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Greetings and welcome to the Charles Lasnier Group conference on financial markets. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. If you have a question, for those on the audio bridge, please press the 1 followed by the 4 on your telephone at any time during the presentation. If at any time during the conference you need to reach an operator, please press star 0.

As a reminder, today's conference is being recorded today Thursday, October 28 2021. I would now like to turn the conference over to Monsieur Charles Lanier, Vice President and Director and Portfolio Manager, RBC Dominion Securities. Please go ahead, sir.

Good morning everyone and thank you for joining us for our fall 2021 market update. We are happy that you were able to join us. And we are looking forward to this call. Let me start right away. We have a big presentation today. I am looking for the file as we speak. My apologies. It's a new system that we are using. Toka, toka, toka. Where is it? I cannot find it. So let me use the other way. This way. Perfect.

So, the presentation this morning is called arriving safe and sound. We are going to. And you're not seeing the right thing. La la la la la. Display settings, duplicate slide show. Now you're seeing what I'm-- perfect. So arriving safe and sound. My apologies. It's a long deck. I've got numerous slides, but numerous things that I want to share with you that have caught my attention over these past few weeks, past few months. So without further ado, let's jump right in.

Listen, since January first of this year, those data in front of you are as of last month because it was a full month. October is almost finished, but not yet. We've had a good year, so far. And if we added October, October has been a good month, as well. All the numbers in front of you would be a little better. And the tail right now is the stock market has done very, very well so far in 2021, after having had a great 2020, as well. It's in the bond markets that things are a little more difficult.

As well, the US dollar has fallen compared to the Canadian dollar. So for those of us who have believed that we should be diversified and we should own US names, US stocks, it's been kind of a headwind. But keep in mind that having US dollars historically has been a wind in our sails rather than a headwind. But this year definitely, it makes things a little harder.

It's now you know we're now a couple of weeks past the end of September. But as you might remember, September was not a great month in the market. It was our most difficult month in 2021 so far. You'll tell me that, as usual, I will note though that having a diversified portfolio certainly help. The other thing that I would want to note at this point is that all year long we've had a different moment, different euphoria.

We started the year, you'll remember, with a chat group on the Reddit board bidding up GameStop and GameStop which is a chain of video, used video games. Suddenly their stock went ballistic. So that was the first euphoria of the year, but we've had more since then. Depending on the week or the day, crypto sometimes goes up by a wide margin, sometimes comes down by a wide margin. And we can take questions at the end over crypto. Tesla, of course, has been parabolic. It had a big, big day earlier this week on the announcement that Hertz, the rental car agency, had passed a massive order of Tesla cars. So there's another euphoric moment for you in the market.

Yet, there are numerous uncertainty out there, things that keep investors at night certainly. Many of you have called over the past few months asking of some of these subjects. So, yes stocks are high. Oil is certainly recovered. Let's remember that just before the March of last year, the COVID outbreak, oil went negative. So in other words, they paid you to take a barrel of oil. It was due to a diplomatic spat between Russia and Saudi Arabia. Inflation is a concern. The slowing of the Chinese economy.

COVID is not behind us. I was reading in the Wall yesterday morning, COVID cases are going through the roof right now in Europe. Not great news for those of us who like to travel. Will Donald Trump come back? It seems to be indicating that he will, sadly, run again. That is a sad news right there.

Everywhere around the world, we've had record deficits from our various governments. So, yes, the Trudeau government here in Canada is going through large deficits, but rest assured it's not the only one, as we'll see. And last but not least, it's detailed the stock market performance as the tale of where is your portfolio. If you're missing a sector or if you're missing a few names, you've been left dead in the water.

So this year, surprisingly, for many investors, the best performing category is oil. The energy names have just gone through the roof. It's the best sector in the Canadian market. It's also the best sector in the US market, beating technology. Technology, of course, being the second best market in both cases. So really you have to pick your spot or else you haven't had good performance. So those are some of the things that don't necessarily keep us awake at night, but that we certainly spend time thinking about.

So let's jump in one by one. Well you won't be surprised. Numerous things that I've mentioned on the past slides are explainable by this. You have a global supply chain at the start of the pandemic. You'll remember papers and the media were full of articles where Canada did not have any vaccine capabilities. We needed to import medical equipment. We needed to import vaccines.

