Hello and welcome to The Download. I’m your host, Dave Richardson, and we are joined for Stu’s days, as we are somewhat usually by Stu Kedwell. Stu, welcome.

Hi, Dave. Thanks for having me.

So, Stu, you are the co-head of North American Equities at RBC Global Asset Management, which we remind everyone every Tuesday or thereabouts. Just watching some of the activity that we’re seeing in North American markets. Odd activity. Some people are pointing the fingers towards young investors on social media, going out, manipulating shares, and just all kinds of crazy stuff going on. As an investment manager, how do you look at this activity? Do you look at it, and how does it impact your thinking about what’s going on in markets?

Sure. Well, it’s hard not to look at because some of it is pretty spectacular from a commentating standpoint. You know, as someone always reminds me, people bet on horses, so don’t be surprised that different activity takes place in markets. And we like to understand it because right now, where there’s a fair amount of liquidity provided by central banks like we’ve talked about in the past, the real economy is not really using that liquidity because things are still on clampdown or locked down so that liquidity tends to flow into all sorts of different places in the markets. It’s one of the primary ingredients of speculation. So, when you start to see share prices moving around by double digit percentage points in a day without any meaningful corporate news, it is illustrative of a pocket of speculation. So, when we look at the broader market, we want to be aware of it because it means that people are very enthusiastic and optimistic about their ability to make near-term money in the stock market, but from a longer-term financial planning standpoint, it’s not really an activity that we’re going after in our funds. When I think about this in my own account, as many of you know, the dividend fund is my RRSP, and I hope to compound that somewhere between 7 and 9% over a very long period of time. When I think about my financial plan, I’m reminded that a tremendous amount of the value in that plan is going to be created in my last doubling period. The one mistake that I look back on different periods of my career that I’ve made is, sometimes you get caught up in the enthusiasm and if I’d just put more into the long-term financial plan, I’d have more to participate in what will likely be four or five doubling periods before I retire. You know, I was looking at this prior to the podcast, in 2000, there was a lot of similarities to today’s environment. There was Chatlines. Today there’s Wall Street bets. I keep some tickets and some trades I did; one of them that I remember is VerticalNet. I think I lost the one hundred dollars a share faster than just about anything in my whole life. I just looked up and VerticalNet was taken over in 2004 for 2.75$ a share, which made my one-hundred-dollar penalty, with the benefit of hindsight, to actually be a pretty good trade. But nevertheless, I did get caught up in it during that moment in time. When I think about the benefits or the rewards that appear ample during these periods of time, I’m reminded to either set aside a smaller percentage of my portfolio to embark on that activity, reminded that when you’re speculating it’s an entirely different toolkit than investing is. You’re not likely to get the long-term compounding, even though you might get some short-term spectacular gains and unfortunately losses that comes from this pretty wild market activity. So those are some of the things that have been going through my mind as I watch GameStop and some of these other stocks that have taken off as of late.

Yes, and I I’ve just been having some conversations with people in the industry in terms of direct-investing channels where self-directed investors are in and a lot of activity around trading stocks and just the incredible volumes — and not just the volumes, but the range of people who are getting involved in these activities. Sometimes it’s hard. Your 14% return on a global balance fund last year seems really boring when you’re looking up and watching, as you reference, a couple of stocks that went up one 150% in a day. But they’re two very different things, investing and speculating. Which I think we’ve highlighted on this podcast before. And I think you lay out some pretty good advice around being careful or even how you think about that. It’s different for everyone. But it is something you need to think about before you take your life savings and you start playing around in that world.

I think that’s one hundred percent true. When you think about a financial plan and compounding your assets over a long period of time, as I said before, it’s that last doubling which is where all the money is made. You think about the number of billions that Warren Buffett has tacked on since he hit the age of 75. And it’s just having a great pool of assets compounding on your behalf. Unfortunately, with speculation, while the rewards can be extremely handsome, they can also be punishing if you’re mixing up the two buckets. Because if one bucket gets empty due to speculation, you don’t get the last doubling of your financial planning savings. That’s pretty penalizing to your long-term financial outlook.

Yes, so who are you taking in the Super Bowl?

That’s right, what do they call it, Godzilla against King Kong, two great quarterbacks. I will take the Tampa Bay Buccaneers. That’ll will be my call for the Super Bowl.

And that would be gambling, which is akin to speculating. We’re talking about investing here on this podcast. Stu, thanks again for your time.

Great. Thanks, Dave.