April 3, 2020


As millions of people across the world shift to working, learning and shopping from home, they will test internet networks with one of the biggest mass behavior changes the world has ever experienced

The pandemic has deepened reliance on services from the technology industry’s biggest companies, while accelerating trends that were already benefiting them (the most obvious being ecommerce and movie streaming).

The chart below contrasts the winners and losers in these areas.

Even when the economy does eventually improve, many big tech companies could still benefit from changes in consumer habits.

For example, as more customers try different ecommerce services out of necessity, they may create permanent shifts in buying habits.

Shelter in place orders, not surprisingly, have resulted in increasing traffic to conferencing and video streaming platforms.

Downloads of the Netflix app increased 66% in Italy and 35% in Spain in March.

In the United States, where Netflix is already ubiquitous, the company has seen a 9% increase.

Working, shopping, learning and seeking all entertainment from home has seen new heights of internet use and, not surprisingly, placed stress on the critical infrastructure of the internet. Many of you working from home might have already been warmed by your respective IT departments to limit work related video streaming and some firms have even blocked access to ecommerce sites such as Amazon, Costco and Canadian Tire, all in order to limit stress on infrastructure.

Other notable recent examples:

     - Government officials in Europe apparently reached out to Reed Hastings (CEO of Netflix), to ask if the company could temporarily reduce the video quality of its streams to lighten the strain on the internet network.

     - YouTube also agreed to suspend streaming of high-definition video in Europe for a month.

     - Last week Microsoft announced that the number of users on its “Teams” video conference program had grown to over 44 million daily users (an increase of over 40%). There have been at least 900 million meeting and call minutes on Teams every day.

The shift to work at home has also demonstrated the merits of cloud computing when internet use unexpectedly spikes. For companies that have not shifted to the cloud (and there are still many) managing their internet infrastructures and making adjustments to computing needs on the fly is expensive and complicated.

Cloud computing makes it all easier and therein lies what could be the long-term acceleration of the biggest investment trend of all, borne out of necessity.

According to health experts, lives depend on reducing face-to-face interaction. and the internet is perfect for that.

Entertainment Tip

I will make this section a regular feature for those dealing with self-isolation.

To start this off, since we have been on the topic of streaming, I thought that I would share that my wife and I have been enjoying watching the series entitled ‘The Marvelous Mrs. Maisel’, on Amazon Prime Video.

Briefly, the series is a historical drama (that also contains quite a bit of humor) set in 1950s New York City and follows the twists and turns of the life of the main character, Midge, as she discovers her abilities as a stand-up comic.

There are approximately 26 one-hour long episodes to enjoy in the series.

March 20, 2020

The Innovation Environment: Social Distancing

Innovation often gains traction during tumultuous times.

During the 2008 Great Financial Crisis (GFC), several innovative themes made substantial progress.

For instance, software companies offering faster, cheaper, more cost-effective, and creative products and services became very attractive to businesses looking to streamline costs during an economic slowdown.

Software-as-a-service and online retail were the prime beneficiaries during the GFC and have subsequently grown to be some of the largest companies in the S&P 500 index.

The COVID-Crisis

This crisis, while a serious threat to health and the economy will also pass, and life will once again normalize.

However, the importance of keeping social distance has the potential to leave a lasting mark on some of our behaviours long ager the crisis is over.

Moreover, greater government and regulatory attention are likely to be paid to North America’s healthcare technology and supply chains.

As investors, we can look forward and consider what opportunities are coming:

Healthcare Technology - breakthroughs in DNA sequencing and artificial intelligence enabled researchers to sequence the COVID-19 virus in just two days (compared to five months for the SARS coronavirus in 2003). As a result, the FDA could approve the first vaccine in a few months, instead of up to 18 months and well ahead of the next flu season.

Telemedicine – Similar to the closure of many shopping malls in the US, many family medical practices have now temporarily closed. The pandemic has thus shifted the paradigm of where healthcare delivery takes place. Out of necessity, remote office visits could skyrocket in popularity as traditional medical care settings are overwhelmed by the pandemic (or closed). There would also be containment related benefits to this shift; staying home for a video call keeps you out of the transit system, out of the waiting room and, most importantly, away from patients who need critical care.

Going Virtual – From a work meeting, a social visit with a friend, worship, to a yoga class, in a world of social distancing, socializing has shifted into the virtual realm. Engineers at many tech companies have been scrambling to add new servers and equipment at data centres to meet demand since the pandemic started.

February 28, 2020


What is it?

Hyperloop has the potential to change how we plan, design and travel between cities and could radically alter urban development patterns.

Just as the streetcar, train, automobile, and airplane redefined transportation and set the stage for urban development patterns, a hyperloop system is capable of having an equally transformative effect.

Development of the concept was introduced by Tesla and SpaceX founder Elon Musk and works by loading passengers and cargo into a pod which quickly lifts above a track using magnetic levitation.

The pod then accelerates gradually via a solar-powered electric motor, gliding silently inside a vacuum tunnel at speeds that are equal to those of commercial airliners (i.e. about 1,000 km/h).

Images of the pod (below top) and the solar planned topped tunnel (below bottom):

Sounds preposterous?

Yes, but imagine the basic description of passenger aircraft in the pioneering days of aviation – seating people in a winged metal tube and shooting them into the air.

Why it’s innovative…

Hyperloop is all about removing the two things that slow down regular vehicles: friction and air resistance.

Using magnetic levitation and big vacuum pumps eliminates friction and air resistance, letting those bus-sized pods zip along at high speed.

It wouldn’t just be fast, hyperloop could be cheaper and better for the environment than the planes, trains, and cars.

The hyperloop tubes would have solar panels installed on the roof with back up battery systems, allowing for an environmentally friendly, self-powering system.

Why the need?

Conventional modes transportation (road, air, rail, etc.) tend to be some variety of expensive, slow or environmentally harmful (i.e. carbon emissions).

As the world looks for carbon-neutral methods of transportation, the economics of hyperloop are best suited for high-speed transportation over moderate distances and could eventually be highly disruptive to carbon-intensive short-haul flight routes.

Advantages of hyperloop…

As compared to commercial airliners, which hyperloop is most likely to compete against:

     · it does not require fossil fuels;

     · operates silently;

     · is potentially safer;

     · can run much more frequently;

     · is not impacted by weather.

When will it be a reality?

Several projects around the world are in testing phases (India will likely have the first hyperloop in commercial use):

     · Virgin Hyperloop One has been testing in Nevada since 2017.

     · In the summer of 2019 Hardt Hyperloop in Europe announced the opening of a test facility and distant long term plans to develop a Europe-wide transportation system.

     · In India, Virgin Hyperloop One is about to go through the procurement process for service between the cities of Mumbai and Pune. This project could be up and running for passengers by the end of the decade.

February 14, 2020

THE INNOVATION ENVIRONMENT: Technological Innovation & Inflation

In 2017, as chair of the U.S. Federal Reserve, Janet Yellen publicly questioned if aggressive online competition might be keeping a lid on inflation, even in a world of rising demand (and rising wages).

Researchers at the Harvard Business School found that Amazon’s prices are 6% lower than those of eight large retailers, and 5% lower than on those retailers’ websites.

However, this is not a new trend.

Disinflation has been a common feature of North American retail for decades, well before ecommerce.

In the 1990s and 2000s, the retail innovators of the day, the big-box stores (i.e. Walmart, Home Depot etc.) were able to cut prices as they used new software technology of that era to optimize their supply chains.

