Rahim Kanji’s Post

Are We in the Late Innings of a Real Estate Bubble in North America, Europe & Parts of Asia (ie, China)? In today’s WeeklyLT, we continue to explore assets that may be in their later innings.   What inning of the game are we in? Is the perceived future wealth too heavily concentrated on one side of the boat? The following explains why I believe we may be in the very late innings of this real estate cycle: https://lnkd.in/gKJQQ2s3 Real estate is inherently a long-term asset, and protecting its future over the coming years and decades requires answering some fundamental questions: 1. Who will I eventually be able to sell my asset to? Consider the possibility we could be moving toward a world where a significant portion of the local population demands less immigration and more controls on foreign property purchases like we are beginning to see. 2. Will the future cohorts want this asset, and will they be able to afford it? Focusing on the next generation of local buyers is crucial. A recent poll done for CIBC in Cananda concluded 76% of Canadians who don’t own a property feel that entering the housing market is out of reach. Similar figures have been reported in many of the cities highlighted in the Visual Capitalist graphic. If the next generation of buyers also aren’t having kids or not wanting to own vehicles as much, this will also drastically change the DEMAND SIDE OF THE EQUATION. 3. Will future buyers be able to borrow money as easily and affordably as the prior ~40 years? From the early 1980s to 2020, declining interest rates in many Western economies made it easier for people to enter the housing market, provided they could meet the down payment requirements. However, as discussed in prior posts, we may be entering a new era defined by rising inflation, protectionism, conflict and fiscal spending dominance to name a few. 4. MOST IMPORTANTLY, WILL THERE BE MORE BUYERS THAN SELLERS? Demographic trends do not paint a rosy picture for the future, especially in China. With fewer children being born compared to previous generations, demand for large homes is likely to decline. The overarching rule of SUPPLY VS DEMAND and FUTURE DEMOGRAPHICS PROJECTIONS are what I believe to be the safest way to project the LONG-TERM REAL ESTATE MARKET. Additionally, we should consider the potential impact of technology & future government response. For example, smaller, more affordable homes on more land coupled with increased rent controls, capital gains taxes, etc.. could prompt a wave of sales from current real estate investors, potentially flooding the market. I believe we are close which is why I remain bearish on the long-term prospects of real estate – unless in a place where demographics and government response are more favorable.

Are we in the Late Innings with the Magnificent 7? Today’s WeeklyLT continues from last week’s discussion, focusing on those heavily invested in the “Magnificent 7” - Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta & Tesla. What inning of the game are we in, and is the market too crowded on one side of the boat? Investing is often seen as a game of managing probability and risk. Looking back, only a few companies from my youth have withstood the test of time. Many draw comparisons between today’s Magnificent 7 and the “Nifty Fifty”, a group of 50 large-cap stocks on the New York Stock Exchange that were highly favored by institutional investors in the 1960s & 1970’s. Names like IBM, General Electric, Xerox, Polaroid & Coca-Cola were among them. Much like the Magnificent 7 today, investors were attracted to these companies for their consistent earnings growth and perceived stability – LEADING TO INCREDIBLY HIGH PRICE MULTIPLES. However, during the bear market of the early to mid 1970’s, those lofty valuations became unsustainable as the broader market declined. Later, the rise of the Internet further disrupted many of these once-dominant companies. Some argue the Magnificent 7 might not meet the same fate. These companies continue to pour billions into research & development, aiming to stay ahead of technological disruptions from upstarts. They are not just participants in innovation; they are leaders, potentially creating barriers for future competitors. Yet, the combined worth of the Magnificent 7 is now a staggering $15.4 trillion combined, as illustrated in a recwnt analysis Visual Capitalist.   https://lnkd.in/gD98_pPv To put that into perspective, in 2000, Apple, Microsoft, Amazon, and Nvidia had a combined value of just $244 billion. Alphabet (Google) was still a private company, and Meta (Facebook) and Tesla weren’t even founded yet. I don’t have a crystal ball, nor can I pinpoint what inning these companies are in. However, it seems increasingly likely that the market may be LEANING TOO HEAVILY ON ONE SIDE, and history suggests that good times rarely last across multiple generations. One reason for the massive inflows into these stocks has been the “carry trade” discussed in last week’s post. Demographics have also played a key role. As these trends begin to reverse, coupled with interest rates higher than they’ve been in years, it might be wise to REASSESS THE RISKS. The probability of continued exponential growth for these stocks may be lower than many anticipate. Investing for retirement requires us to envision what the world might look like decade(s) from now. Are we playing too much confidence in today’s leaders, or should we be considering the broader shifts on the horizon?

