Wine, Cheese and Investing (w/ @danielpronk)
[Music]
Hey guys, welcome back to the channel! We're continuing with the new money advent calendar today, and this is a pretty cool video we've got coming in today. It is, of course, wine and cheese night, and of course, I'm joined by Daniel Pronk. How are you doing, mate?
"How you going?"
I'm doing great, man! How you doing?
"Yeah, I'm doing very well!"
So, the story behind wine and cheese night is I love following you on Instagram, and when you do your Q&A Instagram Q&As, you always have a glass of wine with you.
"Always!"
Yeah, exactly right! But some of the stuff, some of the banter that you come up with when you've got a couple of wines in you is absolutely spot on. So, I love it! I find it very, very funny. So, yeah, this is going to be a, I guess, a half an hour, 45-minute chill out one cheese night. So, if you're following along at home, go and get your favorite wine. I actually really don't like wine, but I'm going to drink this here cider out of a wine glass.
[Music]
Do you have Mercury cider? Surely you have Mercury cider wherever you are.
"I honestly don't know, do I?"
You're not a big cider person?
"No, pretty much gin, yeah, rum, and wine. That's the trio."
That's the holy trinity!
"The holy trinity!"
Now, you see, I'm going to sacrifice my manhood here because I really don't enjoy much alcohol. A lot of the stuff out there I just don't like the taste of, like beer—I just can't hack it. I don't know, I've never been able to hack beer.
"I can't—like, obviously spirits nobody likes, but we all drink them anyway, and then wine I don't like. I can handle some white wine, but I wouldn't choose it, that's for sure. And red wine I'm not a fan of. I'm like, with me, the closest we get to soft drink, like the better, which is so, so bad when it comes to alcohol."
But anyway, I'm just like a real sweet tooth, and I love soft drinks or sodas. So, yeah, that's why I tend to gravitate towards the cider, to be perfectly honest. This will really let my manhood down a little bit, but if somebody gave me a vodka cruiser, I'd be like, "Yeah, why not? Tastes like soft drink, let's go!"
Have you ever tried—they have Pink Whitney now. Have you ever tried that?
"Oh no, what's that?"
It's like pink lemonade with vodka, but I swear to God, you cannot taste the vodka. You can't taste it at all, it just tastes like lemonade.
"Yeah, it's so dangerous!"
Well, I tell you what, to be honest, these are quite dangerous. These get you going in quite a hurry. These Mercury hard ciders—I don't know if anyone's had these Mercury things. Usually, the Mercury hard ciders are, I think, two standard drinks, but you get this variety, which is the crushed raspberry, and a 375 mil can is 2.4 standard drinks.
"So that's quite dangerous!"
That’s quite dangerous!
"Definitely is! You gotta pace yourself, otherwise they'll end your night very prematurely."
Anyway, welcome to cider and alcohol chat with Brandon and Daniel! We should probably talk about something to do with investing and finance and whatnot, so what we've done is essentially gathered a whole lot of questions that you guys have asked both myself and Daniel, and we're just going to go through them and have a bit of a chat and just see what we think about various topics, various questions.
So where do you want to start? Should I chuck the first one out there?
"Yeah, sure, let's do it!"
All right, here we go! What are your thoughts on ETFs?
"That's a very broad one to start with."
My thoughts on ETFs? I think they are probably the safest option for anyone looking for a passive investment—not really wanting to do too much research and find their own stocks or anything like that.
"Yeah, true. Historically, it seems like the best passive investment is just a dollar cost average into an ETF, like the SPY."
So, yeah, if you want passive investing, then ETFs are probably the way to go.
"Yeah, I feel the same! If I'm investing in an ETF, I'm only ever passive investing, trying to focus on the market."
Because you can get so many exotic ETFs now that track specific industries, sectors, blah, blah, blah. You can get inverse ETFs. Have you seen inverse leveraged inverse ETFs?
"Yeah, it's funny you say that because I was just talking about those in my Discord today."
Oh really? There you go!
"Yeah, yeah. Because when Corona came over to North America, I actually sold all my investments and I shorted the Dow, right? And if I bought an inverse ETF, it would have made a lot more money."
Yeah, right! I just didn't know they existed at the time.
"They're kind of scary."
They are a little bit scary because some of them are two times, some of them are three times inverse.
"Yeah."
If you get it wrong, you're in big trouble. Personally, I don't touch any of them, but you're right, if the market goes down and you happen to be in a highly, you know, 3X inverse ETF, then far out, you can make like if the market goes down, what, three percent a day, you make nine percent, which is just insane.
"Yeah, yeah. Too exotic for my blood."
But yeah, you're right, I didn't know about them either until somebody mentioned them to me. I was like, "What the hell is this person talking about?" So I had to go and research them.
"Sorry, guys!"
As for like exotic ETFs, if you want to track cannabis or something, then I find those ETFs probably have like six to ten stocks in them, and then at that point, I would rather just research the individual companies and try to find just one.
"It's a good point! What's the point in an ETF that's got like six stocks in it?"
Yeah, you can look through all those companies in probably a day and figure out which ones are crap.
"Exactly!"
So, yeah, and surely the point of an ETF is to get wide exposure to something.
"Exactly!"
Because it's like, what the hell?
"Yeah, exactly right!"
If there's only six stocks, it's like, exactly! Exactly what you say, you're better off just looking into those companies.