So, the rise of online retail does not easily explain that broader shift.

With market expectations for inflation over the long term rolling over (below chart), the broader role of technological advancement as a secular disinflationary force is worth pondering.

More Means Less…

World economies will surely experience more disinflationary forces in the coming decades as a result of:

     - Continued technological advancement, leading to higher productivity and lower costs;

     - Both the rate of introduction of new technologies and societal adoption of them has been increasing (chart below).


…Consumer Retail:

The internet has provided full price transparency and complete quality disclosure for marketplaces around the globe.

Goods and services of similar quality are unable to get a price increase, as technology and the price transparency it provides makes it easy to find the cheapest price.

Vendors who can command higher pricing quickly draw competition from others seeking any pricing power they can find.

Similarly, vendors that try to sell lower quality items in order to generate more profit are quickly exposed by poor customer reviews and ratings.

All of this is not only deflationary, but it constantly thwarts inflation.

…Consider Power Generation:

Electrical generation traditionally requires excess, idle capacity (i.e. peaker plants) to be built, at great expense, too often sit idle and only generate power during the occasional times that demand peaks.

Peaker plants are now being replaced by industrial-sized batteries that can be scaled up or down easily.

These are not only a lower cost / low maintenance option today, but prices continue to fall as battery technology advances.

…Consider Electric Vehicles (EVs):

Drawing on the above example, as battery technology costs improve, EV pricing will become more and more competitive with internal combustion vehicles (ICE).

An average EV contains only a few dozen moving parts as compared to thousands in an ICE vehicle.

This reduces manufacturing time, complexity, maintenance costs and of course, demand for oil.

In turn, the proliferation of EVs has knock-on effects spanning numerous multi-billion dollar industries such as auto parts, oil refining and retailing.

Investing Implications

Low inflation (and corresponding low interest rates) appear to be here for the indefinite future.

Accelerating technological innovation creates somewhat of a positive feedback loop where new disruptor companies, whose long term growth is based on providing goods and services more cost-efficiently than the more traditional suppliers, can easily find cheap financing to fuel additional growth.

In turn, consumers benefit from disinflation and investors in these companies benefit from share price inflation.

January 31, 2020

THE INNOVATION ENVIRONMENT: An Update on the Alternative Meat Industry

The Big Picture…

Innovators in the food and agriculture sector will focus on the need for healthier, resource-efficient and environmentally friendly food supplies in the years to come, especially as the global population grows and more demand is placed on existing (inefficient) agricultural infrastructure.

A big part of this innovation will evolve around the traditional farming of livestock. This industry is both:

     - inefficient because high inputs of feed, water and land are required to produce a small amount of edible protein;

     - a real climate change variable given its major greenhouse gas (GHG) emissions and need of cleared land for pasture.

Therefore, the continued evolution of plant-based meat alternatives will play an important role in positively impacting climate change.

In fact, there is a multitude of other reasons to reduce the consumption of animal-based meats:

     - to improve human health;

     - to improve animal welfare;

     - to address global resource constraints of land and water.

New Market Directions…

After perfecting the plant-based burger in 2019, alternative meat companies are now focusing on perfecting other products – next up: pork

If plant-based pork takes off, it could turn into a windfall for these companies.

Pork is the most popular meat, accounting for roughly 35% of the world's meat consumption.

Plant-based pork could also be meat alternative companies' ticket to the lucrative Chinese market, where pork is especially popular (but prices are soaring due to African swine fever and shortage of feed).

Room to Grow…

A recent report from Barclays analysts size up plant-based meat's potential market size and makes an interesting comparison to the electric vehicle market.

Specifically, their “work suggests a potential market size of $140 billion by 2029 from less than $14 billion today”.

The report goes on to say that they “believe that there is a bigger market opportunity for plant-based (and maybe even lab-based) protein than perhaps was argued for electric vehicles ten years ago - with an increasingly mainstream appeal compared with electric vehicles’ high-end, niche clientele”.

Not Just for Vegans…

The increasing availability of alternative meat products in grocery stores and restaurants of all types has resulted in a rapidly growing crowd of ‘flexitarians’, that is, consumers who opt for plant-based foods if they are available, affordable and equally as tasty as their animal counterparts.

January 17, 2019

The Innovation Environment: Quantum Computing

Quantum Computing (QC) broadly describes the next generation of computing innovation.

QC harnesses properties of subatomic particles to perform certain kinds of calculations exponentially faster than any traditional computer is capable of.

They are not just faster than traditional computers, they process information in a radically different manner and therefore have the potential to explore big data in ways that have not been possible previously.

Pictured below is Google’s QC ‘Sycamore’ which the company claims can solve a mathematical calculation in 200 seconds that would take a supercomputer 10,000 years.

Potential Applications of QC

Quantum computing is especially good at modelling complex scenarios.

For example, the development of new chemicals or battery technology has usually required physically pouring different materials into test tubes to see what will happen.

When experiments of this type can be simulated by QCs, time and cost savings would be substantial.

Other important applications could include:

      - Drug discovery could be enhanced by QC’s ability to analyze and optimize unprecedented amounts of complex information on the human genome.

      - Transportation and logistics could see wide applications of QC - from self-driving cars to route-planning and optimization or flight-scheduling

Going to the Cloud

Traditionally, quantum computing systems have only been operated in labs, accessible to very few.

These computers are large (about 10 feet high), expensive ($15 million or so) and operate only in extremely cold temperatures (-460 degrees Fahrenheit).

Recently, IBM, Microsoft and Amazon have made an important step forward.

The companies have been working to provide greater access to the technology by implementing quantum computing as a service in the cloud (available to select customers).

Quantum cloud services will work as follows:

     1. Cloud providers will have remote data centres housing QCs;

     2. Users will tap into them from their own computers and write their own software or use existing software to harness the computing power without actually needing to understand how it works.

December 20, 2019

Innovation Environment: Three Secular Growth Investment Trends for 2020 and Beyond

Thematic investing is a strategy designed to benefit from long-horizon secular investment themes across the globe.

The process involves research on how innovations in technology, or changes in demographics etc. will impact industries and companies.

As the year and decade come to a close, we highlight three attractive themes below.

Socially Responsible Investing (SRI)

     - SRI is now on the rise because investors are realizing they can both influence and align with an organization’s mission and purpose, rather than simply the organization’s profit.

     - The growth of SRI reflects the fact that investors are increasingly conscious of the social and environmental consequences of the decisions that governments and companies make, including attention to the wellbeing of employees, diversity and carbon reduction initiatives.

     - In the US, there is now more than $12 trillion invested in socially responsible ways and 2019 marked a sharp increase in fund flows into SRI oriented strategies (chart below).

     - Nearly every S&P 500 firm now issues a sustainability report and have embraced corporate social responsibility practices, such as reducing greenhouse gas emissions, giving back to their local communities and promoting fair labour.

Beyond retail investors, a group of the world’s largest asset-holders (pension funds, sovereign wealth funds, endowments and insurers), responsible for trillions of dollars in assets, now view themselves as “stewards” of assets on behalf of their clients (rather than simply asset “managers”, which has become an antiquated view).

As a steward of these assets, they are focused on environmental, social and governance principles – which are also proving material to a company’s ability to generate long-term reliable financial performance.

Renewable Power

Over the past 5 years, approximately $1.5 trillion globally has been invested in renewable energy projects (wind, hydro, solar). However, the growth in this SRI investment will likely pale in comparison to the years ahead (see chart below according to Bloomberg New Energy Finance).