In today’s WeeklyLT, we dive into the events of last Monday’s stock market crash and what we can learn from it. Last week, we discussed the constant decisions & trade-offs between: 1. CHOOSING SHORT-TERM PAIN FOR LONG-TERM GAIN, OR 2. OPTING FOR SHORT-TERM GAIN, WITH AN INCREASING RISK OF LONG-TERM PAIN IF THINGS GO AWRY Sometimes, the second option can yield gains that continue on for decades. However, this can complicate decision-making because: 1. As more people see others benefiting, the number of people wanting to “come aboard the ship” increases – evoking the saying, “too many end up on one side of the boat.” 2. This raises the risk that, if and when fortunes eventually reverse, the consequences can be even more severe. The phrase “markets are designed to inflict the most pain” is a well-known adage in macroeconomics. SO, WHAT EXACTLY HAPPENED LAST WEEK THAT LED TO MAJOR INDEXES LIKE THE S&P 500 & NASDAQ COMPOSITE EXPERIENCING THEIR WORST SINGLE-DAY LOSS IN YEARS? The downturn wiped out over $2.4 trillion from global stock markets in a single day, with Japan’s Nikkei 225 plunging by more than 5%. Many attribute this crash to the unwinding of the “CARRY TRADE” THAT HAD BEEN IN PLACE OF YEARS. With near-zero interest rates in Japan for over a decade, many Japanese investors borrowed the Japanese yet, converted it to US dollars and invested in US markets (stocks and bonds) to earn a spread. Borrowing more to capitalize on this long-standing reward mechanism increased returns even greater – but also quietly amplified the risk, which was often overlooked during the duration of this trend. That is, UNTIL… At the end of July/beginning of August, the Bank of Japan announced a reversal in policy by finally raising interest rates by a mere 0.25%. This was to strengthen its dollar which has been falling to dangerously low levels. This small signal & miniscule rise was enough to trigger liquidations, forcing investors to sell assets to cover margin calls. Although markets gradually stabilized after Monday, it served as an important reminder: IF YOU FIND YOURSELF ON ONE SIDE OF THE BOAT, ASK HOW MUCH LONGER THE GOOD TIMES WILL LAST BEFORE THE BOAT TIPS THE OTHER WAY AND WHETHER YOU ARE POSITIONED FOR THE DOWNSIDE RISK. In the coming weeks, I’ll explore where similar situations may exist (ie, Magnificent 7 US stocks & real estate) – where too many people may be on one side of the boat.