Well, Canada is not unique. The world has set up itself where the value add of Silicon Valley is often, if you want to simplify it, is often manufactured in China. And it worked out well for the better part of two decades, but certainly COVID has shown the weakness of that system. So right now the global supply chains are under pressure. They explain the oil prices. They explain the rise in inflation.

They explain the shortage in numerous sectors. Microchip for cars is one but in certain United States, you'll walk through a grocery store and some of the sections might be empty. It's explainable by that. So I won't go through the 10 points but I'll point out some of them.

So first of all, we've all gone from spending on experience. So for instance traveling, unable to experience restaurants or vacation. A lot of people have turned around and started buying durable goods. So you saw it in the massive, massive outpouring of money for renovation. Money was spent in our backyards. Money was spent on sport equipment. So from experience to durable goods. The other thing is, there was a boost in the rise for anything that it was electronic, and the reason being simple.

A lot of the world economy was sent home. And we might have been equipped to serve at home and we might have been equipped to listen on to YouTube videos at home, but we weren't equipped to work for months on end from home. So there was companies who send their workers at home, suddenly there was this demand for computers and electronics that wasn't there before and that created shortage, as well.

At the same time that we believe in the just-in-time, or companies believe in just-in-time. Well, you can see the rise in demand. With just-in-time you have no inventory. And if in certain countries, the manual labor that you relied upon, either in ports, as dock workers, or truck drivers, or employees in the plant, were sent home because of COVID. Well, you can see where the bottlenecks were.

So, definitely, you will not see inflation come down until the global supply chain is back on track and working properly. And I would say that right now, that's the most worrisome slide that I have for you. It's this one because our common prosperity was built upon this. And we need to get it moving again but secondly we need to, perhaps, unshore certain production while not raising the cost of what we're onshoring too much.

Rise in oil prices, of course. Like I said, price of oil went from negative to a much higher price. Earlier this week, I filled up our Volvo station wagon for the somewhat large sum of $112. I hadn't put in $112 of gas in a car in Canada in a long, long time. I've traveled to Europe before so I'm used to spending over $100 on gas over there, but certainly not in North America. So I was kind of surprised. It gives you an idea of where the price of oil has gone. What does it do?

Well, in a nutshell, it lowers GDP. And for countries who rely on oil and import oil, this hit to GDP growth can be quite important. Look at the table on your left, the left of your screen. South Korea is perhaps the best example. It's believed that the growth to GDP in 2022 for South Korea could be lowered by close to 4% just by the rise in oil prices. So that's quite a big hit.

Regardless of that, unemployment rates remain low. Last time there was such a large, large increase in oil prices, it created difficulty for employment. This is not the case. So you can see, on the left side of your screen, employment going back all the way to September 1969. Of course, the large top that you see at the right of that first graph, that is COVID. So it's March and April and May of last year, of 2020.

But you can see, it's dropped very, very rapidly. And our unemployment rates are quite low by historical standards. We're not as low as we were prior to COVID. But by historical standard, and you have quite a few years on that graph, they're quite low.

Why is that? Well you see it on the right of your screen, small business in the US have been hiring, hiring, hiring, having a hard time finding workers. And there is job as this chart shows. This is from the US Bureau of Labor Statistics. We are looking in the US right now for north of 10 million employees. So as long as companies are hiring, you can expect the unemployment rate to be very, very, very low. Having said this though, like I said, we're still not where we were prior to COVID. So there's still 5 million more Americans that are out of work than in the first few months of 2020 when the economy was closed.

So there's been kind of a stalling in September and it's mostly, I would say, because you would be able to tell me, well, Charles if these companies are looking for workers, there might be a mismatch in skill.

One of the things that I want to share with you that I don't show in this presentation, is that economics has shown us, sadly, that people who are unemployed due to being let go in a recession, a large percentage of them, not a majority, but a large percentage of them, never find work again. So think of your 55-year-old person losing his job or her job, being unemployed for a year, a year and a half, maybe. When the economy starts again and companies are really looking for workers, typically they'll go looking for younger worker and will be much harder for this person to find work. This could be the explanation to that chart on the left of your screen.

Inflation is a big problem. I would caution you though and I reason I'm showing you this, on the left hand side. First of all, it could be more of a North American problem than anything else. This data is ex-US, so the rest of the world excluding the US. And secondly, it does capture the late '70s, early '80s inflation rate. And as you can see, it's come down. We can see at the right of the two graphs that there's an uptick inflation.