"Yeah, yeah, I think with ETFs, use them for passive investing."
And you're right, for most people! I actually just made a video where I think for most people, passive investing is probably the way that they want to go. Because, I mean, like we obviously like researching companies and being active investors, but most people, they don't really care much for publicly traded companies; they'd probably rather watch something on Netflix.
"Exactly!"
So, yeah, for them, and I mean, with passive investing, I mean, ignorance is your superpower. I mean, so many active investors get screwed because they're so emotionally invested in the short term, and then they end up not making money at all. So it's like you might as well just passively invest, forget about it, and come back in 30 years or continue to contribute to your portfolio over like 20, 30 years and then see where it goes, I reckon.
"Yeah, exactly!"
All right, I reckon that covers ETFs. Do you want to pick your next one? What do you like out of the questions we've got?
"Okay, oh, okay! What are your best investing books? What would you recommend to investors?"
Oh, best investing books. This is interesting because we spoke about what investing books were like not too long ago, and we actually had pretty much the same ones. So I always say, for people that are in Australia, I always say if you just have no idea—you've never even like, what is a stock? What is the stock market? Like you just don't understand—then start with something like The Barefoot Investor.
"I don't know if you've heard of The Barefoot Investor?"
Probably not because it is an Australian-focused book, but it essentially just goes through all of the steps of personal finance that you need to get sorted out first.
"Like make sure that you haven't got high credit card debt because obviously getting killed with the interest rate there as opposed to investing. Blah, blah, blah."
It's like make sure you're on top of your debts, make sure you're tracking your income and expense, all that sort of stuff.
"And then it gets into some concepts of passive investing."
So I always say if you're new and you want to like learn about that stuff from a basic level, then The Barefoot Investor is great.
"But then moving on into some more stock market-specific books, I really like—like my favorite is Rule One. That's the one that really opened my eyes."
Rule One by Phil Town!
"Yeah!"
I actually like a lot of the books kind of scratch around the surface, but I found that when I read Phil Town's book and he broke down that Warren Buffett strategy, he really went kind of in depth and said, "Okay, so we're talking about a moat. How can you actually tell whether a company has a moat?" kind of thing. How do you actually value a company?
"So that's one of my favorites!"
What are some of yours?
"My absolute favorite is The Intelligent Investor!"
By far!
"Yeah!"
But really, that's interesting because it is a great book, like I won't deny, and obviously Warren Buffett gets behind it, but man, it's dry.
"I was just about to say that! I guess one problem with the book is how dry it is and how hard it is to sit down and read it."
Yeah, like that! Even when I read it, I read it in bursts of like 10 to 15 minutes, and then my brain is like, "Okay, it's time!"
"But so that's my favorite book, but honestly, I would not recommend like a beginner investor go and buy The Intelligent Investor because I don't think you're going to retain very much."
I think starting with a book like Phil Town would be way better for you!
"Yeah, no, I agree. I remember the first time I tried to read The Intelligent Investor, I probably got like, you know how it starts off when it's like comparing stocks and bonds? That's like how it starts. I didn't get past that first section."
It sent me to sleep.
"It took me—I went back and read it another, like I think two or three years later, and that was when, obviously, it's like, okay, I actually understand what's going on here."
But yeah, and so many people recommend it, and it is a great book, but you're right, if you're brand new to investing and you get recommended The Intelligent Investor, you probably get turned off of investing forever.
"So just probably start with that, Phil Town book. But another good one is Peter Lynch's book as well, One Up."
"Yes! That's one that you like as well, right?"
That's a great book!
"Yeah! Solid book, really like that one."
This is a slightly different kind of approach, I guess, to the Phil Town and Warren Buffett kind of method, but still, many of you notice many of the themes are the same as you kind of work through that book, and he's got his own insights as well, which I think are very, very handy.
"What I think is cool is like all these books, the central concept is kind of the same, but they all have their own little bit of niche twist on it, if you know what I mean?"
Exactly!
Yeah, and I love it because you get to kind of see how Peter Lynch thinks and how Phil Town thinks and Benjamin Graham.
"Yeah!"
And then, sorry, I'm sorry, you go, you go.
"All right, I was going to say, the thing is, is that by reading all of these different books, I mean, obviously they're writing their own books, and that they probably haven't—or maybe they have, maybe they haven't read these other people's investing books—but the good thing is, is that you just get their plain and simple opinion on something, and then you read a few of these books and the prevailing themes really stand out more because, like, you know, you read a Phil Town book and you're like, 'Oh, okay, this concept of margin of safety,' and then you read a Monish Pabrai book, and he says margin of safety as well, and then you read Warren Buffett's material or Benjamin Graham, and he's like, 'Okay, so this concept of margin of safety is something that is consistent amongst all of these top investors.' What is it? That's something that I need to write down and make sure I really understand."
"That’s what I was going to say!"
Yeah! So, a little bit of a tangent here. What do you think about the market right now? Because, personally, I'm not finding margins of safety anywhere almost.
"I'm 100 percent with you! The problem, look, when I—if we're truly going for big solid fat margins of safety, then even after March, that big March crash, there were still some companies where I'm like, 'Oh, I love this company so much, I want to buy the shares,' and I was looking at it, I'm like, 'Man, this is still overvalued!' The market's come off!"
"Yeah, it's come off like 30 percent, and this stock is still so overvalued!"
