FidelityConnects: Canada's moment part 2: Unlocking resource potential

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Joining me now in the studio to continue today's discussion is Fidelity

 

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Director of Research and portfolio manager, Reetu Kumra, and Fidelity

 

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portfolios manager, Jo Overdevest.

 

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Reetu, Joe, wonderful to have you here.

 

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Thanks for having us.

 

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Good to be here.

 

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We're going to change gears, talk more about Canada.

 

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We're not going to talk about whether the Gordie Howe Bridge is going to open

 

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or when but we are going to talk about investment opportunities within our

 

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market. It's been a real sort of single trade, it seems, south of the border

 

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but that's not so. There's opportunity within Canada.

 

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Reetu, if I could start with you, could you sort of give us perspective?

 

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Last year what were the contributors to Canada's performance and then this year

 

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so far?

 

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Absolutely.

 

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I'm going to actually rewind a few years ago, if we thought about

 

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what people thought of Canada everyone loved to be negative on Canada.

 

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Why was that the case? We had immigration that was declining

 

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or going down.

 

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We had low productivity.

 

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We had this wall of mortgage maturities that were coming up and a levered

 

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consumer amongst other things. Rightfully so.

 

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We would have wanted to be positive on Canada.

 

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But if you look at the last couple of years that has not been the case so

 

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there's been a little bit of a disconnect there.

 

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Why is that happening? I think there's a few contributors to that.

 

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First, we have policy moving in a positive direction

 

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where we're very focused on trade diversification, just infrastructure build

 

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amongst other things, which I know we'll get into.

 

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Number two, the TSX is a resource-based market.

 

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Resources, as we know, have done very well, the

 

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gap up in gold which happened last year, or energy this year due to the

 

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unfortunate situation in the Middle East.

 

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All positive for the TSX.

 

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On top of that you have AI infrastructure

 

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CapEx buildout that's happening currently which also lends itself well to

 

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a resource-based market.

 

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On that note, if we just double-click on the TSX and what that actually

 

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consists from a makeup standpoint, I always like to say that

 

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the TSX is not a stock market, it's a market of stocks.

 

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If we actually dissect what that means, we have roughly

 

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35% to 40% of the TSX that's resources-based, including roughly

 

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13% gold and 18% energy.

 

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I just spoke about the gap up in both of those commodities.

 

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These stocks aren't what they were 10 years ago.

 

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They're actually generating a healthy amount of free cash flow, really strong

 

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balance sheets so those are all positive contributors.

 

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We have another roughly 40% that is interest rate sensitives.

 

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If we've seen what's happening in the interest rate sensitives,

 

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the financials have had positive earnings revisions, we've had sectors like

 

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the utilities and the power companies that have benefited from the AI CapEx

 

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buildout as well as the energy backdrop, and then we have the

 

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remaining part of the TSX which is roughly 20 to

 

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25% which is really where a lot of the stock picking comes from.

 

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A lot of the global businesses are there whether it's in consumer or

 

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industrial. We have a variety of businesses where we have early cyclicals

 

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like the autos and the transports.

 

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We have through the cycle compounders like the grocers.

 

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We have defensive companies like the waste companies.

 

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That's where a lot of the nice stock picking can come from, and as a result

 

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we have had a backdrop where the TSX has done remarkably well.

 

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That's very refreshing and everybody should have Canada on the radar.

 

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That's the reason, really, we're having this discussion today as well.

 

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Joe, maybe I'll just ask you something, I picked up on policy that you

 

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mentioned. There seems to be a bit of a policy dilemma for the Bank of Canada.

 

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Can you address that? There's really an unknown right now.

 

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Did rates drop? Did they stay the same? Did they increase?

 

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It depends on some trading partners, doesn't it?

 

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Glen, it's never a good time to be a central banker.

 

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Today, in particular, it's really tough for any central bank.

 

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You're even seeing this globally. Some central banks are actually raising rates

 

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where we just ... obviously, before the Iran conflict  no one really debated

 

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many countries raising rates.

 

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Even the US now it's even a debate.

 

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I think in particular for Canada when you hear our central bank saying

 

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... rightfully so ... we have two big overhangs.

 

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Number one is obviously CUSMA, what actually happens with that.