Factors driving the exponential pace of investment include:

     - Escalating concern about climate change and associated government policy;

     - Superior economics of renewables and further technological advances;

     - Gradual rise of electric vehicles (i.e. higher demand for electricity);

     - Increased demand from financial investors for both income (i.e. renewables produce attractive investment cash flows) and for socially responsible investing strategies (i.e. SRI).

Air Travel & Tourism

Research from the International Air Transport Association (IATA) this year indicates that global passenger numbers could double to 8.2 billion in less than 20 years.

The Asia-Pacific region is expected to drive the biggest growth with more than half the total number of new passengers coming from these markets (see chart further below).

Growth here is being driven by a combination of strong economies, rising household incomes (i.e. a growing middle class) and generally young populations.

Most notably:

     - China is likely to displace the US as the world’s largest aviation market by the mid-2020s (the rebalancing of China’s economy towards consumption will support strong passenger demand over the long term);

     - India will take third place after the US (surpassing the UK by mid-decade);

     - Indonesia is forecast to grow from the world’s 10th largest aviation market (2017) to the 4th largest by 2030;

     - Thailand is expected to enter the top 10 markets in 2030, replacing Italy which drops out of the ranking.

December 6, 2019

The Innovation Environment: The Hydrogen Fuel Cell S-Curve

Fuel cell and hydrogen costs are falling, while global emissions rules are tightening.

This is broadening the appeal of a technology that allows vehicles to run on the universe’s most abundant element, releasing only water and heat as byproducts.

After decades of tinkering and failures, could it be that the fuel cell is now on an S-Curve trajectory?

The general S-Curve shape is indicated below:

This pattern occurs frequently in charting growth and is especially relevant to describe the adoption of any new technology.

The X-axis displays the passage of time; the Y-axis displays the % usage of the technology by the general population.

     A: Beginning Stage: New technologies are expensive, inefficient and not well understood; adoption is slow.

     B: Ascent Stage: At the “inflection point” (when the curve slope starts to rise sharply) the new technology is finally achieving pricing power, efficiency and broader acceptance.

Adoption grows exponentially and shareholders also can make great profits. In fact, so far in 2019, the second best performing stock on the TSX is a hydrogen fuel cell company.

There’s been a real change in this industry over the last 12 months.

A series of deals have indicated the technology is now penetrating the traditional automotive industry:

     - Cummins (generally synonymous with the diesel engine) bought Canadian fuel cell maker Hydrogenics earlier this year;

     - Truck maker CNH Industrial invested $250 million in Nikola Motor, a startup aiming to put hydrogen semi-trucks on the road;

     - Robert Bosch, the world’s largest auto parts supplier, announced plans to mass produce fuel cells in 2 years in partnership with a Swedish fuel cell designer.

     - In total this year, vehicle manufacturers, gas suppliers, and other private sector institutions have announced more than $17 billion in hydrogen fuel cell investments.

Moreover, in Europe and major Asian markets, operating a fuel cell-powered electric bus is now cost competitive with a traditional fossil fuel burning versions.

Use of the technology is also diversifying into ships, trains and forklifts.

Still There are Challenges

In the development process so far, fuel cells are playing a distant second fiddle to vehicles powered by lithium batteries.

Fuel cells have an edge in large commercial vehicles: refueling with hydrogen is just as fast as filling up a truck or bus with diesel, while batteries can get too heavy, and charging times too long, when scaled up for larger vehicles (summed up nicely in the chart below).

However, the electrical infrastructure required to set up a network of charging stations is fairly ubiquitous and has been cost effective for small fleets of electric vehicles. So, development of battery powered vehicles has occurred first.

In contrast, hydrogen infrastructure is virtually non-existent and, thus, filling stations are very expensive to set up for only a few vehicles. However as fleet sizes and investment grows, costs will naturally decline.

With high growth rates, but still small overall market share, we look to infrastructure costs to decline pushing the fuel cell industry further into the Ascent Stage of the S-Curve.

November 22, 2018


What is it?

In brief, the CCT process captures airborne carbon and through a chemical process and creates calcium carbonate (a harmless sea shell-like material).

The carbonate is then re-heated to release CO2 (which is captured and stored permanently underground or sold for other industrial uses).

The basic technology was invented for submariners in WWII, but is only recently being deployed at an industrial scale.

CCT has two main applications:

     - To scrub carbon from the exhaust gases of industrial sites (i.e. fossil-fuel based power generation etc.); 

     - More broadly to scrub carbon from atmospheric air through the use of a giant installation of fans (one such facility is pictured below).

Why it's Popular...

The $360 billion global coal industry is fighting for its survival.

It is using carbon capture technology as a “Hail Mary” attempt to save itself. The concept is that coal can be made cleaner by capturing the carbon emissions and storing it underground.

Is CCT Part of the Answer to Global Warming?

Could this be an expensive exercise in reputation laundering for the coal industry or is there actually some merit to the technology?

Opponents say this is a wasteful bid to prolong coal's life in a world of ever cheaper renewable energy.

While likely true, clean carbon technology isn't just about making coal emissions cleaner.

It is also relevant to industries where there are few cost effective alternatives for carbon reduction: i.e. steel, cement, or petrochemical production.

Cleaning Up The Past…

Researchers suggest that there is over 40% more CO2 in Earth’s atmosphere now than in 1800 (i.e. pre-industrialization).

Addressing climate change with CCT could involve two approaches:

     1. Scrubbing carbon from the emissions of industries where there are few reasonable carbon neutral alternatives;

     2. Addressing the CO2 left over in our atmosphere from hundreds of years of industrialization.

In fact, some very wealthy clean energy investors, including Bill Gates, have started backing startup companies that specialize in the removal of residual carbon in the atmosphere.

November 8, 2019


An online order often starts the same way, with the simple tap of a finger.

Then, two days later, or even in a matter of hours, the package arrives.

The ease and convenience of the process, paired with more and more people living in densely populated urban areas has led to a new consumer lifestyle – buying more and more from the comfort of home.

It seems simple enough and we tend not to give underlying process much thought.

But to deliver any order from businesses that sell over the internet, be it prepared foods, groceries, electronics or furniture, requires billions to be spent on logistics.

In 2018 Amazon spent nearly $28 billion on deliveries in the U.S. market, and costs are rising…

To get a sense of the sheer scale, in New York City more than 1.5 million ecommerce orders are delivered every day.

To get all of these packages delivered, ecommerce companies have to date used a mixed-bag of services from large, professional courier companies, local couriers to crowdsourced “last-mile” delivery drivers using their own vehicles.

Getting Organized…

But now with the promise of one-day delivery starting in some major cities, ecommerce companies need more control (in terms of both cost control and organized capacity) over their distribution networks.

As a leader and innovator in the field, Amazon has taken a two-pronged approach:

1. It’s offering those with entrepreneurial ambitions the option to do more. Instead of showing up for the “gig” last-mile work, drivers can opt for a new program where Amazon helps them establish their own delivery business.

2. Investing heavily in delivery methods of the future involving electric vehicles and robotics. Pictured from left to right: Prime Air, Amazon’s air delivery drone’s for 30-minute urban deliveries; EV vans - a $700 million investment in electric vehicle maker Rivian; Scout, a sub-urban delivery robot.

What to Watch…

1. Tech spending: The expansion to one-day delivery will drive more investment into emerging delivery technologies. This highly competitive arena will be interesting to watch develop over time.