Today’s WeeklyLT explores the issue of SOCIETAL SHORTERMISM due to far too many examples that I’ve come across lately, whether it be Individuals/Olympians, Politicians/Countries or Leaders/Companies. This pervasive mindset often boils down to daily decisions & trade-offs, specifically: 1. CHOOSING SHORT-TERM PAIN FOR LONG-TERM GAIN, OR 2. OPTING FOR SHORT-TERM GAIN, WITH AN INCREASING RISK OF LONG-TERM PAIN IF THINGS GO AWRY Some of the recent events have highlighted this issue are: A. Canada Olympic Soccer Team Drone Spying Scandal In Canada, hockey often reigns supreme, but soccer has been gaining popularity. For much of my lifetime, our national soccer teams were largely irrelevant due to the lack of being globally competitive. A turning point came around 2011 when a new coach from overseas was brought in. He was given immense control to revamp the program. Like all competitive sports, the difference between winning & losing is often miniscule. As the video below explains, there likely was years of systemic spying on other team’s practices to gain that small but perhaps significant advantage. This of course is unethical & illegal. We’ll never know if the talent alone was good enough in those prior years. https://lnkd.in/g3-UKyun B. Memories Tainted by Similar Cheating Some of my favorite memories of watching past sporting events, such as the 1988 Olympics with Ben Johnson’s 100m sprint victory or the 1998 Home Run race between Mark McGuire and Sammy Sosa, were also marred with controversy. These athletes used illegal substances to gain an unfair competitive advantage, tarnishing their achievements.           C. The Long-Term Perspective in Business Recently, I’ve had the opportunity to network with many ex-colleagues, many of whom have been in the workforce longer than I have. I often asked how many successful projects or companies they could recall that were steadfast around long-term positioning & implementing best-practice rather than taking shortcuts for short-term gains (ie, meeting a deadline, a budget, focusing only on their own group, etc.). Unfortunately, most could only recall 1-2 examples throughout their careers. Our corporate structures (with the focus on quarterly results), political systems (4-5 year election cycles), and society as a whole are far too often centered on SHORTERMISM. Yes, our brains have been wired this way due to evolutionary & survival reasons. But times are different now. Instead of adopting a “win at all costs” mentality, lets embrace the mindset of working hard, playing hard & applauding growth & continuous improvement that will position us for the sustained longer-term. Let’s evolve to and demand a more LONG-TERM MINDSET, CHANGE REWARD STRUCTURES and take that moment to think about the trade-offs and potential consequences 5-10 or 50+ years down the road. These are the topics I've been discussing with my kids lately.

Like humans & businesses, COUNTRIES need to make decisions today that consider both SHORT AND LONG-TERM IMPLICATIONS. The pros, cons & trade-offs of these may not be felt until years down the line. One significant example is HOSTING THE OLYMPIC GAMES, the topic of today’s WeeklyLT. Hosting the Olympics is a useful microcosm from which we can draw insights & leverage for broader understanding. As highlighted in last week’s post, Crowdstrike recently lost $20b in market value following its faulty software update to its flagship Falcon cybersecurity product used on Microsoft windows operating systems. The ensuring global technology outage has resulted in ~ $1b in damages, according to some estimates. Internal reviews are surely underway to determine if shortcuts were taken or risk mitigation tactics ignored. In the context of hosting the Olympic games, I came across a CNN article stating: “including Paris, five of the past six Olympics (summer & winter) had inflation-adjusted cost overruns of more than 100%, according to an Oxford University study released in May 2024.” https://lnkd.in/gN4UBTpV Research indicates that HOSTING THE OLYMPIC GAMES CAN EASILY COST ANYWHERE BETWEEN $10-40 billion. Consider the recent hosts of the Summer Olympics: Tokyo in 2020/2021, Rio in 2016, London in 2012, Beijing in 2008 & Athens in 2004. The economies of these countries have not significantly improved following the Games. Quite the contrary in some instances. It is fair for the citizens of these countries to ask: WHAT IF THOSE FUNDS HAD BEEN SPENT IN WAYS THAT RAISED THE STANDARD OF LIVING FOR “THE MANY?” Perhaps it could have been invested in lowering energy costs, a proven method to enhance the standard of living of the many. Or how about on education, healthcare or critical infrastructure investments (ie, transportation, water, forest fire prevention, etc.). Living in Calgary, I have experienced the impact of infrastructure issues firsthand. A critical water main break recently resulted in significant water restrictions for its citizens & businesses. Just this past Monday, a forest fire reached the breathtaking town of Jasper, leading to the destruction of 1/3 of the town. Both points of views can be debated, but THE KEY RECOMMENDATION FROM THIS POST IS THAT SUFFICIENT TIME BE ALLOCATED FOR SUCH DEBATES. Calgary, known for its boom & bust cycles, has many examples of companies peaking just before investing in bold new corporate headquarters. MANAGING EGO VS. PRACTICALITY & PROJECTING LONGER-TERM IMPLICATIONS OF TODAY’S DECISIONS ARE THE KEY POINTS TO CONSIDER.    That said, I admit to enjoying watching the Paris 2024 Olympics thus far & benefiting from venues built during the 1988 Calgary Olympics & 2010 Vancouver Olympics, where I was born & raised. The hope is that cities & countries can adopt a more practical approach to hosting future Olympics, & PROPERLY DEBATING THE OPPORTUNITY COSTS AND LONGER-TERM IMPLICATIONS.