 

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That's still to be determined.

 

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Number two is just general inflation because of the oil price in particular.

 

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They're doing the right thing. They're seeing more data, more cards get flipped

 

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over before they make an actual judgement on an interest rate move.

 

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It's probably the right thing to do because much like them and even CEOs that

 

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we talk to have the same impression.

 

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When making big capital investments right now it is making everyone feel a

 

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little nervous and pulling back a little bit saying, you know, let's wait till

 

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more information comes out.

 

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That's a real litmus test, isn't it, as far as the CEO meetings.

 

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Reetu, you talked about the team, and we'll explore that in a little while, but

 

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I do want to ask you at this point, what are the CEO meeting like

 

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these days? What's the vibe in aggregate of the people that your team is

 

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meeting with, and the portfolio managers?

 

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Absolutely. I think over the coming months as we approach

 

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July 1st and even beyond I think there is a universal consensus that we

 

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will miss the July 1 deadline. It'll be volatile

 

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in the coming months and there'll be a lot of

 

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headline risk.

 

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Overall, I think the consensus is that

 

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the US doesn't necessarily want to go to a

 

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Congressional vote and potentially just keeping things status quo and

 

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having potential side deals, whether it is related to dairy or Section 232.

 

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Really, no one knows. Everyone is just kind of reading the same headlines we

 

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all are and let's see what happens.

 

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We've really got to discount the headlines, as you said, because of that

 

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headline risk. That's a whole other webcast, really.

 

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Joe, headwinds that Prime Minister Carney may be encountering right now.

 

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I think the Prime Minister is in a tough spot as well.

 

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What I like about Canada is we're a country of respect.

 

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Let's just take a step back. We talk to, say, oil and gas companies, probably

 

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the more extreme because they do big projects.

 

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They'll say in Texas, it's easy to do a project.

 

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We just boom, permit goes and that's it.

 

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Here in Canada things take longer.

 

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Some of these people might say, well, that's bad.

 

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But we also have to understand we're a country of respect. What I mean by that

 

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is when we do things, and Prime Minister Carney knows this in particular, we

 

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have to make sure all stakeholders are involved.

 

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That's the locals, that's the province, that's Indigenous groups, that's the

 

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federal level, and, of course, the companies who are investing to make sure

 

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we're on the right path.

 

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In particular for Canada ...

 

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some people say, well, he has a majority, he can just do whatever he wants.

 

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The Prime Minister still has a tough role.

 

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He has to balance his own caucus.

 

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Within his caucus there are people who may be more for oil and gas

 

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and there may be some who are more for renewables only.

 

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He has to balance that to make sure he comes to a conclusion that's good for

 

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the country but also doesn't break his government as well.

 

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I think sometimes when we see these headlines people think why is it not

 

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happening now? You have to understand, again, our country, especially how our

 

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parliament is set, it's not that simple just to drive things through.

 

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I'll be honest too, even if we drove it through, trust me, you don't

 

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want to drive something through, we go to start digging and all of a sudden the

 

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locals protest and it actually never gets done.

 

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These things have to have certain steps to it that are right and, more

 

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importantly, respectful for all parties involved.

 

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The information you've just told us is not just absorbed from Joe and Reetu

 

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sitting in the office. You're also getting out, you're seeing companies, you're

 

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going to conferences. Joe, have you got anything coming up?

 

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Tonight I have a very interesting dinner, someone who's advising the government

 

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on many of these things involving the US and Canada.

 

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July we're very excited to go to the TD Energy Conference which will be

 

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happening around stampede time, see a number of CEOs from, obviously,

 

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the pipelines, the E&Ps, integrateds and services.

 

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Always great to see them at their home turf.

 

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We should talk about that from the perspective of foreign investment.

 

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Reetu, do you want to start off just as far as what does Canada need?

 

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Where are we at? Joe, you can pick up that as well.

 

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Well, it's interesting. If we rewind 10 years ago,

 

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I was the energy analyst at that time and we had

 

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many people leaving Canada.

 

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We had many companies leaving Canada, selling their Canadian assets.

 

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Now what's interesting is that we have foreign investment coming back into

 

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Canada. Most recently we had a big energy deal that happened with foreign

 

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inflows coming into Canada.

