KeyStone’s Stock Talk Podcast Episode 161


Special 2022 predictions episode. Including a look back at our 2022 predictions on Bitcoin, Gold, SPACs, the U.S. & Canadian markets, Cannabis stocks, Government Handouts, and more. And we look forward to bold prediction for 2022 on Small-Cap & Dividend stocks, Brennan’s Basketball pool, the Canucks trade deadline activity, and how inflation will continue to be a hot button issue, at least for the first half of the year. In the end, we tag on a question from a listener on Fire and Flower Holdings Corp. (FAF: TSX), a technology-powered, adult-use cannabis retailer with 102 corporate-owned stores in its network. We let you know how the company screens using our criteria.


Welcome to my co-hosts, Brennan & Aaron. How was your first partial week of 2022?

Let’s keep this conversational and free-flowing. Let me start with a look back at each of our top predictions for 2021.


Aaron Prediction #1: There is a 90% chance that the US market will outperform the Canadian market.

  • S&P 500 was up 26.89%
  • S&P TSX Composite: 18.99%

Aaron goes 1 for 1!

Brennan Prediction #1: (Now this is not designed to throw shade at Brennan (which, as you all know, I have no problem doing), but it was his first-ever prediction and when I listen back, this prediction was a bit cumbersome in terms of the way it was framed or stated. Let’s just say, I predict, Brennan will be more polished in his 2022 predictions). Brennan stated that “safe haven” assets will perform well in 2021 and that metals and mining stocks will perform well as a result – specifically referencing base metals. Aaron then questioned him on what he meant in terms of “safe haven” assets. He stated he meant base metals, bitcoin, etc…We then went on to say that metals and bitcoin would not be considered  “safe haven”. We went back on forth with jabs for a few minutes and I think we sort of settled on the crux of what he was trying to say was that hard assets would outperform with inflation creeping in. And that stocks that plied their trades in these base metals would outperform. We will scrap the “safe haven” assets from the prediction and go with base metals do well due to inflation in 2021. This turned out to be a good prediction.

Did the stocks which mine and explore for these base metals also perform well? The S&P/TSX Global Base Metals Index gained 22% in 2021. Let’s give Brennan a win on this one!

Of note, the TSX-V Metals and Mining Index was up just 9.5% on the year – I believe this is because gold stocks did not perform well at all in 2021 – dragging down the gains.

Ryan’s Prediction #1: SPACs markets heat up in 2021, but at some point in 2021, the average SPAC share price will collapse.

What are SPACs? Last year, Aaron referred to them as SPANX…which really could be foreshadowing as they took a Spanking in the market.

Special purpose acquisition vehicles – or SPACs. Also known as “blank check companies, they are set up with no commercial operations and strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.

Let’s see how this prediction held up in 2021.

Global SPACs, which went public mostly in the US, raised a total of about $160 billion this year, accounting for 28% of the total proceeds raised by U.S. IPOs.

SPACs had a roller-coaster ride as investor enthusiasm for them at the beginning of the year turned to disappointment because of their poor returns. The main SPAC exchange-traded fund, the Defiance Next Gen SPAC Derived ETF, has shed 25% of its value in 2021 after peaking in February.

That sounds like a win to me.

Popular SPACs

DraftKings (NASDAQ: DKNG) – down 50%

Skillz (NYSE:SKLZ) – down 72%

Virgin Galactic (NYSE: SPCE) – down 51%

Opendoor Technologies Inc. (OPEN) – down 59%

Pershing Square Tontine Holdings – and the big winner of the group – down just 38%


SPACs are not going away.

The IPO pipeline for the first quarter of 2022 is strong, with social media platform Reddit, transportation tech start-up Via, software maker Cohesity, and private equity firm TPG has filed with regulators to go public.

Ryan’s Prediction # 2a: Brennan will acquire a girlfriend in 2022. Unfortunately, when we ask her to come on the show to congratulate Brennan (and warn her), we will be ghosted (as the kids say) and eventually she will be identified as imaginary.

Brennan’s Prediction #2: Bitcoin will not replace Gold as a Safe Haven Investment but will perform well into end of 2021:

  • Bitcoin remains much more volatile than gold, but considering Gold was down 5.5%, while Bitcoin was up 46.5% over 2021 – in what was generally a risk-off year for the markets – I believe that my prediction that Bitcoin will not replace Gold as a Safe Haven Investment going forward is reasonable.
  • Given that Bitcoin was up 46.5% his prediction that Bitcoin would perform well in 2021 was also correct.

Aaron’s Prediction #2: Bitcoin Bubble will start to burst in 2021.

Bitcoin: At prediction Almost US$40,000.

Bitcoin Today: US$43,400.

It has been very volatile, but not yet crashed.