So, I did find—look, I don't want to be caught with too much cash at any one time because cash is trash at the end of the day over the long term. So, I did settle for—in March, I settled for some weaker margins of safety just to deploy some cash.
"But at night right now in the market, it is very difficult, and a lot of the comments—like I've made videos on margin of safety and whatever, and a lot of the comments are like, 'This method doesn't work at all! Like, I tried five companies, and there were none of them even remotely close to margin of safety!'"
And to those people that comment like that, I just kind of want to say, "Yeah, that is correct, but the process still works, right? You just have to be patient."
"I don't know."
Yeah, what are your thoughts? Are you finding much? Are you finding anything cheap at the moment?
"I think we're basically overpaying for most things right now."
"But, yeah, I think like 98 percent of the things I look at right now are heavily overvalued."
The only real value stock I found recently was Canadian Solar, and I found it—
"Okay, yeah."
And I had a price-to-earnings ratio of four and a price-to-free cash flow of three when I found it.
"Wow! Okay!"
And I made a video about that on my channel; it's up about 110 percent since I made a video on it since I bought it.
"Do you know why it went? Did it crash or something? Did it go down heavily?"
"No, it was just trading really cheap, and to this day, I still don't fully understand why, but even after like a 110 run, it has a price-to-earnings ratio of nine."
"Wow! That's a solar company!"
"Wow! Okay!"
So obviously, they're in a good space for the future.
"Yeah!"
Still heavily depressed; their margins are industry-leading; they're killing it; their projections are awesome. So, as long as they can continue executing on their projections, I'm like, I'm going to keep holding it.
"No, well fair enough, that makes sense! That makes total sense! If you believe in it and the management's proving that, you know, they're producing the goods, and they're continuing with the growth and all that stuff, then far out, of course, you'd hold it. You have no reason to sell it, that's for sure!"
Exactly!
That's an interesting topic then, and this is a question that I've got that I just kind of get from time to time. We both have pretty similar investing strategies. When do you consider selling a position? Are there any things where you're like, "Oh, okay, yeah, I better sell?"
Or are you more in the Buffett camp, if it's just like, it's a great business, let's keep holding?
"Honestly, most of—well, pretty much every stock I own, I've researched very heavily, right? So I pretty much don't even look at my portfolio, to be completely honest with you."
Okay, yep!
"I look at it from like day to day, but like once a day, and then if I notice that a stock is down like 30 or something, then that's when I start to get interested."
Yeah! But a lot of the time I find in this market, especially with all the volatility, like if a stock is down 15-20 percent, there's really not—sorry, there's usually not a good reason for it!
"Yeah, true."
Like Canadian Solar, again, for example—they just reported earnings, and the earnings I thought were great, but the stock dropped like 20 or something ridiculous! I was like, "I'm not going to sell just because the stock is down; that makes no sense!"
Yeah!
"I really only sell if my underlying thesis has changed or something around the business has completely changed, like my future outlook on it."
"But I agree, it's still good! There's no reason to sell it just because the stock is down."
What about when a stock goes up? What are your thoughts about selling when the stock goes up?
"So you've bought in margin of safety, let's say you got this fat margin of safety of like 50 percent, right? And you got in there, and now it's been on a charge, and all of a sudden, the P/E is like a hundred, and it's heavily overvalued, but you love the company; the management team is executing, you know, they're doing a great job. Do you sell, or are you more in the hold camp?"
"Honestly, I think I would sell!"
You think you would sell?
"I would! And that actually just happened to me with a speculative investment!"
Right!
I had to sell it because it ran 120 percent in a week, and I was like, "This is—that’s ridiculous!"
That feels good.
"It feels good, but it's uncomfortable, you know? So when I get uncomfortable, that's when I'm like, I should probably sell."
Yeah!
And I think that a lot of people get a little bit nervous about selling as well. They're kind of just like, "Uh, I don't know." They kind of like, "Well no, I believe in this company, keep holding it."
"But I think from my own experience, I've been up on positions that I've, you know, really liked, and then I've seen that profit, you know, in my unrealized gains slowly evaporate as the stock comes back down to earth, and I've seen that happen to me a couple of times. So I'm in all favor if people see big profits on overvalued stocks that they hold, then I'm all in favor like go and sell it!"
"I mean, there's no problem with locking in a profit; like, that's you won!"
You say that because one of the gold companies I'm invested in, I invested in a gold company when gold was rallying to new all-time highs.
"Yep!"
And I believe I was up like 60 percent on that position, but now that gold has come back down, I'm actually at a loss on that position now.
"Right!"
Just like you, I had a massive gain, and now I'm sitting on like a 2 percent loss. Just completely wiped it out.
"Damn!"
Yeah, and when that happens, even if you want to hold the stock for the next 10, 15 years or whatever, when that happens, you're just like, your heart breaks. I mean, you can't stop it; we're only human, right?
"Oh no! You do the calculations on your phone, you’re like, how much could I have made if I sold and re-bought?"
Exactly!
As dangerous territory, I reckon hindsight is very dangerous for particularly stock investors.
"We just break our own hearts by utilizing hindsight!"
But anyway, right! Do you want to pick another question out of the multiple that we have here?
"Okay, I'll ask you this one because I think I know the answer. Oh, do you hold Tesla?"
"Yeah, I do! I do hold Tesla!"
That is absolutely 100 percent correct!