 

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Your thoughts, Joe, just on needs for foreign investment.

 

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Is that from companies or is it from countries?

 

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It's really interesting.

 

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I think what happens is we have to know what we possess that is in high demand.

 

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Natural resources is a big one. Also, just subtleties, the rule of law,

 

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very respectful people, great education, hardworking people.

 

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When we talk to the global CEOs these are the things they bring up when they

 

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talk to Canada. Someone recently said, Canada is unofficially the friendliest

 

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country I've dealt with. That's actually a very nice statement but it's very

 

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true to what we are. We're friendly in business, we're friendly in how we

 

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interact with people. That more than ever is actually a very big

 

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competitive advantage. What would be great is that if you see for foreign

 

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investment ... in talking to our foreign players, even our domestic CEOs

 

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across multiple sectors would say the liberal government right now, they

 

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have seen material change. They may not have seen, like I said, the action of

 

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shovels in the ground yet. It's more talk at this point in times and planning.

 

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Even that there's talk, they've seen a marketed improvement.

 

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Our global CEOs have said that too. We actually now can see there's

 

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conversations happening with business and that gives us the first step of

 

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confidence. Again, we'll see now where the execution of these plans take place,

 

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and they may take a while.

 

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I think what's interesting, though, you're seeing, as Reetu alluded to, Shell

 

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already took a step. They're buying ARK resources, they own a gas patch.

 

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Also, you see Germany doing LNG contracts.

 

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There's two ways of negotiating. Again, I'm sure our Canadian government

 

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is realizing this as well, especially with the US not just global players,

 

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when you need something you sometimes give something up.

 

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Resources, in particular, we can do LNG contract, that's great.

 

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It's a long term commitment.

 

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It's great for the producers of LNG to know that we have an off-tank and we

 

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have a certain price but we maybe can even go a step further.

 

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When governments negotiate with each other and go, you know what, we need this

 

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from you, you need this, why don't you invest in our natural resources?

 

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Why don't you invest in the pipeline? Why don't you invest in the LNG facility?

 

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What happens, it lowers the cost of capital.

 

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Because the oil and gas company, or any company investing in Canada, looks at

 

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what's the cost to capital, what's the return.

 

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But if you're looking at what's going on with the Strait right now in terms of

 

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Iran conflict, you might not be too worried about your cost of capital as a

 

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government. You might be more worried about just getting supply because

 

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otherwise we could have shortages.

 

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That lowers the return hurdle which would be very attractive and maybe

 

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fast track some of our projects.

 

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I'd like to talk more about oil, and I'm glad you mentioned that you were an

 

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energy analyst at the beginning of your career, it reminds us that

 

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both of you, and all portfolio managers, covered basically every sector as

 

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analysts to become diversified portfolio managers, you can talk about

 

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everything. Oil as a commodity, as a price,

 

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very volatile like the rest of the market. It's probably not at the

 

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height that many would expect given the constraints in the Strait of Hormuz.

 

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There was talk the other day about the shadow fleet that might be getting

 

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through and nobody knows about.

 

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Can you comment on that, Joe? Why is oil ...

 

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I don't know what it's trading at now but why is it at the price it's at and

 

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perhaps not higher given the conflict?

 

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Oil is always a complicated commodity.

 

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We started using the analogy, it's a sleeping dragon. No one worries about oil

 

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until the dragon wakes up.

 

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Just like Game of Thrones everyone's like, oh my goodness, it can be a

 

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dangerous thing to do, deal with, which is a dragon, which is oil.

 

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It's huge for inflation, central banks hate it, governments hate it,

 

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citizens, of course, hate it.

 

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What's happening right now why oil is maybe not higher than people think, one

 

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of the biggest things is there is other pipelines on the west side of the

 

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Middle East that had some capacity.

 

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Say 20 million barrels per day at the outset was offline,

 

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probably almost give or take 10 went to the west side with that pipeline.

 

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Give or take. We have to understand that you embrace your own ignorance,

 

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you're not gonna know these numbers exactly.

 

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Could there be some shadow oil going through?

 

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Generally, if you know geopolitics and how things work, probably some shadow

 

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inventory is getting through. That's just the truth of it.

 

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The other thing, though, that's interesting is that we actually came ...

