FidelityConnects: Oil and opportunity: Canada’s resource story

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<b>Subtitles are AI Generated</b>

 

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Hello, and welcome to Fidelity Connects. I'm Pamela Ritchie.

 

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The TSX was one of last year's quiet overperformers

 

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delivering steady gains and entering this year on pretty solid footing.

 

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Nearly 30% of the index's gains were driven by gold

 

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underscoring the depth of Canada's resource advantage.

 

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Now, that advantage is meeting a powerful new catalyst in AI.

 

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Joining us here today to break down how he is viewing Canada,

 

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the story of Canada for investors, where resources fit into the next phase

 

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of growth, and the opportunity set within is Global

 

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Natural Resources Fund portfolio manager, Joe Overdevest.

 

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Joe, perfect time to be speaking to you.

 

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Welcome. How are you?

 

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I'm excited to be here.

 

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Delighted to have you here.

 

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We'll invite everyone to send their questions in over the next half hour or so

 

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for Joe. I want to ask you to level set us on the discussion

 

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of natural resources broadly but really Canada's place, oil's

 

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place, Canada's oil discussion, within the global oil market

 

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right now. Tell us where we are.

 

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There's a lot of pieces coming together.

 

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Canada looking all right here?

 

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Canada looks great. Canada has great resources, great potential.

 

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We'll get into some of the things that could further our development.

 

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When you look at the big commodities, of course, everyone's front page news, a

 

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little bit more is gold and then copper which makes sense.

 

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What's going on there is pretty powerful.

 

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I would say to this audience too, don't forget oil.

 

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Oil is still a very key commodity in geopolitics and, more importantly, how the

 

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world uses it in a significant fashion.

 

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Right now it's probably being held back by OPEC but at some point in time  when

 

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OPEC comes off in the supply they're putting on the market, the supply and

 

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demand of oil could tighten up and you have a catch-up story as well with

 

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oil. You're seeing that in the stocks, the stocks are discounting higher oil

 

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prices versus what you're seeing in the spot market.

 

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Canada has a great amount of potential and we can dig into it today.

 

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Let's dig into it a little bit.

 

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The idea is that if there's less flooding of the market, basically, from OPEC

 

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Canada steps up as the so-called reliable producer, which it's always been.

 

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We hope one day with better options to send that commodity around

 

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the world, tell us what is standing in the way of that sort of

 

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getting there.

 

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The first one would be oil price. If the oil price is

 

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like high 60s you'll see a little bit more development across the world, not

 

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just Canada. Number two, I think what you're alluding to is policy.

 

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I think what happens right now is the Liberal government are deciding how do we

 

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move forward with this in terms of pipeline pathways,

 

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which is carbon sequestration, which, of course, hopefully leads to more

 

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development. I think when you look there

 

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just some clarity would be nice. There's a lot of talk, and I think that's

 

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really what we're waiting on right now because, again, a pipeline would get to

 

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new markets, would open up maybe a better oil price, less of a discount,

 

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versus predominantly selling it to one major customer right now being the US.

 

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Let's say that some of those things do get managed over the course of the next

 

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5, 6, 7, 8, 10 years. Again, where does Canada sit in terms of

 

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sort of the reliable player versus, I mean, OPEC, lots of

 

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people buy oil from OPEC, North America included, but there have been

 

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stories of it being unreliable in certain areas, being kind of a wonky

 

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alliance of producers.

 

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I don't know to what extent Canada sort of markets itself outside

 

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of that as the reliable producer. What's that worth, or is it worth something?

 

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It is worth something because, again, especially even the last 12 months or

 

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even two years we're seeing how geopolitics are affecting many sectors.

 

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I think, at least right now, Canada actually stands very high

 

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in terms of people trust Canada not only for oil but

 

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other resources or other goods as well.

 

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That's great, and our standing relatively is actually probably going higher not

 

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lower. I think what happens as well is that when you look at

 

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Canada, we also have, obviously, a relationship with the US but also we

 

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have global market access. I think that's where we can develop.

 

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When you look at major, let's say oil supply, OPEC's number one.

 

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Other suppliers in the world actually are growing, are the US.

 

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That relationship maybe has been tarnished a little bit globally.

 

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On the margin your top two growth areas are already

 

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kind of looking like, well, maybe we should look to Canada.

 

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The other areas would be offshore, maybe Africa which, of course, comes

 

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with some risk as well.

 

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To your point of knocking off some names

 

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Canada stands out as something that would be opposite to some of these.

 

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Really, what we're looking for now is maybe in particular our governments as

 

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well to negotiate some of these things would be very beneficial for the

 

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country. The resource is there, the producers want to do it, we have the

 

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people to do it, it's really a matter of dotting the I's

 

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on some of these contracts.