"But I— with Tesla, so I kind of subscribe to that Phil Town investing strategy where it's like you want to keep, if you're going to play around with speculative stuff, you want to keep it collectively under 10 percent of your portfolio."
So a lot of the YouTubers that we follow in this space have just like dumped their whole, like as much as they can into Tesla, and they're absolutely crushing it.
"But for me, I never went like very heavy into Tesla, I suppose, which looking at the stock price is obviously a mistake, but looking at where the company was back when I invested in it, which was in like, I think early 2017."
So back then, it was much more speculative than obviously where it is now. This is like, geez, 2017, I don't even know if the Model 3 was out at that point.
"I don't think so!"
No, maybe it was about to come out in the next year or two or something like that.
"But no, obviously, a lot of people, I had big faith in that management from Elon Musk, so I got in there, and obviously I've done very well on the stock."
"But you know, I'm certainly—a lot of people are thinking that I'm some millionaire from investing in Tesla, but unfortunately not the case! I wish that—if you know that, going back to hindsight, right? You wish you had this information, I would have gone into as much debt as possible to buy Tesla's stock if I'd known."
Do you hold Tesla stock?
"I don't! I've got no idea!"
No! Unfortunately, Tesla is my biggest regret in investing, man.
"Yeah? Yeah!"
Because last—no, yeah, 2019, so my birthday is May 2nd.
"Yep!"
And I told myself in 2019 for my birthday, I was going to buy some Tesla shares because I love Elon Musk, I love Tesla, I think electric vehicles are the future.
"But, um, during my birthday, if you look at the stock chart, there was this massive dip in May, and every article on Tesla was just negative, negative, negative. So I kind of—back then, I didn't know as much as I do about investing now, and those negative headlines really scared me away from the stock."
"When in hindsight, that's like when I should have been loading in!"
Yeah!
"So I never bought it because I got scared of the headlines, and then I just never bought it."
"I always felt like I was chasing the run, you know?"
Yeah! I was just kept going, and going, and going! It's like the one that got away, kind of thing!
"Exactly!"
Yeah! But if I had bought Tesla in May that year, I think it would be up 1500 percent right now!
"Yeah! It's just crazy, man!"
It's insane! I remember when it was trading at around about 300, between 300 and 400 dollars, and then it went down to like 180, and I don't know when that was, but that was just, that was me!
"That was May, was it?"
Yeah, I remember because looking on my birthday it was around 180, 180 to 190. I think my average buy is 218, but that's before the five-to-one stock split that they did.
"So, yeah, it was my opinion on it back when I invested was that it was speculative for me, so I kept it low; I kept the position low."
"Obviously in hindsight, you wish that you put the house on it, but that's just not what happened."
"But you know, I think based on the information that I had available at the time that I made the investment, it was probably the right thing to do, even though obviously it didn't work out that way with the stock."
"But yeah, man, that sucks though! I'm sad that you didn't get in because now, as I mean now, it's just ridiculous, right?!"
I think it's trading at a P/E of 1,100 and something, which is just insane!
"That's just insane!"
But yeah, anyway, I looked at the cash flow of the business the other day, like after the most recent earnings report, and I believe my fair value for the company came out to like 90 to 100 billion dollars, right?
"And it's like if I want to get a margin of safety, there's just no way!"
There is no way! I don't even know what the market cap of Tesla is right now, but it's high.
"I'm going to look it up. I'm going to guess 500 billion."
Oh, you are so close—538!
"Holy! Not bad, not bad!"
There you go! Anyway, Tesla stock, the one that got away! I don't know, we might get an opportunity. I think it's much less speculative now than what it was, so you never know. Funny things happen in stock markets, so maybe we'll get an opportunity in the future.
"All right, let me ask you—let me ask you this one? This is interesting! Would you ever do a meet-up in real life?"
"I just wanted a bowl of cheese in my mouth!"
Oh no, sorry! I was looking at the—well, I'll answer this question. I think that definitely yes, I would love to do a meet-up in real life; I think that would be awesome.
"But I'm just a little bit nervous to be honest doing meetups."
Yeah!
"Because I just don't know—because I think there's—like obviously we've got similar-sized channels, and if we had like 5,000 subscribers, I'd just be like, 'Yeah, let's just go meet up at a coffee shop or something, you know?' If anyone is around and wants to come along and, you know, have a chat about investing or something, let's just go!"
But I've just seen a lot of YouTubers that have tried to do meet-up events, and they've just gone horribly wrong.
"Just from people not—like for me, when I look at my, like my audience, I'm just like, 'Yeah, I really don't think too many people would show up to a meet-up.' And I think that that's what a lot of YouTubers think when they organize these things."
So they're just like, "Yeah, let's meet up here in public somewhere," and then like a thousand, two thousand people show up, and then they're like, "Oh my—what have I done?"
"Yeah, I'm in trouble here!"
Yeah!
"And I think even one of the YouTubers like organized some convention which failed miserably because they didn't anticipate how many people would come in. They didn't have like any security or anything like that, so it was just an absolute shambles."
"But I would definitely like to—I definitely think it'd be awesome! Like I hate with you like content creation where subscribers to us just look like numbers; they're literally just numbers that show up on a computer screen to us."
"So I really want to get out and organize meetups and actually meet the people that are the numbers, I suppose."
"What are your thoughts?"
No, I totally agree with what you just said! It's like recently I just hit 100,000 subscribers, and I remember that last push to 100,000 subscribers, like honestly, it was just the number!
