation is building and there's there's there's something about a manifest destiny. If people want volatility, they're gonna create volatility either intentionally or unintentionally. It it would make us a lot more excited as money managers to have some more shit to talk about. I mean, if we see a big pullback, you know, I don't see our group more excited than when there's a big pullback and a lot of stuff we wanna buy gets cheap. So it would it would actually be productive if we saw 1 this year. Yep. Josh Sheluk: A little bit bittersweet those things for us as well. Mhmm. Next prediction is is quite closely related to that one. So I I think 2025 stock returns will not be close to their long term average. And then this is another thing that was inspired from our friends at BCA Research. So the average return on the S and P 500, the US stock market over the last 100 or so years is is roughly 10%. You know, squint a little bit is 9%, it's 10% whatever. But it's roughly 10%. But it's very unusual even though that's the average. It's very unusual for returns to actually hit 10% in a year. They're actually more often up by quite a bit more than that or or down by some degree or measure. It's it's pretty rare that things end up in, like, the 0 to 10% range. And and this is another reason why forecasts are kind of bullshit because if you look at all the market forecasts that are out there they're probably all gonna call for the vast majority of they're in a call for something between like an 8 to 12% return on the market this year and that just almost never happens So that's just like the kind of the coward's way out. So I I don't really have a like, I'm not saying that the market's gonna go up 30%. I'm not saying it's gonna go down 30% by the end of the year. I just don't think we're gonna hit that 0 to 10 or 12% mark like people would maybe anchor to because that's the long term average. Colin White: Well, I think it's gonna be important, yeah, in anchoring too. So, I mean, we've had a bit of a good run, and clients are super happy right now. So regardless of what they say or what we say to clients, they anchor on, like, yeah, 17% is a good return. Okay. It's it's it's an amazing return, and, you know, it's not gonna happen very often. So let's enjoy it and let it go because, you know, these things don't happen regularly. So, yeah, I do think it's important, and I think it's important to spend some time on this podcast trying to manage expectations. We're due. We're we're due for 2 things. We're due for a good market pullback, and we're due for a below average year. Now having said that, neither one of us has got a 100% confidence in that. So, you know, you need to behave accordingly. Like, you know, there's there's other there are those who would listen to this podcast and say, oh, that's it. I'm going to cash. You know, if there's gonna be a pullback and this is gonna be a blow average year, oh my god. You know, the sky is falling. I have to go to cash. But, you know, that would not be what we needed a disclaimer in the middle. Don't fucking do that. We the the the don't don't use this podcast as your reason to make that kind of decision. Josh Sheluk: See, this is one thing I I don't really believe in is is, like, we're due for this. We're we're due we're due for this. We're due for that. We're due for below average. We're due for above average. We're due that's just not the way that the market or the world works. Like, I I I I think if so we've had 2 years consecutive with returns above 20% on the S and P 500 that's historically unusual but if you look at the historical precedent for this it doesn't mean we're due for a down year so just because we've had good years doesn't mean we're due for down year or just because we've had bad years doesn't necessarily mean we're due for an up year really what it means is is nothing quite frankly like we can't really look at the last couple years and say anything so I this is part of this prediction is like if we look at the last 100 years we're not due for an average year. We're not due for down year. We're not due for a really big up year. We're just we're just due for for something, and we just don't know exactly what that's gonna be. Colin White: Oh, and then that's a super fair comment, and I would agree with a lot of it. You know? But it's it is human nature. And after a while, human nature does begin to affect outcomes. I mean, if people are expecting something to happen, they begin to behave as if it's gonna be happening, and then it can actually lead to it happening. Yeah. So the you know, but again, judging the mood of the planet is beyond my capabilities. But to simplify it for our listeners, it'd be similar to flipping a coin. You flip it, you know, 10 times in a row, it comes up heads. When you flip it the 11th time, you're due for tails, but statistically, it's got exactly the same Yeah. Probability of coming up that time. Right? Josh Sheluk: Yeah. That that that's a great way to put it. Like, you're you're not due for tails. You're not, actually. You're you're you're just due for normal odds. A 50.50 chance of each of those things. Colin White: Yeah. But in your head Yeah. But that's that's where the thinking of mind works. Right? Josh Sheluk: For sure. For sure. Yeah. That so these studies, I'm sure you've read about this. These studies have been done where in a classroom of students, everyone's given a coin. Half of them are told to make up the heads tails heads tails that you get when flipping this coin a 100 times, and