Print Transcript
[music] >>Hello I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Which is brought to you by TD Direct Investing.
Every day I'll be joined by guests from across TD, many of whom you will only see here. We'll take you through it's moving the markets and answer your questions about investing. Coming up on today's show. Will be joined by Brad Simpson, Chief Wealth Strategist at TD Wealth to discuss the three questions he got in his mind when it comes to the state of the global economy.
MoneyTalk's Anthony Okolie will take us to the latest Canadian inflation report and in today's WebBroker education segment, Caitlin Cormier will show us how you can research money market funds using the platform.
So here's how you can get in touch us. Just email moneytalklive@td.com or Philip that your response box under the video player on WebBroker.
Before we get to our guests of the day let's get you an update on the markets. Let's check on the TSX Composite Index, 217 points, more than a full percent.
Noticing weakness across all the major sectors really.
Let's check in some of the energy names including Suncor.
A bit of selling pressure on this one, 38 bucks and $0.20 a share, down a little more than 2%.
Centerra Gold, that stock a disappointing quarterly result, a bit of a balance back today but has not regained any bit of the ground that it lost yesterday.
All in all, up a little more than 4%. It's hard to find pockets of green in the market. But Centerra bouncing back from yesterday's selloff is one of them.
South of the border, there's no shortage of things for market watchers to be watching.
Whether the debt ceiling negotiations, the strength of the US consumer, maybe some troubling news at Home Depot that we will tell you a little later in the show in terms of their sales forecast. A little lacklustre of the day.
The S&P 500 down about 1/4%.
The tech heavy NASDAQ was actually in positive territory and holding there. Nothing too dramatic to the upside.
But still, seven points on the board, it is a green arrow.
Advanced Micro Devices is one of those names moving higher in the text basis.
You get to find out how those superstar fund managers are deploying their capital.
New York City hedge fund, Third Point, seems to have a little bit of money moving in that direction. 102 bucks and change up a little more than 5%.
And that's a market update.
Our featured guest today says there are three big questions on his mind when it comes to the state of the global economy.
Joining us now to discuss is Brad Simpson, Chief Wealth Strategist and with TD Wealth.
Always good to have you in the program. Welcome back.
>> Great to be here.
>> Let's break down the numbers. It's been a lot of central-bank tightening. I understand this is the first thing on your mind.
>> Yeah. Something from the last segment you said, it's a lacklustre market today to mark like every second Monday I do this kind of global conference call through our system.
One of the things I say is "is it me or do the financial markets right now have this lacklustre feel to it?" When you think of all the things going on, and really, markets are really, really quiet.
>> I got accustomed last number two these wild swings of inflation. Up 3%, down 3% now what she seems to be… > One of the things we always talk about is adapting and evolving. You know, it's almost like we've gotten to the point where we are so used to big things. We are just getting used to this endless array of big things that are impacting.
Like the quiet level markets surprised me.
It does. I guess I think it we would be remiss no matter how many ways we look at it, inflation is still the thing that you gotta put front and centre.
And you know, in a news cycle, saying "okay we've heard about this a bunch of times and let's move beyond" >> The machine is hungry!
>> The bottom line is that this thing is more resilient than really, what I would say most people, I would say our first thoughts really were on this. So, I think it behooves us to come back and go "let's keep on this and let's look on this and when we do look at it, it is getting better." We are seeing both CPI and PPI numbers came out last week showing that the efforts by the central banks are starting to tighten things up. Inflation is continuing to come down. You look at the US Federal Reserve Board, 500, 500 1/4, lots of rate increases.
Their last increase of 25 basis points came out and said "well, kind of surprised with everybody saying they will take a wait and see attitude" going a bit slower on this. We saw the Bank of England come out and they have somewhere to go but their language definitely started changing and saying "we think we are starting to get a grip on this". He looked over at the ECP… Saying "look, we're going to stop doing this at 50 basis points, a clip, 25 basis points a clip".
All of that starts to point to the more positive trend for inflation and so, with the central-bank changing their tone…I think there is a ways to go but without a doubt we could probably feel, I go to dinner parties and I can hear the fear that is still there and it's understandable.
But that fear is starting to slow and it probably should. Because I think that, you know, quite a lot of the conversation we go to from here is that in many ways financial markets have almost turned and said that's dealt with. Where were going to go to next?
>> Is the part of your economic growth? The whole point of all this aggressive tightening is to get inflation under control.
They said the byproduct of that, the whole point of this is we will slow the economy a little. Are we getting the signs they are actually doing that?
Some of the data coming out sort of surprises me.
>> I think that's one of the things you really want to look at is that we, when you start working through the economy, again, sometimes I feel like "boy the things you folks are looking for, how can you look at the world in this way?" Right? But there is only really one way to slow inflation down and that's you have to start taking on your economic growth and looking where that is.
And so, if you sat back and looked at the global economy and you said "let's start out and say that unemployment is a 3 1/2%"… That is the lowest it's been since 1969, I don't think I'm the youngest looking guy in the world.
I was born in 1969.
That was a few years ago!
So despite the fact that we are starting to see, we saw some numbers come out this weekend showing that inside of the labour numbers are sure are starting to show. 3 1/2% is still really, really employed. So the two big things, I think you have to look at, when thinking about where this global economy is going: I think the starting point is employment.
And I don't think anybody could argue that this is a softening sign here. But, when we look at people who are employed, the other side of this is looking at the consumer.
These two kind of go hand-in-hand with one another.
As we start to look at what's going on inside of the economy, what we see is, we all know what happened with the Silicon Valley Bank and all the offshoot from that.
What were seeing inside the economy, both in North America, seeing in Europe, is we are tightening up credit.
And credit makes the world go around. Money makes the world go around.
Ease of money going into that. So one of the measures we use is financial conditions. And so, I think if we went back in time and looked, I think I was here in August, about a year and 1/2 ago on one of the things you were talking about is the central-bank came out and was looking at easing the financial conditions. They were trying to tighten and Jerome Paltrow said "that's it, done".
>> At Jackson Hole.
>> Yeah. So if you look at it, financial conditions of gotten tighter and tighter and tighter and tighter since then.
Then you look at senior loan officers coming out. So this is flat out, you know, mid-level Bank people going out and having the boss tell them "listen, don't send anybody out there. Small, medium size businesses, they are starting to show that this is getting tighter.
" So, usually when you start to see this happening in times past and you see the tightness of these levels, they have usually been a pretty strong indicator that your light stage, getting closer to a recession.