"But then you have to realize like these are actually people, you know?"
Yeah!
"So I kind of find that when I'm in my comments and everything now that you build that connection with your audience."
"But doing a meetup, I would love to, but it's kind of intimidating to think how it would actually go!"
Definitely!
"Because you don't know what to expect! You could like say, 'Let's meet up at a coffee shop,' and as you said, 500 people show up, and that's not good!"
"So sorry, I needed to reset my camera!"
Oh, fair enough! You know how cameras only record 29 minutes?
"I hate that! It's so annoying because I want to do these sit-down talks and talk for a long period, and I've got no idea when my camera is going to conk out, but I had my headphones in, so I heard what you said, but yeah, no, I agree!"
Yeah, I totally agree with you! It would be cool! I'm looking forward to the day when we can get all of us, like all of us together in the same place again and maybe organize one epic meetup.
"I think like FinCon is the thing where that happens, but I don't know! I was going to go to the States for FinCon this year, but obviously that didn't work."
Yeah, they're going through some things right now.
[Music]
"Yeah, they got a couple issues."
A couple issues over there! But yeah, no, definitely! All right, let me ask you another question.
Let's look at this one! Oh, here we go! What's your advice for young investors after taking a big loss? You've unfortunately had a big L—what do you do next? Do you give up and quit investing forever?
"No way!"
Well, personally, I actually had a huge loss in 2018 or 2019.
"Yeah!"
And I think the best thing to do is just take your lessons, you know?
"I mean, yeah, you have a short-term failure, but if you can extract every lesson from that situation and learn going forward, then I think you'll be better off in the future! I wouldn't say give up, though! I don't think that's the right option."
No, definitely not! The way I see it is like you're going—if you're a new investor, you're going to lose money at some point or another. You're going to make a real bad investment, and you're going to eat some humble pie.
"And there's two things you can do: you can give up, which a lot of people do, which is really sad—you just straight up give up—or you can learn your lesson what you're just talking about."
And the way I see it is you think about how much money you have as a young person and then think about how much money your parents have and then how much money do your grandparents have.
"And generally speaking, you have the least, your parents have the second most, and then your grandparents have the most amount of money. So I think if you're starting out and you're like 20 years old or maybe you're still studying at university or something like that, you really in the grand scheme of your whole life, you don't have very much money!"
Exactly!
"So if you fast forward 20 years, you're going to have so much more money than what you have now. So it's better to try and invest now, learn your lessons through your mistakes now before you end up having, you know, hundreds of thousands, if not, you know, if you're lucky, millions of dollars, and you're trying to think about what to do with it."
Because you'd much rather make investing mistakes when you've got a couple of thousand bucks than when you have a couple of million dollars—that's for damn sure!
"That was—I think that was a perfect answer, man, honestly!"
Yeah, that's my take on it! But yeah, I don't think that—the thing that annoys me is when people give up on investing because something doesn't go right.
"Would you want to pick out another question?"
Yeah, for sure! What are you feeling? What are you feeling?
"Actually, I have something to add to that."
Oh, go for it!
"Yeah, okay! So my biggest loss was in 2019, and I believe it was like 8,500."
Okay, wow!
"And that was huge for me, and as you just said, like yeah, but as you just said, when I'm 30 years old, that's probably not gonna be very much. And then, this year, my biggest gain ever was over 10,000 dollars! So using the lessons I had from that one mistake, I've been able to recoup all of those losses and more! So it's like, it's just take your lessons and continue moving forward!"
Yeah! No, that's good! Well, it's good that you've been able to bounce back from the loss so quickly; that's amazing!
"But yeah, it's phenomenal! Just treat your losses as lessons!"
Exactly!
"All right, you pick one! You pick one!"
"All right! Are you okay with like a more kind of technical one?"
Yeah, let's go for it!
"All right! Do you think we're headed for deflation or insolvency directly ahead?"
In Australia, we actually did have deflation.
"I can't remember."
Really?
"Yeah, we did! It wasn't much, but we did!"
I'm trying to find it now; it's a really interesting kind of thing to think about because we could see—where we are now—we could see inflation, or we could see deflation.
"I've kind of read some articles on both sides of the equation, thinking with all of the stuff that's going on with, you know, lockdowns and, you know, supply chains and whatnot, you could have a situation which is deflationary; you could have a situation which is inflationary too."
"And the way I think about it is always just going back to just basic principles because obviously I'm not an economist; I'm no expert."
"But I just think about, okay, what's inflation? Prices going up! What's deflation? Prices going down! How does that work? Was it in the market?"
So we're thinking about supply and demand. If demand goes up, supply goes down, then it's inflationary, and then if supply goes up and demand goes down, then it's deflationary.
"And then you kind of think about the two, I guess possibilities, is that we could have people that are willing to get back out there, and we need to buy this stuff. We want to, you know, we want to get back to normal life; we want to resume our past habits."
But so that would mean that, you know, the demand would go up, but then the supply might stay down because, you know, interruptions with the global supply chain and whatnot, with different countries battling different rules and lockdowns and whatnot.
"So maybe that causes high demand, low supply; on the flip side, you could have, 'Well, maybe people have less money than what they had before. They've been financially hit; maybe they're trying to hold onto their cash; they're not going to have that demand they had before, and maybe, you know, places like China as well, they're back open and all—huge, you know, massive part of the supply chain in China—so maybe have that; maybe have supply resuming to normal, and demand stays low."