Ryan’s Prediction 2. Cannabis (two parts):

  1. Continued Consolidation & Opportunity in the US – favorable regulatory environment and positive investment sentiment.
  2. Consolidation in Canada – Share Rollbacks, further pain in many names

While 2021 started with a huge run-up in US Cannabis stocks, regulation has yet to come and the segment faced severe declines in the second half of 2021. Opportunities likely exist, but the sector was down significantly in 2021.


Horizons US Marijuana Index ETF-32.32

In Canada – consolidation in the space did occur and further pain was seen in most Canadian-based Cannabis names.

This prediction was a 50-50 split.

Brennan’s Prediction #3: The pandemic end is in sight by the end of 2021….

  • Well, I think I don’t have to say much about this one as I was dead wrong…

Brennan’s 2022 Predictions:

  • With fears of inflation and Governments around the world beginning to gear toward interest rate hikes, I believe that Gold will perform well in 2022 because of its safe-haven properties.
    • And just to extend on this, I am putting my money where my mouth is as I own a couple of the stocks under coverage which has exposure to gold, including:
      1. A gold-miller recommendation that podcast listeners and clients should be familiar with, as well as a new gold miner recommendation that came from our new U.S. report released right before Christmas.
  • Small-Cap Stocks will perform better in 2022 than they did in 2021.
    • Using the performance of the Russel 2000 in 2021 as a benchmark, which produced a return of about 1.7%. I believe Russell will exceed this performance in 2022.
    • On top of this, I believe Cannabis stocks will have a better year in 2022…
  • This is a bit of a flyer – but I believe that Rio Tinto will announce a new discovery and plan to advance a diamond mine in Saskatchewan during 2022.
    • The reason I believe this is Rio Tinto – which is the third-largest diamond miner in the world behind Debeers and Russia’s Alrosa – had only 2 operational diamond mines at the beginning of 2020.
      1. With Argyle (located in Australia) which actually closed in 2020.
      2. Diavik (located in the Northwest Territories) is expected to cease production in 2025.
    • Right now, the company has only 1 advanced diamond exploration project on their books which is the FalCon project located just 40 kilometers east of where I grew up in Prince Albert, Saskatchewan. So given Rio’s diamond supply coming to an end in 2025 along with the time lag between developing the necessary infrastructure for a mine in Saskatchewan, I believe they will need to push ahead with the project and will announce a discovery.

Also…word has it, Brennan is looking to purchase a diamond and “put a ring on it” in 2022, and want the supply of diamonds to increase and prices to come down…

  • The Semi-Conductor/Chip Shortage will continue to be an issue throughout 2022 and even potentially into 2023.
    • The reason I believe this is because Sony reduced its PlayStation 5 production guidance for the 2022 fiscal year and companies like Toshiba have warned that the fabrication of chips situation is unlikely to normalize in the year.
  • I am going to double down on my prediction from 2021 and say that the pandemic’s end will be in sight by December of 2022….
  • I am going to win the Basketball Draft that I am in, taking home the glory and $450 cash!
    • I am currently tied for 1st place in the league which consists of 12 of my friends. I am almost guaranteed to make it to the playoffs as long as my team stays healthy of course. But of course, I will keep everyone updated on this.

Aaron Dunn:

2021 Predictions

  • Prediction 1: 90% chance that the S&P 500 would outperform the TSX.

Last year, I predicted that the S&P 500 would continue to outperform the TSX as it had for 9 out of the previous 10 years. The average annual outperformance for the 10 years leading up to 2021 was about 9% per year.

My prediction was correct. Once again, in 2021, the S&P 500 outperformed the TSX with an annual price return of 27% compared to 22% for the TSX. Both markets posted incredibly strong performance for the year. Important to note is that the performance differential between the two markets was 5% so well below the 9% average over the preceding 10 years.

One of the points I made during my prediction discussion last year was that the Canadian market suffers from some systemic challenges which are why it has been underperforming our neighbor to the south pretty consistently over the last decade. The issue in Canada is overconcentration, with more than 50% of our stock market in two sectors, resources and financials. And also, under concentration, in the sector of Technology which made up only about 10% of our market.

Interesting to note is that the very factor that has hindered the Canadian market through most of the last decade, over-exposure to resources, was actually a big benefit in 2021 as oil and metals prices posted strong growth through the year.

  • Prediction 2: Brennan will lose more than 75% of his debates.

I also predicted that Brennan would lose more than 75% of his stock debates in 2021.

Again here, I think it comes as no surprise to anyone that Brennan did indeed lose more than 75% of his debates in 2021. In fact, I did go through the podcasts over the year and I could not find a single debate in which Brennan was the victor. I do have a very vague memory of Brennan winning something at some point in time. I don’t know. Maybe this was from another year or maybe it was just a strange dream. I’m going with the latter. In any event, Brennan’s loss rate was well above 75%.