 

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The power that's needed to power AI has been discussed a lot for

 

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green energy reasons to build up nuclear, to build up all

 

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kinds of other green energy, and that seems to be a go in a lot of ways because

 

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all kinds of energy are being thrown at it.

 

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What does it mean for oil though, as well?

 

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Is that the flame under the policy to say let's get ...

 

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is AI the reason that oil will be easier to market around the world?

 

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I think AI will be more driven in the short term on natural gas and longer

 

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term nuclear. The reason why is more natural gas plants

 

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could come on at a quicker pace. I think nuclear is more because if

 

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AI plays out the way it is right now, it's a very dynamic situation, as you can

 

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imagine, but if the pace of what the hyperscalers are talking at

 

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you're probably going to need nuclear.

 

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The natural gas will be part of it but some of

 

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these facilities will be very, very big.

 

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What's going on right now, of course, in Canada, we could be part of that

 

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solution as well, actually, building out nuclear reactors not just in Canada

 

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but worldwide because we have some technology, one of them being, in

 

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particular, CANDU.

 

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And we've got some uranium.

 

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Yes, we have a lot of uranium.

 

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We can definitely be a solution provider for that.

 

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Obviously, Cameco, one of our biggest companies here in the energy

 

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sector not only produces uranium but also can actually help

 

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build, with Westinghouse, the actual reactors.

 

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There's a big deal that the US government wants to do through Westinghouse and

 

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that is sort of already in the so-called pipeline.

 

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In terms of oil powering the world today,

 

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the future, the demand story for going further beyond just

 

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maybe we're a reliable player, speak to the demand ultimately of oil power in

 

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the world in years to come.

 

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I think that's one of the stories too. You talk about different commodities and

 

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we always look at supply and demand. Maybe copper might be growing around 3%,

 

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accelerating potentially to 5% as we electrify the grid.

 

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We bring in more data centres.

 

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All this helps copper, even EVs.

 

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On the oil side story the growth is probably less.

 

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It's probably a little less than 1% but the oil markets are still seeing demand

 

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growth. I think that's a very key point.

 

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Some of that is emerging markets but also as the world GDP goes up

 

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oil generally goes up with it. You're just seeing anemic growth.

 

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Outside of the OPEC growth we're seeing right now of moving barrels on

 

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the market there's not a significant amount of growth.

 

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One of the other areas would be Canada and the US.

 

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When you look at Canada and the US really only the major players in terms of

 

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the large integrated names, the Exxons, the Imperial Oils, or even Suncors,

 

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are growing a few per cent per year.

 

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The other players are marginal at best.

 

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Even some of the biggest players like Diamondback Energy in the Permian, it's

 

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flattish.

 

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When you think back at other kind of commodity cycles the key players who

 

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are the higher growth companies are not flattish.

 

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They're growing at very high level.

 

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I think the larger companies, if they're the ones growing it makes sense

 

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because they're the last ones usually to cut.

 

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It's really a story in an oil market, demand continues to do well

 

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and, really, the supply is pretty anemic.

 

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Once this OPEC overhang goes away I think as Canadians,

 

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as investors in general, don't be too complacent on energy markets because

 

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energy, in particular, this past year the stocks actually did well because

 

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they're pricing in a higher oil price.

 

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They're pricing the...

 

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The demand of the future.

 

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The equities are a discounting mechanism.

 

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They see that this OPEC overhang potentially is more of a shorter term thing,

 

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that oil prices could come back when this goes away.

 

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Did Venezuela, the event, we know what it is, did it

 

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scramble the short term story?

 

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Does it scramble the long term story for Canada, ultimately,

 

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and what it ships to the US?

 

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Venezuela, the timing was interesting.

 

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I did 300 meetings last year with CEOs and CFOs.

 

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Wait, hang on, back up, 300 meetings?

 

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Three hundred, yeah.

 

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Basically, one per day throughout the year if you average it out.

 

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We're very fortunate to work at Fidelity, the resources and

 

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company access.

 

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This year-to-date was 70 meetings already.

 

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Actually, I was in the Global Energy Conference when the

 

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Venezuela news broke.

 

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Some government officials from the US spoke, we also had the majors,

 

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some of them producing in Venezuela as we speak.

 

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Venezuela, for the audience, obviously, yes, it's like just under a million

 

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barrels per day. In the peak it was around over three.

 

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The question for the audiences is, what does this mean in the short term?

 

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It probably means a few hundred thousand barrels per day potentially come on

 

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because you just had such a disarray of mismanagement for a long period of

 

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time.

 

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As Canadians we have to watch, some barrels could displace our barrels because

 

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we're sending them heavy oil, in particular, into Canada.

 

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Mexico and Venezuela used to produce as well heavy oil, their numbers have come

 

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off the last years. We have gained shares, Canadians.

 

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For the audience, all of a sudden we had to preface what this means.