2. Outsourcing to fleet management companies: While Amazon and other major ecommerce companies such as Wal-Mart and Costco have spent heavily on logistics fleets in the past, the trend of outsourcing to independent fleet management companies is growing. These companies, have demonstrated substantial cost savings, reduced risk and increased vehicle uptime for their customers, in exchange for fee-based service. Some of these little known, infrastructure-like businesses that underlie these exciting trends could be attractive long-term investments.

October 25, 2019

The Innovation Environment: Canadian Urban Population Trends

This week the Century Initiative, a think-tank focused on Canada’s long-term economic goals, tabled a detailed plan, at its heart designed to ensure that future generations enjoy the same standard of living that we do today.

The report centered on boosting the national population to 100 million by the year 2100 to ensure continued economic success in Canada.

The bulk of this growth would come through increased immigration.

Otherwise, the Century Initiative’s research shows that current demographic growth trends will translate into a population of about 50 million in 2100 (with growth ceasing thereafter).

As well, the number of senior citizens would be much higher proportionately and create greater fiscal pressures.

This trend is already apparent in data and projections from Statistics Canada (below).

The good news is that Canadian immigration trends set a record this summer (chart below)…

…and this rate puts Canada as the leader (by a wide margin) in the G7….

Where Would All of These People Live?

According to the Century Initiative report, governments should create “mega regions” of dense populations to create “nodes of economic activity”.

To support this level of population growth would see major cities triple in size.

The report projects the Greater Toronto Area will be home to 33 million, while Montreal and Vancouver will each hit 12 million.

Even if the Century Initiative is not implemented in full, it is clear that the populations of major Canadian urban centres will be experiencing continued strong growth.

This Could Be Problematic

Vacancy rates in Toronto, Vancouver and Montreal are all below 3% (a level that is viewed as healthy for a balanced market).

New supply of rental apartments is only meeting about one-half of the actual need (chart below).

Investment Implications

For investors (both current and prospective), strong urban housing demand is another example of long-term secular growth that will benefit owners of real property, multi-family REIT and property development investors.

October 11, 2019


The new space race is much more intricate than the cold war contest between the US and the Soviet Union and perhaps, ultimately more lucrative.

Pioneering government agencies, like NASA or Roscosmos (Russia) now face competition from private corporate space programs as well as national programs in China and India.

Everything from advancing propulsion systems, space tourism, GPS satellites to colonizing Mars are up for grabs.

Of particular interest, private companies themselves have space ambitions that go well beyond government contracts.

Below is an overview of the major players in the modern space race.


The Beijing government views space as vital for boosting the economy and promoting advanced technologies.

They see space as a very important driver for growth and competitiveness going forward.

The China National Space Agency (CNSA), known for building its own human space flight program without help from the Americans, launched more satellites in 2018 than any other country.

Whereas US and Russian space programs struggle with budgets and funding, China is expanding its investments on every front, including communications, reconnaissance satellites, GPS and human spaceflight.

Major ambitions of the CNSA include:

     - Mission to Mars: 2021

     - Crewed lunar landing: 2030


NASA is known for constantly wanting to be on the cutting edge of technology and mission planning.

They sent the first (and so far the only) humans to the Moon, they hold the records for first probes to visit all the outer planets and even Pluto.

NASA’s Jet Propulsion Lab is the global leader of interplanetary communication, telemetry and travel.


India is looking to take a giant leap in its space program and solidify its place among the world's spacefaring nations, attempting its second unmanned mission to the moon last month.

Like China, the Indian Space Research Organization (ISRO) is eager to showcase the country's capabilities in technology.

In 2013 India put a satellite into orbit around Mars in the nation's first interplanetary mission.

India also plans to send humans into space by 2022, becoming only the fourth nation to do so.


Roscosmos is known for dominating the first two thirds of the Space Race of the 1950s and 60s.

Currently the organization is the only human space flight provider to the international community.

Their cosmonauts have more space station experience than anyone else: while NASA kept working away at the Shuttle program, Roscosmos launched 6 space stations, creating expertise that may give them an advantage in the future.


To date, Chinese and US companies are developing most aggressively.

In the US, lucrative government contracts for space launches are awarded to private companies.

Winners get 25 launches, paying $100 - $150 million per launch, which provides plenty of cash to pursue private space exploration agendas.

Beyond government partnerships and contracts, in the US and UK, ‘billionaire-funding’ generally geared toward rockets fit for human travel, are slowly moving forward on their own, privately funded agendas.

China started developing a private space industry in 2014, pledging to encourage private capital’s participation in China’s construction of civilian space infrastructure.

Since then, military-civilian partnerships have become commonplace and private firms have been allowed to launch from military bases.

In China’s commercial space industry, a group of private firms are launching satellites and exploring other money-making applications for space travel.


The Portfolio of the Future is largely allocated to various technological growth investment themes, however its broad mandate also includes investment in other areas of secular growth and evolving social trends.

One of these trends, in fact a very powerful social trend, is the humanization of pets.

The State of Pet Ownership (“Companion Animals”)

In Canada:

  • According to CAHI (Canadian Animal Health Institute) we prefer cats.
  • The Canadian cat population was recently estimated to be 8.8 million versus 7.6 million dogs.
  • In either case cat and dog populations increased by an average of 22% as compared to 2014.

In the U.S.:

  • Sixty-eight percent of U.S. households, or about 85 million families, own a pet, according to the American Pet Products Association (APPA).
  • This is up from 56% of U.S. households in 1988, the first year the APPA survey was conducted.
  • Dog and cat populations are estimated to be 79 million and 74 million respectively.

The population of pets in North America is large and experiencing very strong growth.

In fact, growth rates of pet ownership rival (or in some cases exceed) the revenue growth rates of some of the hottest technology companies.

Pets are basically people…

Underlying the strong increases in companion animal ownership is how people now view their pets.

If you are a pet owner or know someone that is, this recent survey from Fortune Magazine likely won’t surprise you…

…nor will it surprise as to how much pet owners spend each year (while these figures are a bit out of date, other studies indicate that spending has been increasing annually by about 5%):

Most visibly, the companion animal market has been a boon to entrepreneurs. From animal breeders, doggy daycares and spas, dog walking services, cat hotels and even a line of catnip infused feline beverages have all been created by small businesses to cater to these trends.

From our perspective, since pets are essentially treated as family members, a great deal of the annual spending goes toward keeping them healthy and therein lies the investment opportunity for us.


Not long ago natural gas was viewed as the clean “bridge fuel”, the one that would create a safe transition for society from coal and oil, to a fully renewable future.

The concept of natural gas as a transition fuel was put forward by the International Energy Agency (IEA) in 2011 in a report on what it termed the “golden age of gas”.

According to the IEA, we would see natural gas demand jump by 50% to become 25% of global energy consumption by 2035.

At the time, natural gas was seen as a cleaner alternative to coal, a factor the resource industry was happy to seize upon as it allowed them to boost output while being seen as part of the solution to climate change, rather than part of the problem.

While natural gas is “cleaner” burning than coal, it is comprised mostly of methane, a climate super polluter, remarkably worse than CO2 at keeping heat close to the Earth (chart below).

While the IEA focused on natural gas in the early part of this decade, other investors across the planet were funneling money into research and development for renewable resources.

The resulting cost reductions of renewables have been impressive.

Instead of the “golden age of gas”, by 2035 it will be more expensive to run 90% of gas plants in the US than it will be to build new wind and solar farms equipped with storage systems, according to the Rocky Mountain Institute.