So the way I see it is it could go both ways, and I'm not going to try and pretend and say I know what's going to happen, but yeah, I'm really interested! Like I'm just along for the ride! I mean whatever happens, I'll just see what happens. I mean, what do you think?
"Why not?"
No, I think that was a good explanation because when—I don't know if we can say corona on YouTube!
"Oh, I’ll bleep you!"
I'll bleep you. All right, I'll just say Rona.
"When Rona first hit, I actually thought that we were going to see deflation!"
Because I thought people were going to be saving money, not spending, staying at home and everything.
"But then when the governments introduced trillions of dollars of stimulus, then that’s kind of when I was like, well, maybe we start seeing inflation now."
So, as you said, it's kind of like when you might see both.
"Yeah, we don't know which one's going to balance out."
So, I had no idea!
"Yeah! And I think you get into a dangerous game when you start guessing what’s going to happen, especially the worst thing is when you start making investments because you're guessing on what's going to happen. Like, if this happens, you know, in the next three months, then I'll make a lot of money."
I think a lot of people do the same thing with like company earnings. It's like, "Oh, I think that this earnings, this time round for this quarter is going to beat analysts' expectations; therefore, the stock should rise, so I'm going to bet big on this company that that's exactly what's going to happen."
"And then sometimes that happens, like it's literally like a bet! It's not an investment; it's like I'm betting that this is going to happen, and you know, if you're betting, then you have to be comfortable with losing."
I guess that's the way I see it!
"Yeah, betting on companies earnings is like gambling to me!"
Definitely! Definitely! I'm glad we're on the same page there; I thought we would be!
And you, like what you said a little bit earlier, you had that company where you thought their earnings were great, and their stock crashed.
"It's like what the hell? Like come on! I thought this was fantastic!"
That to me is a buying opportunity!
"Yeah, for sure!"
For sure! I mean, especially if you're thinking long-term. If you're thinking long-term and you're like, "Oh, long-term, these earnings are great, but there's some little short-term blip in those earnings," and then everyone's just like, you know, all the big investment banks, like short-term, they're having to do this, you know?
"Then that's just like, 'Oh, here we go! Long-term value investors come out to play!'"
You know?
"Exactly!"
All right, let me ask you another question here! All right, let's go for maybe this one. How and where do you find your stocks? How do you go about finding them?
"It really starts with an idea!"
Okay!
"I try to pay attention to what's going on in the world: where is the world heading? Like electric vehicles, solar, renewable energy, things like that."
And then I try to think, "Yeah, where is the world going?" And I try to find the best companies in those given industries that are also selling at a relatively good price.
"Right!"
So, for example, my Canadian Solar investment, I wanted to invest in a solar panel company that was good and also selling at an attractive evaluation.
"So I didn't want to invest in a company like First Solar where the P/E ratio was like 80."
So that one was like a hard pass for me!
"Yeah!"
If I want to invest in the solar industry, then I try to find a good player that's also at a relatively good value as well!
"Yeah, that’s what I try to do."
I agree; I definitely like to think about the future and just plan it out and what I think is going to go well.
"I like Phil Town's little exercise that he writes in his book where it's just like think about what you're good at, what you like, you know, just those beginner questions to formulate that basic circle of competence kind of thing."
Yeah!
"For me, here in Australia, for example, like our bank stocks are crazy because here we have like dividend yields on bank stocks of about like 6, 7, 8 percent!"
Which is just insane!
So you can get like sometimes you can get like 7 percent just on dividends.
"And we've also got the imputation credit system where—I don't know, do you—do you guys don't have imputation credits?"
No, no!
"Okay, it's essentially where, so your company makes its profit, okay, and then it pays its tax, its company tax. And then from its post-tax income, it pays its dividend, and then you receive that dividend as cash, and then you pay tax on it as your own individual income."
So you get taxed twice!
"The same money gets taxed twice! So the imputation credit system essentially when you receive that money, you still declare it as income, you still pay tax on it, but the company tax portion of your dividend you get given a credit, a tax credit back for that."
Oh, okay!
"So it's essentially just whatever income you do receive from that company just can't—or in most instances, it just cancels out the company tax component so you actually end up with a little bit more!"
"Kind of thing!"
But yeah, so like, but going back and going back to the point, these bank stocks, like in Australia, it's a pretty good deal, like with all that, with the dividends and the franking credits and whatnot, but I just have no interest in bank stocks!
"And that's just, yeah, I'm just not—I'm just not interested!"
I mean, and to be honest, a lot of financials, I just don't care about! I really—I’m interested in like social media companies, EV, you know, that future stuff!
"I know banks are always going to be around, but I just don't care about them, so I just never look into them."
So I think when it comes to finding stocks, I just like to think about, you know, what I'm interested in and kind of go down the rabbit hole of interests as opposed to, you know, just what's potentially going to make me the most money in the long term because I just won't go deep on those companies, you know.
"No, that's actually a good point! That's like Peter Lynch's book, One Up on Wall Street. He talks a lot about investing in what you know!"
"Exactly!"
That's actually a really good point! Like right now, I'm trying to invest in a gaming company right now; I'm trying to find one!
"Okay, yep!"
Because I mean, I'm on my computer all day, and I game a little bit, so that's a really good way to find investments too!