 

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Doesn't mean they don't buy our oil but we have to maybe compete for

 

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market share. The price we get might be less than it was if Venezuela

 

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wasn't producing so much but we still get a decent

 

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price to oil markets.

 

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Again, back to your point, it's great if then we can have over time,

 

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and this is what the Liberal government's trying to figure out, how we can find

 

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other customers.

 

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No matter what your product is you want multiple customers to get the best

 

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price. I would say, in particular for Venezuela though, if you watch

 

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closely what the public comments are saying on these oil companies it's like,

 

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okay, it's safe on the ground, the resource is there, but the big

 

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third part is what are the economics of this.

 

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Am I doing a deal with the Venezuelan government or the US government?

 

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The US government can move and change in two, four years, what

 

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backings ... so they're waiting for someone to give clarity.

 

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So we both need policy clarity in Canada as well.

 

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They need policy clarity.

 

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We've got it on autos, AI is coming, we think, we've got defence, we've got all

 

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kinds of things. What will their cumulative retooling

 

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of policy in a perfect world mean for resources in Canada?

 

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That's one of the questions because we're trying to, essentially, mine our own

 

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resources for our own ...

 

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to sell to other clients but to also to use towards our own economy.

 

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What does it mean, new policy being written?

 

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You're already seeing it a little bit. I would say the Liberal government is

 

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probably right now been more open to development in copper and gold, for

 

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instance, those mining sectors.

 

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And you've definitely seen that, yeah.

 

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I think just easing of restrictions and speeding things up is very helpful.

 

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I think what's interesting is that because it's a minority government the

 

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Liberals have to watch that like oil is more sensitive than copper is.

 

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It's just the way it is politically.

 

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So copper and things that help with that type of policy can be written faster.

 

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It seemed to be written faster, for sure, the oil markets,

 

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when we talk about pathways or pipelines there's still a lot of talk.

 

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It is the essence of the government.

 

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When you have a minority government you need to get other people on side

 

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and oil is definitely a little more sensitive. What you're seeing in copper and

 

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gold, a lot more in terms of development and a lot quicker and

 

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a lot of more confidence. Even when you talk to CEOs,

 

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it's a drastic contrast the last 10 years versus today.

 

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I think that's what you hope for in oil, when they come to you and say, you

 

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know what, things are a lot easier to get done, we're very confident.

 

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Confidence is a big thing in the capital markets but also in capital

 

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allocation, and what the CEOs want to actually put in the ground, especially

 

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when you're talking billions of dollars, we're not really there yet on oil.

 

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We're definitely further along on copper, for sure.

 

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Do you want to bring in sort of the broader Canadian investment thesis, let's

 

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take a look at the financial sector, the banks themselves.

 

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They've sort of, in terms of talk, which you were saying, ready to be

 

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there to help provide whatever capital market support they can provide

 

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to parts of growth within the Canadian economy that has to do with natural

 

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resources. What do you think of the banking sector?

 

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I mean, it's been an amazing place for a lot of investors to be.

 

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What do we need to know about the future?

 

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The Canadian banks right now are actually generally boring in a good way.

 

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There's nothing major controversial, their business models are great business

 

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models so very high ROE businesses, high dividend yields, and they're focused

 

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on dividends and buybacks.

 

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They're not really that focused on doing major acquisitions at this point in

 

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time in the US.

 

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I was going to ask you that.

 

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You hear a lot about consolidation of US banks, regional, smaller,

 

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there's always a question about that.

 

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Would Canada be the one that does some of the acquiring in that situation?

 

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I don't know.

 

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It's a great question. The US banks have been a target for the Canadian banks

 

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for a period of time because we're very consolidated here in Canada so they

 

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look to the south. I would say that the feedback from investors is probably

 

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walk before you run. It would be preferred by investors

 

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probably a little more bite size and more in terms of dominate

 

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a region. That's the one thing when you go into another region in the US, in

 

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particular, there's all these other banks like JP Morgan who already number one

 

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share, Wells Fargo, so you're already coming in as a marginal player, but maybe

 

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if regionally you can dominate one area it's a little beneficial, or

 

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one segment. I think right now the banks actually all look

 

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very similar. They're all doing dividends and buybacks and they're focused

 

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on their cost efficiency.

 

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Again, almost like the Canadian stock market in general, quietly doing

 

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extremely well.

 

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What we're looking for there is potentially an acceleration of earnings growth.

 

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For banks, the earnings growth had been subdued for the last few years because

 

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they put a lot of credit on the books.

 

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They're worried about the mortgage, they're worried about all kinds of things

 

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happening.

 

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They're worried about USMCA, they're worried about mortgages, so they

 

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pre-booked a lot of credit issues. Every day that goes by and there's

 

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not issues, potentially, you have credit releases.

