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Are we on the brink of an economic collapse? Jonathan Wellum of RockLinc Investment Partners says that the debt is getting completely out of control. Wellum says the debt is growing ‘at an unsustainable rate, and that we’re adding a trillion dollars every 100 days. Join host James Connor as he interviews Jonathan Wellum, CEO of RockLinc Investment Partners. They’ll discuss alarming debt crisis, the economic outlook for the U.S. and Canada, and what strategies you should consider to protect and grow your wealth in these uncertain times.


Speaker 1 0:00
It’s a major concern there observed is it’s complete and utter insanity. So you know, when I was in my doing my Commerce degree at McMaster back in the 80s, early 80s, that’s when Ronald Reagan was president. That’s when they first went over $1 trillion, I believe was 1983. It’s now 35 trillion. So you’ve had a compounding at over 8% a year, with a growth in the GDP of about 4% a year over that timeframe. So you’ve got about a 4% per year gap over the last 50 years almost. So this is not sustainable. It is what you call insanity. You can’t take a jet debt to GDP from 30% to well over 100% And then can think you can continue to do that.

James Connor 0:45
Hi, and welcome to Wealthion on James Conner. Well, 2024 is shaping up to be one hell of a year the economy continues to be very strong, the jobless rate is low. The s&p and the Nasdaq are making new highs every day. But there still feels like there’s a level of uncertainty associated with the health of the underlying economy and whether or not we’re going to go into a recession. To help make sense of all of this. My guest today is Jonathan Willem of rock link Investment Partners and Brock link is a Wealthion, financial advisor for Canadian investors.

Jonathan, thank you very much for joining us today. How are things in Toronto?

Speaker 1 1:24
Thank you very much, James. Yeah, I mean, well, the weather’s getting a little better and the leafs are out of the Stanley Cup, which is typical, unfortunately, as a Torontonian. We all love our Maple Leafs. But yeah, things are things are going along quite well, other than just watching the political situation in our country and some of the some of the concerns we have there. But the stock market itself and certainly some of the commodities are doing better this year, and that’s lifted the TSX and making it one of the better performing indexes and some certainly some opportunities that we found in the market.

James Connor 1:58
Yeah, I’m sorry to hear the or see the Toronto Maple Leafs episode on the playoffs. But I guess it’s no surprise, but still, I was really rooting for them this year, even though I’m not a Leafs fan, but I do really support their fans. They got an amazing fan base.

Speaker 1 2:13
Yes, it is. It is something to behold when you go to the maple leaf games, again, I don’t really follow. It’s a long season. And it’s tough to stay engaged for the whole season. But when they do make it to the playoffs, it just lightens up the whole area, the whole Greater Toronto Area, I think gets gets into it and gets excited. So it would be wonderful if we can win that cup after after all it’s been I think it was a 1967 since we last won it. And so we’ll see what happens is, we’re eternal optimists here. Yeah,

James Connor 2:42
it’s been a few years. And it’s been quite a few years since a Canadian franchise has won the Stanley Cup. Yeah.

Speaker 1 2:47
Which isn’t fair, because hockey’s our game, right? It started in Canada. So it’s our sport. So

James Connor 2:53
let’s move on. Now, before we examine your investment approach, and where you are allocating dollars to this economy in the stock market, I want to get your views on the economy. The US economy has been amazingly robust. But there feels like there’s an underlying element of uncertainty, a sense of uneasiness. And this was reflected recently in the consumer confidence number, which came in at the lowest level since July of 2022. So almost two years ago. And what’s your sense of the US economy here?

Speaker 1 3:24
Well, I mean, again, I think you have to make a separate separate do a separation between what we’re seeing on Wall Street, and some of the enthusiasm was stocks, and then what’s really happening on Main Street. And so, you know, in us in from, from our perspective, those can’t stay detached forever. And so yes, you’ve got a lot of enthusiasm on Wall Street, they’re looking at these numbers, they say, okay, things are trending the right direction, interest rates, you know, we might get some cuts this year, I mean, beginning of the year, as you know, it was like, you’re gonna just slash rates. Now, it’s looks like well, it would be lucky if you get one or two rate cuts, and, and so forth. And yet, there’s this tremendous optimism that continues to percolate on Wall Street and particularly amongst like some of the large tech stock stocks, but it’s also it’s also filtering down into even some of the smaller stocks and securities. But on Main Street, as we see here in Canada, it’s tougher times and so people have much larger mortgage payments, car payments have gone up insurance for cars autos has skyrocketed, food costs have gone way up. And so consumer spending is being pinched significantly, people are concerned about the future. And so that I think is is starting to come through in the numbers we see it especially in the retail numbers, and in discretionary spending is coming down restaurants, spending and so forth has also been impacted. So I think the picture actually on the street is much tougher, and much more difficult for the average person given the rapid rise in inflation over the certainly the Biden years, the last three years to be four years. And versus the income gains and in an all we have is more and more threat of more taxes and, and from the government. So I see a bifurcation, my concern as an investor is we want to make sure buying businesses that are resilient can take a tougher environment, because I think it’s coming. And I think Wall Street is going to have to wake up to some of the more more of the underlying and long term realities that are facing the market.