the other half are told actually flip the coin a 100 times. And without fail, you can look at the results blindly and know which students actually flipped the coin and which ones made up the the list. Because the ones that made it up Colin White: think that things are Josh Sheluk: a lot more random and a lot more consistent than they actually are. Like, the ones that made it up, they'll go heads, tails, heads, tails, heads, tails. And all of a sudden, the ones that actually flipped it have 6 or 7 heads or 6 or 7 tails in a row. That's statistically unusual, but it happens when you flip a coin a 100 times. So the world is people don't really understand randomness and statistics the way that that they should. Colin White: Or no. That they I don't know if that they should, but they don't understand it. I can even go one deeper on this because when they came up with the original Apple iPad and you had the shuffle function that you could just, you know, randomly pick music off of the iPad, they were accused of being racist. Yes. Because every once in a while, they would play 6 country western songs in a row. Yeah. And, well, that can't happen if it's random. Well, actually, it can happen. So they actually had to program it to be unrandom Unrandom. In order to to get people to stop accusing them of things they just weren't. So Yeah. Again, the human brain is not really good at math. Josh Sheluk: Yeah. That's true. It's true. That is such a great example. Alright. This I know the 7th prediction is gonna be near and dear to your heart, Colin. Colin White: Oh, good. Josh Sheluk: I think I introduced this to you yesterday. I'm not sure. But my prediction is that at least one single stock leveraged ETF will blow up Colin White: this year. Josh Sheluk: Well, no. Like, totally blow up. Colin White: Like, be taken off the market blow up? Josh Sheluk: Yeah. Yeah. That's my thinking. Yeah. And, like, go to 0 to be taken off the market blown up. So just to explain Which Colin White: which which one? Which one? Josh Sheluk: Again, bonus predictions. Give me some more money. I'll give you more predictions. But no. Colin White: So this is to introduce we need to introduce subscriber service that if you subscribe to us and pay us money, Josh will actually give you all the bonus predictions. Josh Sheluk: Yeah. Look us up on Patreon. There's a Patreon there for us. But no. So just to explain what this is for for our audience, for our listeners. So these new ETFs, exchange traded funds, these new investment products have have come out where they take a single stock and they lever it. So they give you twice the returns to the upside and twice the returns to the downside or something along those lines on a single stock. So the first thing is this is total horseshit because this is the the simplest, investment to implement maybe slightly less, simple than a covered single stock covered call ETF but but pretty damn simple. So so simple to implement from, an investment perspective and these I I just looked up one company that's charging 1.15% on an annual basis to do this and as I said yesterday I could literally run all these ETFs from my basement in my underwear on my own without a single employee at my entire organization that's how simple this stuff is to implement and they're charging 1.15 percent on this stuff so leverage has good attributes when the stock or whatever it is it's levered does well, and it has some potentially very damaging or detrimental attributes when that investment does not do so well. So it magnifies both gains and losses. And I think at some point this year, one of these companies is gonna have a pretty substantial loss or pretty substantial decline on their share price. And as soon as you lever that, you get double that loss, and that could be, as I've said, I think it's good. Some something's gonna blow up this year because this is this is just the most idiotic product that's been launched in a while, in my opinion. Colin White: Oh, okay. In a while. Okay. So you qualified it as a thought. I thought you were No. Because that's a high bar. Josh Sheluk: It is a high bar, and I'm sure I'm I'm forgetting something. But I thought the covered call single stock covered call products were stupid because, again, it's something that's very easily implementable by an individual for probably a a thousandth of the cost. And I think this is this is more this is more risky. Just as simple to implement, but riskier for the investor. And people are gonna get caught up in in these things and the the potential returns that they offer. Colin White: Yeah. No. I I can't disagree with you. The the lever one way to explain the lever thing is if, you know, if you're 50% levered, like, you put up a $100,000 and you borrow a $100,000, if you have suffer a 50% loss in the investment, you lose a 100% of your money. Yep. You know? So that that that that's how that math works. And I've lived through the presentations that were given back in the day where they put a an application for a mortgage on your house on every chair. And, you know, somebody stood at the front of the room and talked about all the beautiful things about leverage, how everybody needed to lever up their house to go buy investments. And that doesn't happen anymore because it blows up. And it's not a sure thing. And it's beyond the risk profile of most retail investors, to be honest. And if you think about it, many, many retail investors have leverage in their life because they borrowed to buy a house. And, you know, that's a very