 

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The USMCA negotiations will be a big thing about how much could actually be

 

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released but you're already starting to see the potential there.

 

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Earnings are subdued, you potentially have earnings acceleration

 

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when these kind of credit issue subside.

 

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Hello, investors. We'll be back to the show in just a moment.

 

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I wanted to share that here at Fidelity, we value your opinion.

 

15:19.518 --> 15:22.554

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else you get your podcasts. Now back to today's show.

 

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Really, really interesting.

 

15:45.444 --> 15:49.615

Let's go into the more resources

 

15:49.615 --> 15:53.719

sector, other types of resources, what you see there for a right now

 

15:53.719 --> 15:57.957

discussion. Within your portfolios you're leaning towards which areas?

 

15:57.957 --> 16:01.193

Let's talk a little about allocation.

 

16:01.193 --> 16:04.363

Darren and I who are in the global natural resources, and anyone else when we

 

16:04.363 --> 16:06.665

look at resources here on the team, supply and demand.

 

16:06.665 --> 16:09.668

The tightest supply and demand would be gold and copper.

 

16:09.668 --> 16:13.038

We'll get into gold because it's not really a supply demand but tightest

 

16:13.038 --> 16:17.910

commodities or attractiveness, gold, copper would be up there.

 

16:17.910 --> 16:21.747

Probably oil would be next and uranium, uranium probably a little higher than

 

16:21.747 --> 16:24.450

oil right now just because of short term demand for it.

 

16:24.450 --> 16:26.652

Do you think that will peter out a little bit?

 

16:26.652 --> 16:30.889

I mean, there's a question mark of whether some of the excitement about

 

16:30.889 --> 16:33.792

turning towards nuclear has already been priced in.

 

16:33.792 --> 16:34.927

What's your call there?

 

16:34.927 --> 16:39.131

I think the demand for nuclear actually can continue to grow if

 

16:39.131 --> 16:42.701

AI grows. Right now these are some big numbers being put in place.

 

16:42.701 --> 16:46.705

Probably the bigger thing when you go further back, the AI technology is being

 

16:46.705 --> 16:50.175

adapted, what's actually being questioned in the marketplace right now is how

 

16:50.175 --> 16:53.579

do we fund this? To your point, the speed of it is ...

 

16:53.579 --> 16:56.315

because if you don't have the funding of it it may actually be a great

 

16:56.315 --> 17:00.019

technology, it may be used in a great fashion, but we actually have to spend a

 

17:00.019 --> 17:02.087

lot of capital to build these data centres.

 

17:02.087 --> 17:04.189

That might be the bottleneck right now.

 

17:04.189 --> 17:08.127

Is that why the US appears to have more data centres, and announcements about

 

17:08.127 --> 17:10.262

them specifically, than Canada?

 

17:10.262 --> 17:13.932

I mean, on a relative basis we're, obviously, a smaller country but...

 

17:13.932 --> 17:16.935

The data centres, number one is actually size you're alluding to.

 

17:16.935 --> 17:21.006

When you talk about these things you're talking like gigawatts.

 

17:21.006 --> 17:25.110

What you generally want for the audience here is that you'll say, you know,

 

17:25.110 --> 17:27.212

is it part of the grid or behind the metre?

 

17:27.212 --> 17:31.216

Behind the metre is fine but you don't have the backup ability sometimes

 

17:31.216 --> 17:35.254

that you would on a grid. Whenever you're looking for power sources you like to

 

17:35.254 --> 17:39.925

be on the grid, the point is it's very reliable.

 

17:39.925 --> 17:43.295

You can imagine with data centre we don't want things going down for any period

 

17:43.295 --> 17:47.332

of time. When you look at the grid and you say, okay, I need a gigawatt

 

17:47.332 --> 17:51.437

here, well, really the US, first of all, is an area where you can

 

17:51.437 --> 17:55.541

potentially do that, whereas Canada, it's actually tough to do that because our

 

17:55.541 --> 17:58.043

grid is just smaller. We're a smaller country.

 

17:58.043 --> 18:00.279

Number two is probably policy, and this is the difference.

 

18:00.279 --> 18:04.783

The US administration, federally and, in

 

18:04.783 --> 18:09.121

particular, state-wide, would be like Virginia and Texas stick out.

 

18:09.121 --> 18:12.825

They've been very accommodating to data centres, almost welcoming them and

 

18:12.825 --> 18:16.795

encouraging investment and speeding up approvals and making sure

 

18:16.795 --> 18:21.100

the taxes are attractive. Whereas here in Canada I think it's still a debate.

 

18:21.100 --> 18:25.571

It's a debate at the federal level and at the provincial level.

 

18:25.571 --> 18:28.006

How welcoming do we want to be?

 

18:28.006 --> 18:33.078

You can imagine most of these people who are building it are Americans.