Not a sign that you're going to look at the changing labour environment.
Then if you look at the changing labour environment, you kind of go over the consumer. You can look at the consumer in North America. You can look at what they are spending on restaurants, look at what they're spending on close… Every time I walk in to get some shorts or something, I'm amazed at how much is on the shelves. How much sales there still are in these types of things.
You kind of start putting all those pieces together.
It's an economy that, while looking good, if people start worrying about their job, people start taking the look at it and saying there was about roughly about 1,000,000,000,000 1/2 dollars of surplus capital and people's balance sheets in the US so that's the largest consumer in the world. We think that's about down to 500 billion now.
That's a lot of spending.
But that's a lot of spending they've gone through quite quickly. You think of people's wallets getting tighter and tighter.
You look over in Europe and you start to see things slow. Looking at the big tailwind that everyone is kind of counting on. China would reopen and be a big tailwind.
We have seen some numbers.
Not so strong either.
All of that points to we have a healthy economy today but there is no doubt this is one that is slowing as well. Which will really help take care of the inflation. But it's also going to change the dynamics of the market environment as well.
>> When we think about that being with the central banks want.
>> Absolutely.
>> They are staying in control.
They are getting what they want now it is a getting out of their control?
>> That's one of the things you have to look at.
These are the things that we know and these are the trends that we can follow.
Let's start and look back and go "okay, we are confident that we've been able to contain the banking crisis so far." But this is a "so far". So I think that that is still a potential risk that is out there.
And I think all the kind of cousins of that… You know, that I think were well aware we are well aware of and we published a paper a couple weeks ago about commercial real estate, we wrote about this pretty extensively in our portfolio strategy quarterly. One of the effects, ultimately, could be many as the commercial real estate, it's pretty tough sliding there right now. And if you look at it through that lens, that has potential. Because an awful lot of that is midsize banking sector.
Talking about small and midsized businesses, most of their access to credit is coming from the small size banking sector.
That all starts to point to real potential problems down the road.
You start looking at some of the hiring patterns from some of the small and medium-size companies. Really starting to tighten up there. So that one, I think is still, I'm not saying if there is an inevitable break out there. But I think that could be one way to get ahead of central banks. That they just can't stop the momentum on, would be one. And I think the second one is, which I'm guessing we will probably dig into a little here : this debt crisis is a real thing.
And this isn't something that a central-bank can solve.
That has the potential to have a lot of downstream impact that, I think, quite frankly, there's a lot of lawmakers in the United States that don't have the financial background to understand just actually how big of a deal this potentially is.
>> A lot of very interesting ideas there.
Threads will pull on throughout the show. We will get your questions about market strategies for Brad Simpson in just a moment's time.
A reminder of course you can get in touch with any time by emailing moneytalklive@td.com or Phil at that viewer response box under the video player on WebBroker. Right now let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading.
Home Depot is warning sales will decline this year as customers shun big purchases and homeowners delay large renovation projects.
The news comes as the retailer posted its largest revenue base in some two decades.
Home Depot was forecasting flat sales for this fiscal year but now says it expects a pullback of up to about 5% in comparable sales.
The International Energy Agency says the pessimism surrounding crude oil stands in stark contrast to a tightening market. While all prices of Bush lower and recession concerns, the IEA says it expects tight supply in the second half of this year. And the agency says China will account for nearly 60% of demand growth in the months ahead.
Shares of Power Corporation under pressure today.
The holding company which has controlling stakes in great West and IGM has missed expectations for its latest quarter.
Contributions for the company's alternative platform came in weaker than expected a little more than 2 1/2%.
Let's check in on the markets checking in on pastry with the TSX Composite Index. A triple digit loss on our hands. That's good for a 1% downside.
In the S&P 500 that brought a read of the American market right now down 1/4 of a percent. We will call that 10 points.
>> Back with Brad Simpson taking your questions. You know people are thinking of this one, one of the top questions: how are you thinking about the debt ceiling?
>> There is a debt ceiling?
(They laugh) in my office at home I have this giant print on one of the walls.
It is from 2012 economist cover about the debt crisis at that time.
During the Obama administration and I had written the artist and said I loved the front cover. And he was so complement, he sent me a JPEG is so I can make a big print out of it.
It's amazing. It's Uncle Sam of the Statue of Liberty.
Biting and spirits as they are driving a Thelma and Louise type car painted with the American flag rate for the cliff.
The license plate has "debt" on it… So I think when you look at, I kind of think about the debt crisis almost every day when I walked into my office at home because I kind of see this print.
I shared that because I think there is a lot to learn from 2011.
Good and bad.
Because this is not 2011 but I think when you compare 13 or 2021 kind of the more recent, 2011 has a lot more the feel of what you would be concerned with.
One: you were here before an election cycle so you kinda got these two different political parties on either side who want to put a strain on this to build this for which way will be best to work with. So I think you have to think about that. Now, the difference between this time and then is we live in a far more extreme world than we did in 2011.
Both these parties, we are in the primaries, moving into a primary season both on the Democratic side and Republican side. One of the things we have to realize, being Canadians here but kind of stepping back and going the way the political system works in the US is the primaries or people who spend all their time in politics and they do nothing but politics.
So it's quite extreme. One, I think the dangers between now and 2011 is that those primaries, those drivers and that on both sides, the right and the left of the spectrum on both sides, are really driving this agenda right now.
And that makes it really difficult for the centre to negotiate. That extreme environment that we see on cable TV every day, that's the thing playing out there.
So what happened in 2011?
Right up until this X date of ultimately, all this really ultimately is is "how much do I have in my Bank account and how much can I find?" >> Yeah the hedge and you open that box and think of all.
>> Right now, arguably the ledger of the United States as somewhere between $800-$1 trillion. Some say it's as low as 500 billion that are covering all the expenditures as we move through June.
June is not far away. So, if we look at it and think "what happened then?" Well, there was a deal.
A deal that was struck. What of the market do before that?
Well, interestingly, it was kind of like this when going in.
It was quite quiet. The starting point was lacklustre.
Volatility was quite low.
Equity markets were quite calm.
Then, of course as we move through that cycle and we had a downgrade of US debt, that had a negative impact.
We saw equity markets sell off. We saw treasuries selloff.
For a little bit of a period of time. Which I think is something that we are probably going to experience here as well. And then, ultimately, a deal was struck and things normalized and we went back to normal again. And that's, you know, many ways it seems to be playing out very similar right now.
>> That low probability but high-impact. We think were going to get a deal but if we didn't, then there's trouble right?