"But I'm really surprised you don't like financial stocks because they pay such high dividends, and they're pretty consistent; they're kind of a monopoly a little bit!"
Yeah!
"I think maybe one day there's a world where I do start investing, especially I think like if I wanted to generate passive income, then I would probably just go with them because you can just take the cash from the banks or something, and a lot of older Australians do that."
"Um, it's very, very common."
So maybe there comes a time where I revisit them or something, but right now just like, man, I don't get banks! But that's just me!
"So do you think it's because you're young and you want to invest in the future, but you don't really care about like so much the passive income?"
I think that's definitely! I'm not interested in getting any! Like, I'm in a fortunate position, obviously, where I've got a stream of income running the YouTube channel and running a business, so I don't need to use investing to generate income to pay for rent or to pay for bills or whatever.
"But so, and if I do get paid a dividend, I'll just look at reinvesting that!"
But yeah, maybe there's a situation in the future where I do switch gears and kind of want to wind down a little bit and just take the passive income, and maybe that day comes when I decide to stop doing YouTube, but I don't see that happening anytime soon!
"What are your thoughts on that?"
Just as a side note, what are your thoughts on investing for passive income as opposed to just investing to grow your capital and compound it and whatnot?
"That's the thing; it's funny because that's kind of why I asked you because I'm young too—I mean clearly I'm on YouTube as well making a decent income!"
But I do have some dividend stocks that are my biggest positions.
"Okay, yeah!"
So I try to reinvest that money, and I just like cash flow!
"Yeah, fair!"
Totally fast. I'm also not very much of a growth investor though, honestly!
"Are you?"
"Not overly! Like, not really, honestly! I like a nice stable income!"
"Yeah, fair enough!"
"Sorry! I just—my card just got full!"
"All right, well, let's move on to another couple of questions!"
All right, another couple of questions, and then we'll finish it up.
"This is good! Have you got your—you still got your cheese going over there?"
"I do, yes!"
You do? Very good! What's your choice of cheese?
"I got a—I'm pulling the super classy tonight! I got these baby bells!"
Oh nice!
"Right, I bought the variety pack; I got different colors."
Oh, that's nice!
"It's not bad, man, it's not bad!"
They're pretty good!
"It's the way to go!"
Yeah! I've gone fancy just for the framing, just for the video. I've got like five different cheeses!
"I know! I saw your setup, and I was like, man, I'm kind of slacking over here!"
No, not at all! Not at all! Cheese and wine! Geez, what an invention!
Even if I hate wine—hey, let me ask you this one; this is interesting, and I wonder if we'll have the same thoughts!
"This person asks thoughts on the oil industry! What are your thoughts there, man?"
I think the oil industry is a sunset industry for sure!
"I think what I think is going to happen is oil is never fully going to disappear!"
Nah!
"I think what's going to happen is we're going to see much more consolidation, and there's only going to be a few companies left!"
"Now, I agree! I feel—I feel that that's accurate!"
The thing I think that saves oil is the fact that it's used in plastics!
"Yes, exactly! I think that's what saves oil! But in terms of transportation, I think—I was talking to Sven the other day, and roughly 50 percent of oil is used in transportation!"
"Yeah, and you're right, it's a sunset industry! That sunset is going to last a very long time because obviously it takes so long!"
If we're looking at EVs as well; it takes so long to transition the whole global fleet to electric as opposed to internal combustion engine.
"But I definitely think it's a slow painful death!"
Exactly!
"Well, I think it's like a slow, slow painful decline to a certain low plateau."
Yeah!
"I don't think it's ever going to fully disappear!"
Yeah!
"But I think we are definitely on a downtrend, and I think we're going to see acquisitions and more consolidation in the oil industry."
"No, I agree—thank goodness too, because I flip and hate oil companies!"
It's just a point of personal opinion!
"That's unfortunate because my city runs off oil!"
Yeah!
"I know! There's a lot!"
Well I mean, to be honest, like I care a lot for climate change and Australia, I think Canada—big export is oil right here in Australia! One of our second largest exports is coal!
"Which, you know, is not any better!"
We've just got so many goodies in the ground over here in Australia that we just we're crazy about digging them up and shipping them off to the rest of the world.
"But coal is definitely our biggest export! I think iron ore is our biggest, but yeah, obviously iron ore is not going anywhere, but coal over time as well, so it's another sunset industry!"
"I mean, even now we're seeing so much push to renewables, and in 20 years, who's going to want to buy coal?"
"But we're also in a similar political situation to what the US was just in with under Trump, where it's just like we've got a—you know, a political system that is all for coal—like let's keep pushing coal, and it's like, well, as long as we do that, we fall further and further behind."
"But it's probably wise not to get too political, right? Especially when you're a couple of drinks in!"
"Yeah, that's actually exactly what's happening in Canada right now!"
Right, okay, so similar dynamic!
"We're trying to move away from oil because like my province and my city in general was the oil hub of our whole country!"
"Okay!"
And now that we're moving away from oil, there's so many unemployed people here, so it's like we're kind of trying to find that balance of how do we move away from oil and still keep people employed?
"Yeah, true!"
That is a hard question to— that's a hard equation to answer, I guess!
"Good luck, politicians! I'm glad I'm not one!"
Great! All right, let's finish off with this last question!
What are your—yeah, here's here's an interesting question! Are we in a tech bubble? What are your thoughts on this?
