How to Invest Wisely During These Fascinating Times - Benji Gallander

00:00:08 Thank you all for coming. Christophe is not as nervous as me so, I decided to bring something. You know how kids have dolls they take to bed etc., so I brought something so I wouldn't be so nervous. I was thinking of wearing this today, a lot of you know Gary Busey, he is kind of out there and being a contrarian, some people consider me to be somewhat out there too.

00:00:46 The first thing I'd like to do is thank the people that get this show together. It takes a tremendous amount of work so I would like to thank Jay Meridien and Danielle. They are two of the key people; Jay is up top, and I would like to take a moment to thank Joe, Jay's father who started this whole thing. It takes a tremendous amount of work and I think they put on a great show.

00:01:11 Today I am going to talk about how to invest wisely in fascinating times. Can everybody hear me well enough? Okay.

00:01:21 One of my favourite words in the English language is continuum. A continuum is - I am sure you likely know - it is something stretching from one end to another and I think part of the reason I like the word continuum is that there are not that many words that have two u's in a row in them. There is vacuum and continuum; so, it always kind of fascinated me that word, for whatever good, bad, indifferent it is.

00:01:52 I look towards the United States and we know it is a fascinating time and if you want to put together a continuum, on the one end you have Barack Obama, who used to be the President as you know and now you have Donald Trump. Could two people be any more different? I'm not going to get into politics here, I know who I prefer but another continuum is risk and reward.

00:02:25 Again these two lines, some overlap, some move in between and my feeling is that under Barack Obama there was far less risk than there is today. Because, he was not tweeting at three o'clock in the morning whatever came into his head, perhaps after a few drinks or whatever. Whereas with Donald Trump, in many ways you don't know exactly what you are going to get and he basically says or tweets what he thinks and that is creating a lot of question marks out there.

00:03:04 When things are volatile there are two places that people often go when they fly to safety. What are those two places that people often go to fly to safety? Gold. So, gold is one. You are in a conference here with commodities and gold and I think that gold as something that is safe does not really make sense to me.

00:03:33 Some of you may remember years ago when gold was at eight hundred and fifty dollars an ounce; that it felt about two hundred and fifty dollars an ounce. So, let me just ask you - how safe is that? Not so long ago, gold was at eighteen hundred dollars an ounce. Now it is about twelve hundred and it went down further than that. Again, how safe is that?

00:03:56 So, I question gold as being something for safety. I do think that it is something that is good for diversification but that's a completely different thing. So, I like gold, I think gold can be worthwhile to own, but in terms of safety it is not so good, unless maybe you are fleeting a country and you've got some things you can get through a border with.

00:04:21 What is the other thing that people look to for safety? US dollar. So, the US dollar people go to for safety. I don't know how many of you have looked at the US balance sheet lately but they have a debt, a huge, huge debt. You can go online and look at the debt log and they have a deficit and it keeps on increasing. They are very much going in the wrong direction whilst the economy is going in the right direction. In terms of a place that's safe? In terms of putting your money there? I highly question that too.

00:05:02 Then you have to think, where do you go for safety? Now often when I talk in Vancouver - I last talked there in January - I focus on a methodology contrary to the herd. We are contrarians, we invest only in companies that have been around for at least ten years, generally making money, turnaround situations and that kind of thing. Afterwards you are welcome to come to our booth and talk to us, we are over in number five, but today, I am focusing more on investing wisely during turbulent times.

00:05:35 Why are the times turbulent? It goes beyond Donald Trump. Take a look at the debt levels, not only in the US but in this great country of ours. Provincial governments, the federal government, municipal governments; almost all have huge debt loads and they are increasing. This is very dangerous.

00:06:00 Does somebody want to tell me about shorting the Canadian dollar and where that is at right now? Do you know what shorting is? You think it's going to go down? People talk about shorting stocks. The shorts on the Canadian dollar - anybody have any idea where they are now? The shorts on the Canadian dollar are at a record level. More people are betting that the Canadian dollar will go down than ever before, in terms of total value.

00:06:31 It doesn't mean they are going to be right, but a number of years ago when the Canadian dollar was higher and in parity with the US dollar we invested both in the Canada states. Some of our investments in the states are ADR's so maybe French or Israel or other places. I was betting a lot on the states because I thought I'm less afraid of the states and the US dollar, than the Canadian dollar.