>> And I think you kind of have to look at this kind of, this base case here as you're going to have a deal that's going to kind of look like 2011.
Probably done by X date. A little bit unsure of that.
There is this the second scenario that you look at and you say "well, they will kick it down the road until 2025." You know there's probably about a 25% probability of that one. The difficult time with this one is there's probably the disaster scenario.
The problem is the disaster scenario is probably somewhere around the 40% scenario and this time right?
That's where I think the risk in this market is.
My starting point is saying these two different extremes is ultimately, these two extremes have to come to an agreement and there's only so many hours and days that the house is open for them to push this through.
And these two extremes are not terribly opened to compromise. So you have this great compromiser in the middle here which is highly likely they will get this through.
But if they don't, I think it's important that we are communicating and talking about what the ramifications of this are.
>> Pretty blunt.
>> Yeah.
And I think that's important because you know, the bluntness is, at the end of the day, one of the things it risk is the reserve currency of the United States that fundamentally, the issue of what makes that currency some safe is, if I own a debt now I will get paid back and that's going to be stable.
I don't think you want to mess with that. I don't think you want to play with the 14th amendment and say "constitutionally, we do want to go out and build $1 trillion coin" these are all options that are there.
That principle of making sure that you are paying that back.
Your perspective of what's going on in domestic politics, that's of the risk on this is. Ultimately, we think that this works out. But I do think and what we are doing every day as you want to make sure that your allocating and thinking about how you're edging some of these risks.
>>@Always at home make sure you do your own research before making decisions.
We will get back with Brad Simpson in just a moment's time. A reminder that you can get in touch of us at any time by emailing moneytalklive@td.com.
Now let's get to our educational segment of the day.
If you're interested in money market funds, WebBroker has tools which can help. Joining us now with Maurice Caitlin Cormier, Client Education Instructor at TD Direct Investing. Kalin great to see you. Let's talk about these funds and the platform.
>> Absolutely.
So these are a form of a mutual fund that are really for more kind of short-term parking money sort of situations. So they are relatively low risk, low return as well of course. That's kind of that five of the coin where we have low risk/low reward. So really they are kind of just sort of a short-term parking your money away and trying to get a little bit of yield on it while it's there. So, what energy was amended quickly show you how we can find these funds within WebBroker.
So let's go ahead and happen. When I click on "research" we're going to go "tools" and click on "screeners". So from here we can go ahead and choose the mutual funds screeners specifically. I'm gonna go ahead and create a custom screen.
On the click on "fund category" to get the type of mutual fund we are looking for. And some to go ahead and click. You can click Canadian or US, because there is options for both. For to damn the click Canadian money market.
At the bottom ongoing to deselect including ETF's so I can only see mutual funds and then here the 31 matches.
I can also deselect here the "show TD mutual funds" first and able to show me an alphabetical list of all the different money market funds and you will see here on the far right hand side, they all indicate that they are DI eligible. So I can go through here and look at the different funds available and make decisions as to which ones I might want to do a bit for the research on or parked some money.
>> The reason why we understand that investors are getting interested in money market funds is of course that yields have been much higher than they've been in a long time so if someone is doing this exercise how they find out the yield that's being offered?
>> Absolutely so we do a little bit of extra work in this case to find the yield on a money market fund. One way that you can do it is you can actually click on the fund code within the watchlist information.
So it's gonna pop up this little box here.
We can click the "buy" button. You will see the yield for the particular fund. Overhear the right hand side.
There is actually another way to do it. I will also just quickly mentioned there are some that say "premium" behind them and they can have a minimum of $100,000 that you need to invest before investing in those funds so just keep that in mind.
Let's look at this one here.
The BML. So if I click on it.
Let's add this to a watchlist. I'm in a go ahead and add it to "list two" I'm going to X it and then I will go on the type top right hand corner to watchlist and under the list I can actually see I have three different money market funds and on the far right hand side, it's showing me the distribution yield. So this kind of a quick and easy way, if there's a few different money market funds that you want to keep an eye on and see what the distribution yield is, instead of going into that by button you can actually create a watchlist of different funds or keeping an eye on and then click through and see the distribution yield just under the fundamental information for the funds.
>> Great stuff as always Caitlin. Thanks for that.
>> Thanks Greg.
>> Caitlin Cormier, Client Education Instructor at TD Direct Investing. Make sure to check out the Learning Center and WebBroker for more educational videos, live interactive master classes and upcoming webinars.
We are back with Brad Simpson Chief Wealth Strategist at TD Wealth. Here's a question coming in, (Greg reads the question). We can't give specific investment advice on the platform. We can definitely talk about what people should be thinking about.
In portfolio construction and in different stages in their life too.
I agree you should consult with an advisor, Portfolio Manager. It makes an awful lot of sense.
So I want to answer that looking at it in terms of looking at your fixed income component of your investment portfolio right now.
I think that if you encapsulated the first part of our discussion, it is "what is the goal of central banks right now and why do we talk about this?" The issue is when it comes to fixed income investment, there are two things that are the most important here.
Interest rates.
Duration. What am I getting for the rate return?
Credit. Those are the two things that drive your fixed income rating return from invested managers investment managers point of view. How much yield I getting and how much risk my taking?
When you look at the world that we have today, if you say that short-term interest rates were put up to 500, 5% of 5.25" percent by the US Central Bank, it can kind of plus or -50 basis points across the major industrialized nation's on that, don't forget three years ago, we were talking about 10 Year Treasuries in Germany. They were zero and then there was $18 trillion of negative interest rates.
Meaning you were actually having to pay somebody to hold on your money for you. Fast forward to where you are today, the US 10 year US treasuries about 3 1/2% today.
And that… What's the goal of the Central Bank? The central-bank is to slow things down. So your raise those rates and then, once things get too slow, because at the end of the day, things we are doing right here is, this is not precision based staff. Right? So my gut tells me, when I look at the data and things were looking at, that the efforts of central banks and the things we've done over the last 18 months, we are about halfway through that.
Which means there's going to be more things slowing right?
Pulling jobs and we are going to see second and third quarter for public companies. They're going to come out and say "yeah, we are not making as much money as we did in the past." That means the central banks, 18 months out from now, 12 months out from now, thinking about how do we start lowering rates to get things going again?
That means for a person's fixed income investor, we are maximum overweight fixed income right now. And we think it makes an awful lot of sense.
Government guaranteed Securities and yielding at 3 1/2% of 10 years. Yeah there's going to be interest rate volatility for sure.