 

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the bigger two ones is the actual inventory situation.

 

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We came into this situation globally with a lot of oil.

 

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Actually, if you just take a step back before Iran, most people in the

 

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commentaries would say oil wasn't gonna have a good year because there was just

 

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so much global inventory. Number two would also change is China has

 

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been lowering their SPRs.

 

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Essentially, their strategic reserve oil, they're using it which is the right

 

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thing to do. It was a significant amount of reserves so they aren't really

 

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pulling as much [crosstalk].

 

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They're putting it on the market versus pulling.

 

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Exactly. At some point that wears out and some point

 

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global inventories start getting tighter.

 

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Just because the dragon hasn't totally woken up I

 

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think we [should?] be complacent. It is still a dangerous situation for the

 

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world in particular. You want to resolve this conflict as quick as possible.

 

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We hear that as consumers, as travellers, about jet fuel.

 

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There's going to be none, flights are going to cancelled.

 

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The other day they're going, actually, we've got enough for a few months, it'll

 

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be okay. We'll see.

 

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There's also such a backlog that consumers shouldn't expect that

 

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inflation will drop immediately, price of oil will drop immediately once

 

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this conflict does become resolved. There's real infrastructure issues

 

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with getting that moving again. Is that true, Reetu?

 

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Absolutely. Actually, to take what Joe said a step forward,

 

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back to my earlier comments earlier in this podcast, what

 

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we're seeing is this rise in geopolitics lends

 

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itself well to the TSX. What you can see if you

 

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actually think a couple steps forward is that countries will feel like they

 

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need to stock up their inventory for critical minerals.

 

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We've seen that with energy and these SPRs

 

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are actually coming in use right now.

 

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Joe, production refineries within Canada, this is

 

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all about opportunity for Canada.

 

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Because of what's going on there is opportunity for Canada to be

 

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producing more of a lot of things for the rest of the world.

 

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I'd love to ask you about oil, as far as I understand refining happens

 

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but only really for some domestic demand, not for international demand.

 

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I was reading about helium the other day.

 

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I'm sure our viewers were as well.

 

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Canada produces 3% of the world's helium which has multiple uses.

 

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A lot of it's being held up in the Strait of Hormuz.

 

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Canada has an opportunity with Saskatchewan and Alberta producing it, but

 

14:51.457 --> 14:56.328

it's not refined in Canada, liquefied, it's done in the United States.

 

14:56.328 --> 15:00.733

Do you think the foreign investment is the key to get refining happening

 

15:00.733 --> 15:02.234

north of our border?

 

15:02.234 --> 15:05.204

A great question. We live in a capitalist society.

 

15:05.204 --> 15:07.640

If the returns are there  we've already done it.

 

15:07.640 --> 15:10.643

How do you solve that if the returns aren't attractive?

 

15:10.643 --> 15:14.046

I'll even add others for you. Critical mineral, the refining,  most of it's

 

15:14.046 --> 15:15.915

done in China.

 

15:15.915 --> 15:19.385

You add different things of just refining in general that you've already

 

15:19.385 --> 15:23.389

mentioned like helium and gasoline, all that, as you can imagine,

 

15:23.389 --> 15:25.591

you're right, why isn't it done here?

 

15:25.591 --> 15:28.327

I think that's where there's an interesting negotiation.

 

15:28.327 --> 15:32.331

You actually have ... this is where it'll be interesting negotiation wise

 

15:32.331 --> 15:36.335

with the US. We've been talking to CEOs who've been on the

 

15:36.335 --> 15:40.372

other side of this, are writing cheques to get refining done, to make sure

 

15:40.372 --> 15:44.209

that they have an offtake that directly goes and benefits the US.

 

15:44.209 --> 15:47.513

If they're willing to write that cheque, in some cases in the US but some cases

 

15:47.513 --> 15:51.617

internationally, maybe we can negotiate something like that going, okay,

 

15:51.617 --> 15:57.656

we have the ability to provide for you something you need.

 

15:57.656 --> 16:00.192

A lot of times people say why isn't this happening, well, just the returns

 

16:00.192 --> 16:04.063

weren't great. You would have done all this refining a long time ago if the

 

16:04.063 --> 16:05.164

returns were great.