So inflation now is officially running north of 5%, maybe even 6%. That's a lot higher than what we were used to. But we're nowhere near where we were in the late '70s, early '80s. For those of you not old enough to remember the '70s, please remember that, in that decade, a barrel of oil the price was multiplied by 11 times. So a much, much, much different situation. The end result of that, of course, is that even though everybody is talking about inflation, you can see it on the graph to your right of the screen, your unit cost of labor have gone down.

Now, yes, general income tended to creep up. I've read the same paper and the same media output as you have. How do you explain what you're seeing in one word of technology? So as a company have had a hard time finding new workers and finding qualified workers, they've looked at their process and they've automated as much as they can of their back office or their plan. Speaking of Dominion Securities, a lot of the work that our team used to do manually is now done by artificial intelligence.

Last year, we spent roughly $75 million to $80 million, just at Dominion Securities part of our [INAUDIBLE] in automating various processes. So that's where it explains the falling unit of labor cost. And it's hard to have inflation if you don't have that graph going up in a meaningful way. Again, look at the late '70s, early '80s, and you can see that your labor costs were going up, which is not the case right now.

Another concern and something that's been in the paper an awful lot these days. First part of the year, first part of the last two years, I guess, was, of course, the Two Michaels. But at the same time, you saw in September, Evergrande, a very large real estate developer in China, threatening to go bankrupt. The numbers were staggering. The level of debt that they have, the number of projects that they have. It was mind boggling and it's not apparently the only company that has trouble there. And it's explainable by this.

So what you're seeing on your left hand side is, how much is investment and residential real estate worth of GDP. And in China right now, it's 10% in GDP, which is more than two and 1/2 times what it is in the US at 4%. So really, residential real estate in China is a very, very, very significant part of the growth of that economy.

If you let go of revenue and you look at the financial assets, or the assets, of a country, you have five of them in front of you, from China to Australia. And then dark blue. So that's on the left hand side of your screen, it's investments. So you're buying, you're renovating, you're building. On the right hand side of your screen, it's already done. It's on your balance sheet. And if you look at China, certainly, property on their balance sheet, residential property, is, by far, the largest asset class that they have.

Look at the US. Look at Japan. Look even at the UK. And it's a much more balanced situation. Even Australia. Because it's $6 trillion worth of real estate and it's really $4 trillion of assets, of investable assets, fixed income and equity. In China, really, the property market towers over everything else. And it explains why the Evergrande fiasco was so important to financial market and why the Chinese leadership looked into it.

We also have concerns in China about the production of electricity. China, it will not be at COP26 in [INAUDIBLE] Well, not the leadership. They'll send bureaucrats. And that might be the reason. You have on your left hand side, the map of China. And in red and pale yellow, you have the provinces, the areas, the provinces where they've needed to rationalize electricity use.

So in plain English, saying, OK, Charles Lanier, you can run your plant on Tuesday morning, Thursday afternoon, Friday afternoon. That's it. The rest of the time, you don't have electricity, anymore. And the reason for that, is not that they don't produce electricity. You can see it on your right hand side of the screen. The middle column, if you want, is electricity production. And they are trending above their weight. They're 6.5% above their trend line in production.

The problem is that the electricity demand is well above that trend line, as well. And it all comes back down to this global supply chain that is not functioning as smoothly as it has. So electricity production is a big issue. You've seen also the Chinese leadership asking its various power plants to produce electricity at all costs, including the environment. So two years ago a year ago, the Chinese leadership was slowly phasing out their coal powered production facilities or trying to minimize their use. Right now, they're saying we're in an emergency situation and we will do what needs to be done, including burning as much coal as we want.

Speaking of electricity, just as an aside, if Bitcoin was a country. So the electricity needed to power Bitcoin around the world. And ask questions later. Why do I say Bitcoin needs electricity? Trust me, it does. Bitcoin requires, on a yearly basis, the equivalent of Sweden. So yes, I think crypto has a future. Perhaps not Bitcoin's, by the way. That's a different subject and a different discussion. But it certainly takes up an awful lot of electricity when you think of a country, like Sweden, requiring as much electricity in a year as Bitcoin does. Bitcoin, as it stands right now. If Bitcoin grows even more, it might require a little more electricity.