Changing Strategies Globally

Earlier this year the mayor of Los Angeles announced the city will abandon a plan to replace three aging gas power plants along its coast, and will instead invest in renewable energy as it seeks to move away from fossil fuels.

Strategy revisions like this are happening all around the world.

For example, in high growth emerging economies such as India, where demand for electricity is expected to double over the next 20 years, coal and natural gas have been long forecast to be the fuel of choice for power generation.

After all, India has plentiful reserves that are inexpensive to access.

However, in spite of the low (economic) cost of coal and natural gas, it is still too expensive relative to renewable energy alternatives, such as wind and solar (where, due to continued technological development, prices continue to fall).

Rallying Renewables

Renewable energy technology is a sector experiencing both major secular innovation and strong investment performance.

In fact, growth in renewables is larger than anyone expected…

…and it’s only getting started (the below chart shows how far major regions are from their respective long-term targets):

INNOVATION ENVIROMENT: Internet with Global Reach

Since the year 2000, over 4.2 billion people in this world have gained access to the internet.

Of course that leaves approximately 3 billion people who still have no access (most of these people are located in relatively poorer developing areas of Africa and Asia).

Focusing on geographic space rather than population, roughly 80% of the Earth’s surface is without access to the web.

Given that large part of the world’s surface is covered by water and is uninhabited – why does this matter?

For a few reasons:

     1.  Bringing basic internet access to those without it, typically lower income people, is empowering.

     2.  For the purposes of this discussion, the world of IoT (Internet of Things) requires global connectivity.

Accessing the internet from anywhere in the world would doors for IoT applications to be employed across the planet.

One great example of this need is in the burgeoning field of IoT for agriculture.

Often, rural farming areas don’t have fast reliable internet access.

With robotic farming being a new reality (for indoor farming - see link below), outdoor large scale robotic farming at least feasible.


The main hurdle to overcome for large scale robot farming is poor rural internet access.

Without real time connectivity, the robots cannot communicate with each other, or connect to cloud computing infrastructure.

Communication Innovation

A few major tech companies have set long-term goals of connecting the world, or in the least, remote areas of it.

But late last week, these far off plans by others were circumvented with the partnership between a major US tech company and a US satellite communications company.

With near the completion of a brand new, powerful low orbit 75-satellite constellation (rendition pictured below), true global internet access is here.


Long-term innovation investment themes such as artificial intelligence, digital currencies and cutting edge medicine garner the majority of investor attention and excitement.

This often obscures less exciting, but arguably more important areas of long-term secular growth, such as emerging technologies to protect the world’s fresh water supplies.

The Global Water Landscape

First, the Good News…

     - 70% of world is covered by water

Now the Bad News…

     1.  97.5% of all the water on Earth is salty (salt water cannot be consumed, used for agriculture or power generation, and desalination is very expensive);

     2.  a further 1.75% is frozen at the poles;

     3.  so the world has to rely on just 0.75% of the planet’s available water (almost all of which is subterranean groundwater).

Beyond this, we, as human beings have not been good custodians of this resource.

Add to that, there’s a growing number of us on the planet, and, the more prosperous we are, the more water we require.

Warning Signs

For certain highly populated parts of the world, fresh water access is projected to be increasingly under stress.

In fact, according to the UN, more than a quarter of humanity (about 1.9 billion people) will reside in areas where water is potentially severely scarce (see chart below).

Meanwhile, global water has increased six times in the past 100 years and is expected to increase somewhere between 20% to 50% by mid-century.

Where Does It All Go…

According to the US Geological Survey, the vast majority (about 80%) of fresh water demand in developed economies comes from the power generation and agriculture industries (chart below).

Since water is a renewable resource, naturally filtered by the Earth over time, the fundamental issue going forward is not the supply of the resource itself, but whether we can make use of innovative technology for efficient consumption, safety and improved access.

Water Innovation

Industrial and specialty chemical companies around the world are making major progress in this regard.

Below are some interesting examples of innovations in the technology of water infrastructure:

     - Nanotechnology in filtration - This technology removes microbes and bacteria from water using composite nanoparticles, which emit silver ions that destroy contaminants.

     - Membrane chemistry - Chemistry significantly contributes to innovative water treatment solutions, such as turning salt water into fresh water suitable for human consumption. Recent breakthroughs using ceramic membranes have been credited with forcing down the cost of desalinated water anywhere between 20% and 50%.

     - Seawater desalination - Seawater desalination is very expensive, consuming around 4 kWh of energy for every cubic metre of water. One solution being explored is biomimicry, that is, mimicking the biological processes by which certain plants or fish extract seawater using minimal energy.

     - Smart monitoring - In developing countries it is estimated that 45 million cubic meters per day leaks out of distribution networks.

      - Wastewater processing - New technologies are promising to transform wastewater into a resource for energy generation and a source of drinking water. Modular hybrid activated sludge digesters are now removing nutrients to be used as fertilizers and are, in turn, driving down the energy required for treatment by up to half.

August 30, 2019


What is the “adaptive immune system”?

The adaptive immune system is likely the most vital system of the human body, protecting us from everything from the common cold to serious diseases.

The immune system is considered to be "adaptive" because it can respond to our unique environments.

However, fully understanding adaptive immunity is one of the major challenges of modern medical science.

Why it’s important…

The ultimate goal is to map the immune system, that is, to find which receptors cause disorders, for example, or which protect us from the flu.

Researchers believe that the adaptive immune system is nature’s most finely tuned diagnostic and therapeutic for diseases.

Once fully understood, they envision personalized immunotherapies to enhance the immune system’s disease fighting capabilities are more likely to be used relative to current pharmaceutical treatments (i.e. chemotherapy).

For now however, the inability to decode the immune system is preventing the medical community from fully leveraging its capabilities.

It’s a matter of complexity…

In 2003, the scientific community successfully mapped the human genome (accounting for approximately 20,500 genes).

This has since has given the world a resource of detailed information about the structure, organization and function of the complete set of human genes.

Much like genes, immune systems vary from one person to the next, providing immunities depending upon what microbes an individual has been exposed to throughout their lifetime.

Unlike genetics however, there are millions of harmful microbes resulting in an immense array of immune system variations.

According to one researcher, the possible variation of immune receptors is roughly 10 million times more than the number of stars in the Milky Way galaxy or 100-fold the number of ants on Earth.

Even with modern scientific instruments, a complete map of the immune system would take over 100 years.

Enter the Big Tech Companies

Today several biotech companies are combining the expertise of immunologists, mathematicians and computer scientists to develop cutting edge computational tools to study the immune system.

In many cases, they are increasingly supported by capital investments from big technology companies, but more importantly, tech companies provide the massive computational infrastructure for these big-data problems.

This powerful combination will surely assist in developing new precision medical diagnostics and patient-centered immunotherapies


The stock market exists to provide companies with an opportunity to obtain capital by selling shares to investors.

Public markets have been around for centuries and probably always will be, but over the past two decades, stock market has been getting smaller…a lot smaller.

Trade battles and nervous investors impacting day-to-day market valuations aside, the trend here is the secular decline in the number of publicly listed companies on North American stock markets.

In the US the decline started in 1997 (chart below).

The trend in Canada is similar, from 2007 the number of publicly listed companies has declined 17% according to the TMX Group.

So where is everybody going?

There are several interrelated trends here:

1. More Mergers & Acquisitions (M&A)

One obvious cause of fewer stock listings is the increase in M&A (when one company acquires another, or when two companies merge, stock listings disappear).