 

16:05.164 --> 16:07.266

Also, number two, I will say, permitting.

 

16:07.266 --> 16:11.203

A lot of these refining buildings are not the nicest things

 

16:11.203 --> 16:14.907

to build in terms of what people wanna have in their backyard.

 

16:14.907 --> 16:18.010

A lot of people, oh, it's not my problem, I don't wanna deal with it.

 

16:18.010 --> 16:22.247

Again, if you had maybe as a government saying this is a great negotiating,

 

16:22.247 --> 16:25.184

we're gonna lower the cost of capital, we're going to put in a location that

 

16:25.184 --> 16:28.887

everyone feels acceptable with, it could be a win-win, yes.

 

16:28.887 --> 16:31.857

Not in my backyard, that makes me think of data centres.

 

16:31.857 --> 16:34.126

That makes me think of AI which you had mentioned a few minutes ago.

 

16:34.126 --> 16:36.328

We should talk about AI.

 

16:36.328 --> 16:40.032

As much as Canada has great diversity outside of that single sort of thought

 

16:40.032 --> 16:44.169

that people have around AI there's kind of second and third derivative inputs

 

16:44.169 --> 16:47.506

from Canada, and maybe data centres as well.

 

16:47.506 --> 16:49.775

Could you start with that as far as AI right now?

 

16:49.775 --> 16:54.046

Absolutely. We don't have here in Canada the AI-8

 

16:54.046 --> 16:58.150

or the Mag-7 like we have south of the border but we do have second

 

16:58.150 --> 17:02.287

and third derivatives that we can think about that are related to AI.

 

17:02.287 --> 17:06.258

We do have some hardware companies which are involved in

 

17:06.258 --> 17:08.527

the data centre buildout.

 

17:08.527 --> 17:11.864

We have uranium that's built here which is a power source.

 

17:11.864 --> 17:14.666

We have the power and utilities that I had mentioned earlier that are

 

17:14.666 --> 17:18.804

benefiting from AI spend, or the data centre spend as well as the

 

17:18.804 --> 17:21.774

backdrop of energy.

 

17:21.774 --> 17:24.243

We have some industrial companies that are involved whether it's the

 

17:24.243 --> 17:28.514

construction of data centres or even other

 

17:28.514 --> 17:32.451

aspects of whether it's machinery involved with

 

17:32.451 --> 17:35.421

construction. There's a lot of ways to play AI.

 

17:35.421 --> 17:37.656

Not to mention, of course, resources.

 

17:37.656 --> 17:39.992

We would need copper.

 

17:39.992 --> 17:44.430

There's a lot of ways to play AI despite not having that direct impact.

 

17:44.430 --> 17:47.833

The good thing is those resources aren't solely for AI, they're for all the

 

17:47.833 --> 17:50.936

other buildout that we're seeing and all the refining that we are going to see

 

17:50.936 --> 17:53.405

as well. Could you talk about small modular reactors?

 

17:53.405 --> 17:57.276

I'm understanding that that's something that Canada has been producing which

 

17:57.276 --> 18:01.113

are portable and able to go to lots of nooks and crannies of the world.

 

18:01.113 --> 18:05.184

It's amazing where nuclear has been. We've been doing these videos and podcasts

 

18:05.184 --> 18:07.719

a long period of time. I remember the old days were like, you know, why is

 

18:07.719 --> 18:13.158

there not more nuclear?

 

18:13.158 --> 18:17.262

A long time ago even the people who were big on the

 

18:17.262 --> 18:19.965

environment said no nuclear, everybody was against nuclear.

 

18:19.965 --> 18:23.535

That has definitely changed. You're seeing nuclear go across the globe now,

 

18:23.535 --> 18:26.071

from China to the US, everybody's in on nuclear.

 

18:26.071 --> 18:29.842

You're exactly right. It'll be interesting, in particular, next even 6 to 12

 

18:29.842 --> 18:33.946

months, the different technologies. Canada has a few of them,

 

18:33.946 --> 18:37.950

certain of our companies are involved with the technology.

 

18:37.950 --> 18:40.185

Many other countries are doing big nuclear reactors.