2022 Predictions

  • Prediction 1: The Covid Pandemic will peak in the first quarter of 2022 and we will return to some semblance of normalcy before the end of the year.

This may be more of a hope than an actual prediction but thankfully it is based on some factual evidence. Full disclosure, and to nobody’s surprise, I have no expertise in medicine or life science so any statements I make are purely my opinion and should not be taken too seriously in any way.

My hope is that the Omicron variant is the beginning of a transition from Covid being a pandemic to endemic, meaning that the harmful impact of Covid lessens and becomes something that we can deal with without substantial restrictions, lockdowns, and the potential for overwhelming the health care system.

Now I’m not going to get too much into the details here but based on the data that is available now, and also listening to experts, it seems clear that while Omicron is much more transmissible and also much less lethal than previous variants, such as Delta. The data from South Africa and the U.K. appear to support this.

To be clear, I think that Omicron gets much worse before it gets better but between vaccination, natural immunity, and a combination of both, my hope is that the danger of Covid really starts to decline after the first quarter, or at least the first half, of this year. This is somewhat how the 1918 pandemic that killed an estimated 50 million people globally ended. Eventually, enough people developed immunity that it became less severe and strains of that virus still exist today but are just less dangerous.

Once again, this is more of a hope and a dream than a prediction. I’m far from an expert so don’t rely on this commentary in any way.

  • Prediction 2: Cost-push inflation will continue to be a major factor in the economy through 2022.

My second prediction, which once again is not particularly bold, is that inflation will remain a substantial factor in the economic outlook through 2022. But what’s important to understand is that not all inflation is the same. Generally, when we talk about inflation due to an overheated economy, we are talking about demand pull inflation. In this scenario, the economy is hot, lots of spending and investment create high demand for products and services, companies can’t keep up and prices rise.

I think there may be some demand-pull inflation in 2022 but what I’m mostly concerned about is cost-push inflation. This is where prices rise not necessarily due to high demand but more so due to a higher cost of inputs that go into the products. We have seen increases in virtually every input from metals, to energy, to labour to supply chain. Supply in particular is something that I don’t see getting sorted out in 2022. Lack of container ships is one factor and the industry is building new vessels but my understanding from the conference calls of these companies is that its going to be at least another year or more before that segment of the supply chain catches up with demand. And that is only one part of the supply chain. The issues can be seen in all areas from container ships to ports, to the trucking and rail infrastructure and warehousing.

I was just reviewing a conference call from a trucking company yesterday and the main focus of the call was about how they can’t get truck drivers. They are having to turn business away and raise prices. The labour shortage is being felt across all industries and wages are rising. Even in warehousing we have coverage on industrial REITs which service ecommerce and surprise, surprise, supply is extremely tight and rents are rising. All of this is inflationary.

Now fear not…because with challenges and risks there are also opportunities.

However, there is a lot of talk about Central Banks raising interest rates in 2022 to help curb inflation. Likely this will happen to some extent but it is far from a solution to our inflation problems. High rates will help to slow down the economy and deal with demand pull inflation, but higher rates will do little to deal with issues like the supply chain. My guess is that rates will not rise as much as Central Banks are predicting. The last thing they want to do is kill economic growth and still have inflation.

Now this does not mean that I am bearish on the stock market. There is still a lot of capital circulating around and it needs to find a home. There are also a lot of great companies that are providing essential products and services and solutions to problems that the world faces. We are looking at some very interesting opportunities in the market right now and in spite of my concerns about inflation, I am very optimistic that smart investors can continue to find opportunities to grow their wealth over the next 1 to 3 years and beyond.

  • Prediction 3: Brennan’s debate loss rate will decline to below 75% in 2022.

Finally, I am going to make my boldest prediction and that is that Brennan’s debt loss rate will be below 75% in 2022.

Why do I think this? Well, Brennan has a lot of issues and covering them all wouldn’t just be an entire podcast episode but rather an entire podcast series unto itself.

That said, one thing I have been critical of Brennan with respect to his podcast debates is that he has to pick his fights better. Many times, in 2022 Ryan and myself have allowed Brennan to pick his side, for or against, when debating a particular stock. Brennan has always made the worst choice possible so there is room for improvement here.

Now, I think we all know that I like to bash Brennan as much as the next guy. But I will say that Brennen is a very capable, hardworking, and competent person. If he wasn’t then he would not be working at KeyStone. So, at some point, if Brennan’s performance does not improve then that is my own failing for not properly guiding and helping to develop this young person so that he can become a better version of himself.

Ryan 2022 Predictions:

Ryan: SPAC broadly will continue to underperform in 2022.