 

18:33.078 --> 18:37.116

Do we to give the hydro power here in Quebec to an

 

18:37.116 --> 18:41.086

American data centre? That could be a discussion that maybe didn't go over so

 

18:41.086 --> 18:45.124

well. I think you're still debating about how we

 

18:45.124 --> 18:48.060

do this to make sure we protect our resources and our energy.

 

18:48.060 --> 18:51.463

Again, we're very much blessed to have cheap energy here.

 

18:51.463 --> 18:55.434

Lastly, I think also just the politics of what's going on in the US

 

18:55.467 --> 18:56.802

and Canada.

 

18:56.802 --> 19:01.106

There's still a policy piece to what you're talking about right now as well.

 

19:01.106 --> 19:04.776

I think there's a sensitivity. Even just a few months ago we still had a

 

19:04.776 --> 19:08.881

certain tax on a lot of the hyperscalers' revenue here

 

19:08.881 --> 19:12.851

which was something that we pulled back here in Canada but you can imagine

 

19:12.851 --> 19:16.221

even for a hyperscale it's like, okay, you had this special tax on me and I'm

 

19:16.221 --> 19:20.225

Meta, what other tax are you going to put on me if I

 

19:20.225 --> 19:23.795

also build an AI data centre?

 

19:23.795 --> 19:26.999

All those things need to be solved right now but you will see data centres was

 

19:26.999 --> 19:30.736

probably built. In particular Alberta is being talked about right now with some

 

19:30.736 --> 19:34.806

potential, not the same size of the US, but probably

 

19:34.806 --> 19:38.777

if AI continues almost all countries would in some fashion will have

 

19:38.777 --> 19:42.548

their own data centre.

 

19:42.548 --> 19:46.785

To your point, the last thing is sovereignty too, where the data comes from.

 

19:46.785 --> 19:51.223

And where it lives. We learned last week, we were speaking to the CEO of Coveo,

 

19:51.223 --> 19:54.526

where it's computed and then where it's backed up.

 

19:54.526 --> 19:57.095

It's one thing to actually do the computation but then if you send it somewhere

 

19:57.095 --> 20:00.666

else for the backup once a month, twice a month, twice a week, whatever, that

 

20:00.666 --> 20:03.502

also means it's not sovereign because it's been somewhere else.

 

20:03.502 --> 20:05.337

Really interesting discussions to have there.

 

20:05.337 --> 20:09.675

You've got a whole bunch of questions coming in. Can I put some of them to you?

 

20:09.675 --> 20:09.775

Please.

 

20:09.775 --> 20:13.912

Back to OPEC, this is the discussion, does OPEC have a lot of spare capacity

 

20:13.912 --> 20:17.182

at this time? I mean, they kind of always do but tell us about that.

 

20:17.182 --> 20:20.686

They have spare capacity enough to be meaningful I would say is the thing.

 

20:20.686 --> 20:24.990

They're pausing right now releasing barrels. It'll be really interesting too

 

20:24.990 --> 20:29.328

... I'll be frank with the crowd here, the audience, OPEC's

 

20:29.328 --> 20:31.763

probably been more aggressive than they have been historically in terms of

 

20:31.763 --> 20:32.798

releasing barrels onto the market.

 

20:32.798 --> 20:35.300

There are lots of thoughts on why that is.

 

20:35.300 --> 20:38.670

We won't go there but they have been very aggressive about it.

 

20:38.670 --> 20:41.540

It's almost like their actions are not normal.

 

20:41.540 --> 20:44.343

They're almost like they're trying to hold back the oil price and it could be

 

20:44.343 --> 20:45.544

for political reasons that they're...

 

20:45.544 --> 20:46.612

Maybe, that's the argument.

 

20:46.612 --> 20:48.847

Exactly.

 

20:48.847 --> 20:52.384

When you look at OPEC, I will say too that there's always something, oh, they

 

20:52.384 --> 20:56.054

have a million or two million barrels per day, well, they're not audited,

 

20:56.088 --> 21:01.126

right? Our oil reserves are double-checked.

 

21:01.126 --> 21:05.097

There's always an impression you have to watch is that they want to give the

 

21:05.097 --> 21:07.933

world the view that they control the oil markets and they have a lot of

 

21:07.933 --> 21:10.836

capacity to go on or off.

 

21:10.836 --> 21:13.538

As always, you just have to understand where the data is coming from but they

 

21:13.538 --> 21:17.209

do have the ability, yes, to continue to put pressure on the markets, but they

 

21:17.209 --> 21:18.477

are pausing right now, yes.

 

21:18.477 --> 21:20.479

Okay, fantastic.

 

21:20.479 --> 21:24.750

Jason is sending us a question saying, lots of discussion about moving

 

21:24.750 --> 21:29.187

to nuclear, how long does it take to bring nuclear online?