James Connor 5:25
And when you say you think the US consumers under pressure, what are you looking at specifically? Are there any indicators specifically, that tells you that they’re in trouble?

Speaker 1 5:36
Yeah, the spending numbers, I mean, the and so you’ve got where people are spending. So they’re not spending in the areas that are, you know, highly discretionary, those are starting to come down. So we’re seeing that in again, in food, food numbers, you’re seeing it. And in terms of the even targets number just released this morning. I mean, they’re under a certain amount of pressure. You’ve seen it in, in restaurants, and restaurants, spending, Starbucks, and so forth. And so you’re getting pressure in those particular areas. And so that’s where I think you’re starting to see some of the some of the pressure and some of the issues, you’re also seeing in the large uptick in debt debt. So we look at credit debt. And that’s gone up a great deal. People are borrowing more money, their savings rates are down the savings level is one of the lowest it’s been in a long time. So they’re consuming every dollar that they’re earning. And that’s again, not a good thing if you’re not building up savings in the economy. So I think you’re seeing it both in terms of spending patterns where people can pull back, they are starting to pull back. And of course, you still have to continue to continue to buy the basics and you continue, you still have to fund a lot of your unnecessary expenses where it’s inelastic demand, you know, you just can’t stop spending. But you’re also seeing it in the uptick in debt and credit card debt, mortgage debt and so forth. So that’s that those are concerns for us.

James Connor 6:54
Yeah, you raised a few interesting points. And you mentioned the word bifurcation earlier. And this is definitely we see this continuously throughout consumer spending habits. And you touched on Starbucks, so people aren’t throwing out $7 For a frappuccino anymore. But at the same time, I recently read an article about Delta Airlines. And one other might have been united. But they were seeing the uptick in the number of flights going over to Lisbon in Madrid. His correspondent with Taylor Swift playing in both of those cities, and I believe I heard they’re their flights to both of those cities were up 25 plus percent. So there are still consumers out there spending a lot of money, you know, going to a Taylor Swift concert.

Speaker 1 7:39
Yeah, there are pockets is no question. I mean, I look at just airfares, I keep an eye on the airfares. And there’s certain routes and certain destinations people are paying up for it’s emotional and people will go into debt and spend money that they might not even have. But overall, when I look at the airfare rates, and I’m looking more just on the Canadian airline industry, I’m surprised at the discounting that is taking place I’m getting hit every day with, you know, from Air Canada for WestJet other organizations where you know, you can get pretty substantial deductions and rates. So I’m not sure we’ll have to see exactly how much people are spending on flying over the summertime. By dad, sometimes there are destinations and certain routes that are very robust. And there’s certain traffic, Taylor Swift seems to have that influence in certain areas. And don’t ask me why but she does.

James Connor 8:28
So you touched on debt levels, and I want to talk about the federal debt. Now. It’s currently at around $35 trillion. It’s increasing by $1 trillion, every 100 days. These days when I go when I touch on these numbers, it just blows me away. It’s like we’re throwing around a trillion dollars now like it means nothing. And and so I want to get your thoughts on this. And then we can’t forget the fact that it is an election year. So the Biden administration has been spending trillions of dollars to keep this economy going. I recently read an article that said for every $1 trillion that we are getting in terms of GDP, it’s costing us taxpayers 1.5 trillion, so not a good use of funds. But what are your thoughts on the US debt levels? And is this an issue of concern?