But I would think that making sure that you are building an investment portfolio for your fixed income, that you go out and you can buy guaranteed security.
Government guaranteed Securities.
You can probably, right now, have some duration… So five or six years out, if you're managing an overall, we think that makes an awful lot of sense.
We think that investment grade makes a lot of sense.
You can get yourself a higher rate of return.
Still, real nice income from that. And we think that makes an awful lot of sense here as well. We are with high yields, be careful about chasing yield there.
We are now at about 500 basis points spread out. Which is starting to put more and more pressure, if you get, some of the stuff we talked about here today.
Moreover slow down. We do see bankruptcies are still very manageable but they are starting to increase.
So I wouldn't chase yielding that high-yield sector.
If I were going to be in that part of my portfolio, I would probably want to be really loan short there.
Allocating and just taking out right higher credit risk in that.
So I think for a person like that, quite frankly, in many ways this is, for an investor like this, this is a really terrific environment.
For that. And even if you go over swinging into the more risk component of your portfolio, looking at dividends and cash growers inside of companies, even, you're talking about Home Depot. This is not a recommendation on Home Depot but trading at 17 times earnings, gone for a world of pain, markets price and a lot of that pain. There's a lot of good companies out there that look like that that deserve consideration as well.
>> Some homework time for the audience. We will get back to your questions for Brad Simpson on market strategies and just moments time.
Make sure you do your own homework and research before making investment decisions.
A reminder you can get in touch with us anytime.
Do you have a question about investing or was driving the markets? Our guests are eager to hear what's on your mind so send us your questions. There are two ways you can get attachments: you can send us an email any time at moneytalklive@td.
com.
Or you can use the question box right below this screen right here on WebBroker.
Just write in your question and hit "send".
We will see if one of our guests can get you the money talk the answer right here at MoneyTalk Live.
Talking about inflation, hearing consumer prices actually grow in April unexpectedly.
Core measures continue to ease. Our Anthony Okolie is been digging into all these numbers and the implications for the economy. Anthony.
>>Canadian inflation did Job 4.4% that after a 3% increase in March. This was the first increase in headline consumer inflation since June of last year. As the chart shows.
Both headline and core CPI were in a downward trend since peaking in June of last year.
But they still remain elevated in April.
Core goods inflation, it actually rose 3 1/2% year-over-year in April.
Up from 3.
3% in March.
There is some good news. Super core inflation, this is a measure of core services and inflation actually decelerated in April down from 6.3 in March.
Now, when we break up the data by category as my next chart shows, prices rose in several components in April.
The biggest contributor to CPI month over month gains were driven by price up surges for gas and recreational activities.
In fact, gas prices rose more than 6% in April.
Statistics Canada places the blame on OPEC and its allies. Their decision to cut all production. Now, Canadians also got some relief on their grocery bills in April. Thanks to smaller price increases for things like fresh vegetables, coffee and tea.
Finally, shelter inflation also moved higher last month as Canadians continue to pay more in mortgage costs, interest costs in April as this last chart shows.
Mortgage interest costs quickened in April up 20% year-over-year.
Well, actually slowed to .2% year-over-year. Now the cooling in the housing market because of high mortgage rates, that was a key factor in driving down homeowners replacement costs. So, overall, while inflation took a pause in its movement downward in April, it was really due to a surge in gas prices. But it reinforces the challenges of the Bank of Canada faces in bringing inflation down to its 2% target. Great?
>> Definitely we get a hotter headline when some people question where inflation might be headed. What is TD Economics think about the rest of the year?
>> TD Economics expects the Bank of Canada will be able to keep its interest rate of 4 1/2%.
For the remainder of 2023. They also believe the Bank of Canada has to remain vigilant to restrain inflationary pressures.
They may need to hike again if the momentum in the economy doesn't cool as expected. Greg?
>> Interesting stuff.
Thanks Anthony.
>> My pleasure.
>> MoneyTalk Live's Anthony Okolie. We check on the markets.
The TSX Composite Index having a triple digit loss on my screen right now. 227 points. More than a full percent. Power Corporation, the earnings missing the target.
Under pressure at this hour as well nothing too dramatic.
2.
7% of the downside.
Some energy names including Enbridge down at this hour with 3%. The S&P 500, we've been talking about the debt ceiling. Of course Home Depot, disappointment.
The consumer, nothing too dramatic 1/4 of a percent.
Tech heavy NASDAQ was actually positive at the top of the show is it still? Still up about 1/4%.
We talked about the big funds investing in a release what they did. In the previous quarter.
You're saying Alphabet. The parent company of Google.
Third Point taking a stake in this name.
We are back now with Brad Simpson, Chief Wealth Strategist at TD Wealth. We have an interesting question here about the risk of the markets, the US debt ceiling. (Greg reads the question) >> If you went back to 2011, gold went up about 20%.
If you think fundamentally, one of the things with the debt crisis and what the risks are in it, at the end of the day, that currency is one where you don't have a bar of gold and you offset it with the dollar and the other side right?
Ultimately, you have a currency where it says that there is a debt outstanding and there's going to be a payment on the other side of that and trust me… That's what the currency is.
It's based on the trust.
That's why it's so important.
For us I think, the way I would look at it is this is, gold is a very good diversify her.
It's a good hedge. I like hedging with things where I can get cash flows and dividends out of. So, I would definitely see two parts.
Two parts to that answer.
Gold is a very good diversify her in this environment and makes sense as part of somebody's portfolio.
I also like the idea of saying "I can go out in with the areas I'm uncomfortable with, when you're market neutral, you have your cash return and that's one of the things we know.
Cash returns are a lot higher right now.
So I can do things like in a gold like way but where I've got a cash return that I know that I'm getting and I'm protecting my downside with it. So in our ways of modelling that, that's a method that we would prefer to use over gold.
But gold in an environment like this does make sense.
>> We can squeeze one more question.
This one came in the show but grandparents talking about starting RESP for their grandchild.
Say the scenario is the grandchild was just born. You know you have a timer. 18 years before the post secondary hits.
>> One of the things that we do is an organization as we sit back and we look at it and we say that when we are managing for clients we think about "what are your immediate needs, those immediate cash flow needs?" The second one says "okay, what are the things I'm going to need in the intermediate?" So the next 3 to 5 years and how should I allocate on that?
If you think about when you're allocating capital, really what you're doing is you're saying "here's my capital today.
When am I going to need cash flows from things down the road?" So short-term, kind of medium-term, then your "how do I fund those with my taxation and how my working with that funding is I'm going out?