 

21:29.187 --> 21:31.423

It's a long time and it's a good question.

 

21:31.423 --> 21:34.493

You and I had this discussion just a minute ago.

 

21:34.493 --> 21:35.527

Like ten years.

 

21:35.527 --> 21:40.098

Yes. The latest right now potentially is SMR.

 

21:40.098 --> 21:44.703

SMR is a small reactor, it's easier to even approve, it's easier to just

 

21:44.703 --> 21:47.005

... the people are funding it to feel comfortable.

 

21:47.005 --> 21:49.207

You can put it on wheels and roll it around.

 

21:49.207 --> 21:53.045

It sounds so compact. It's not quite but smaller and easier to build.

 

21:53.045 --> 21:56.248

Easier to build and I think that's more bite size.

 

21:56.248 --> 21:59.818

I think those are the ones you can knock off definitely some years.

 

21:59.818 --> 22:03.488

I think what's also interesting is that here in North America we're actually a

 

22:03.488 --> 22:06.291

little bit behind the rest of the world in developing nuclear reactors right

 

22:06.291 --> 22:10.228

now, which is funny in that normally North America leads it but I think we have

 

22:10.228 --> 22:14.433

such bad history, especially in the US, of building nuclear reactors,

 

22:14.433 --> 22:18.270

going over budget and too long that the US government is coming in with policy,

 

22:18.270 --> 22:22.040

and actually partner with Westinghouse here in the US and go, you know what,

 

22:22.040 --> 22:26.044

we're going to build, if not build, fund or support the first

 

22:26.044 --> 22:28.280

eight or ten reactors in the US.

 

22:28.280 --> 22:32.451

I think their hope is that everybody else is going to see in America

 

22:32.451 --> 22:35.654

the Americans build it themselves and go, you know what, the first few didn't

 

22:35.654 --> 22:39.558

go over budget massively or they're going okay, and then they're hoping other

 

22:39.558 --> 22:43.595

utility companies go, you know what, we'll go on the next two to three

 

22:43.595 --> 22:45.497

after that, two to four after that.

 

22:45.497 --> 22:48.266

I think that will help Canada as well because, of course, we'll supply the

 

22:48.266 --> 22:51.536

uranium but also we'll probably look towards that and go, should we have our

 

22:51.536 --> 22:55.607

own policy? If we don't at the very least seeing people build, and to your

 

22:55.607 --> 23:00.412

point, come on time, on budget, or at least close, would be a huge

 

23:00.412 --> 23:01.513

vote of confidence.

 

23:01.513 --> 23:05.517

Yeah, and create maybe the seeds for competition and getting it

 

23:05.517 --> 23:09.087

out there. Another question, how long does it take to build a data centre?

 

23:09.087 --> 23:11.490

I mean, I guess it depends on how big it is but, yeah, question coming in for

 

23:11.490 --> 23:14.726

you.

The actual data centre doesn't take long to build itself.

 

23:14.726 --> 23:15.994

It's more the powering of the data centre.

 

23:15.994 --> 23:20.632

It's pre-fab anyway.

 

23:20.632 --> 23:24.169

That's the benefit of the Fidelity global research, you probably started

 

23:24.169 --> 23:28.273

hearing about it almost 12 months ago where probably the higher level people

 

23:28.273 --> 23:31.376

who are involved with data centres said, you know what, the bottleneck is

 

23:31.376 --> 23:35.714

power. It's not getting chips anymore, it's actually the power side.

 

23:35.714 --> 23:39.951

It's still the power side and I would say

 

23:39.951 --> 23:42.954

when you want to do these things you say, like I said, okay, I need a half a

 

23:42.954 --> 23:47.325

gigawatt, I need a gigawatt, it's who can actually withhold that on the grid.

And

 

23:47.325 --> 23:52.063

then you're like, okay, well, I'll do it behind the metre all myself, well, the

 

23:52.063 --> 23:55.333

natural gas plant might take a few years.

 

23:55.333 --> 23:58.770

You don't have the provincial regulator watching to see how steady the supply

 

23:58.770 --> 24:02.607

is and to sort of be the backstop for that kind of oversight.

 

24:02.607 --> 24:06.044

That's when you go back to your nuclear. I think shorter term natural gas will

 

24:06.044 --> 24:10.015

be your solution for, potentially, data centres and longer term it's

 

24:10.015 --> 24:13.718

nuclear. This is something that most people in the industry would say as well.

 

24:13.718 --> 24:17.155

I think one of the things right now at this moment is affordability.

 

24:17.155 --> 24:19.057

It's very sensible these data centres.

 

24:19.057 --> 24:23.328

We can talk all this about Excel models, and we've talked about this before,

 

24:23.328 --> 24:27.365

investing is not just the Excel model it's also just the human or an EQ side of

 

24:27.365 --> 24:31.236

the analysis, affordability is a big deal.