Speaker 1 9:14
It’s a major concern there observed is it’s a complete and utter insanity. So you know, when I was in my doing my Commerce degree at McMaster back in the 80s, early 80s, that’s when Ronald Reagan was president. That’s when they first went over $1 trillion, I believe, was 1983. It’s now 35 trillion. So you’ve had a compounding at over 8% a year with a growth in the GDP of about 4% a year over that timeframe. So you’ve got about a 4% per year gap over the last 50 years almost. So this is not sustainable. It is what you call insanity. You can’t take a jet debt to GDP from 30% to well over 100% and then continue think you can continue to do that at a increasing rate. In other words, the second derivative, you know, is actually, you know, positive number. So you’re growing now debt at a level, where as you’ve already pointed out, I’ve seen different numbers for every increase in dollar in debt, you might be getting 30 cents of GDP, I mean, this is a complete flop this will not be able to continue. So it’s not sustainable in the very fact that it continues to be sustained, you know, it continues to go on does not mean it won’t come to an end. And so I think investors need to be very careful when you’re, when you’re adding a trillion dollars every 100 120 days, on a tax base of six to 7 trillion in federal government, I mean, it just, you cannot make these numbers up. So no, it’s not sustainable. And that’s one of the reasons why I think you’ve got commodities, things that are priced in US dollars gold, in particular silver starting to go up and people being concerned and using these safe harbors, there’s no way we can, we can continue to have a standard of living and have a stable economy with this kind of debt being added to the system. And particularly with the world’s leading economy, and also the reserve currency of the of the world. So I think investors need to wake up, and they need to be getting, I’m not saying run from the market, but you need to be allocating capital intelligently wisely in different areas that at least might protect your purchasing power. There was I saw a great chart the other day, and it just had, you know, from gold from the time that Nixon took basically the US off the last vestiges of the gold standard back in August of 1971. You know, it’s $35. Now it’s, it’s now around 2450 or so. And that’s actually grown faster than the s&p over the same period of time, if you take that 5053 year span of time. And so what that tells you, though, is that we’ve seen a massive devaluation in currency. And and so if we’ve already had that watch out ahead, I mean, you cannot be continuing to add this debt. We’ve seen it also in Canada, we’ve seen it in many countries around the world, but the US right now is out of control when it comes to their debt.

James Connor 12:03
So if I was to play devil’s advocate here, we’ve been talking about debt levels for decades now. And you made mention the fact that back in the early 80s, the federal debt was only $1 trillion now is $35 trillion. So it keeps increasing and yet the economy continues to grow. Why should I be concerned? Why should anybody be concerned about the debt levels, because the economy

Speaker 1 12:27
is growing based upon debt, and eventually, you cannot finance that debt. And we’re, I mean, we’re basically at that point. Now, James, when you think about in order to finance the debt, as a result of the so called pandemic, that we went through the COVID fiasco, what did they did, they expanded the balance sheet, they basically just printed the money. So in Canada, the Bank of Canada expanded the money supply by three $400 billion, which was sort of equal to the debt in the US, they went from a couple trillion up to almost $9 trillion bank, the level of money printing, and then they’ve pulled that back down to sort of the mid Smid $7 trillion in the US. So we’re already at the point where, you know, they call it the Minsky moment, whatever you want to call it, where we can no longer fund the debt through tax dollars, efficiently and effectively, which means that you’ve got to use your central banks to buttress to support your debt. If you’re doing that, that means you’re adding to the money supply, you’re devaluing your currency. So we’re at that point, the issue is, you know, when will the market fully realize that and when will that get priced in? And when will there be more discipline forced on our governments? I don’t know the answer to that. But our view is be prepared now and, and sort of do your investing and your stock market allocation based upon the fact that we could be in for some tougher times. So

James Connor 13:46
I just want to summarize what you said about the US economy, even though you think there’s impending problems associated with the debt levels, you’re still fully invested.

Speaker 1 13:55
No, we’re running while we’re running. It’s gonna vary by client because we of course, are fully discretionary money managers in to depend on the clients coming in, and we’ve got some that are retirees and some that are young professionals building their portfolios, but overall, I we’re running around 65% in equities, 35% short term, very safe, fixed income investments. So no, we were keeping some powder dry, and some money off the table. But we are in the companies that we are buying, we’re trying to buy companies that do have long term secular growth or in some of the more favorable areas of the economy are not leveraged financials, which could take a bigger tumble. And so we’ve really tried to allocate in areas that would be more robust and and have a stronger and higher resiliency to the challenges that we seek could emerge at any time in the market. Okay,

James Connor 14:48
so before we examine how you’re allocating capital in white names, specifically, I want to continue on the discussion with the economy. I want to look at the Canadian economy now given that we both for died in Toronto, I want to get your views on the Canadian economy. GDP per capita has been in decline for five years, while at the same time, this number has been increasing in the US. Canadian labor productivity has been in decline for 10 years real incomes have been in decline for a number of years. And there’s no reason or this is should be no surprise, given the excessive tax burden that we face in Canada. But what are your views on the Canadian economy? Yeah,