The next one is kind of your legacy asset. So I look at, with my own children, with their grandparents did.
I'm setting up RESPs that's legacy money.
You're young and you a 15 to 20 years, ultimately 15 or 20 years is over the long term away. It's also a good reminder of, I think, a lot of the discussion points are having today.
Lost in translation in the last decade, I think, is this is investing in things that are producing capital growth and greater earnings in paying that out.
So I think things that are based on corporations growing their earnings, developing products and services that people are gonna want in the future and attracting more capital because people want to benefit from that so you can ultimately find education down the road, that's where I think you want to look at for that. Time is on their side and also just flat out the core ambition of investment it's really structured in a way of what that RESP is all about.
>> Those 18 years come quicker than you think.
My youngest is 18.
I'm trying to watch my succession.
"Dad can we make that payment to the University?" It's always a pleasure to have you here Brad.
I enjoy the conversation and look forward to the next time.
>> Thank you.
>> Actually the next time will be tomorrow night where we will be on the program at 7 PM Eastern time.
BNN Bloomberg. Stay tuned on tomorrow's show, Scott Colbourne from TD Asset Management will be our guest taking your questions what fixed income.
Reminder that you get a head start by emailing moneytalklive@td.com. That's all the time we have for the show today. Thanks for watching and we will see you tomorrow.
[music]
Which is brought to you by TD Direct Investing.
Every day I'll be joined by guests from across TD, many of whom you will only see here. We'll take you through it's moving the markets and answer your questions about investing. Coming up on today's show. Will be joined by Brad Simpson, Chief Wealth Strategist at TD Wealth to discuss the three questions he got in his mind when it comes to the state of the global economy.
MoneyTalk's Anthony Okolie will take us to the latest Canadian inflation report and in today's WebBroker education segment, Caitlin Cormier will show us how you can research money market funds using the platform.
So here's how you can get in touch us. Just email moneytalklive@td.com or Philip that your response box under the video player on WebBroker.
Before we get to our guests of the day let's get you an update on the markets. Let's check on the TSX Composite Index, 217 points, more than a full percent.
Noticing weakness across all the major sectors really.
Let's check in some of the energy names including Suncor.
A bit of selling pressure on this one, 38 bucks and $0.20 a share, down a little more than 2%.
Centerra Gold, that stock a disappointing quarterly result, a bit of a balance back today but has not regained any bit of the ground that it lost yesterday.
All in all, up a little more than 4%. It's hard to find pockets of green in the market. But Centerra bouncing back from yesterday's selloff is one of them.
South of the border, there's no shortage of things for market watchers to be watching.
Whether the debt ceiling negotiations, the strength of the US consumer, maybe some troubling news at Home Depot that we will tell you a little later in the show in terms of their sales forecast. A little lacklustre of the day.
The S&P 500 down about 1/4%.
The tech heavy NASDAQ was actually in positive territory and holding there. Nothing too dramatic to the upside.
But still, seven points on the board, it is a green arrow.
Advanced Micro Devices is one of those names moving higher in the text basis.
You get to find out how those superstar fund managers are deploying their capital.
New York City hedge fund, Third Point, seems to have a little bit of money moving in that direction. 102 bucks and change up a little more than 5%.
And that's a market update.
Our featured guest today says there are three big questions on his mind when it comes to the state of the global economy.
Joining us now to discuss is Brad Simpson, Chief Wealth Strategist and with TD Wealth.
Always good to have you in the program. Welcome back.
>> Great to be here.
>> Let's break down the numbers. It's been a lot of central-bank tightening. I understand this is the first thing on your mind.
>> Yeah. Something from the last segment you said, it's a lacklustre market today to mark like every second Monday I do this kind of global conference call through our system.
One of the things I say is "is it me or do the financial markets right now have this lacklustre feel to it?" When you think of all the things going on, and really, markets are really, really quiet.
>> I got accustomed last number two these wild swings of inflation. Up 3%, down 3% now what she seems to be… > One of the things we always talk about is adapting and evolving. You know, it's almost like we've gotten to the point where we are so used to big things. We are just getting used to this endless array of big things that are impacting.
Like the quiet level markets surprised me.
It does. I guess I think it we would be remiss no matter how many ways we look at it, inflation is still the thing that you gotta put front and centre.
And you know, in a news cycle, saying "okay we've heard about this a bunch of times and let's move beyond" >> The machine is hungry!
>> The bottom line is that this thing is more resilient than really, what I would say most people, I would say our first thoughts really were on this. So, I think it behooves us to come back and go "let's keep on this and let's look on this and when we do look at it, it is getting better." We are seeing both CPI and PPI numbers came out last week showing that the efforts by the central banks are starting to tighten things up. Inflation is continuing to come down. You look at the US Federal Reserve Board, 500, 500 1/4, lots of rate increases.
Their last increase of 25 basis points came out and said "well, kind of surprised with everybody saying they will take a wait and see attitude" going a bit slower on this. We saw the Bank of England come out and they have somewhere to go but their language definitely started changing and saying "we think we are starting to get a grip on this". He looked over at the ECP… Saying "look, we're going to stop doing this at 50 basis points, a clip, 25 basis points a clip".
All of that starts to point to the more positive trend for inflation and so, with the central-bank changing their tone…I think there is a ways to go but without a doubt we could probably feel, I go to dinner parties and I can hear the fear that is still there and it's understandable.
But that fear is starting to slow and it probably should. Because I think that, you know, quite a lot of the conversation we go to from here is that in many ways financial markets have almost turned and said that's dealt with. Where were going to go to next?
>> Is the part of your economic growth? The whole point of all this aggressive tightening is to get inflation under control.
They said the byproduct of that, the whole point of this is we will slow the economy a little. Are we getting the signs they are actually doing that?
Some of the data coming out sort of surprises me.
>> I think that's one of the things you really want to look at is that we, when you start working through the economy, again, sometimes I feel like "boy the things you folks are looking for, how can you look at the world in this way?" Right? But there is only really one way to slow inflation down and that's you have to start taking on your economic growth and looking where that is.
And so, if you sat back and looked at the global economy and you said "let's start out and say that unemployment is a 3 1/2%"… That is the lowest it's been since 1969, I don't think I'm the youngest looking guy in the world.
I was born in 1969.
That was a few years ago!
So despite the fact that we are starting to see, we saw some numbers come out this weekend showing that inside of the labour numbers are sure are starting to show. 3 1/2% is still really, really employed. So the two big things, I think you have to look at, when thinking about where this global economy is going: I think the starting point is employment.