significant leverage. And there are people we've got clients and especially in the environment right now where you've got a mortgage that's worth more than your house is worth. You know? So, you know, that's how leverage feels. Like, you can you can dig yourself a hole that can take you a while to dig out of. So something to be very, very careful with. Josh Sheluk: And I'll be looking forward to see which one blows up or 2 or whatever. Colin White: You you need to share with me the list you're watching. I have my list I watch. I'd like to see your list. And with Josh, let let let's just call it out here. I'm gonna I'm calling you out. It would be easy to implement for Josh Shellick, a seasoned investment professional with a CFA. You know, the average person may struggle to to execute on some of these strategies. Josh Sheluk: I I I did not say that the average person could sit in the Colin White: Just wanna be clear. Josh Sheluk: Execute all Colin White: of them. Yeah. Josh Sheluk: I think to to add a whatever a 100% leverage to something, I think most people can do that with maybe a little bit of coaching. But the the thing that I'm criticizing here is not the people that go buy these products. It's the company that decides to launch them and charge 1.15% for doing this because their cost structure on doing something like this is basically 0. So and that this is why, like, one capable person could run this entire organization, of of leverage single stock ETFs with very little, difficulty. Like, they could be on a beach for 7 hours a day and and run these portfolios for the extra hour per day. And that should not be something that you can charge 1% for is the point. Colin White: And and and have the product actually be a Josh Sheluk: small part of your income because the rest of your Colin White: money is gonna come from the product actually be a small part of your income because the rest of your money is gonna come from the YouTube channel about you only working an hour a day while you're sitting on a beach. That's where the real money is. Yeah. I love that. Merch on top of that. You know? It's a whole business model, Josh. Josh Sheluk: Yeah. Yeah. So last year, it was the single stock covered call ETFs, and I I think those things probably did pretty poorly relative to just buying the stock last year because the stocks were up pretty significantly on most of that that high flying tech stuff. So it costs investors a whole bunch of money implicitly, opportunity cost mostly on that stuff. And now this this is gonna actually literally lose lose clients' money at some point. So Colin White: it's Alright. So you you didn't hit you didn't hit one of my predictions. Are you finished with your predictions? Josh Sheluk: I'm done. I'm done. Take it away. Colin White: So as you have pointed out, Josh, we've seen a couple of good years back to back. You know, the markets have done well. Confidence is high. I repeat, confidence is high. I'm beginning to see the early days of the return of the day trader Oh. Because it is so easy to sit at home in your muscle shirt and short shorts after your workout and talk to the world about how much money you made today. I am beginning to see that re pull of freight. So we are entering the overconfident phase, and there are enough people out there who are who have had a little bit of a run of luck. They've been in the markets in a good time, and they've made some money. And they're now saying it's easy. You know, here's my strategy. I only trade for an hour a day. Here's exactly what I do. You can do this too. And they're selling the lifestyle, and they're making money off their YouTube channel. And it's it's getting traction because we've had a period, recency bias, that has been relatively easy to to make money, because the the the rising tide is raising all boats. I am predicting this year confidence will grow to a level that we will see a return of the common day trader kind of mentality. And that that little cottage industry will see an explosion of influencers talking about their various strategies. And it will anger me to no end and cause me to slap my forehead a lot because I have already had to slap my forehead. There was one guy on there talking about how his method of backtesting guaranteed future success. Because if you could come up with your trading strategy and backtest it over a period of time, that's the smart way to do things. And it's like, oh, no. Josh Sheluk: Because no one's ever thought of that before. Colin White: It's like looking in the sky and picking out a pattern. Of course, there's a pattern. There's a few 1,000,000,000 stars up there. Yes. You can make whatever the fuck you want out of it. So I'm I'm predicting that that that's gonna become a bigger thing this year. I think it's going to enter the zeitgeist a little bit more because we're entering a period now where confidence is exceedingly high for all the wrong reasons, and it's been very difficult to fuck things up. There are people who've managed to do it, but there's it's very it's been more difficult to fuck things up. Josh Sheluk: Yeah. Don't don't you think it was 2020, though, that this actually reemerged as a big thing during COVID? Colin White: It it it it certainly got some traction, but the volatility there was a little bit harder to spin a really good positive news story because, you know, there was a sell off before there was a takeoff and all that kind of stuff. But I'm just judging by my feeds and and and what I'm seeing. Right? So it's you're right. I