Speaker 1 15:27
and even when you look at the US that growth in GDP, per capita, and so forth, they’re all at very low levels that but they are positive. And they have been expanding, which is, which is a testimony to the resiliency of the American economy and the American people in business. In Canada, we have just been walloped by policies that are so detrimental and so dangerous to our economy. So, you know, we’ve had massive expansion of the state in this country. I mean, so just on the federal level, we’ve had about a 40% increase in the size of the government over the last five years. I mean, this is unthinkable in terms of the expansion of the state, which we’ve seen under the liberal NDP coalition, we’ve had the tax burden continue to go up, in particular, the taxing of energy. So we’ve had this carbon tax, which is supposedly supposed to solve all of the climate, climate issues, just tax people, and that somehow mysteriously is going to solve the climate issues. And so our energy costs are incredibly high. And as you know, James energy runs through everything, if we’re going to solve any of these issues, we’ve got to drop energy costs, we must make it cheaper for energy. So we can produce, manufacture things at a lower cost, and so forth and get inflation down. And so we’ve had these incredible tax policies, regulations, the again, the current federal government has added just unbelievable level of red regulation similar to the Biden government might add in the United States, which is added a lot of regulations and, and one of the reasons maybe for a more positive look in the United States is that the markets are already looking forward to a change in government in November, which would be much more positive for the economy. But in Canada, we’ve had these regulations, we’ve had Trudeau Government interfere with over $100 billion of capital projects. Now we’ve got a budget that just came down, which wants to increase capital gains taxes, which is the worst thing you can do when you’ve got capital, leaving your country to put a heavier tax on it. And so we’ve all these policies, which, which are really driving the economics in our country. Not to mention, of course, immigration, which, again, we we we look forward to immigration is Canada’s a country that’s been built on immigrants coming here. But they have to come at a rate where you can assimilate them, and you have the infrastructure to incorporate them effectively into your housing market, your educational institutions along with your health care system. And we’ve been bringing in two and a half percent population growth to our base, and it’s just impossible to keep up. So we’re stressing all of our basic institutions. And so you do all of that, and you have these kinds of policies. And yeah, you’re going to end up with the numbers that you’ve seen the Canadian economy is under tremendous, tremendous stress. And it’s essential that Canadians push back against our politicians in these policies, and it must be reversed. These are policies which are outrageous and, and are gonna continue to do more harm to our country.

James Connor 18:20
Yeah, and I just want to put this into perspective for our viewers. Canada has a population of 40 million people in the year 2023, the Canadian government brought in a million additional people, half of those people or 500,000, came into the Greater Toronto Area, which has a population of 5 million. So our population increased by 10%, just in the Greater Toronto Area alone, putting huge stress levels on the infrastructure. Exactly.

Speaker 1 18:47
Yeah. When you those, that’s a good way of looking at it. And, yeah, so. So when you do all of that, and you bring in people that, again, you don’t even have the economy that can integrate them into productive jobs. In some cases, you have professionals coming to Canada, and they can’t even get into their profession. I mean, they’re, they’re held up by regulatory restrictions and so forth. So why you do want to bring in doctors if you can’t get them to work in the medical field, or why do you want to bring in people that we need in the construction industry, if they’re not going to work in the construction industry, and so forth. So it’s, it’s, it’s, yeah, it’s just a really mess in terms of policies and lack of fourth forethought, and this is really causing a lot of challenges in the Canadian economy. It’s also getting Canadians very frustrated with the system. And so we’ve had a lot of money has been leaving the country in 2023. It was somewhere around 4030 $40 billion or more left the country. And that’s, that’s a substantial amount of capital, that we cannot afford to leave the country. I mean, we’re a resource based country, James and I think we’re one of the wealthiest countries in the world in terms of the natural endowments that we have in our country, and we need to develop them but if you’re going to develop then you need capital and you need a regulatory regime that will reward that capital and let it flourish. And, and so that has not been the case. And so what we’ve seen is just a stifling of many of our core industries. And this is, again, something that has to be reversed if we’re going to continue to see, you know, wealth grow, and GDP per capita actually increases, which is what we should be shooting for.

James Connor 20:22
And you made mention of how large the federal government has become in recent years, can you put that into perspective, in terms of the number of employees that have been hired that work for the federal government, and also in terms of GDP? Yeah,

Speaker 1 20:37
I don’t, I don’t have the numbers. I don’t have the numbers in the federal bureaucracy. But there has been a 40% increase in the federal bureaucracy over the last, you know, just pre COVID, up until the current situation. And so one can just imagine, we had a very large state in the first place, the federal bureaucracy was already large to increase that by 40%, is just unthinkable, really, in terms of the numbers. But in terms of the, it’s interesting is when you look at the government spend, and I’m talking about government spent federal, provincial municipal, so all three levels of government back in 1960, in Canada, we are just a little over 15% of the GDP would have gone to those three levels of government in 2021, which was at the height of COVID. And also deficit spending, it was 52%. Currently, it’s about 46%. And so you have almost half of your economy being subsumed by the public sector at one level. And United States is low 40s. In France, it’s just for, you know, just for some comparisons in France, it’s actually a little over 60%. But, you know, you cannot, in my view, and I think anyone who’s really looks at this objectively, you cannot have the government being almost half your economy, federal, provincial, municipal, and have a productive growing wealth, wealth creating economy, because government sector by its very nature is not there to create wealth, it’s bureaucratic, it’s inefficient with resources, it’s also on accountable. So the larger they get, the more inefficient they actually become. And we’ve seen this in all the different areas we see it in healthcare, we see in our education system, the more money you put into them, the more inefficient and ineffective they become, and they’re on accountable. And so this is really strangling the Canadian economy and most of our western democracies, we have gotten fat, we’ve gotten somewhat lethargic, we don’t have the competitive spirit anymore. And we’ve liked government take more and more of the economy. And we’re and the result, of course, is increasing debt per GDP, decreasing wealth levels, and so forth. So the only way to reverse this is we must slash the size of government, we must have the private sector become more involved, take over large swaths of the economy, so that we can drive efficiency and effectiveness with capital and down the regulations unless we’re prepared to do that. It’s going to be a tough, tough slog for us going forward. And I think Canadians are gearing up to realize that government is not the answer, what the answer is all of us getting to work and working hard, and being entrepreneur entrepreneurship, and rewarding capital and investing back in our country.