And I don't think anybody could argue that this is a softening sign here. But, when we look at people who are employed, the other side of this is looking at the consumer.
These two kind of go hand-in-hand with one another.
As we start to look at what's going on inside of the economy, what we see is, we all know what happened with the Silicon Valley Bank and all the offshoot from that.
What were seeing inside the economy, both in North America, seeing in Europe, is we are tightening up credit.
And credit makes the world go around. Money makes the world go around.
Ease of money going into that. So one of the measures we use is financial conditions. And so, I think if we went back in time and looked, I think I was here in August, about a year and 1/2 ago on one of the things you were talking about is the central-bank came out and was looking at easing the financial conditions. They were trying to tighten and Jerome Paltrow said "that's it, done".
>> At Jackson Hole.
>> Yeah. So if you look at it, financial conditions of gotten tighter and tighter and tighter and tighter since then.
Then you look at senior loan officers coming out. So this is flat out, you know, mid-level Bank people going out and having the boss tell them "listen, don't send anybody out there. Small, medium size businesses, they are starting to show that this is getting tighter.
" So, usually when you start to see this happening in times past and you see the tightness of these levels, they have usually been a pretty strong indicator that your light stage, getting closer to a recession.
Not a sign that you're going to look at the changing labour environment.
Then if you look at the changing labour environment, you kind of go over the consumer. You can look at the consumer in North America. You can look at what they are spending on restaurants, look at what they're spending on close… Every time I walk in to get some shorts or something, I'm amazed at how much is on the shelves. How much sales there still are in these types of things.
You kind of start putting all those pieces together.
It's an economy that, while looking good, if people start worrying about their job, people start taking the look at it and saying there was about roughly about 1,000,000,000,000 1/2 dollars of surplus capital and people's balance sheets in the US so that's the largest consumer in the world. We think that's about down to 500 billion now.
That's a lot of spending.
But that's a lot of spending they've gone through quite quickly. You think of people's wallets getting tighter and tighter.
You look over in Europe and you start to see things slow. Looking at the big tailwind that everyone is kind of counting on. China would reopen and be a big tailwind.
We have seen some numbers.
Not so strong either.
All of that points to we have a healthy economy today but there is no doubt this is one that is slowing as well. Which will really help take care of the inflation. But it's also going to change the dynamics of the market environment as well.
>> When we think about that being with the central banks want.
>> Absolutely.
>> They are staying in control.
They are getting what they want now it is a getting out of their control?
>> That's one of the things you have to look at.
These are the things that we know and these are the trends that we can follow.
Let's start and look back and go "okay, we are confident that we've been able to contain the banking crisis so far." But this is a "so far". So I think that that is still a potential risk that is out there.
And I think all the kind of cousins of that… You know, that I think were well aware we are well aware of and we published a paper a couple weeks ago about commercial real estate, we wrote about this pretty extensively in our portfolio strategy quarterly. One of the effects, ultimately, could be many as the commercial real estate, it's pretty tough sliding there right now. And if you look at it through that lens, that has potential. Because an awful lot of that is midsize banking sector.
Talking about small and midsized businesses, most of their access to credit is coming from the small size banking sector.
That all starts to point to real potential problems down the road.
You start looking at some of the hiring patterns from some of the small and medium-size companies. Really starting to tighten up there. So that one, I think is still, I'm not saying if there is an inevitable break out there. But I think that could be one way to get ahead of central banks. That they just can't stop the momentum on, would be one. And I think the second one is, which I'm guessing we will probably dig into a little here : this debt crisis is a real thing.
And this isn't something that a central-bank can solve.
That has the potential to have a lot of downstream impact that, I think, quite frankly, there's a lot of lawmakers in the United States that don't have the financial background to understand just actually how big of a deal this potentially is.
>> A lot of very interesting ideas there.
Threads will pull on throughout the show. We will get your questions about market strategies for Brad Simpson in just a moment's time.
A reminder of course you can get in touch with any time by emailing moneytalklive@td.com or Phil at that viewer response box under the video player on WebBroker. Right now let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading.
Home Depot is warning sales will decline this year as customers shun big purchases and homeowners delay large renovation projects.
The news comes as the retailer posted its largest revenue base in some two decades.
Home Depot was forecasting flat sales for this fiscal year but now says it expects a pullback of up to about 5% in comparable sales.
The International Energy Agency says the pessimism surrounding crude oil stands in stark contrast to a tightening market. While all prices of Bush lower and recession concerns, the IEA says it expects tight supply in the second half of this year. And the agency says China will account for nearly 60% of demand growth in the months ahead.
Shares of Power Corporation under pressure today.
The holding company which has controlling stakes in great West and IGM has missed expectations for its latest quarter.
Contributions for the company's alternative platform came in weaker than expected a little more than 2 1/2%.
Let's check in on the markets checking in on pastry with the TSX Composite Index. A triple digit loss on our hands. That's good for a 1% downside.
In the S&P 500 that brought a read of the American market right now down 1/4 of a percent. We will call that 10 points.
>> Back with Brad Simpson taking your questions. You know people are thinking of this one, one of the top questions: how are you thinking about the debt ceiling?
>> There is a debt ceiling?
(They laugh) in my office at home I have this giant print on one of the walls.
It is from 2012 economist cover about the debt crisis at that time.
During the Obama administration and I had written the artist and said I loved the front cover. And he was so complement, he sent me a JPEG is so I can make a big print out of it.
It's amazing. It's Uncle Sam of the Statue of Liberty.
Biting and spirits as they are driving a Thelma and Louise type car painted with the American flag rate for the cliff.
The license plate has "debt" on it… So I think when you look at, I kind of think about the debt crisis almost every day when I walked into my office at home because I kind of see this print.
I shared that because I think there is a lot to learn from 2011.
Good and bad.
Because this is not 2011 but I think when you compare 13 or 2021 kind of the more recent, 2011 has a lot more the feel of what you would be concerned with.
One: you were here before an election cycle so you kinda got these two different political parties on either side who want to put a strain on this to build this for which way will be best to work with. So I think you have to think about that. Now, the difference between this time and then is we live in a far more extreme world than we did in 2011.
Both these parties, we are in the primaries, moving into a primary season both on the Democratic side and Republican side. One of the things we have to realize, being Canadians here but kind of stepping back and going the way the political system works in the US is the primaries or people who spend all their time in politics and they do nothing but politics.