I come back to China. So real estate is a big issue. Electricity and power production, in general, is a second large issue in China. What have financial markets done? Well you can see it here. That white line that you see at the right of your screen is the spread for risky assets compared to non-risky assets. So in other words, how much are financial market asking extra to buy something that they deem risky in China?

And as you can see, it's just gone parabolic. And it wasn't always the case. You can follow that white line at other period of time and it was following the rest of the market. But certainly, very recently, in 2020, it's gone parabolic and the last two slides were that explanation.

Not all is negative for China. But this slide might not be very positive for us. As we transition the world economy to a cleaner economy, and as we ask more and more from our electronic devices, and we transition towards electric cars, and so on and so forth, we will need certain minerals. And so what you have in front of you are two different graphs. The graph on the left hand side are photovoltaic cell shipment by country.

And you'll know that China has 67% of the world's shipment, as where the United States is all the way down at the bottom, has just one. Now the photovoltaic cells are fundamental for the solar powered industry. And in lots of the world where they don't have the rivers that Canada enjoys, wind and solar will be a part of the equation. And they will rely on the US.

The following two states that you see, Malaysia and Vietnam, please keep in mind that the plants in those two countries, often are owned by Chinese interests. So at 67%, that might even be an under-reported number. Their share might be a little higher than that. Look then, on your left-- right hand side, rather, of the screen. Look at the renewable minerals, again, that are fundamental. They're fundamental to various technologies.

I illustrate, cobalt. Cobalt is fundamental to the rechargeable battery industry. So think of your Tesla. Think of your iPhone. Anything that has a battery that's rechargeable, you'll need cobalt. 67% of the worldwide production is done in the country of Congo, the Republic of Congo.

Now I hate to point out, Congo is not exactly the perfect example of political and democratic stability. And so if you look at that table, you realize that, with the exception of the Australia and US, a lot of these other countries are not exactly model liberal democracy as we understand it. And it'll be interesting as we try to transition the world. And as we're meeting, the countries are meeting in [INAUDIBLE] soon, they will need these various minerals to attain their long term goal on climate change.

And yet they'll rely on Russia, and Congo, and China to get there. It will make things interesting. Having said this, where do Americans in generals stand in terms of asset allocation of financial assets? Well, as you can see on this chart, first of all, investors tend to be greedy. The fear and greed index tries to calculate if people are negative or positive on stocks. This was updated October 25, so earlier this week. And people are officially in the greedy territory.

And we could see it all through November-- and not November, October rather. It's been a rather good month. And it's translated itself on the left hand side of your screen by the fact that for US household equity sale shares in companies is at an all time high at 50%. You can see the crisis of '08/'09, it had gone down all the way down to 34%. So roughly a third. And as it stands today, 50%.

So in there you would include the equity they have in their house, you would include their pension money. Well, their stock market minus 50% and the other two minus any debt represents the other 50 which is quite a number. And so therefore, it leaves a lot of you. And a lot of pundits to say, well, you know, the stock market share is quite high. And I don't disagree with you. And I'll show you why I don't disagree. But let's keep one thing in focus.

Since 2019-- so I will forget 2021, which was rocked by the full closure of the world economy, and then the reopening, and the jump that, that created but distorted the numbers. If you compare, quote-unquote, "normal year," so 2019 with 2021. Nominal GDP in the US is up by 7%. Yet remember, companies GDP it's not just companies, it's citizens, it's government, it's numerous other economic activities.

If you look just at companies, their sales have grown by more than double nominal GDP at 16% over that time frame. And their earnings has done even better at 36% growth during that time frame. So as a result of that, if I go from September 30, 2019 to September 30, 2021, I'm not overly surprised that the S&P has done well. It's up just shy of 45%. Is that a little ahead of its skis compared to a 36% rise in earnings? Sure, it is. But it's not completely unrelated to the economy.

And this is looking the same idea over more countries than just the US. You have in front of you the profits or the earnings per share of various indices, various countries. So MSCI All Country World Index, that tells you what you need to know. In 2020 earnings per share-- again, because we closed the world economy for a number of weeks in some cases months, earnings per share of that index fell by 14% compared to 2019.