James Connor 23:12
So we have a declining economy. And I want to get your views on what this means the Canadian housing market, and I recently had a discussion with David Rosenberg, and he thinks we have a major reset coming in the housing market, because in Canada, we can only get a three year and a five year mortgage. And a lot of the people that got a three year mortgage, they’re going to be coming up for renewal soon at a much higher interest rate, and therefore their monthly payments are going to be significantly higher. What are your views on the Canadian housing market? Well,

Speaker 1 23:44
we’ve already seen in many of the markets surrounding the Toronto area 20% Or more drop in the prices, and I have a couple of young 2020 year old mid 20 year old children, and one just purchased a place and, and a very nice modest, you know, townhome that they can start off often. But that’s it was down about 20 25% from the peak. And so we are seeing the drop in the real estate, we’re also seeing increased numbers on the marketplace, and housing houses staying on the market much, much longer, much, much longer. And so I think David Rosenberg is is very right, inaccurate in terms of his analysis that the mortgage costs in many cases are up 5067, even 100%. If there’s refinancing, and that’s crippling to people because it’s not just them. Again, it’s not just your mortgage payments going up, taxes continue to go up. Price of transportation and cars is going up insurance for all your house and your cars are going up. The food costs have gone up. Trudeau has put our taxes on gas is up. I mean, we’re paying almost $2 A leader. We’re paying. I go down to the Caribbean occasionally and we have an offshore fund in the Cayman Islands. So I was down in Grand Cayman recently and I did the analysis and you can buy gas Celine and a little small Caribbean island at the same price you can pay in Canada. And so these these prices are, it’s just too much so that so that’s going to continue to put price pressure on the housing market and people’s ability to fund these things. And so we see it with our we’re running a wealth management company. So we’ve got, you know, over 600 clients, and, and we see it in some, you know, in the eyes of someone, some of them when they come in, I mean, they’re under a lot of pressure, and their budgets are really, really tough. And they’re having to cut back and, you know, any anyone’s been in a big mortgage situation, and they have to refinance, it’s really, really putting pressure on the family finances. And so I think it does mean that unless rates really were to come off substantially, then the prices are going to have to break so that people can afford the houses even. And that’s with a eight, that’s even with the supply constraint that we have in this country. I mean, if we didn’t have such a supply constraint, I think the prices would have dropped a lot more if we didn’t have all the immigrants coming into. And so you’ve got these other things that push in one direction, and then you’ve got the economic reality pushing the other. But the economic reality, I think, is winning out. And a lot of the people coming to our country now are not all that wealthy, many, many of them are coming from difficult situations, they don’t have the money to afford these houses. And so that’s creating problems for them also. So I would subscribe and think very highly of David Rosenberg’s economic views.

James Connor 26:26
And just for the benefit, our of our US viewers, were paid about $6 A gallon in Toronto. And that compares to $3 a gallon in the state of Michigan, which was right beside the province of Ontario. Yeah,

Speaker 1 26:42
yeah, that’s assuming I guess a three three, was it 3.8 liters to three and a half, three to American gallon if you’re doing the American gallon versus an imperial gallon, but we went up to $2. A leader? Yeah, sometimes it converted to usci be at least the $6 Yeah, us it’s, it’s, these are crazy numbers. And the men were that were the second third largest oil reserves in the world.

James Connor 27:06
Okay, so you’re not? So you have concerns about the Canadian economy, and also about the Canadian housing market? What about when you look at the Canadian banks? Because, of course, they’re carrying a lot of mortgages. Are you concerned about these loan loss provisions with the Canadian banks?