So it's quite extreme. One, I think the dangers between now and 2011 is that those primaries, those drivers and that on both sides, the right and the left of the spectrum on both sides, are really driving this agenda right now.
And that makes it really difficult for the centre to negotiate. That extreme environment that we see on cable TV every day, that's the thing playing out there.
So what happened in 2011?
Right up until this X date of ultimately, all this really ultimately is is "how much do I have in my Bank account and how much can I find?" >> Yeah the hedge and you open that box and think of all.
>> Right now, arguably the ledger of the United States as somewhere between $800-$1 trillion. Some say it's as low as 500 billion that are covering all the expenditures as we move through June.
June is not far away. So, if we look at it and think "what happened then?" Well, there was a deal.
A deal that was struck. What of the market do before that?
Well, interestingly, it was kind of like this when going in.
It was quite quiet. The starting point was lacklustre.
Volatility was quite low.
Equity markets were quite calm.
Then, of course as we move through that cycle and we had a downgrade of US debt, that had a negative impact.
We saw equity markets sell off. We saw treasuries selloff.
For a little bit of a period of time. Which I think is something that we are probably going to experience here as well. And then, ultimately, a deal was struck and things normalized and we went back to normal again. And that's, you know, many ways it seems to be playing out very similar right now.
>> That low probability but high-impact. We think were going to get a deal but if we didn't, then there's trouble right?
>> And I think you kind of have to look at this kind of, this base case here as you're going to have a deal that's going to kind of look like 2011.
Probably done by X date. A little bit unsure of that.
There is this the second scenario that you look at and you say "well, they will kick it down the road until 2025." You know there's probably about a 25% probability of that one. The difficult time with this one is there's probably the disaster scenario.
The problem is the disaster scenario is probably somewhere around the 40% scenario and this time right?
That's where I think the risk in this market is.
My starting point is saying these two different extremes is ultimately, these two extremes have to come to an agreement and there's only so many hours and days that the house is open for them to push this through.
And these two extremes are not terribly opened to compromise. So you have this great compromiser in the middle here which is highly likely they will get this through.
But if they don't, I think it's important that we are communicating and talking about what the ramifications of this are.
>> Pretty blunt.
>> Yeah.
And I think that's important because you know, the bluntness is, at the end of the day, one of the things it risk is the reserve currency of the United States that fundamentally, the issue of what makes that currency some safe is, if I own a debt now I will get paid back and that's going to be stable.
I don't think you want to mess with that. I don't think you want to play with the 14th amendment and say "constitutionally, we do want to go out and build $1 trillion coin" these are all options that are there.
That principle of making sure that you are paying that back.
Your perspective of what's going on in domestic politics, that's of the risk on this is. Ultimately, we think that this works out. But I do think and what we are doing every day as you want to make sure that your allocating and thinking about how you're edging some of these risks.
>>@Always at home make sure you do your own research before making decisions.
We will get back with Brad Simpson in just a moment's time. A reminder that you can get in touch of us at any time by emailing moneytalklive@td.com.
Now let's get to our educational segment of the day.
If you're interested in money market funds, WebBroker has tools which can help. Joining us now with Maurice Caitlin Cormier, Client Education Instructor at TD Direct Investing. Kalin great to see you. Let's talk about these funds and the platform.
>> Absolutely.
So these are a form of a mutual fund that are really for more kind of short-term parking money sort of situations. So they are relatively low risk, low return as well of course. That's kind of that five of the coin where we have low risk/low reward. So really they are kind of just sort of a short-term parking your money away and trying to get a little bit of yield on it while it's there. So, what energy was amended quickly show you how we can find these funds within WebBroker.
So let's go ahead and happen. When I click on "research" we're going to go "tools" and click on "screeners". So from here we can go ahead and choose the mutual funds screeners specifically. I'm gonna go ahead and create a custom screen.
On the click on "fund category" to get the type of mutual fund we are looking for. And some to go ahead and click. You can click Canadian or US, because there is options for both. For to damn the click Canadian money market.
At the bottom ongoing to deselect including ETF's so I can only see mutual funds and then here the 31 matches.
I can also deselect here the "show TD mutual funds" first and able to show me an alphabetical list of all the different money market funds and you will see here on the far right hand side, they all indicate that they are DI eligible. So I can go through here and look at the different funds available and make decisions as to which ones I might want to do a bit for the research on or parked some money.
>> The reason why we understand that investors are getting interested in money market funds is of course that yields have been much higher than they've been in a long time so if someone is doing this exercise how they find out the yield that's being offered?
>> Absolutely so we do a little bit of extra work in this case to find the yield on a money market fund. One way that you can do it is you can actually click on the fund code within the watchlist information.
So it's gonna pop up this little box here.
We can click the "buy" button. You will see the yield for the particular fund. Overhear the right hand side.
There is actually another way to do it. I will also just quickly mentioned there are some that say "premium" behind them and they can have a minimum of $100,000 that you need to invest before investing in those funds so just keep that in mind.
Let's look at this one here.
The BML. So if I click on it.
Let's add this to a watchlist. I'm in a go ahead and add it to "list two" I'm going to X it and then I will go on the type top right hand corner to watchlist and under the list I can actually see I have three different money market funds and on the far right hand side, it's showing me the distribution yield. So this kind of a quick and easy way, if there's a few different money market funds that you want to keep an eye on and see what the distribution yield is, instead of going into that by button you can actually create a watchlist of different funds or keeping an eye on and then click through and see the distribution yield just under the fundamental information for the funds.
>> Great stuff as always Caitlin. Thanks for that.
>> Thanks Greg.
>> Caitlin Cormier, Client Education Instructor at TD Direct Investing. Make sure to check out the Learning Center and WebBroker for more educational videos, live interactive master classes and upcoming webinars.
We are back with Brad Simpson Chief Wealth Strategist at TD Wealth. Here's a question coming in, (Greg reads the question). We can't give specific investment advice on the platform. We can definitely talk about what people should be thinking about.
In portfolio construction and in different stages in their life too.
I agree you should consult with an advisor, Portfolio Manager. It makes an awful lot of sense.
So I want to answer that looking at it in terms of looking at your fixed income component of your investment portfolio right now.
I think that if you encapsulated the first part of our discussion, it is "what is the goal of central banks right now and why do we talk about this?" The issue is when it comes to fixed income investment, there are two things that are the most important here.
Interest rates.
Duration. What am I getting for the rate return?
Credit. Those are the two things that drive your fixed income rating return from invested managers investment managers point of view. How much yield I getting and how much risk my taking?