 

24:31.236 --> 24:34.606

Even if the data centre can come on in a short period of time if the local

 

24:34.606 --> 24:38.577

people are not comfortable that their utility bills won't go up,

 

24:38.577 --> 24:40.612

and I think that's the thing, you're gonna have to see the data centre

 

24:40.612 --> 24:44.549

companies guarantee in some way some deal that says

 

24:44.549 --> 24:48.186

I'm gonna pay more than everybody else and make everybody else whole.

 

24:48.186 --> 24:54.259

Otherwise it is almost politically suicide to do that.

 

24:54.259 --> 24:56.962

To raise people's energy bills.

 

24:56.962 --> 25:01.032

Arguably that's the smoothing effect of government money and then corporate

 

25:01.032 --> 25:04.236

money coming in to essentially make that happen.

 

25:04.236 --> 25:08.073

Exactly. It kind of makes sense because utility bills are usually in many cases

 

25:08.073 --> 25:11.810

very much controlled. We have a regulator for utilities on purpose to make sure

 

25:11.810 --> 25:14.212

the average person doesn't get hurt.

 

25:14.212 --> 25:16.915

I think that's where some of the bottlenecks you're seeing right now as we

 

25:16.915 --> 25:20.285

speak is actually not the building of it, it's more like, okay, who's going to

 

25:20.285 --> 25:22.687

pay for this in terms of utility bills.

 

25:22.687 --> 25:26.725

They want to make sure that it's not the actual local mom and pop person who

 

25:26.725 --> 25:28.827

just owns a home.

 

25:28.827 --> 25:32.063

Again, that's a policy, it sort of kicks it back to policy being needed to be

 

25:32.063 --> 25:34.866

created for exactly at that.

 

25:34.866 --> 25:39.204

Take us a little bit to the gold story and the trade and the fundamentals.

 

25:39.204 --> 25:42.073

I feel like we should end out this way because it's what drove the TSX last

 

25:42.073 --> 25:46.144

year. Are the fundamentals the same after a pretty major hiccup a couple weeks

 

25:46.144 --> 25:50.148

ago in the gold price? Are the fundamental the same for gold going higher

 

25:50.148 --> 25:53.184

right now as they were most of last year, all of last year.

 

25:53.184 --> 25:57.422

The reason why we got here is still here. The reason we got here,

 

25:57.422 --> 26:00.425

I've been doing this for a while, sometimes it's interest rates, sometimes US

 

26:00.425 --> 26:04.396

dollar, no it's central banks. After Ukraine's situation happened central

 

26:04.396 --> 26:08.066

banks said, you know what, maybe I shouldn't own so much US dollar Treasury and

 

26:08.066 --> 26:10.068

you're seeing a mix shift.

 

26:10.068 --> 26:13.305

Almost all the major central bankers on the margin are adding a little more

 

26:13.305 --> 26:16.875

gold and a little less US dollars just a little bit on the margins.

 

26:16.875 --> 26:18.877

That's a big buying power.

 

26:18.877 --> 26:22.847

We talk about ETS, trust me, central bankers will dwarf many other buyers

 

26:22.847 --> 26:25.283

in the market by a significant margin.

 

26:25.283 --> 26:29.788

That continues, the central banks continuing to buy gold.

 

26:29.788 --> 26:33.758

Now the kicker more recently is US dollar has been weak, been connected

 

26:33.758 --> 26:39.264

to interest rate cuts in the US, in particular by the Fed the last 12 months.

 

26:39.264 --> 26:42.901

What's going on in gold, there's lots of volatility.

 

26:42.901 --> 26:47.038

There'll be a Fed announcement, who's the new Fed leader...

 

26:47.038 --> 26:51.042

That seemed to crack open some real fears about gold being too high

 

26:51.042 --> 26:52.844

but that said, we've seen that come back.

 

26:52.844 --> 26:56.748

I think that's more of a short term ... almost a reason to get a little more

 

26:56.748 --> 27:00.885

defensive. The actual fundamentals of why we got here has not changed.

 

27:00.885 --> 27:03.188

The kicker is people seeing deficits.

 

27:03.188 --> 27:06.524

No one really wants to cut spending on all these major countries.

 

27:06.524 --> 27:10.729

If deficits stay high at some point in time when you're thinking multiple steps

 

27:10.729 --> 27:15.000

in the chessboard you're like, gold might be sniffing out that these deficits

 

27:15.000 --> 27:18.336

are being solved, they're going to be solved by probably a weak dollar policy

 

27:18.336 --> 27:22.474

or by some extreme measures so hard assets of alternative

 

27:22.474 --> 27:24.776

currency become attractive.