TECHNOLOGY IS MADE BY HUMANS, AND LIKE HUMANS, IT HAS FLAWS. Recent WeeklyLT discussions have explored the pros & cons of our growing reliance on technology. However, it’s important to remember that technology, like humans, is not infallible. This past Friday, we encountered a situation reminiscent of the fears surrounding Y2K in 1999. Back then, IT professionals worried whether computers would function properly when the calendar switched to the year 2000. The concern was the computer systems, which used two digits to represent the year (ie, “99” for 1999), would fail when the year turned to “00.” Fortunately, the transition to the new millennium went rather smoothly. Fast forward 24+ years & just compare our reliance & interconnectivity with technology – THEN VS NOW. This past Friday, Crowdstrike, a major cybersecurity firm, deployed a routine software update or patch (similar to the ones we get on our phones) to its systems hosted on Microsoft servers running Windows. Unfortunately, this update triggered the dreaded “blue screen of death” on numerous Microsoft servers, causing widespread application outages. The impact was profound, affecting half of the Forune 500 companies & causing chaos in government agencies & businesses worldwide. Many flights across North America, Europe & Asia were grounded. Banks, stock exchanges, hospitals, 911 call centers & so forth were disrupted. THE SOFTWARE UPDATE DID NOT GO ACCORDING TO PLAN. Although a fix was quickly released, it required companies to manually restart their servers in safe mode – a challenging task for organizations that no longer have the resources to manage cloud-based servers. https://lnkd.in/gKEKhUc8 LESSONS TO CONSIDER: 1. Balance & Reliance: It’s crucial to ensure that we (or the companies we manage) do not become overly dependent on technology. 2. Trust vs Vulnerability: It has taken 24+ years to increasingly gain the trust of technology, moving applications to the cloud, paying & buying products online. This trust can be shattered instantly by a significant incident. We must be cautious about the corners we cut in the short term, such as testing, disaster recovery plans, not doing phased roll-outs, documentation, etc.). 3. Cybersecurity Concerns: Initially, many suspected a Cybersecurity attack. The reality is that technology is created by humans - and we do have our enemies. The world is more interconnected than ever, and recent events like Covid-19 have led countries to reevaluate their supply chains, opting for near-shoring with allies for example. This incident highlights the need to consider the services side of our dependencies as well. Crowdstrike & Microsoft products are used globally. Imagine a future where cyberattacks are the new form of warfare. We should not underestimate the threat & should prepare accordingly. In the words of Wayne Gretzky, we must “skate to where the puck is going to be, not where it has been.”

Today's WeeklyLT provides promise that a proactive healthy lifestyle for us & our children by having a 24-7 personal AI Doctor in our pockets could be around the corner. Sam Altman (CEO of OpenAI which is behind Chat-GPT) & Arianna Huffington (CEO of Thrive Health & founder of Huffington Post) announced last week their respective VC firms are jointly wanting to fund a new AI health coach. This coach would provide 24/7 real-time expert-level advice from the latest peer-reviewed scientific articles. https://lnkd.in/gMf--ZA5 The video explains that about 90% OF THE $4.1 TRILLION SPENT ON HEALTHCARE IN THE US GOES TOWARDS TREATING CHRONIC & MENTAL HEALTH CONDITIONS. AT LEAST 129M AMERICANS HAVE AT LEAST ONE CHRONIC CONDITION.” Sure, we have coaching & information available today via the internet, scientific journals, public libraries, WeeklyLTs, smartwatches, Fitbits & similar devices. But these are not in the form-factor that humans typically require which is “cheap, instantaneous, user-friendly & trustworthy.” If this personalized AI health coach can offer two-way conversation using generative AI, it could revolutionize the health-tech industry. Of course, it would need to have access to our data to provide personalized health tips. This will be the risk-reward dilemma & debate, but generally, humans eventually adopt technology when the benefits outweigh the costs. . The AI-powered health coach will focus on the five key behaviors that often determine health outcomes: 1. Sleep 2. Food 3. Movement 4. Stress Management 5. Social Connections Examples: Your AI health coach detects that you have high blood pressure, perhaps after someone cut you off on the road. It may suggest parking your car & doing a two-minute breathing exercise or meditation. The AI-coach instantly shows you the benefits this had in lowering your blood pressure from X to Y. Or it senses a spike in blood sugar after eating a chocolate banana brownie & suggests a 15-minute walk. It then shows you a much lower reading after your walk, proving the positive impact on your health. WE ARE ENTERING A WORLD THAT WILL PROVIDE US 24/7 PERSONALIZED HEALTH & MEDICAL ADVICE, WHICH COULD DRASTICALLY REDUCE SOCIETAL HEALTHCARE COSTS & CHALLENGES IN FRONT OF US TODAY. THANK YOU, TECHNOLOGY. BUT AS I ALWAYS SAY, WE CAN STILL ACHIEVE THE ABOVE DESPITE THE TECHNOLOGY IF WE ARE WILLING TO PUT IN THE WORK.