SPACs raised a great deal of cash in late 2020 and 2021. I would caution that broadly, valuations for many former SPACs remain at a historically higher valuation, despite the broad drop in 2021. Why? Prior to the IPOs via the SPACs many investors were willing to pay top dollar to buy into these companies in private fundraising rounds in the run-up to their IPOs. Subsequent to the initial SPAC purchase, shares moved higher in the public market initially to true historically high valuations. While some winners remain, broadly the glut of  SPACs released in late 2020 and through 2021, will perform poorly in 2022.

Aaron is not allowed to go first next year – he keeps stealing my thunder.

Ryan’s Prediction #2: Inflation will be a huge market focus in 2022 – particularly in the first half of the year. We have already heard the US Federal Reserve talk of potentially moving faster in terms of rate hikes.

Rate Hikes will be more bark than bite.
It will be difficult to move rates too far, too fast, without derailing the economy. So there will be more talk, than actual meaningful rate hikes in 2022.

Prediction: Despite a stellar record with nary a loss in the last 9 games since the Bruce Boudreau coaching change, the Canucks, under a new regime, will actually be sellers at this year’s trade deadline, eschewing ownership short-term play-off aspirations, and looking to build a sustainable winner 2-3 years down the road. (this is likely wishful thinking on my part – but I am putting it out there).

Great run, against some crap teams albeit, but the Canucks strength of schedule is the toughest of any team in the NHL going forward. Tough to continue and I am hoping this management team does some of the hard work that may be unpopular short-term to build a long-term winner. If nothing is done – not selling the now for future – they are in such cap difficulty that they will basically bring back the same team next year and perpetually be a bubble playoff team…in the mirky middle – Something I cannot stand!

Ryan’s Prediction #3: COVID will not end for the foreseeable future but new variants will become less potent (or dangerous) and that, coupled with high vaccination rates and advancements will make it more manageable through 2022 and we will have a semi-normal Christmas next year.

Endemic to pandemic  – slated to interview 50 companies in California in March and 25 in Vegas in May.

Ryan’s Prediction #4: Removal of stimulus from World Central Banks and governments will impede growth and the markets will face periods of significant volatility in 2022 – correction periods that will lead to value opportunities long-term.


Your Stock Our Take

Came in from Marc


Fire and Flower Holdings Corp. (FAF:TSX)

Current Price: $4.80

Market Cap: $182.4 Million


What does the company do?

Fire & Flower is a leading, technology-powered, adult-use cannabis retailer with 102 corporate-owned stores in its network.

Key Points:

  • The company has a strategic partnership with Couche-Tarde Inc. which is the owner Circle K stores. Fire and Flower say that it will be utilizing Circle K’s existing lease footprint to expand the co-location program across Alberta, Saskatchewan, and Manitoba in 2022.
  • The company secured a $30 million debt facility through Couche-Tard which will help fuel the company’s growth strategy.
  • Recently acquired Pineapple Express, which is a Cannabis industry logistics provider, completing more than 40,000 deliveries per month to recreational and medical cannabis customers across Canada.
  • On November 29th, 2021, the company announced a 10:1 share consolidation. As a result of the consolidation, the 358 million shares issued and outstanding prior to the consolidation have been reduced to approximately 35.84 million shares. Management said this is a step towards the company’s U.S. expansion and to advance its NASDAQ listing.

Recent Financial Results: (Q3, 2021)

  • Revenue was up 37%, to $45.4 million compared to the same quarter last year.
  • Net Loss was $(2.0) million compared to a loss of $(25.7) million in Q3 2020.
  • The company reported its 6th consecutive quarter of positive Adjusted EBITDA which came in at $2.1 million and was a 5% increase year-over-year.
  • Balance sheet – $16.5 million in cash, with debt of $2.4 million, providing net cash of $14.1 million.
  • Valuation basis, the company trades with a trailing EV/EBITDA multiple of 28x and a P/S of about 1.1 times sales.

Our Take:

As many listeners know, Cannabis stocks were decimated over the 2021 fiscal year, with Fire & Flower’s stock down over 45% – retracing all gains that it had made in 2020.

Overall, the business is reasonably attractive. They are well-positioned to execute on its growth strategy with a healthy balance sheet, a strategic partnership with Circle K, a brand new $30 million credit facility, and a recent share consolidation which places them on track to list on the NASDAQ and expand into the U.S.

Fundamentally the business is strong with good revenue growth and adjusted profitability, despite a lack of reported earnings. Plus, the stock trades with reasonable valuation multiples considering its potential runway for growth.

But the primary concern that I have is how the company plans on diluting shareholders into the future (as their track record isn’t so great), plus it would be nice if they could enter profit on a net income basis moving forward.

So, all-in-all, I believe if someone is bullish on the Cannabis space in 2022 and beyond, I believe the stock could potentially offer some value. But as clients know we like another Multi-State Cannabis operator in the U.S. which we believe offers better growth at a reasonable price.


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