A few recent (or pending) transactions include:

    - AT&T’s takeover of Time Warner.
    - Allergan taking over Abbvie.
    - Onex buying Westjet.

2. Fewer IPOs

Stock listings are not disappearing due to simple attrition (i.e. takeovers or bankruptcies), the number of initial public offerings (IPOs) is declining too.

In Canada IPOs hit a two-decade high of 355 in 1997, according to the Financial Post. In contrast, last year there were just 54.

3. Increasingly, Companies Prefer Staying Private

Privacy has its advantages:

    - It’s cheaper – public companies must deal with the cost burdens of financial regulations and regular reporting requirements.

    - More control & longer term focus – private companies are not beholden to the scrutiny of public investors and analysts following a quarterly reporting cycle.

The era of low interest rates has made staying private an option for many companies due to the increased appeal of using debt financing instead of raising money by selling stock (generally a more affordable option when rates are higher).

So, since 2008 companies are finding it easier to get private financing and to never go public.

4. The Rise of Private Equity & Real Asset Investing

Low interest rates and uncertain markets have increased the demand for private investments.

So, where are all of the publicly listed companies disappearing to?

Many are going to going private by way of the Private Equity (PE) Takeover.

The private (“institutional”) market has more than doubled in size between 2008 and 2018, from $20T to $55T today, with expectations to reach $100T by 2030. It is primarily large institutions like pension funds which are providing the funding here. With the bond markets paying almost nothing, they need to find alternative investment strategies.

Beyond what is already invested here, the cash pile (‘dry powder’) available to private equity managers for more buyouts has grown to $2T (this will likely mean more public companies will disappear in the years to come).

What’s driving this?

In a low interest rate world, PE investors require cash flows to meet the liabilities of their primarily investors (usually pension funds) that can no longer be earned by investing in bonds.

So, the preferred source of this cash flow is from real assets such as real estate, utilities or infrastructure.

For years, PE buyers have been finding buyout opportunities in the stock of publicly listed real asset companies deemed to be ‘mispriced’, often by nervous by public investors.

For instance, this week alone the Australian Stock Exchange will be losing the listing of a retirement home operator and the TSX and Nasdaq may lose the listing of a renewable power company, both to private equity buyers.

August 2, 2019


It has been said that the digital age is destroying our ability to communicate.

But what do so many of us do when we’re on our phones… mostly we communicate, but by text message (SMS), chat or other form of social media.

Evolving Communications…

While person to person SMS is now fairly ubiquitous globally, there is substantial growth in the development of communication between people and devices.

Businesses are discovering the power of text as the world’s most preferred form of communication and it’s being facilitated by a particular form of cloud technology.

It’s called A2P (application-to-person) SMS.

Most of us have probably received A2P messages without even realizing it. Many businesses, such as banks, airlines, hospitals, and retail stores, use them to communicate with customers.

For example:

   - “Your Uber Eats driver is 1 minute away”

   - “Withdrawal of $2,500 from your RBC account”

   - “Your dental appointment with Helen is next Wednesday at 9am”

We love text messages…

One reason that the A2P market is growing exponentially is because it's in tune with today's communication trends.

Research shows that people prefer short, personalized notifications. A2P can match that preference easily.

According to Techjury, SMS messages are eagerly received by users:

   - 75% of consumers are OK with receiving SMS messages from brands (after they’ve opted in).

   - SMS messages have a 98% open rate (open rates for email are said to be in the 20% range), and;

   - 90% of the messages are read within 3 minutes.

The tech making it possible…

The Communications-Platform-as a-Service (CPaaS), a cloud-based platform that allows developers to build real-time, customizable communications services to their applications.

Think of a CPaaS like an old stereo system. The main stereo infrastructure is the receiver unit – that’s the CPaaS.

If you want to listen to cassette tapes, you don’t have to buy an entirely new system, you just add a tape player to the receiver.

Have a CD? Just add a CD player etc. Instead of having different pieces of equipment or technology, you have a centralized system made up of different components.

Established businesses across the globe are realizing the value of embedding communication technology into digital business processes to enhance customer experiences and engagement, enable operational efficiency and create new opportunities to generate revenue.

According to IDC, corporate and government spending on CPaaS is forecasted to grow to $10.9 billion by 2022 (this equates to annualized growth of just over 39% from 2017 levels).

What’s coming…

The huge popularity of messaging has led developers to ask the following question: if people like texting so much, why not make it the option for ‘talking’ to digital services and creating more immersive experiences (i.e. video, augmented reality or virtual reality).

Where A2P only consists of push messages and notifications to a mobile phone, further development of CPaaS allow conversational messaging by machines (chatbots) which is shaping up to be the future of front line customer engagement.

Equally so, to remain competitive in the digital world, enterprises need to engage their customers in innovative ways and according to their individual preferences.

CPaaS is the ideal platform to accommodate this omni-channel approach.

July 19, 2019


Recently I was out with my wife and two young daughters running a few errands on a summer weekend. My wife remembered that the girls could use a 7th pair of shoes and we should stop by the shoe store, it was nearby.

However, as we pulled into the shoe store parking lot we were met by a vacant storefront – another victim of ecommerce.

For years ecommerce has been disrupting brick and mortar retail. And it continues...

With ecommerce accounting for just over 11% of all retail sales this year and projected to continue ramping up (chart below according to CBRE), the runway for compounding market disruption remains long.

Early Ecommerce Models

Ecommerce originated as a broad internet platform open to all retailers and small businesses to sell goods on.

Retailers gave up access to customer data and pricing control in favor of generating higher sales volumes through this new channel.

Over Years, Two Things Happened:

   1. Ecommerce platform companies become consumer products companies…

Seeking continued growth, ecommerce companies are now less inclined to stay in their sector and are using their massive scale and access to data to pull off a classic retail trick.

That is, observe which products sell well, then introduce private-label brands to grab market share.

By adjusting search results, ecommerce companies direct consumers to their own products, outcompeting other suppliers.

To be sure, a recent paper by economists Feng Zhu and Qihong Liu observed Amazon’s behavior over time, and found that it tends to introduce products in niches that smaller merchants did the work of discovering by finding out what consumers like.

   2. Customer data & brand experience have become extremely valuable to control…

With improving technology (i.e. cloud, AI etc.), access to information and proliferation of last-mile logistics infrastructure, the barriers that existed previously preventing manufacturers from selling directly to the consumer have effectively been removed.

Today brand owners and manufacturers are less satisfied with traditional ecommerce platform arrangements, instead wanting to capture valuable customer data themselves, control prices and the customer experience via their own, independent ecommerce sites.

The Independent B2C Evolution

Individual businesses no longer require ecommerce platforms or established retailers to sell their products and can now provide a more personal experience by connecting with customers directly.

For example, Bose need not rely on other retailers to sell its products when it can connect with customers through its own digital store.

B2C Ecommerce Platforms

Today merchants large and small can use a single interface to set up and sell through their own online store.

Just as WordPress made it easy for anyone to set up a blog or content website, B2C ecommerce platforms let anyone set up and run a digital store immediately, cost efficiently and with minimal technical expertise.

The most advanced B2C platform companies act as a hub for tracking inventory, shipping, sales, and marketing analytics.

July 5, 2019

The Federal Energy Regulatory Commission recently announced that electrical generating capacity by renewable energy sources (i.e., biomass, geothermal, hydropower, solar, wind) has now - for the first time - surpassed that of coal.