 

27:24.776 --> 27:28.847

Are we at the beginning of a super cycle for commodities, broadly?

 

27:28.847 --> 27:30.615

I think every cycle is a little different.

 

27:30.615 --> 27:32.517

The last one was driven by China.

 

27:32.517 --> 27:34.819

It was just so massive in terms of demand.

 

27:34.819 --> 27:37.522

I think this one's just a little difference, nuance.

 

27:37.522 --> 27:38.957

I know people like to say history rhymes but...

 

27:38.957 --> 27:43.094

But is it sort of a slower burn because that was a pretty straight up, wasn't

 

27:43.094 --> 27:43.762

it?

 

27:43.762 --> 27:46.231

It's a slow burn.  That's what I'd like to tell the audience, right now this

 

27:46.231 --> 27:50.435

has been a slow burn. That's what's great about this market, it's page 20,

 

27:50.435 --> 27:53.271

commodities, Canada page 20. AI...

 

27:53.271 --> 27:59.577

Because you actually read newspapers like I do.

 

27:59.577 --> 28:02.747

I actually have physical newspapers. Page one is the US market and we quietly

 

28:02.747 --> 28:05.483

have been outperforming the last five years in terms of the Canadian stock

 

28:05.483 --> 28:09.654

market and Canadian resources. That's actually a good thing because

 

28:09.654 --> 28:12.257

it's less of like, oh, everybody's talking about it.

 

28:12.257 --> 28:16.361

It's definitely not the hottest sector by any means.

 

28:16.361 --> 28:18.797

Isn't it nice to live in Canada and to invest in Canada.

 

28:18.797 --> 28:21.833

I think those are all really good stories.

 

28:21.833 --> 28:26.104

I often ask you what you're reading or podcast or whatever, anything to

 

28:26.104 --> 28:28.673

bring that we should all take home and read or...

 

28:28.673 --> 28:32.343

I think for this audience, probably one of them is Chip Wars.

 

28:32.343 --> 28:36.181

If you want to talk about AI, it's a history of semiconductor chips.

 

28:36.181 --> 28:40.118

Suggested to me by, I believe it was Connor Gordon a year or two ago.

 

28:40.118 --> 28:44.055

It's a more new book and it's very much realizing why the US is in

 

28:44.055 --> 28:47.826

the lead right now for semiconductors. In some ways semiconductors and oil

 

28:47.826 --> 28:51.796

almost are acting like very big geopolitical chips,

 

28:51.796 --> 28:53.932

trading chips back and forth.

 

28:53.932 --> 28:57.535

Lastly, probably for this audience, it's not as much as one podcast or book but

 

28:57.535 --> 29:01.673

probably look at podcasts or even Twitter or X for

 

29:01.673 --> 29:05.710

just understanding what is going on with AI, in particular, Claude Code

 

29:05.710 --> 29:09.380

or OpenClaw, it's pretty profound what's going on.

 

29:09.380 --> 29:13.384

It might be the killer app, well, or it's being at least put in

 

29:13.384 --> 29:14.586

that realm.

 

29:14.586 --> 29:17.222

For this audience, even if you don't even want to know about it for investing

 

29:17.222 --> 29:20.024

reasons it may help your own business or may help your own life personally,

 

29:20.024 --> 29:24.129

just knowing what these tools are because it's pretty profound what's

 

29:24.129 --> 29:27.398

going out there. Why I'm suggesting that is because you almost need the most

 

29:27.398 --> 29:31.436

recent iterations of that, it would be on X or

 

29:31.436 --> 29:33.538

maybe on a podcast. There you go.

 

29:33.538 --> 29:36.040

Fantastic. Joe Overdevest, we're delighted to have you join us.

 

29:36.040 --> 29:39.544

Thank you for taking us through incredible investment cases in all kinds of

 

29:39.544 --> 29:41.112

different industries across the country. All the best.

 

29:41.112 --> 29:41.980

My pleasure.

 

29:41.980 --> 29:44.616

Thanks for watching or listening to the Fidelity Connects

 

29:44.616 --> 29:48.920

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30:14.145 --> 30:15.446

and Instagram.

 

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We'll end today's show with a short disclaimer.

 

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The views and opinions expressed on this podcast are those of the participants,

 

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and do not necessarily reflect those of Fidelity Investments Canada ULC or

 

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its affiliates. This podcast is for informational purposes only, and should not

 

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be construed as investment, tax, or legal advice.

 

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It is not an offer to sell or buy.

 

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Or an endorsement, recommendation, or sponsorship of any entity or securities

 

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cited. Read a fund's prospectus before investing, funds are not guaranteed.

 

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Their values change frequently, and past performance may not be repeated.

 

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Fees, expenses, and commissions are all associated

 

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with fund investments.

 

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Thanks again. We'll see you next time.