 

18:40.185 --> 18:43.489

As you can imagine one of the biggest overhangs, and the US is actually finding

 

18:43.489 --> 18:46.325

this out the hard way because they said we will write cheques, well, guess

 

18:46.325 --> 18:49.995

what, it's been six months and nothing's happened because no one actually wants

 

18:49.995 --> 18:53.398

to take the first step on these big reactors because they have a history of

 

18:53.398 --> 18:56.635

overruns, not producing and just taking a lot of time.

 

18:56.635 --> 18:59.972

In particular, the overruns were massive.

 

18:59.972 --> 19:03.909

The SMRs, in particular, what we're thinking of right now deploying here in

 

19:03.909 --> 19:07.846

Canada looks to be smaller size, also easier footprint

 

19:07.846 --> 19:11.049

when it comes to geography. Again, very important stakeholder wise it's

 

19:11.049 --> 19:15.287

accepted. It looks to be right now a very palatable

 

19:15.287 --> 19:16.722

solution for Canada.

 

19:16.722 --> 19:19.658

We're seeing a lot of massive distribution centres in Canada.

 

19:19.658 --> 19:22.861

Those Amazon boxes are everywhere and they're huge.

 

19:22.861 --> 19:26.565

Back to your comments about AI, are we getting data centres here or is that

 

19:26.565 --> 19:28.767

still something that resides more in the United States?

 

19:28.767 --> 19:32.371

No, there's been talks of data centres here.

 

19:32.371 --> 19:34.973

I think one of the biggest ...

 

19:34.973 --> 19:38.210

what do data centres need, they need a cold climate so Alberta's very fitting

 

19:38.210 --> 19:39.945

for that.

 

19:39.945 --> 19:44.683

Alberta's been a big province with data centres but also Ontario.

 

19:44.683 --> 19:46.552

We're seeing talks about it.

 

19:46.552 --> 19:50.522

I think right now what we need to be focused on is how are these

 

19:50.522 --> 19:53.559

data centres gonna be powered?

 

19:53.559 --> 19:56.929

That's been a big topic of conversation, particularly in Alberta.

 

19:56.929 --> 20:00.699

Makes a lot of sense. The research team, you're responsible for the analysts,

 

20:00.699 --> 20:04.703

how do you and the analysts work in volatile times

 

20:04.703 --> 20:08.574

like this? Is it gloves off, this is extremely different or business as usual,

 

20:08.574 --> 20:09.908

what's going on?

 

20:09.908 --> 20:11.677

That's a really good question.

 

20:11.677 --> 20:15.847

What I like to say about the research team is that everything is about

 

20:15.847 --> 20:18.283

our people, our process and our skill.

 

20:18.283 --> 20:22.154

We hire highly intelligent people that are very curious and passionate about

 

20:22.154 --> 20:26.191

the markets. We show them the Fidelity way, our investment process, and

 

20:26.191 --> 20:28.227

we give them the resources to succeed.

 

20:28.227 --> 20:32.297

When it comes time to the team, our team here in Canada is,

 

20:32.297 --> 20:35.934

to our knowledge, the largest research team covering Canadian securities, which

 

20:35.934 --> 20:37.836

I think is a huge competitive advantage.

 

20:37.836 --> 20:41.773

We have sector specialists and during volatile times

 

20:41.773 --> 20:45.777

that we're seeing right now they are knee deep in their sectors and it's very

 

20:45.777 --> 20:50.082

quick for them to analyze a situation. We've had so many kind

 

20:50.115 --> 20:54.453

of big moments in the last few years, whether it's Liberation

 

20:54.453 --> 20:58.490

Day, the election, and now more

 

20:58.490 --> 21:01.260

recently the conflict in Iran.

 

21:01.260 --> 21:05.530

Our team has been able to, ahead of time, look at the possible

 

21:05.530 --> 21:09.635

range of outcomes if it's a potential predicted situation

 

21:09.635 --> 21:13.772

like the election or Liberation Day, and continuously update

 

21:13.772 --> 21:15.774

them as needed.

 

21:15.774 --> 21:19.978

Before the actual day hits itself we already understand

 

21:19.978 --> 21:24.316

what our potential paths are, the bear and the bull case and

 

21:24.316 --> 21:26.685

that's continuously updated.