00:06:58 I built up the portfolio until it was well over 70% in the United States as compared to Canada, which has actually lead to a huge return for us, just on the appreciation of the American dollar. Now while there is a huge debt against the Canadian dollar I am questioning it. I am not saying it is not going to go down further, but it's already down at about 73, 74 cents. Some people think it will go down to 65 or lower and it may, I don't really know, but I think longer term the Canadian dollar is usually a fair bit higher than it is now, so ultimately, I think it's going to get there.

00:07:39 What are some other danger factors that are up right now? If you look at stock markets around the world many of them are at record levels. To me, that is a major danger sign. You look at the SNP, the Dall, European, some European markets etc., they are at super high levels.

00:08:04 So, going way back prior to tech wreck in 2000, file 1999 in our quarterly issue in October. We compared More Corporation, who are a huge envelope company with commerce one, which had a much higher valuation than more. But more had tremendous revenues, losing a bit of money. Conference one had zero revenues. So, in a tech bubble, I remember being up in Northern Ontario the day it went up five hundred points and hit five thousand. I said, "This makes no sense to me." It was fascinating to watch on CNBC but it made no sense, so we basically thought this won't last.

00:08:50 I remember being on 'This Morning' which was Canada's number one radio show with a woman who was very bright and she was saying like many people, "We're in a new paradigm. Technology was a new paradigm." I said, "No we are not in a new paradigm it's same old, same old, this is another bubble and the thing that doesn't change is people and human psychology in terms of fear and greed."

00:09:19 When markets go way down as they did in 2000 and 2008 what do people generally do? They run from the stock market and that's when they should be looking to invest - after this blow off. Greed. When markets are going really well, what do people do? They want to keep up with the Jones's and they invest. It's the worst time to do it. So, when I was on 'This Morning', ‘CBC This Morning’, years ago, it turned out I was correct. It was not a new paradigm, it was a huge blow out and it has taken seventeen years to climb back to where it was.

00:09:57 There are the major problems for you. Trump, as I mentioned; major problem. Now we are seeing disagreements; G7 meeting, people are looking at things and the other countries in somewhat different ways. We've got Brexit going on. I don't even know if Brexit is still going to happen, a lot of people look at it like a ‘fait accompli’ and I don't think it is actually as major as what people think, but when you have changes like that, that can create problems.

00:10:32 Things that people are talking about now are something like Greece. Greece is still having huge problems and many of the European countries have huge problems. Italy, etc. Spain, etc. So what you are seeing is the media - and as many of you know I write for the Globe and Mail we have the Contra guys come every two weeks. I know many of you have seen me on BNN, I'm on market call about every five weeks, but the media only has so much space to write about things and to follow things, so for quite a while Greece was the rage but it is not right now.

00:11:10 So you have to think - a lot of these things have not gone away they've actually got worse. In 2008 we had major blow outs with Lehman brothers, etc., etc. If you have not seen the movie 'The big short', it is a wonderful movie, read the book. If you are investing and you want to know more, make sure you do a lot of reading. It is absolutely critical whether it's business books or whether it's the Globe and Mail or other media. I was just in Hungary for two weeks, the financial times is there all the time, and you can get it here of course. There are so many problems out there that I can actually perceive there is greater risk than in 2008. So, after 2008 a lot of people said don't invest, don't invest, don't invest. I’ve never seen anything like that.

00:12:06 People often say to me you've been investing for about forty years, I know it's hard to believe, but investing for about forty years you must have seen it all. And, I say "Well I hadn't seen 2008 before, it was a whole other level." Even I was afraid to jump in and invest but I did do some investments. As a lot of you know they were mostly US bank financials which are still over 33% of the Portfolio even though we've sold a lot. So, markets are really, high. In terms of investing wisely here is what I'm doing now. I like to think it's wise.

00:12:47 I'm investing less now. So, over the past year, I've only brought two stocks for the Portfolio. Even then I'm not an active investor, in a normal year I buy three to five. Active investing as most of you probably know does not generate as good a return as more passive investing.

00:13:09 I don't believe in buy and hold although we tend to hold a much longer time than most people, but we are always looking at 100% plus games where stocks have been before. I think it is important right now to not get sucked into the band wagon of buying into things. What I also want to do is, I want to sell a few more things so whenever we buy anything we set an initial sales target so we are very, very disciplined.