Today's WeeklyLT expands on posts from the past two weeks by leveraging Jane Goodall’s life, legacy & research to remind us: “THERE IS NOT A MAJOR GAP BETWEEN US & ALL OTHER ANIMALS.” The prior two posts I’ve written have alluded to our IMPROPER USE OF TECHNOLOGY, ESPECIALLY OVER THE PAST 15 YEARS FOLLOWING THE LAUNCH OF MOBILE DEVICES & SOCIAL MEDIA. THIS MISUSE IS WIDENING THE GAP – FOR THE WORSE. OUR MOVEMENT, SOCIAL CONNECTIONS & OVERALL HEALTH & HAPPINESS ARE NOT TRENDING IN THE RIGHT DIRECTION. As a reminder for those unfamiliar, Jane Goodall (now 90) is a British primatologist, ethologist & anthropologist, renowned for her groundbreaking work in the study of chimpanzees. She has extensively researched & documented (written & video) the social & family interactions of wild chimpanzees throughout her lifetime & proved to us that: 1 – Chimpanzees make & use tools (ie, using of sticks to extract termites), a trait that society previously thought to be uniquely human. 2 – Chimpanzees are not strictly vegetarians; they hunt & eat meat, often engaging in cooperative hunting to catch prey such as monkeys. 3 – They have intricate social structures & relationships; Goodall observed behaviours including grooming, forming alliances & establishing hierarchies within their communities. 4 – They exhibit a range of emotions similar to humans, expressing joy, sorrow, anger & affection. 5 – They engage in play, form close bonds with family members & grieve the loss of loved ones. 6 – They can be aggressive & violent, engaging in conflict & wars between other groups, BUT they also show reconciliation behaviours such as kissing & embracing after conflicts. https://lnkd.in/gzeJTV_b I'm glad my kids got to learn about Jane Goodall & chimpanzees this week as part of their camp by watching a film about her. “CHIMPANZEES ARE LIKE US BIOLOGICALLY – OUR CLOSEST LIVING RELATIVES. WE HUMANS ARE A PART OF, AND NOT SEPARATED FROM THE REST OF THE ANIMAL KINGDOM” (Jane Goodall). PERHAPS WE NEED TO GO BACK TO OUR ROOTS. BACK TO OUR CORE. BACK TO WHERE WE CAME FROM? A little less use of technology, coupled with more movement, whole foods, social connections & time outdoors can go a long way in raising our overall health & happiness. That’s my plan for this beautiful Sunday. Pass it along. We owe this to ourselves, & most importantly, our children.