 

21:26.685 --> 21:30.622

As a result, having such a large team really helps when we have sector

 

21:30.622 --> 21:32.457

specialists like we do.

 

21:32.457 --> 21:36.428

I was talking to Adam Kramer from Tactical High Income yesterday and he talked

 

21:36.428 --> 21:40.532

the same about having the research of different types of outcomes

 

21:40.532 --> 21:43.035

which are getting more and more vast.

 

21:43.035 --> 21:45.504

Those are tested on a regular basis as well.

 

21:45.504 --> 21:49.107

You've got to test that thesis to see which ones do we keep, which ones do we

 

21:49.107 --> 21:50.976

reduce. Can you talk about that?

 

21:50.976 --> 21:54.946

Absolutely. We're consistently updating our scenarios, especially as

 

21:54.946 --> 21:57.883

we get more data.

 

21:57.883 --> 22:00.786

Whether it's a predicted scenario or an unpredicted scenario ...

 

22:00.786 --> 22:04.389

I know even in the situation with the Iran War, I'm sure Joe can talk about

 

22:04.389 --> 22:07.159

this, that was a little more unpredicated.

 

22:07.159 --> 22:10.862

Joe, if you want to mention your conversation with our analysts over that

 

22:10.862 --> 22:11.963

weekend.

 

22:11.963 --> 22:14.166

It was actually very ironic because we already had done work on demand

 

22:14.166 --> 22:17.202

destruction so we already have models just in case something bad happens.

 

22:17.202 --> 22:20.672

If there's a war somewhere, if there was a conflict, where's demand

 

22:20.672 --> 22:22.341

destruction, where does it look historically?

 

22:22.341 --> 22:26.144

We have numbers that look at percentage of GDP, percentage of US consumption on

 

22:26.144 --> 22:28.080

gasoline.

 

22:28.080 --> 22:31.950

Saturday morning, 6:00 a.m., I woke up and it was a long weekend of

 

22:31.950 --> 22:36.154

conversation with Jin, who's our rock star analyst on the energy side, about

 

22:36.154 --> 22:38.990

what companies benefit, how long this could be, where could oil price settle

 

22:38.990 --> 22:43.495

out, also helping the team of what other commodities would it also benefit.

 

22:43.495 --> 22:46.398

That's actually agriculture space, methanol space.

 

22:46.398 --> 22:49.000

There's a whole bunch of knock-on effects as well kind of thing.

 

22:49.000 --> 22:52.003

We're very thankful to the men and women who aren't here who are the analysts.

 

22:52.003 --> 22:54.873

Well, I'd like to ask you what you predict next but we shouldn't get into that.

 

22:54.873 --> 22:55.974

You were just going to add.

 

22:55.974 --> 23:00.045

I was just going to say by Sunday we had a full analysis from

 

23:00.045 --> 23:03.014

the team as to what to expect come Monday morning.

 

23:03.014 --> 23:04.750

The portfolio managers were ready to execute.

 

23:04.750 --> 23:08.887

That's very beneficial to have, to have that kind of scale and

 

23:08.887 --> 23:12.758

the team that we have that's working around the clock in situations like this.

 

23:12.758 --> 23:16.395

Could you quickly mention the name of the fund that benefits from the long and

 

23:16.395 --> 23:18.363

short research that your team does?

 

23:18.363 --> 23:20.632

Yes, it's the Canadian Long/Short Alternative Fund.

 

23:20.632 --> 23:24.569

That's basically a fund that is a research-driven fund that

 

23:24.569 --> 23:29.107

really goes long on our buy-rated names, goes short on our sell-rated name,

 

23:29.107 --> 23:33.044

to really capture the full alpha being driven from our research.

 

23:33.044 --> 23:35.981

Fascinating. Joe, we've just had a question come in from someone in our

 

23:35.981 --> 23:39.951

audience and they said from the meetings with companies that you've had are you

 

23:39.951 --> 23:43.155

hearing from some CEOs saying, you know, we've have got to relocate.

 

23:43.155 --> 23:46.091

This isn't working out in Canada, we should go somewhere else.

 

23:46.091 --> 23:50.162

No at this point in time. I would say, you know, trust me, we have these open

 

23:50.162 --> 23:53.999

conversations where we ask why don't you, right, kind of thing.