Speaker 1 27:20
Yeah, I mean, we’re, we’re probably one of the most unusual money managers in the country. I mean, I’m sure there’s a few others like us, but not very many, we have about 1% of our assets exposed to banks. So and that’s with, as you know, in Canada, the banks can do no wrong. And that’s where you put your, you know, at least a quarter of your money or more. Our views are highly leveraged financial standard financials in a middle of a debt crisis. And so their assets are Canadians liabilities. And so as you point out, even if we don’t have a major blow up, we just think that they’re going to be tough slogging for the banks for some time. And, you know, in terms of real large capital increase in the value of the capital growth is going to be very limited, at best, you’re going to collect the dividend. At worst they go, they’re gonna see non performing loans go up, and their exposure to other areas of the economy could put pressure on them. And so we have not had banks now for several years. I mean, very little, we have dribs and drops of some banks. And so we’re very careful about leveraged financials, because if there is a problem in the market, as we, as people should know, the value of the banks can drop precipitously, and very quickly.

James Connor 28:31
So let’s continue on this discussion with the stock market and where you and your team are investing money right now, both in the US and Canada. The s&p and the Nasdaq had been ripping and we continue to make new highs every day. But as a value investor, where do you see value in this market?

Speaker 1 28:47
Yeah, well, we continue to look at a number of sectors and we So technology is one that you really cannot avoid. Because it is to us as basic infrastructure, it’s essential. So we are we have a number of investments in the technology space, if we can find companies that reasonable values. Now, we bought we added a lot of Amazon in 2023. Because in 2022, I was shocked at Amazon went down by about 40%. And yet the numbers just continued to chug along. AWS, its cloud business and so forth, continue to go along so so we’ve got a fair bit of Amazon on our books relative to other investments. And part of that again, it’s just we like the business and it continues to grow and got really got quite relatively inexpensive in 2002 2000 22,020 to 2023. But also like software business, we want to come to like Roper, which is a leader in software and people don’t know the Roper name, but they have dominated a number of verticals below them in software software companies are nice. Autodesk which is you know, the leader in CAD, and all the construction people architects use them and so forth to companies like that. We have a number of investments in infrastructure, which has been tougher go because anything that sort of infrastructure where you’ve got a large amount of debt on the balance sheet by the nature of the industry and interest rates go up, it does put pressure on those companies, but we’ve tried to do is buy infrastructure companies where they’re very sophisticated with the use of debt, their growth businesses are not highly regulated utilities. And so we’ve owned a number of the Brookfield companies, Brookfield infrastructure, Brookfield renewable. We like that space. Book real Brookfield renewable, as you as you probably noticed, did a great deal with Microsoft, a lot of these tech companies are so energy hungry with AI in the data centers, they have and they want to be green, and they want to look good and virtue signal to the markets. So they have to acquire renewable energy. And so you know, they they’re going to companies like Brookfield and signing up large, large, long term, you know, purchase power agreements with Brookfield renewable. So that’s an area that we were involved in, we do have something gold, silver, precious metals, again, you you’d probably ascertain that from my my concerns over the debt. We love some of the royalty companies and we have probably about 18% of our total assets exposed to some of the precious metals area, which is pretty large when you consider that’s 18 out of 65% of our equity. So it’s a good proportion of our investments, and some consumer staple businesses church into white. You know, some boring companies like you know, like that some help some in the health care area. Dan Dennett here is relatively inexpensive and is a leader in medical supplies, medical equipment, analytical equipment, things like that. So, you know, we we intersperse across a different number of industries, Schneider Electric, we’ve added just recently, we like that business, because they’re also part of building data centers. And they also have a lot of the componentry that goes into utilities, which have to be continued to be, you know, built off a lot more money going into utilities to to fund this transition to electric vehicles and demands on the utility system. Yeah, so looking for the specialized areas where we can find great businesses, nice purchase goods sector, their growth behind them, well managed. Well, finance companies. That’s really what we do. So

James Connor 32:15
you mentioned that you do have large allocation toward precious metals. And your focus is on royalty companies, why royalty companies, as opposed to miners? Yeah.

Speaker 1 32:26
And so, we have, we have a couple of miners. But if we go into that space, it’s usually really the elite miners and ones that have a good good areas, good political, you know, political exposures and so forth. So Agnico Eagle has been one that’s been a core holding that we’ve had for a while. But mining is a very, very tough business. The economics are tough. And we love cash flow, and we love predictable cash flow. And so and but we want to have exposure to gold, silver, copper is increasingly important, because of electrification, even oil and gas, if you can get a nice royalty offshore oil and gas that’s very effective also. So that’s why we’ve gravitated to the Franco Nevada is of the world the wheaton precious metals, which just hit an all time high yesterday on the market. sandstorm, a Cisco royalties, we have a little company, a small little company that we think is going to double and triple in the next next two, three years. Even if the price of gold doesn’t go up. Gold royalty, it’s a small little company, but it’s got some great royalties. And cash flow is going to can really, really ratchet up in the next little while. We like those businesses, because they’re basically investment bankers to the mining industry. And so you can diversify, they’ve exposure to many locations, many political jurisdictions, a number of different commodities. And it’s all you know, last first dollar is your last dollar, so they invest, and then they get this perpetual property rights and royalty on that property for forever, basically. And so we like that business model is it’s it’s real cash flow, generative business model, and we’ve done well on it for many, many years. Long before I did rock link, I was the CEO of AIC funds, and we were one of the largest investors in Franco Nevada, and we just love that business. And what Seymour Schulich and peerless on did there, and it really, really awakened me to the opportunity of royalties, and especially if you can buy them on good properties, good assets, and you have really smart capital allocators running the company. And so that’s what we look for. And so we’d love that exposure, we think it’s great. And if if gold does go up, continue to go up and silver go up, then all their future cash flows just go up with it. It’s a beautiful business. And

James Connor 34:40
the other big advantage associated with royalty companies is you remove all operating risk.