Today's WeeklyLT is a follow-up from last week & discusses key points from Jonathan Haidt’s recent book titled “The Anxious Generation: How the Great Rewiring of Childhood is Causing an Epidemic of Mental Illness.” https://lnkd.in/gauxPPA6 Haidt researched childhood mental health data & noticed alarming changes after the launch of smartphones & social media, especially in young girls. His key points are: 1. Social media is eradicating childhood. 2. Smartphones are experience blockers, hindering kids from reading, having hobbies or getting enough sleep. 3. We are overprotecting our kids offline (ie, not letting them go outside & play) but under protecting them online (ie, where strangers can find multiple ways to converse with & exploit them). The author starts by explaining how critical childhood in humans is. It’s the crucial phase where brains wire themselves based on experiences (which influence future development) & our motor patterns. I’ve also explained the importance of establishing key habits & routines for our lifelong health & happiness such as movement, social connections & time in nature. Imagine if this were removed from animals. Let’s then remind ourselves that we are no different. I recall running cross country in elementary school. Mostly everyone ran the whole way & maxed out their physical abilities. On a recent run during the day, I witnessed kids going on a run as part of their gym class & hardly anyone could run more than 200m without the need to stop, walk or talk. Haidt’s research has proven that, during puberty, children’s bodies are heavily influenced by technology. Since the advent of smartphones & social media, this has led to higher risks of anxiety, depression, self-harm & suicide – especially in girls of Gen Z. It’s been a hockey stick rise for girls, while boys have had a slower curve. “WHEN BEING PUBLICLY SHAMED, YOU ARE SOCIALLY DEAD….WHICH IS INCREDIBLY PAINFUL” is one of Haidt’s quotes that will stick with me forever as a parent. NOW TO HAIDT’S RECOMMENDED SOLUTIONS. I would suggest these are the bare minimum: 1. No smartphones before high school. 2. No social media until 16. 3. Phone-free schools. 4. More free play and real-world responsibilities.

Today's WeeklyLT discusses the LONELINESS EPIDEMIC & WHY TECHNOLOGY (e.g., future AI companions) CANNOT BE THE CURE. That’s right – an EPIDEMIC. One of the most prominent figures to declare loneliness an epidemic is Dr. Vivek Murthy, the current US Surgeon General. As witnessed in the video link below, Dr. Murthy does a terrific job explaining the profound effects of loneliness on both our mental & physical health. https://lnkd.in/gRtjxQdr He emphasizes the following key points: - “1 in 2 Americans report experiencing loneliness & it goes across all ages, socioeconomic conditions & geographies; Similar stats are being reported in other parts of the world - Is bad for both our individual & societal health - Is associated with > risk of heart disease, dementia, stroke, depression, anxiety & of course suicide --> PREMATURE DEATH Murthy explains the IMPACT OF LONELINESS IS > THAN OBESITY and comparable to SMOKING A PACK OF CIGARETTES DAILY. Moreover, the root cause stems from technological & cultural shifts in society. Loneliness activates a stress response which triggers inflammation & quicker blood clotting. WE ARE SOCIAL CREATURES, alongside our need for food, water & sleep. So the signal from the body is similar when we LACK THE ESSENTIAL NEEDS FOR OUR SURVIVAL. Murthy also explains how it affects our PERFORMANCE & PRODUCTIVITY AT WORK, SCHOOL & IN OUR COMMUNITIES. Younger people are ironically reporting it more than older people, WITH THE ROOT CAUSE UNDOUBTEDLY BEING TECHNOLOGY. LET THAT SINK IN EVERYONE. LONELINESS IS ON THE RISE DESPITE US BEING MORE CONNECTED (ALBEIT DIGITALLY) THAN EVER BEFORE. It is too easy today to look down at your phone & ignore the people around you. Too easy to direct message your friend, instead of going to their house & talking to their parents. Dr. Murthy explains “we are a social species and thrive in connected groups. He RECOMMENDS DEDICATING 10-15 MINUTES EACH DAY TO WORK OUT OUR SOCIAL MUSCLES.” We need to understand the chemical reactions that come from touching & listening to other humans – and equally the limitations of digital interactions. He is working on systemic policy changes to create environments that encourage genuine social interaction but in the meantime, he also recommends the following: - “Answer the phone when a friend calls - Invite someone to share a meal - Listen & be present during conversations - Seek out opportunities to serve others” (ie, volunteering) The above will IMPROVE OUR HEART & BRAIN HEALTH ALONGSIDE IMPROVING OUR OVERALL IMMUNE SYSTEM. It’s something I wish I understood a long time ago, which is why I chose this topic for today. I just sent out a bunch of requests to meet people for lunch as I'm not a great chef. Hope you all reach out to more people than normal after reading this.