would I could have built a case set in 2020 where everybody's forced home and got nothing else to do but sit in front of their computer that maybe you would have seen more of a proliferation. But I I try to maintain a really wide view on what's being talked about. Like, I click on odd things. I follow odd things. I I look at Fox News just to kind of try to maintain some kind of perspective on what's going on. And recently, it it's it's it's I've bumped into a whole shit ton of it, and I'm not sure where I think it's one of those ones where maybe one of them had success, and then then soon as somebody goes, alright, that's working, and there's a bunch of hangers on. But Yeah. But I can see it being born out of a couple of pretty steady years of confident growth and the high-tech sector doing well, which appeals to the nerd and the young people. This is one kind of a ticker. He goes, I'm a 20 year old day trader. I've been doing this for 5 years. I was like, you've been day trading since you were 15? Josh Sheluk: I'm like, yeah. Colin White: Okay. Good good for you. Josh Sheluk: Yeah. Yeah. Yeah. I know. I I, I I think what you're saying there that is definitely true is there's a high correlation between, market success, market returns, and the proliferation of do it yourselfers or people that are are confident in their ability and apparently influencers that, are do it yourselfers as well. Colin White: And that's where the business model gets a bit funky because, you know, like, you can be confident in what you're doing and make money at it. But if you really make more money talking about making money, that's that's a little fucked up. But that is kind of the world that I think that we're we're existing in right now. So maybe it'll persist a little bit longer. But but overconfidence is a thing. You know? That's what I mean. Well, the old expression is not what you don't know is gonna hurt you. It's what you think you know for sure that just ain't so. And, again, I've said it before. Do you think you could sit at home and computer in your pajamas and you've picked out a pattern that the 1,000,000,000,000 of dollars and 1,000,000 of people that troll the Internet with high speed computers that compete on picoseconds, you know, you think you found something that they haven't found and you can exploit it. I I'm gonna call you optimistic, for sure. And maybe you'll get lucky for a while, but to think you've got some kind of sustainable advantage or moat that the trillions of bots that are trolling the Internet haven't figured out, I think you're, you know, you're gonna get crushed at some moment. Josh Sheluk: Yeah. And speaking of which, I was just talking to somebody yesterday about implementation of AI into quantitative strategies that are looking for these types of patterns. So, again, if you think that you and your pajamas at home in your basement can do a better job at identifying these patterns than some of the complex sophisticated intelligent AI systems that are out there, plus the millions of other nerds that are out there that have PhDs and things like that scouring the Internet for this type of thing, that that's, overconfidence to the max. Colin White: Well, it was a book I read a long time ago, Long Term Capital Management When Genius Failed. You know? So it was basically, they they were one of the first groups to really get into global arbitrage, which means they would find a mispricing between the Australian bonds and, you know, the Canadian mineral sector or something. And they would find these arbitrage opportunities and place bets. But the problem was as the world got more efficient, those arbitrage opportunities kept getting smaller and smaller and smaller, and they kept having to borrow more and more money and it became less reliable to find them because that's how the market works. If there's if there's a reliable pattern that people can profit on, there's going to be a lot of competition for it, and it's gonna get competed away at some point. And, again, sitting at home in your pajamas trading, you can be lucky for a while, but to think you've got some kind of sustainable advantage that's not gonna get competed away is, you know, maybe misplaced. Josh Sheluk: You got anything else for us? Colin White: No. That was my big finish. I think 8 is a good number. And I would like to applaud both of us for not coming up with a round number saying we need to come up with 10 predictions and then having 2 bullshit things we say at the end just to Yeah. To call it a 10. I think that's a bullshit game and that other people play. If it's 8, let's call it 8. Let's just leave it at 8 and be held accountable, Leslie. Josh Sheluk: Thanks, Don. Colin White: Thanks, Josh. Josh Sheluk: 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 Dontrocktheboatwealthplanning.comor.ru 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. Josh Sheluk: Please note, the information provided in this podcast is for general information purposes only. It is Kathryn Toope: not intended as financial investment, legal tax, accounting, or other professional advice. Our discussions are not Josh Sheluk: a solicitation to buy or sell any securities or Kathryn Toope: 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 Josh Sheluk: a professional financial adviser before making any financial decisions. Listeners should Kathryn Toope: 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 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. 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