 

23:53.999 --> 23:57.436

For the most part it's no.

 

23:57.436 --> 24:00.639

Much like we're just talking about with even the central banks they want to see

 

24:00.639 --> 24:04.876

how CUSMA actually lays out. Again, they're very

 

24:04.876 --> 24:09.114

loyal, they're very respectful and honourable to be Canadian companies so

 

24:09.114 --> 24:12.751

I think to do that they would almost have to be forced to.

 

24:12.784 --> 24:15.086

What I mean by that, it had to be a pretty extreme situation where,

 

24:15.086 --> 24:19.090

essentially, they would do the best to survive as a company to then

 

24:19.090 --> 24:22.794

move there. What I mean by that is only they would do that in the extreme event

 

24:22.794 --> 24:26.731

that the other scenario is you would lose and end as a Company.

 

24:26.731 --> 24:30.735

These extreme tariffs, as you saw, some of the threats for some companies,

 

24:30.735 --> 24:35.073

it was very threatening for their survival. I think that

 

24:35.073 --> 24:38.743

right now that's not the case. Also, the honest truth of politics, they will

 

24:38.743 --> 24:43.482

say, certain politicians come into power and they go out.

 

24:43.482 --> 24:46.151

You just don't want to all of a sudden start moving your factories, your head

 

24:46.151 --> 24:49.921

office somewhere and all of the sudden, oh, we're just back to point A again,

 

24:49.921 --> 24:51.723

even though we thought we were gonna be at point B.

 

24:51.723 --> 24:54.559

It's not a great way to invest.

 

24:54.559 --> 24:58.830

They like more certainty before especially they give up on Canada.

 

24:58.830 --> 25:02.734

I was just going to say I think overall the CEOs are feeling positive about the

 

25:02.734 --> 25:06.304

direction of policy in Canada.

 

25:06.304 --> 25:09.608

To Joe's point, it's hard to make decisions on the here and now and we have to

 

25:09.608 --> 25:12.811

actually think years into the future especially given where Canada is going.

 

25:12.811 --> 25:15.580

It's nice to hear because at the beginning of this discussion you referenced

 

25:15.580 --> 25:19.751

the fact that in the past, years ago, Canada was being really disregarded

 

25:19.751 --> 25:23.622

and it sounds like there's a lot of positive going on for sure.

 

25:23.622 --> 25:26.892

When we were talking refining and why aren't we doing more of it or what was

 

25:26.892 --> 25:30.128

going on in the States, I guess it's because it really was a world of

 

25:30.128 --> 25:32.864

cooperation instead of now competition.

 

25:32.864 --> 25:34.766

Can you address that?

 

25:34.766 --> 25:37.102

I think that's where the Canadian government in particular right now is

 

25:37.102 --> 25:39.037

deciding negotiation.

 

25:39.037 --> 25:42.974

How much more cooperation do you want to do, maybe you help auto

 

25:42.974 --> 25:47.045

jobs in certain provinces but you give up something and you gain

 

25:47.045 --> 25:51.283

something here kind of thing. They're also debating how long does this

 

25:51.283 --> 25:53.385

political environment last.

 

25:53.385 --> 25:57.556

You don't want to do a long term deal and maybe certain things

 

25:57.556 --> 26:00.025

change on the US side kind of thing.

 

26:00.025 --> 26:04.195

I think it's very nuanced. The government, luckily,

 

26:04.195 --> 26:06.798

is all hands on deck on this.

 

26:06.798 --> 26:09.568

I think our companies we talk to are being very agile.

 

26:09.568 --> 26:13.772

They're trying to get strong balance sheets, trying to keep their costs lean

 

26:13.772 --> 26:16.274

and trying to more react how the cards get turned over.

 

26:16.274 --> 26:19.711

The last year in particular has been a great eye-opening experience for Canada

 

26:19.711 --> 26:23.648

to see what the dangers could be and results in where we are today but the

 

26:23.648 --> 26:26.484

opportunities that lie in front of us. Reetu Joe, it was wonderful to talk to

 

26:26.484 --> 26:27.586

you both. Thanks so much.

 

26:27.586 --> 26:28.253

Thank you.

 

26:28.253 --> 26:32.190

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