Renewable energy now powers over 21% of US generating capacity.

The US Energy Information Agency’s forecasts that renewable energy is going to be the fastest source of power through 2050, accounting for about 50% of new electrical generating capacity.

Similar growth rates (or even faster) are expected globally, creating a multi-decade growth (and income) catalyst for investors.

The Renewable Power S-Curve

The general S-Curve shape is indicated below.

This pattern occurs frequently in charting growth and is especially relevant to describe the adoption of any new technology.

The X-axis displays the passage of time; the Y-axis displays the % usage of the technology by the general population.
   a) Beginning Stage: New technologies are expensive, inefficient and not well understood; adoption is slow.
   b) Ascent Stage: At the “inflection point” (when the curve slope starts to rise sharply) the new technology is finally achieving pricing power, efficiency and broader acceptance.

Adoption grows exponentially.

Shareholders also can make great profits.

With high growth rates, but still small overall share of global energy production, the renewable power industry is entering the Ascent Stage of the S-Curve.

Growth Factors

The secular restructuring of global energy production is being led by fairly clear factors such as…
   - Concerns about climate change;
   - Associated government policy and subsidies;

…and major, durable secular factors such as…
   - Superior economics;
   - Historically low cost of capital;
   - Increased demand from financial investors for long-duration renewable assets.

To be sure, the green energy megatrend is underpinned not so much by politics or subsidies (anymore), but by economics.

Rapid decreases in the cost of solar and wind energy have occurred over the past decade, with projections for further price efficiencies over the next 18 months (highlighted in the chart below).

In the context of all sources of energy production, wind and solar are now the least expensive energy production options:

Obstacles for Renewables: Baseload Power

The baseload on an electrical grid is the minimum level of demand upon it.

Traditionally, the baseload must be supplied by unvarying power plants such as coal, natural gas or nuclear.

Solar and wind have not been a good baseload source of power, due to the variability of both.

However, this hindrance is now starting to be effectively managed with battery storage technology (used to offset variability), which is, itself, in rapid cost decline. Between 2010 and 2030 is expected to decline by about 80% (as per the chart below).

Putting It All Together…

Low interest rates provide additional incentive for utilities to retire aging coal facilities, lock in low financing costs and invest in new, long-life, cash flow generating renewable power developments.

As a corollary to low interest rates, financial investors, particularly private equity, pension and sovereign funds are searching for yield to support growing retirement income liabilities.

Long-life, cash flow generating renewable power assets fit this criteria neatly.

To put all of this very succinctly, pictured below is the investment trend:

June 21, 2019


Ask anyone selling their home (or even preparing to do so), and they will tell you it is a very stressful process.

In fact, in an online survey from Britain, respondents, given a choice to rank 6 life events in order of stress, prioritized the prospect of selling a home as the most stressful.

Beyond the stress, listing a house for sale has become a low-tech process (some agents still use fax machines!).

You interview agents, fix your mind on a selling price, decide how much time and money to spend repainting walls, fixing things up and staging.

Pets are moved out, and then showings and open houses begin.

The sellers wait for an offer to materialize…how long will it take, will it be conditional, will it be high enough?

Enter the Algorithms

Today AI algorithms are quite sophisticated and can be finely tuned relatively quickly.

Presently, growth in the AI industry comes not from new technological developments per se, but from extensions of existing algorithms to new industries.

Recently, a few tech companies have been testing whether it is possible to buy and sell homes using computers.

These companies are called “iBuyers”.

Common factors, such as square footage and comparable sale prices, are crunched by the algorithms along with more distinguishing features such as sun exposure, proximity of schools, overhead power lines and busy intersections.

This process quickly computes an offer price for any home in a target market listed for sale.

Could This Be Your Dream Buyer?

For sellers not interested in selling a home via the traditional agent listing route, they simply accept an all-cash, quick-close offer from the iBuyer for their house as-is, no agents, upgrades, staging or open houses required.

The fee charged to the seller ranges between 6% and 13%.

While this may seem high, so far sellers are willing to pay a higher fee in exchange for peace of mind and the ease of selling quickly for cash.

In fact, in Phoenix where these algorithms are being put to the test, last year 5,000 homes (about 5% of existing home sales) were sold to iBuyers.

E-Commerce for Real Estate

iBuyers could as easily be referred to as ‘high tech house flippers’.

Backed by billions of dollars of venture investment, iBuyers are filling a fairly sizable real estate resale market niche that most industry veterans did not know existed.

After providing cash for a quick sale at a discounted price, iBuyers then arrange for some cosmetic upgrades and relist the house for sale on their own realty websites or shift the home off to a single-family rental investors.

According to one company active in this industry, the target is a 1.5% profit margin on each house flip.

The company projects that if it were a buyer in 5% of transactions in the United States’ largest housing markets, the business would generate more than $1 billion in annual profit.

June 7, 2019 

Searching for love online isn’t a particularly new trend.
Dating websites have been using proprietary algorithms to match singles for 20 years or so.
More recently though, a unique breed of smartphone apps (i.e. Tinder or Grindr) have focused on instant matching and have revolutionized the dating market.
Building on these successful platforms, a hodgepodge of specialty matching apps are benefiting from smartphone usage and technology. These apps range from:

  • Basic personal preferences… such as a partner who is a dog lover, bearded or a foodie…
  • …to a slightly ‘creepy’ GPS-focused app matching people who have physically crossed paths through location tracking on a user’s smartphone, it connects singles who happen to share the same commute, or even pass each other on the street.

Singles, Singles Everywhere…

According to an interesting article about single life by CNN (here):

  • In the U.S. there are approximately 110 million single adults (i.e. widowed, divorce or never married);
  • In Canada too, more people are living in single person households than ever before.

The growing total addressable market of singles is good news for online dating companies.
To be sure, many singles are actively turning to dating apps to meet a partner (the chart below plots the quarter-over-quarter number of paying Tinder users):
Secular Global Growth…
The increasing number of the single person households in North American is a long standing trend and is well understood by investors.
For our investing purposes, the most important secular growth trend for the future is the increasing number of single adults (by choice) in developing countries.
In fact two significant secular trends intersect with the universe of dating apps:

  1. Continued growth in internet access and/or mobile phone usage (below left chart);
  2. Delayed marriages and cultural changes, such as a slow shift away from arranged marriages in India and other Asian countries (below right chart).


May 24, 2019
Artificial Intelligence & the Property Insurance Industry
Earlier this month the Bank of Canada released a report stating that climate-change risks, including extreme weather events, is now being incorporated into its research.
The report identifies several industries that may undergo difficult adjustments, such as oil and gas, but also companies that may be exposed to more risk i.e. insurance companies, banks and asset managers.
In fact, this is already happening…have you seen your home insurance renewal for 2019 yet?
In 2018, insurance companies across Canada paid more than $1.9-billion to homeowners and property owners as a result of climate change, according to the Insurance Bureau of Canada.
For reference, up until the mid-2000s, insurance companies in Canada could expect to pay out $400-million a year in claims as a result of severe weather.
But now a single event can trigger claims of that size, such as last year’s tornadoes in the Ottawa region, which caused about $410-million worth in damage.
Insurance losses worldwide have been increasing as per the chart below:

So too has the frequency of climate-related events:

Mispriced Risk
Under current (out dated) insurance models, we all pay more when insurance companies lose.
In the insurance business, risks gets pooled together on a global scale.
This means that natural catastrophes that occur in other parts of Canada (or the world) push premiums up for all policyholders because insurers are paying out more for claims.
What is clear from the major premium increases over the past few years is that insurance and reinsurance companies have not been able to correctly asses and price the risk of these climate change events.
Risk Reassessment: An Opportunity for Artificial Intelligence
In order to asses climate risks posed to the insurance industry, massive amounts of data would need to first be collected then analyzed.
Using the 2018 California wildfires as an example, the risk assessment would begin with an analysis of unique factors affecting every single insured property such as: nearby fuel (vegetation), topography and road access - all of which played significant roles in the catastrophe.
This kind of assessment is quite obviously very expensive and time consuming for any one company to undertake on its own

May 10, 2019
The Innovation Environment: Environmental, Social & Governance (ESG) Investing

The evolution of social preferences can create new, interesting long-term secular growth investment trends.