00:13:46 Christoph can you hold up that one, not the other one, the right one. In that book, there is one page and all it says is without discipline you have not method. That is the whole page and that is critical and too many people blow in the breeze and now people are more likely to blow in the breeze as ever before.

00:14:02 Some of you who have heard me talk before have heard me say this because, twenty-five years ago not many people were on cell phones. People were not on their computers all the time, they did not have the internet to use. I think it came about 1994, I was on it and that was more of a genesis for most people.

00:14:22 So, suddenly people are getting more information, constantly, constantly, constantly, which means they are going to react more and more. So, if you want to invest wisely I suggest that often, less is more. If I'm not really quite positive about something, I could still be wrong, but I won't do anything.

00:14:42 So, when Donald Trump came into office I had no stocks near my sell target out of the twenty three in the Portfolio at that time. Now there are three near the sell target and I would like to spin them out when they hit it or maybe, possibly go a little above if in terms of market time. But, I am looking to sell more so that if I lose money and markets have a blow off I'm not looking to get out of the market but I will lose money on less money invested into the market.

00:15:15 Where does the money go? A lot of the money goes into really boring stuff, earning one and a half, two percent cash on the side lines, nothing sexy about it. It's taxed at a high rate, unfortunately, but I'm willing to deal with that for some of the portfolio to try and have money on the buy. I always have money on the side-lines, but to get if off the table in terms of risk and then to invest it later.

00:15:43 So I'm going to turn it back over to Christoph, because he has got something to say.

00:15:49 We are now going to be, you guys can ask questions and we will answer them.

00:15:55 The two stocks that I brought - that's a great question. One is GMP Capital, so they basically are wealth advisors and then they also do IPO's that kind of thing, right now I think they are doing a lot of the mirror one industry because banks can't do it.

00:16:15 In the past few years about thirty-five companies in this field have folded because a lot of people do not want other people managing their money and taking somewhat higher fees. And that makes sense, I think most people can manage their own money and do better than giving to it a financial advisor, if they are willing to read. But I still like GMP, it's gone up a bit since we brought it, I paid 3.32 average around 3.50. Just an additional note last fall TD was looking to buy them, it got turned down. Often if somebody is looking to buy you, you may get brought out at a higher price.

00:16:54 The other company is called Weyland they basically buy a lot of patents and then they create law suits to protect the patents. I do not like their business model at all because it is litigious. Unfortunately, what they have done in the last month or so is that they have brought two other companies at very, very, high prices when I look at it. They had over one hundred million dollars in the bank, they paid a dividend of no debt, now they've used up most of that money on the two acquisitions. It's certainly not as good a buy as it was when I brought it. I did not think they would make the acquisitions that they did.

00:17:32 I have I think just one more question, if we have it and then it goes back to Christoph.

00:17:41 Other than interest bearing instruments where else might you put money? I wouldn't raise it to real estate, real estate is really high here, it's really high in Toronto. I think there could be a prick of the bubble in real estate. Some people say you can't recognise bubbles before they crash, well we did it certainly in 1999 before the tech bubble. We were a bit early on 2008 but it didn't make much sense.

00:18:06 Sometimes it's worthwhile if you have a hobby, investing in things relating to your hobby that may have a certain amount of value. So, if you like art, put it up on the wall and enjoy it. Don't even think of it maybe as an investment, maybe you can buy it. Stamps, other things. Baseball cards, hockey cards but again look at relative markets. It's a lot harder now to find other areas to invest in.

00:18:35 One thing I would think about in terms of this and you are not going to get a return monetarily - but travelling. Travelling is a fabulous way to use your money and get a return and after 9 /11 it was one of the best times - horrible time- but a great time to travel. So, look at some countries where they're having some difficulties, where the economies are not doing well and the currencies have gone down and you can travel there at discount. So, to me those kinds of things make sense - but being a contrarian - a little different. And once again for the last time I’m turning it over to Christoph for some final words.

00:19:13 Okay, so we are selling books here at booth number five, down there, and I hope you Guys buy some because I get 25% for each book and I hope that helps me for University, so buy a book!

00:19:26 Thank you for all coming as Christoph said we are booth number five and those are all bestselling books that I wrote about our stocks and starting a business. Thanks for coming.