Speaker 1 34:46
Yes, which is a big, big factor. I mean, I’ve I’ve talked to you know, people in the mining industry and we’ll mention the names and they’ll tell you they’ll say mining is got to be one of the toughest businesses you can possibly go into you And it’s interesting some of them, you know, they get it. But it’s appealing because, you know, the asymmetric returns, I mean, you can you either you either lose and lose everything. Or you can sometimes just make hundreds and 1000s of percents. And that’s what keeps the alert. And that’s what keeps capital going into it, which is a capitalist market. For us, though we’re investing for, you know, high net worth clients medium net worth clients, people have worked hard for their money, they’re not really interested in losing anything, they want to build a base and they want compounding on top of that base. I think the royalty companies are just safer, or companies like a Nikko, ego and other leaders in their field. Those are the ones that our clients really are going to feel more comfortable with and where we can sleep well at night. And we don’t have to be geologists and experts and, you know, tracking into remote parts of the world and looking down holes that we don’t really understand what’s going on.

James Connor 35:50
You mentioned oil and gas. And Warren Buffett is a big believer in oil and gas and a big investor in that sector. For the cash flowing element. What names are you invested in?

Speaker 1 35:59
Yes, some we also I mean, the the more pressure that the world puts on the oil and gas industry from our perspective, it just means that it’s going to hold prices of oil and gas probably higher than they normally would if you didn’t if you don’t if you if you didn’t unleash all of the capital to develop these resources. And so you would look at them as very cashflow generative businesses, just like Warren Buffett does. So we own make energy. Here in Canada, we’ve also some exposure to Suncor Canadian natural resources. And so we’re looking for the companies that have proven long term reserves are well run these companies again, they’ve they’re generating so much cash, you take Meg energy, they’re just paying down some debt right now. And then all of the cash flow is going to go into share repurchases and in dividends. And so if we were buying some of these companies, even two years ago, I think it was, you know, when they were like 1516 17%, free cash flow yields, I mean, it’s just incredible. You can buy a tech company at one and a half percent free cash flow yield, or you can buy an energy company and, you know, in the teens, then we’ll take some energy exposure. And the reality, James is that we’re going to need fossil fuels from here till eternity. And this idea that we’re just going to eradicate our fossil fuel demand is incredibly naive, incredibly naive. And so, you know, from our perspective, we think it’s a long term place to be, and we’re quite happy to invest in renewable energy is also in some new opportunities. Uranium is another space, I mean, I think nucular is going to continue to be an important area also. But fossil fuels is not going to disappear. And so if we can get exposure to some really well run companies and great long term resources, where there’s no wildcat, he needed that, you know, the reserve is there, it’s proven, then we’re gonna buy some of those companies also. So we have about, I’d say 678 percent of our assets in that space. And

James Connor 37:49
so you mentioned earlier, you don’t like Canadian banks. What about Canadian telcos? They’re all down on the year, but we only have three of them here BCE. Tell us in Rogers, what’s your take there?

Speaker 1 37:59
Yeah, we have very limited exposure to telcos. And that’s I think, and that’s only because we just think they’re mediocre businesses, and they’re under a lot of pressure, cost pressure. And so when you only need 2025 stocks to own, we just don’t need to be in that space. And so we have very minimal exposures, I think, a lot of times people are going for the dividend, but that can be risky, also, because you can jeopardize any capital growth or maybe have some capital losses. And so yes, they are down interest rates have gone up, they’re under a lot of pressure. I think that you know, there could be a little bit of a balance on some of them up. But for the long term, we just look at the business models is just being weak, and not the kind of business model that we are interested in. And there I mean, there could be erosion. And we’re always looking at Starlink and other ways that they could be disintermediated over time, through technology. And that also could be a problem. And so yeah, it’s just an area that we are not interested in. The one

James Connor 38:59
thing about Canadian banks, and also the telcos, they nickel and dime you to death always hit you with these fees.