But 2021, which is not over yet, the analysts are saying, well, we could see a bump up of plus 48% compared to the previous year. That's a big, big jump. And it explains why the market has been doing so well. Look at the S&P 500. Look at here in Canada, the TSX has plus 63. Look at an emerging market at plus 54%. Why by the way, is the TSX and emerging market doing much better than the other indices? It's all about natural resources.

Remember, the oil companies, the oil patch was severely, severely hurt last year when oil prices went negative and they stayed low for a while. This year as prices rise and as they had cut costs last year during the darker month, it's showing up on the bottom line. And you can see the TSX just jumping. And that's natural resources for you. The other thing that I often hear is trust. Everything is concentrated in a few companies, typically the technology company.

And you are not right. You're not wrong rather to say that, if I look at the S&P 500, their 10 largest names, the 10 biggest companies on the S&P 500 are roughly 29% of the whole S&P in terms of valuation. But look at the bottom graph, they're also 28% of the earnings of the S&P 500. So they truly are earning their weight, if you permit me that expression. The profit that they generate represents the capitalization weight that they have in the S&P 500.

Let's talk about real-estate Is real estate dead? According to numerous pundits and according to the stock market when they value rates, commercial real estate would be dead and nobody wants it anymore. I would tend to severely disagree with that. And the reason is that, historically we knew that the Walmart and the McDonald's of the world owned a lot of their own real-estate. What is different this time is that we're seeing numerous, numerous tech companies buying office space, buying industrial space. Two example for that are Amazon and Facebook.

Amazon bought the Old Lord Taylor building on Fifth Avenue in New York, not as a warehouse but for workers. They expect to have anywhere between 3,500 to 5,000 employee in that location in the next few years. Facebook in Bellevue, Washington-- that's interesting because Bellevue, Washington is Microsoft territory. Facebook is as you might know is headquartered in California, yet look at the building they just bought from a retailer in Bellevue, Washington again as they plan to hire more and more well-paid, I might add, tech worker in Bellevue, Washington. And the other large, of course, technology company in that neck of the woods is Amazon.

Is residential real estate any better? Well, that's a more muted picture. As you know our residential real estate prices have gone through the roof here in Montreal, in Canada in general, to the point where UBS, the large Swiss competitor, claims that Toronto and Vancouver are some of the most overpriced real estate in the world and they will even say, in bubble territory. What really worries me more than the price of real estate in Toronto and Vancouver, although it's very high, is how much debt Canadian are holding on their home equity line.

And you can see on the right hand side of your screen, at some point it flat-line after '08/'09. We knew we had a lot of debt, we stopped using our homes as ATM. But it started again and it's just creeped up. So that is certainly something to keep in mind. Having said this though, interest rates are so low right now. And the various schemes of the government, of all governments, but certainly the Federal government and the CERB emergency measures that they announced are debt service ratio.

So the debt in number is getting higher and higher. But our debt service ratio keeps coming down because interest rates are just very, very low. And therefore, the total debt payment from an actor tax point of view has gone down as well in Canada. Beware though, when interest rates start creeping up. So we know that prices of houses are going up. The right hand side of your screen, the pinkish graft, if you want, is global house prices, not just Canada since '05. And as you can see, since 2005, it's grown the fastest in the past year that we've seen since then.

US household, you might ask? Since typically we always say that US households are the most important households that we have as investor. Well, as in contrast to Canadians, they're doing well. So you can see their loan-to-value real estate plunging in the right direction. The reason that the peak you see there was, of course, the '08/'09 financial crisis. And the American households really have gotten religion and they're paying down their debt which is a good thing.

And it shows in their overall network which you see on the right hand side of the screen, It's peaking again. In yellow, is real estate and in black, it's their investment portfolio. So a very, very interesting to see how that consumer is doing compared to us. What about our government trust? Well, debt to GDP not so good. As you can see the G7 nation on the right hand side of the screen, the only one that is worth noting as a good student is Germany.

This is by the way, very different than what you read in the paper because politicians, of course, will pick the numbers they want. So when the Federal government says Canada is in a good shape and the conservatives said that, the liberals said that, keep in mind they're talking about the Federal debt. You need to look also at the Federal debt and the provincial debt. And on that metric we're not as good as we think we are.

