Making sense of the markets this week: February 12, 2023

Kyle Prevost, editor of Million Dollar Journey and founder of the Canadian Financial Summit, shares financial headlines and offers context for Canadian investors.

Canadian Telecoms dial up their earnings results

No big surprises from Canada’s major telecommunications companies that wrapped up their 2022 earnings statements: Telus slightly underperformed expectations; while Rogers outperformed; and Bell finished exactly where most thought it would.

Here are the Big Tech earning highlights:

Telus forecasted sunny skies, predicting big gains in both revenue and earnings for 2023, due to its wanted spending needs trending down. The visitor was quick to point out, despite the lower-than-expected earnings results, that its wireless growth numbers and focus on global health operations should protract to pay off in 2023.

Bell unfurled to reward dividend-conscious shareholders as it increased its yearly dividend from $3.68 to $3.87, and reported record growth in its fibre business.

The big story on the Canadian telecommunications horizon is still the “will they or won’t they?” corporate relationship of Rogers and Shaw. The $20 billion takeover by Rogers is seeking final approval from Industry Minister Francois-Philippe Champagne. You can read increasingly well-nigh Canadian telecommunications stocks at

Disney shareholders welcome when return of Bob Iger and a reinstated dividend

Investors were eager to see what Disney (DIS/NYSE) had in store for its first earnings undeniability since CEO Bob Iger returned to the fold without a three-year “retirement.” Iger is legendary in management circles for guiding Disney to key acquisitions (including Marvel, Pixar and Star Wars), and he replaced his successor Bob Chapek. He started his latest tenure on November 20, 2023, so we’re not sure how much credit Iger can take for Q4 earnings, but a big write-up of expectations is certainly a unconfined way for him to take the helm again. (All in U.S. dollars in this section.)

Disney earning highlights:

  • Earnings per share: $0.99 versus $0.78 predicted
  • Revenue: $23.51 billion versus $23.37 billion predicted
  • Disney : Subscription losses came in lower than expected without a price increase
  • Shares: Up 5% in without hours trading on Wednesday, February 8, 2023

Also, Iger announced that Disney is to lay off 7,000 employees and that the visitor is restructuring into three main divisions:

  1. Disney Entertainment, including streaming and media operations
  2. ESPN
  3. Parks, experiences and products

Finally, dividend-conscious investors will be pleased to hear that, nearly three years without the suppuration of Disney’s dividend, the visitor will squint to introduce it then in 2023, with Iger stating, “Our cost-cutting initiatives will make this possible, and while initially it will be a modest dividend, we hope to build upon it over time,” Iger said.

A couple of other notable earnings results south of the verge this week included Paypal and Chipotle.

  • PayPal (PYPL/NASDAQ): Earnings per share of $1 versus $1.20 predicted, and revenues of $ billion versus $7.39 billion predicted.
  • Chipotle Mexican Grill (CMG/NYSE): Earnings per share of $8.29 versus $8.90 predicted, and revenues of $2.18 billion versus $2.23 billion predicted.

Watch out for orchestration crimes re: investment returns

Given how volatile markets have been the past few years, it’s quite easy to make numbers say what you want them to when you play with the variegated time periods involved.

Chartered financial reviewer Ben Carlson was when this week talking well-nigh the Psychology of Market Tops & Bottoms on his blog. Our takeaway is that when looking at tough math for stocks looking to rebound from losing a massive value of value, it’s relatively easy to generate a headline showing “massive gains” all while ignoring the worthier picture.

Source: A Wealth of Common Sense

For example, there’s been lots of news coming out well-nigh the recent massive gains by Tesla—despite the fact you would still be lanugo increasingly than 50% if you had invested in the stock at the top!

To bring home the point, let’s squint at the harsh mathematical truth. Shopify was lanugo 84.8% from “peak-to-trough.” And, “it would require a return of increasingly than 550% from the market marrow to get “back to even.”

That’s certainly not untellable for a visitor that’s proven itself to be a remarkable innovator in the past, but it’s a mathematical reality that shouldn’t be distorted by headlines, such as “Shopify Stock Is Up Over 40% This Year. How Much Higher Can It Go?”

Similarly, with bitcoin lanugo 77% peak to trough (the fifth biggest crash of all time according to Bank of America), that ways bitcoin will need to go on a 435% run from its marrow in November in order to get when to previous highs. 

Of course, proponents of the ”gambling contract,” otherwise known as BTC, will quickly point out it’s once up nearly 40% from those November 2022 lows. And if you zoom out plane further, the returns still squint incredible over the last six-plus years. Just understand the “narrative” you’re stuff told, and then compare the stark mathematical realities surpassing making investment decisions.

