Hello, and welcome to the Download. I'm your host, Dave Richardson, and it is Stu’s days. Stu, where are you today? You look like you're in an attic or something?

I am working from the home office today, Dave.

Oh, wow. So you're going to come in particularly clear. I don't know if the listeners know, but the Wi-Fi in the office is terrible. So you've got great Wi-Fi at home, right? Stu-Kedwell-high-quality Wi-Fi?

We got fiber optic right to the home, Dave.

That's the good stuff, right? So you don't wake up in the middle of the night having nightmares about bad internet. You've got the good stuff.

That's right. I get news early here, Dave?

Before it happens, you're hearing about it.

I'm one or two seconds ahead.

I'm in Vancouver and I'm suffering through the typical hotel Wi-Fi experience. So I won't be as clear. But people just want to hear from you, anyway. So Stu, I understand you did a landmark speech yesterday from the grounds of the Capitol that was examining a hodgepodge of different themes, things that you're thinking about and that investment advisors might be thinking about. And what were two or three of the key pieces in there that would be relevant in terms of the thinking of people listening to this podcast and investing their own money?

Well, I think when you do a presentation like that, people are always interested in the framework with which you're investing. Our framework is that the macro environment is going to be uncertain. The fixed-income markets are in the process of being our friend. Inflation has moved from the robust period of higher inflation. That period is over. Now we're debating what will the new period be? Will it be two or will it be three? Short-term interest rates are closer to a peak. Longer-term interest rates looking a lot more interesting. And this period of time where the yield curve and monetary policy are causing a slowing. We're having discussions with lots of company management who share that opinion. Employment remains very good. So can there be a soft landing? There's not often a soft landing. All these types of discussions. But also, we were there to talk about one of our funds and I think it's a good reminder as well that there's always something to do. There's always interesting opportunities and the environment presents itself and it's going to pressure some businesses, provide tailwinds to others. And our job is to find those businesses that sit at attractive positions relative to the scenarios that might be in front of them, even if those scenarios are a little bit wider than they've been in the past. This process of being a longer-term investor, the idea is you're always trying to put as much capital into places where the tailwinds might be picking up and not as much headwinds in front of you. So yesterday we were talking about natural gas. Canada is at this point, where we're nearing completion of the coastal gas link, which is the pipeline that will take the gas to BC from Alberta for liquefication; LNG. The supply demand dynamics around gas come and go. You can drill for gas somewhat faster than you can build a big oil sands project or something like that. So it's a bit of a different market. But the dynamics around the supply and demand look okay coming into this period of time. And you're about to open a potential new opportunity for Canadian gas leaving Canada.

I'm sitting here in my hotel room in Vancouver. I think the pipe is running right through the middle of the room out to the ocean behind me. I just wanted to go back just before we go much further, earlier last month we did a piece on some of the big changes that are happening in the pharmaceutical industry, particularly around weight loss drugs. And you've seen how that's played out. If you missed that one, go back about four episodes of Stu’s days and you'll get a sense of what Stu was talking about. Now, natural gas. As soon as you get a little bit of cold in the air, I start thinking about natural gas and what the winter is going to look like. And we've seen prices popped up. We were down around $2 a month a bit ago. And now we're up over $3, whatever the measure is for natural gas. But sorry, you were going to go on and say that the dynamics look pretty good for it right now.

And some of the producers are almost like manufacturers. They have a big land bank, so they have a long-time horizon of drilling and they can get reasonable returns. There's a whole bunch of businesses that process natural gas once it's come out of the field. So you put a little bit more volume in their plants, and it helps the economics of the business. It's just an example of notwithstanding all everything going on in the macro environment, that could be a little bit of an interesting opportunity. And the list goes on. When we talk about the consumer, and you talk about monetary policy. You can then look at some of the auto parts retailers. Not an auto part manufacturer, but a place you go to buy spare parts. These businesses tend to do pretty well. People keep their cars longer. It's not as economically sensitive. They're very good businesses. Or you can look at what they call like off price retailers. For Canadians, that's something like Winners or something where maybe there's some inventory around, they can get their hands on it. They can make a good margin. Again, these have been very good businesses over long periods of time. We can look for what we call self-help businesses where maybe you have a new management team on an existing company and there's a roadmap to make that company look like another. And the returns that will come from that are quite visible. We've been spending a lot of time on these ad-supported streaming businesses where you think about flipping through Instagram reels and how tailored some of that advertising comes. You sit and think about watching television. Probably when you started watching television, Dave, you probably had to get out of the chair to change a channel. Now the streamer knows exactly who logged on to watch television. They know everything about you. So when they start doing ads, the odds of those ads converting to business goes up quite a bit. So that's a brand new business that's going to develop and people that have data can support those businesses. There's going to be new revenue streams. I think the point of all this discussion is that the macro is always very important but underneath the surface business is always finding new opportunities and compounding away on our behalf and that's what delivers the long-term returns. Trying to find good businesses run by good management teams that are finding some tailwinds, getting in front of those tailwinds and compounding our capital over a long period of time. Notwithstanding the ups and downs that come from all the macro discussion that can be very loud in the short term.

Yeah. What's interesting about the examples that you've given, a couple of them are examples of a transition of consumer behavior in the midst of a challenging economic backdrop, which is high inflation, higher interest rates, economy slowing down. And then the other example, natural gas, would typically be you'd think of that as being in a particularly good spot when the economy is actually better. So there's different things pushing different industries. And again, your job when you're managing people's money, which is fundamentally your job— not to be a podcast star like you've become, sort of a second line—, but is to identify all of the different places where, again, the tailwinds are there, as you say, and avoid some of those or just back off some of those areas where the headwinds emerge, given the economic conditions that you're facing.

Yeah, 100%. That's the name of the game. And looking at these businesses, they have a bunch of capital. They put capital to work, they try and earn returns on it. If they can grow their revenues without capital, that can be fantastic for us. I think the other thing in this environment that's important is because the interest rate regime has shifted a little bit and the odds of seeing the very low rates that we saw in the last decade are declining. When you have those kinds of regimes, we tend to use more securities right off the bat than fewer because we want to expose ourselves to a bunch of things that might emerge. And my partner has a great line, which is: you don't water the weeds and pull the flowers. You plant these seeds, and you have thesis, and then you evaluate the thesis along the way. And sometimes you have to change course and move on from something that you thought might take place, and it's just not taking place. But it's part of that initial phase of a new regime.

Yeah. And another way to think about it, I guess, would be that when you've got this kind of uncertainty, you've got to be particularly nimble as an investor.

Nimble and open minded.

Yes, absolutely. Intellectual curiosity is one of those great characteristics to have. I like that my children are intellectually curious that they're always looking at different things. They're not necessarily looking at what I would like them to be intellectually curious about right now, but nevertheless, it's exploring and learning and asking questions. And again, I find that to be a hallmark amongst really great investment managers in particular.

Well, hopefully that camp includes me most days, but we'll take the compliment, Dave.

You are quite intellectually curious, too.

Yeah, I'm superstitious too, though, I'm not big on any form of compliment.

Okay, well, I'll just say maybe the average person doesn't necessarily know as much about their Wi-Fi at home as you do or enjoy weeding their garden as much as you do. All right, Stu. Well, thanks again for joining us this morning.

Thanks for having me, Dave, as always. And thanks for everyone who listens.