France, for instance, doesn't have provinces. So that number is what is reported. In Germany, they do have provinces. So think of Bavaria, for instance. So when you compare the state and provincial plus whatever national debt there is, you see where Canada stands. We're not on the right side of that graph. So Yes their spending is going up, you can see it on the left hand side. The average bond yield though has gotten so low with COVID that the cost of holding that debt for the moment, like we saw for Canadian with their [INAUDIBLE] the cost of holding that debt for all governments is not that high. Be careful again when interest rates go up.

Interestingly though, all these new bonds being issued by governments to finance these deficits have been bought mostly by their central bank. You'll note with amusement, the Republican in the US are the one making the most noise about that. Of course, the Republican as a group are economically not challenge from a personal point of view, but economically haven't been very good student and numerous of their theories have been proven wrong since the early '80s.

Look at where they stand. Yes, the US Fed is buying a lot of government debt compared to Canada, Sweden, New Zealand, Japan, the Euro area. It's not that bad. But that's one thing to keep in mind as central banks buy the bonds that governments are issuing to finance their deficit. So what do we do for equities and where should we be? Well, keep in mind that in the US we're higher than the historical norm. We're at 20 times earnings. Historically we've been north of 16 and 1/2 times earnings.

So there's not much room for disappointment after this rally. In Canada were a little better. So in Canada we're slightly above that trend line but we're not-- if I had to put a number, I would say we're roughly at 16 times earnings and the long-term trend line is just shy of 15 times earnings. So it's not that bad. What's interesting for us as investors though, is that when you compare the US to Canada and Canada is so much cheaper than the US right now, typically for future return, future relative return that bodes very, very well. So we're finding the Canadian market as a whole is a lot less expensive than the US.

The other thing I want you to keep in mind is that correction-- and we had a small one in September, correction are normal. So look at this data you have in front of you since 2000. But since 1980-- so that's been a while, 60% of the years, you had a drawdown during the year of 10% or more. So in other words, the year might have finished positive and most you have. But at some point during the year, the market fell by more than 10%.

I have the same data for the S&P 500 not from the same provider, so the table is a little different. But you can see you have there since 1928 to 2021, every single year what was the maximum drawdown during those years. And you can see some of them were very scary, especially around 1929 to 1934. But even more recently, we've had big ones. 2008, we were down by almost 50% at some point during that year. And of course, last year, we were down by 34% on the S&P 500.

Good news now though is that the PMI index, which is one of the things we look at. It's one of the most important index to look at. As long as it's above 50, it's saying that whichever country you're talking about is expanding rather than contracting. Of course, the important PMI index for world market tends to be the US. But I'm showing you the Euro area, I'm showing the emerging markets in Japan. It's slowing down in China. So China is right at the cusp of falling below 50. But for the US right now it's in positive territory and therefore, we don't foresee at all a recession in that country.

So, yes. Stock markets are high. You can see it here on the value line, which covers 1700 companies versus the Dow, which is really 30 companies. It's a little higher than it's been. So what do we do about it as a team? Well, we look for certain sectors that are more reasonable. Certainly one in particular, our US banks. US banks are selling-- and this is a few days old. But the trailing multiple, the trailing price earnings for banks as a whole in the US was just north of 11 times earnings. The S&P on the day this graph was done was selling for 26.7 times trailing earnings.

And if you look forward rather than backwards, the forward price earnings for banks was 13 times versus a forward price earnings of S&P of 21. So really, really a very inexpensive sector and a sector that has a large tailwind. The interest rate curve is as sloped in the right direction as far as they're concerned and it steepening which is a very good news for their profitability. Their other businesses such as investment banking is doing well. Merger and acquisition are up. Small business are borrowing to automate their process. Companies are borrowing to bring back onshore some of that global supply chain.

And last but not least, their Wealth Management Division. So their competitor to Dominion Securities are all doing well also. And yet you're paying a fraction of what the overall market is for that business. The other thing that we do that I think is quite important is you need to understand how you're going to make money. Are you going to make money from dividends? Are you hoping for a capital gain? And if you're looking at two names and both, for instance, pay a dividend, so think of Microsoft versus Fortis. You have to understand why you pay more for a certain type of business than another one.