Why does the CCPIB pay billions for zippy management?

Not much gets the thoroughbred humid increasingly quickly than highly-paid active-management gurus talking well-nigh how unconfined they are at vibration the market.

It only gets worse when the person doing the talking is handling my money. Oh, and he’s handling your money too, so you might want to pay attention.

This week, the headlines read withal the lines of: “Canada Pension Plan Investment Board (CPPIB) CEO John Graham predicts ‘Alpha’ investors will outperform in the next decade.”  

For those Canadians who don’t finger the need to try to sound smarter than you are, the “Alpha” to which Graham is referring to those with the worthiness to generate market-beating returns. Essentially he’s saying: “Look, the next decade will be unconfined for stock-picking investment funds. Considering we’re a stock-picking investment fund, this should be expressly good for us.”

Graham was unquestionably quoted as saying:

“We see the next decade as stuff the decade of value-added, the decade of alpha. Just harvesting market returns has been a very successful strategy over the past 20 years considering of these tailwinds. And right now, it is well-nigh picking your spots. It’s well-nigh picking the right geographies, the right windfall classes and the right securities.”

We know, from the past 20-plus decades of investing in Canada, that “picking your spots” and “picking the right geographies” rarely works for choosing investment funds. This was borne out of wonk studies, and most notably by the famous Warren Buffett versus the hedge funds bet from 2008. You can unmistakably see from this Morningstar data that volatility does not indulge zippy investment funds to outperform, and there is no reason those results will transpiration going forward. Here’s an spanking-new podcast that confirms the long-term evidence.

Look at how well (or poorly, actually) zippy management strategies have washed-up for other Canadian pensions last year, like with the teachers’ plans. That’s some “Alpha” that the zippy managers in the Ontario Pension Plan have going for themelves.

Writer Upton Sinclair is credited with saying, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Well, Graham has well-nigh five-million reasons not to understand that zippy managers are going to underperform the market stereotype over the long term, when they are charging tropical to 1% in fees each year. Those fees get charged whether the investments go up or down.

Journalist Andrew Coyne has unceasingly pointed out that the CPPIB is moving in the wrong direction. Here’s a squint at how financing to manage the fund have ballooned a thousand-fold over the last two decades.


Here’s what Graham and his friends are getting paid to run the show:


Oh, and the folks who hired Graham are doing pretty well, too.


I’m not the only one commenting on the steeply rising salaries and a lack of oversight.  

For comparison sake: the Prime Minister makes under $400,000 per year, and the Governor of the Bank of Canada takes home well-nigh $500,000. 

When reached for scuttlebutt by The Toronto Star, Michel Leduci, CPPIB throne of public wires and communications stated, “We respectfully disagree with your premise on what determines, or ought to determine, bounty at CPP Investments.” He continued: “In fact, there are multiple considerations and principles that we apply, going well vastitude any narrow set of comparators as you put forward.”

So, your “multiple considerations and principles” determine that you should all make way increasingly money than you did 15 years ago? Unconfined principles if you can get them.

In 2018, PWL Research director Raymond Kerzérho looked at the eight largest pension funds in Canada and found the CPPIB had by far the highest operating financing relative to the size of the fund. The visitor moreover released an interesting study on passive versus zippy management by large American endowment funds. PWL’s Ben Felix and Cameron Passmore have moreover taken a turn illustrating the shortcomings of the CPPIB and its self-reporting benchmarks.

While Graham and the rest of the CPPIB often state they outperform their passive benchmarks, just how those baselines are synthetic is debatable, considering the unique makeup of the managed assets. The CPPIB is certainly outperforming the benchmarks to which they segregate to be compared. On a somewhat-related note, I was a highly above-average basketball player once upon a time, compared to what I believe an stereotype basketball player was. No remoter stats needed.

Here’s Mr. Coyne’s written based on a simple portfolio of alphabetize funds consisting of 85% stocks and 15% bonds:


While the CPPIB isn’t alone in its misplaced faith in highly-paid fund managers, that doesn’t midpoint that I—and Canadians, for that matter—have to winnow such a plush and poor long-term strategy.  

I unquestionably stipulate with Graham’s prediction of a “decade of Alpha.” It’s just that the Start he should be referring to is the gap between CPPIB management salaries versus the stereotype Canadian’s paycheque.

Kyle Prevost is a financial educator, tragedian and speaker. When he’s not on a basketball magistrate or in a boxing ring trying to recapture his youth, you can find him helping Canadians with their finances over at and the Canadian Financial Summit.

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