"I don't think we're in a tech bubble, but I do think we're in an electric vehicle bubble!"
"Okay, okay! Elaborate, sir!"
So, have you been paying attention to like the SPACs going on right now?
"Like Arrival?"
I actually just learned about SPACs the other day!
"Okay!"
Like for some reason, maybe this is because I never formally studied any of this stuff at uni or anything, but I was just a gap in my knowledge. Someone said, "Hey, what are your thoughts on SPACs?" and I was like, "What?"
So there you go! Anyway, continue!
"So what's going on right now is these SPACs are partnering with electric vehicle companies to try and bring them to the public markets."
"And what's happening is people are finding out about this, and these SPAC companies are creating multi-billion dollar valuations for companies where they're not even going to produce their first vehicle for the next 12 months or longer."
"That's insane!"
These companies are now valued at above 20 billion dollars, and it's like they're literally not going to create their first vehicle for another 12 months!
"Yeah!"
So I'm calling it! I think we're in an EV SPAC bubble right now!
"Like, yeah! It makes me think, like should I just start some random BS company and just take it public?"
"It seems like I could start, you know, Brandon's Sneakers, and I could just ask for funding. It'll, you know, IPO on the—I don't know, on the NYSE or the NASDAQ for five billion dollars or something!"
Because you're right, at this point in time, some of this stuff that's going on in the market makes absolutely no sense!
"It's ridiculous, man!"
Yeah, it makes no sense! Like if a company mentions that they're going into the EV space or partnering with an EV company, it's like they're going to be selling at 50 to 100 times revenue in no time!
"I don't know!"
Oh dear! And you're right, so many of these companies, like especially EV companies, they're just visions of the future!
"Like even their product lineups, it's like they haven't got a factory, they're not building cars."
They're just saying that they're going to, it's like, I could do that! We could do that!
"Let's start an EV company! Let's go around to investors and say we will at some point in the future make an electric vehicle! We don't do it at the moment, but at some point in the future, we will!"
"Exactly! Our company will be worth billions in no time!"
Man, get quick, get-rich-quick scheme!
"But I saw a company that's producing like two million dollars in revenue, and they're almost worth a billion dollars on the stock market now!"
Just because they make electric vehicle vans!
"Oh my gosh!"
And they source all of their parts from other companies, and then they just put them together!
"Yeah, so they're like a traditional auto manufacturer; they're not like the Tesla, the new age Tesla!"
"They're like the auto—the Fords where they just bring in all these parts and put them together, and then that's the Ford truck or whatever!"
"That's exactly! Yeah, no, that's insane! Well, I think we might be onto something!"
"We might— we might, we might partner up and start our own EV company! Watch this space! Watch this space!"
Well, you can put—we'll just put it out to our audience and say you can put down a zero dollar deposit for our EV, and then we'll rack up maybe five, ten thousand emails, and then we'll say, "Oh, we got orders! We got orders in the pipeline!"
"And then in 20 years we might start thinking about making something!"
"We have the orders! That's the thing: we have the orders! We don't have the factory, we don't have the connections, we've got nothing!"
"But we do have a $5 billion IPO!"
"And we've got orders!"
"Exactly! That's almost the state of the EV market right now!"
"Oh dear! Anyway, we should wrap things up! I've kept you for long enough, but thanks very much for coming on the channel, dude! I appreciate it, man! What a fun time this has been! Wine and cheese! Who would have thought it'd go so well with stock market investing?"
"No kidding! Cheers, my friend!"
"And what time is it over there?"
"Yeah, almost getting ready to wind down and go to sleep; it's 9 PM."
"So, yeah, 9 PM! Nice! I'll leave you to the rest of your evening! Of course, everyone watching at home, make sure you head over to Daniel's YouTube channel, obviously linked down in the description! He makes awesome content similar—we got very similar investing kind of philosophies, so you'll probably notice, although we probably talk about different things, you definitely find those similarities."
"So if you want another channel that's very similar to kind of what I talk about here with some slight different perspectives, obviously different geography, then definitely head over to Daniel's channel and check it out!"
"And congratulations too! I'm just hitting a hundred thousand! That's—you're going to overtake me in no time, dude! That's crazy!"
Definitely! I'd put money on you overtaking me quite soon! You've just—what are you—we didn't even touch on YouTube, but what a story, hey?
"Just how long ago did you start your channel to where you are now? How many subscribers are you at now? You're probably even way past 100 now!"
"I am! Where you at?"
"So I started—you know, I started YouTube in June of last year!"
"Yep!"
"I had no idea what I was doing, honestly! I was kind of just throwing videos out, seeing what would work, whatever, and eventually landed on the stock market; that seemed to be what worked!"
"But yeah, over the last year I've gained like 116,000 subscribers, and now I'm sitting at 117,000!"
"117? That's insane!"
"So, wow! It feels like, wasn't it like two weeks ago that we were just celebrating you just hitting a hundred? See, this is just mind-blowing!"
"Insane growth!"
But no, it's very well-deserved! It's very well justified!
"So now, congratulations to you! Keep doing what you're doing! I love your content!"
"And definitely go and check it out if you're watching at home—link's down in the description!"
"But thanks for a fantastic wine and cheese night, sir!"
"Thank you! And I'm sure we'll see you back on the channel in the not-too-distant future!"
"For sure! Anytime you want to have me on!"
Sounds good! See ya, mate!
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