Speaker 1 39:07
Well, the the Canadian banks are, you know, monopolistic oligopoly, basically, right. And let’s be honest about it. And that’s why it actually is helpful for our business that might say, James, because many, most of the clients that come to us come from the banks, and they’re actually looking for more personal service, a little more differentiated product offering and so forth. And so in some ways, the banks are friends, because they’re just so large and bureaucratic, and increasingly not overly service oriented in many cases, and so, so, so I shouldn’t I shouldn’t I shouldn’t put them down too much. That’s an advantage for us.

James Connor 39:42
So I gotta look at the I gotta ask you about the Canadian stock market now. And the s&p is currently up 12% on the year after being up 20% in 2023. I’m not even going to mention the NASDAQ because the numbers are significantly higher, but the TSX or the drop on a stock exchange is up about 7%. Year to date. I’m not too sure what it was up last year, but there’s no way it was anywhere near what the s&p was up. And as and then you talked about, you know, we both talked about the taxes and the excessive tax burden that we face as Canadian investors. We got a slowing economy. As a Canadian investor, how do you get ahead?

Speaker 1 40:24
Well, I think the the the benefit of being an investor is that you can target the companies you want to invest in and try to buy into the companies that are least affected by the bad Canadian government policies currently, currently, hopefully, those change. So what do I mean by that? Well, we can invite we as investors, we don’t have to invest in companies that are 100%, exposed to Canada, and all of the challenges within our own economy, so we can buy into the US we can buy into Europe, we can buy Canadian based businesses that are making money all around the world. And so I think that, you know, for Canadians, what they need to really focus on is how can I best make sure my capital is going into the kind of businesses that can grow, can expand in in, in productive ways and are not hamstrung by bad Canadian policies and bad Canadian governments, which we’re seeing, you know, not only our federal government, but many of our provincial governments too. So that’s the way we get around it. And so we just invest outside of Canada or in businesses that maybe are Canadian based, but make money all around the world. And I think that’s probably the most productive way of doing it. And then at the same time, putting too much pressure on our leaders and our neighbors and so forth to say, Hey, how can we change this and let’s, let’s be more, let’s be, let’s be looking through the resumes of the people that we’re putting into power, and making sure these policies really fit with the best, the best long term objectives of our country. Jonathan,

James Connor 41:49
as we wrap up, you’ve painted a pretty negative picture about the Canadian economy, what’s it going to take to turn this economy around and to write the ship? Well,

Speaker 1 42:00
I’ll give you a really brutal and honest assessment, a change in government at the federal level. And I think in many of our provincial governments, too many of them are not running their their provinces very well. But I think look, we need to we need to shrink the size of the state, the state is much too large. It’s subsuming way too much of our economy, we’ve got to lower taxes, not increase taxes, we need to unleash our extractive industries or commodity industries, we should be deregulating and making sure that we are maximizing our oil production or gas production, we’re exporting our natural gas into Europe and into the into also into Japan, down the far east where there’s the needs, we need to be deregulating, and in so many areas, and we need to put more and more of our economy into the private sector. So if we’re not committed to doing those things, shrinking the size of government, shrinking regulations, getting taxes down, balancing our budgets, and putting competent people into places of leadership, yeah, it’s going to be a tougher goal going forward. But if we could reverse some of those policies, this country is amazingly wealthy, that people are incredibly resilient, we’ve got a lot of talent in this country. And we could we could really, I think, make a dramatic change in the country in a relatively relatively short period of time. But we just need some of those tough decisions made. And I think Canadians are increasingly I think, at the point where they are looking for change. And so let’s just pray that that is the case. And we have got the leaders that step in that are prepared to make those tough decisions. Well, that was a fascinating discussion, Jonathan, and I want to thank you very much for spending time with us today. If someone would like to learn more about you and your firm rock link, where can they go? Probably the best is just our website, which is rock and rock link with a C at the end. So Roc K And in just go to that website, and it’s got your contact information, info at Rock And you can contact us, it’s also got a phone number there 905-631-5462. And you can hit any one extensions that comes up. And we’re there to service you. And I would love to love to talk to you. And as we do it, the wealthy on anyone just wants to come in and have a chat with this is no pressure at all, no cost. We talked to any any any any Canadian that’s interested in talking to money, give us a shout. Well, that’s great. Once again, Jonathan, thank you. Thank you very much, James, great talking with you. Well, I hope you enjoyed that discussion with Jonathan Willem and he provided me with some insights on what to expect in the coming months. I really enjoyed hearing his views not only on the US economy, but also the Canadian economy. We all need help when it comes to planning and preparing for our financial future. And if you need help, consider having a discussion with a wealthy and endorsed financial advisor at There’s no obligation to work with any of these

James Connor 44:59
visors. It’s a free service that Wealthion offers that anyone who has an interest. Don’t forget to subscribe to our channel, and also hit that notification button to be kept up to date on upcoming events. We have some amazing interviews coming out in the coming weeks that will help you prepare for your financial future. Once again, thank you for spending time with us today and I look forward to seeing you again soon.


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