So I'm giving you the two extremes. Technology has very low capital requirements. In other words, once you spend to create whatever it is that you're creating-- so think of a software. Once you spend millions of dollars creating a software, copy number 2 for all intents and purposes, is free. So your return on scale on men is very, very, very quickly as you're able to ramp up your sales and production. The other thing is unlike, for instance, a Bombardier or a Boeing. If you're a tech company, your cost of building out is hiring more people. And I guess, having them sit-in offices, all you need to buy office building.

But compare that to a plane that a new plane that is being developed, there a massive upfront cost. Then tooling up a new plan to build it. Then getting the various approvals around the world. The upfront costs for those businesses is much higher than it is in technology. So yes, you pay a much higher multiple for a tech business. But then again, the multiplying effect and the network effect that you can have from these companies is much higher. In Infrastructure, it's the reverse.

So think of a BCE in telecom or think of a Fortis in utility. And I could have used, I guess, Talis for telecom. At best, it's a knowledgeable there's not that many players. They tend to be rational in how they attack each other. Yes, there are significant requirements, as for instance, the telecom industry is billing out their 5G network. But they can do it in a very progressive way.

And if you look at utilities, same thing. I say here, they have stable returns on investment. If it's a good management team, they'll know how much the various local governments will let them charge for the utility service that they're providing. Remember, a utility typically, will distribute the electricity or generate then distribute electricity. As they do that, they know in advance for the next five years, 10 years, 20 years, how much they're going to earn on that investment.

And so for us as investors it becomes part of a larger puzzle called your portfolio. Look also at the yield or the income that it generates. Earlier this week, the Canada 10 year was paying you 1.63%. So if you own a Canada bond for 10 years, that's when you would receive. BCE on that same day, was that at almost 5.6% of dividend yield. Fortis was at 3.9% dividend yield. Both much higher than the TSX 60. So again, you need to understand the source of your return when you're building a portfolio.

Nevertheless though, we remain cautious. And I want to share this quote from John Templeton. Templeton, of course, is the famed investor whose name, he gave to a fund company. And he said at the ripe old Age of 82 that "A bull market is born in pessimism. Grows in skepticism. Matures in optimism. And disappears in euphoria." Depending on with when you think the bull market started, was it actually the great financial crisis crash of '08/'09 or was it last year?

Last year was such a short, short period of time, the GFC. Some people are arguing it was just a flash crash and it doesn't count. In either case, I don't remember my phone ringing during those periods of time and people throwing money at me to invest it. And even for the following months following years, people were skeptical. The question is are we maturing in optimism right now? Or are we getting ahead of ourselves? And are we a little more euphoric? And that is the question.

I believe that we're more maturing in optimism. But certainly, the whole team and myself, are monitoring at all times, are we getting euphoric about the market? You know how we think, you know how we work. We like businesses that we understand. We like businesses that we've looked at the financials, we've looked at their cash flow statements, we've looked at their balance sheet. We are able to explain to you in plain English, why their competitive moat is increasing over time. Or able to pinpoint this competitive moat.

Is that the legal competitive moat? Is it's a technological competitive moat? Is it a brand competitive moat? Is it a geographical competitive moat? Whatever it is, am I able, is [INAUDIBLE] able to explain if that is the question. And I'm giving you some examples of companies that we've owned for years and that we continue to like.

I'll finish on this. We purchased recently-- some of our recent transaction, because that's not just purchases. We purchased in our global 35 and global income portfolio, Westshore Terminal. It's a companies whose real estate is almost impossible to replicate. That's the reason behind that purchase.

Uni Select was bought simply in the global 35. It's a much smaller company. It's the smallest company I've bought in a long, long time in terms of market valuation. We think we're going to do very well over time with it. We've also bought some South Korea iShare. That. so far has not been my best investment. You saw earlier that South Korea is highly impacted by the price of oil. And perhaps, I misunderstood that part when I bought it. I'm sticking with it though for the moment.

We sold AT&T from our global income portfolio when they cut their dividend. And then when suddenly they seem to be strategically misguiding themselves, I got discouraged and said that's it. You don't have the discipline that I'm looking for in that portfolio. And it was sold. And we bought instead Medtronic as a play on the reopening of the economy. And we simplified the Medtronic, which is a medical technology company. Has significant, significant barriers to entry for any new competitors.

So that is my presentation. I apologize for being so quick. I realized that I had barely time to breathe. But I wanted to make sure that I left time for questions and that I spoke under an hour.