ESG, once a (often underperforming) niche area of the investment world, is growing in significance amongst institutional and retail investors.

The practice of ESG investing began in the 1960s (referred to them as socially responsible investing) and involves investors excluding stocks from their portfolios based on business activities such as tobacco production.

Today, ethical considerations and alignment with values remain common motivations of many ESG investors, but the field is rapidly growing and evolving, as many investors look to incorporate ESG factors into the general investment process alongside traditional financial analysis such as valuation and dividend growth rates.

In fact, according to research from PWC, ESG investing is expected to grow very rapidly in the future.

It estimates that by 2025, ESG will increasingly be accepted in the US due to rapidly increasing client demand (new investor groups i.e. Millennials and institutional investors etc.).

By the end of 2018, nearly US$9 trillion of assets in the US are following some form of ESG investing.

ESG is Feel Good Investing, But Does It Perform?

A common concern with this style of investing is the idea that incorporating ESG factors into the investment process will hurt performance.

A study from MSCI suggests that companies with robust ESG practices displayed a lower cost of capital (i.e. they can borrow at preferred rates) and, on average, have stock with lower trading volatility.

Adding to that, PWC highlights a growing body of evidence showing that public companies with strong ESG credentials outperform their non-ESG peers.

ESG Consumer Values are Starting to Change Industries…The Trend to Vegan Meat is a Key One

A massive industry soon to be disrupted by ESG is the meat business (a $1.4 trillion industry globally).

In fact, there’s lot wrong with the food system. Beyond the obvious slaughter of animals, producing meat by raising animals on factory farms is inefficient and produces tons of greenhouse gases. (Some analysts even think that we can’t tackle climate change without addressing agriculture industry emissions.)

According to CNBC, 38 pounds of feed, 1,799 gallons of water and 260 square feet of land is required to produce 1 pound of beef. The process also generates 16 pounds of CO2 emissions.

‘Meat alternative companies’ endeavor to address these inefficiencies and have attracted high profile investors including Bill Gates, Richard Branson as well as the venture capital divisions of companies least expected to have them: Tyson Foods, Campbell Soup and General Mills.

Meat alternative companies come in one of two types: Lab Grown (also referred to as cultured or clean meat) and Plant-Based Proteins.

Lab Grown

This is an exciting area of innovation, in its infancy and certainly worth describing here briefly, but unfortunately for investors there is no publicly listed investment (at least for now).

The meat product is entirely animal-based, but avoids the need to breed, raise, and slaughter huge numbers of animals (see diagram below). This process also results in a material reduction in water use and CO2 production.

There are several companies working on lab grown meats. Progress is being made. Costs per pound of lab grown beef have come down from $18,000 per pound to $2,400 (but clearly it’s still a few years away from the grocery aisle).

Plant-Based Proteins

Here, plant proteins are mixed with canola or coconut oil and seasonings to resemble various beef or chicken products.
While this might not appeal to everyone, the key trend here is that plant-based proteins are no longer just a meat replacement for a small group of vegetarians; it’s now its own (rapidly growing) category, driven by ESG consumer preferences.
NPD, a food industry research company, announced recently that case shipments of plant-based protein from distributors to restaurants increased by 20% in 2018.

This trend will surely pick up this year as McDonald’s this week announced that it will introduce a meatless burger and Burger King, after a brief test in select cities, announced plans to roll out its meatless burger across the US.

April 26, 2019

INNOVATION ENVIRONMENT: The Cannabis Real Estate Industry

Certain real estate investments intersect very nicely with long-term secular growth themes.

Many of these have been discussed in this blog in the past, such as sustainable infrastructure, data centre real estate and cellular communications towers.

One area yet to be discussed is the legalization of recreational cannabis, which has generated great interest and investment from all quarters, and its intersection with the world of real estate.

Noted in PWC’s Emerging Trends in Real Estate 2019, the marijuana industry in Canada (and the U.S.) requires major warehouse, greenhouse and retail space to meet the demand of a growing market.

While a relatively new industry with limited data in Canada, we can look to Colorado, the first state to legalize recreational use in 2012, for how commercial real estate was impacted.

There, the experience is indicative of strong growth in demand for warehouse space for marijuana grow-ops and retail stores for distribution and sales.

For instance, according to CBRE, by the end of 2016 cannabis growers occupied 4.2 million square feet of industrial real estate in Denver alone, an increase of 14% from the end of 2015.

Moreover, lease rates charged by landlords for warehouse grow ops were 2 to 3 times higher than other tenants.

According to the Altus Group (a real estate consulting firm), cannabis-growing facilities had already consumed over 8 million square feet in the first nine months of 2018.

Another six-plus-million square feet are in the pipeline (i.e. below is a schematic of an 800,000 square foot production facility near the Edmonton Airport).

Long-Term Growth Prospects

The online publication Futurism produced a short, but insightful briefing on the long-term potential of the cannabis industry.  This can be found here.

To summarize, in the 1940s scientists discovered that the human body has receptors that bind with the chemicals in cannabis.  However, since cannabis was treated by the law as a controlled substance with no presumed medical benefit, further research was essentially curtailed.  This is only now starting to charge, creating a long-term investment opportunity in this industry.

With this basic knowledge, reductions in governmental regulations in many areas around the world and expanding private sector investment, the recreational and medical cannabis industries are an area of long-term secular growth.

March 1, 2019


What is P2G?

The process of converting excess electricity from the power grid produce to hydrogen.


Hydrogen has an extremely high energy content (see below chart) and can act as an important storage medium and a means of balancing power distribution networks.

Once stored, hydrogen gas can either be converted back into electricity when needed by generating power and heat in fuel cells, or, by being blended into the natural gas pipeline network.

A Hydrogen Primer…

Hydrogen is often cited as the energy source of the future, because it offers an effective response to two of the main energy challenges of our time:

     1. The gradual depletion of oil and gas reserves.

     2. The need to cut greenhouse gas emissions and pollution.

The key benefits of hydrogen are:

     1. Its ability to generate electricity.

     2. The combustion of hydrogen is carbon free, releasing only water.

For example, hydrogen makes it possible to consider zero-pollution (electric) vehicles with a long range between recharges and a high level of energy efficiency.

The (temporary) drawback: hydrogen production, storage and transportation require more advanced technological optimization (mainly to reduce costs), meaning that its widespread introduction can be realistically envisaged in the next 5-10 years (according to the International Energy Agency).

P2G in Action

North America’s largest multi-megawatt P2G installation started functioning in June 2018 and is located in Markham, Ontario (other major utilities and energy companies are experimenting with their own systems in Europe and in Asia).

The following schematic outlines the system in Markham:

Patrick Fisher, CIM, FMA

Portfolio Manager & Investment Advisor