When you look at the world that we have today, if you say that short-term interest rates were put up to 500, 5% of 5.25" percent by the US Central Bank, it can kind of plus or -50 basis points across the major industrialized nation's on that, don't forget three years ago, we were talking about 10 Year Treasuries in Germany. They were zero and then there was $18 trillion of negative interest rates.
Meaning you were actually having to pay somebody to hold on your money for you. Fast forward to where you are today, the US 10 year US treasuries about 3 1/2% today.
And that… What's the goal of the Central Bank? The central-bank is to slow things down. So your raise those rates and then, once things get too slow, because at the end of the day, things we are doing right here is, this is not precision based staff. Right? So my gut tells me, when I look at the data and things were looking at, that the efforts of central banks and the things we've done over the last 18 months, we are about halfway through that.
Which means there's going to be more things slowing right?
Pulling jobs and we are going to see second and third quarter for public companies. They're going to come out and say "yeah, we are not making as much money as we did in the past." That means the central banks, 18 months out from now, 12 months out from now, thinking about how do we start lowering rates to get things going again?
That means for a person's fixed income investor, we are maximum overweight fixed income right now. And we think it makes an awful lot of sense.
Government guaranteed Securities and yielding at 3 1/2% of 10 years. Yeah there's going to be interest rate volatility for sure.
But I would think that making sure that you are building an investment portfolio for your fixed income, that you go out and you can buy guaranteed security.
Government guaranteed Securities.
You can probably, right now, have some duration… So five or six years out, if you're managing an overall, we think that makes an awful lot of sense.
We think that investment grade makes a lot of sense.
You can get yourself a higher rate of return.
Still, real nice income from that. And we think that makes an awful lot of sense here as well. We are with high yields, be careful about chasing yield there.
We are now at about 500 basis points spread out. Which is starting to put more and more pressure, if you get, some of the stuff we talked about here today.
Moreover slow down. We do see bankruptcies are still very manageable but they are starting to increase.
So I wouldn't chase yielding that high-yield sector.
If I were going to be in that part of my portfolio, I would probably want to be really loan short there.
Allocating and just taking out right higher credit risk in that.
So I think for a person like that, quite frankly, in many ways this is, for an investor like this, this is a really terrific environment.
For that. And even if you go over swinging into the more risk component of your portfolio, looking at dividends and cash growers inside of companies, even, you're talking about Home Depot. This is not a recommendation on Home Depot but trading at 17 times earnings, gone for a world of pain, markets price and a lot of that pain. There's a lot of good companies out there that look like that that deserve consideration as well.
>> Some homework time for the audience. We will get back to your questions for Brad Simpson on market strategies and just moments time.
Make sure you do your own homework and research before making investment decisions.
A reminder you can get in touch with us anytime.
Do you have a question about investing or was driving the markets? Our guests are eager to hear what's on your mind so send us your questions. There are two ways you can get attachments: you can send us an email any time at moneytalklive@td.
com.
Or you can use the question box right below this screen right here on WebBroker.
Just write in your question and hit "send".
We will see if one of our guests can get you the money talk the answer right here at MoneyTalk Live.
Talking about inflation, hearing consumer prices actually grow in April unexpectedly.
Core measures continue to ease. Our Anthony Okolie is been digging into all these numbers and the implications for the economy. Anthony.
>>Canadian inflation did Job 4.4% that after a 3% increase in March. This was the first increase in headline consumer inflation since June of last year. As the chart shows.
Both headline and core CPI were in a downward trend since peaking in June of last year.
But they still remain elevated in April.
Core goods inflation, it actually rose 3 1/2% year-over-year in April.
Up from 3.
3% in March.
There is some good news. Super core inflation, this is a measure of core services and inflation actually decelerated in April down from 6.3 in March.
Now, when we break up the data by category as my next chart shows, prices rose in several components in April.
The biggest contributor to CPI month over month gains were driven by price up surges for gas and recreational activities.
In fact, gas prices rose more than 6% in April.
Statistics Canada places the blame on OPEC and its allies. Their decision to cut all production. Now, Canadians also got some relief on their grocery bills in April. Thanks to smaller price increases for things like fresh vegetables, coffee and tea.
Finally, shelter inflation also moved higher last month as Canadians continue to pay more in mortgage costs, interest costs in April as this last chart shows.
Mortgage interest costs quickened in April up 20% year-over-year.
Well, actually slowed to .2% year-over-year. Now the cooling in the housing market because of high mortgage rates, that was a key factor in driving down homeowners replacement costs. So, overall, while inflation took a pause in its movement downward in April, it was really due to a surge in gas prices. But it reinforces the challenges of the Bank of Canada faces in bringing inflation down to its 2% target. Great?
>> Definitely we get a hotter headline when some people question where inflation might be headed. What is TD Economics think about the rest of the year?
>> TD Economics expects the Bank of Canada will be able to keep its interest rate of 4 1/2%.
For the remainder of 2023. They also believe the Bank of Canada has to remain vigilant to restrain inflationary pressures.
They may need to hike again if the momentum in the economy doesn't cool as expected. Greg?
>> Interesting stuff.
Thanks Anthony.
>> My pleasure.
>> MoneyTalk Live's Anthony Okolie. We check on the markets.
The TSX Composite Index having a triple digit loss on my screen right now. 227 points. More than a full percent. Power Corporation, the earnings missing the target.
Under pressure at this hour as well nothing too dramatic.
2.
7% of the downside.
Some energy names including Enbridge down at this hour with 3%. The S&P 500, we've been talking about the debt ceiling. Of course Home Depot, disappointment.
The consumer, nothing too dramatic 1/4 of a percent.
Tech heavy NASDAQ was actually positive at the top of the show is it still? Still up about 1/4%.
We talked about the big funds investing in a release what they did. In the previous quarter.
You're saying Alphabet. The parent company of Google.
Third Point taking a stake in this name.
We are back now with Brad Simpson, Chief Wealth Strategist at TD Wealth. We have an interesting question here about the risk of the markets, the US debt ceiling. (Greg reads the question) >> If you went back to 2011, gold went up about 20%.
If you think fundamentally, one of the things with the debt crisis and what the risks are in it, at the end of the day, that currency is one where you don't have a bar of gold and you offset it with the dollar and the other side right?
Ultimately, you have a currency where it says that there is a debt outstanding and there's going to be a payment on the other side of that and trust me… That's what the currency is.
It's based on the trust.
That's why it's so important.
For us I think, the way I would look at it is this is, gold is a very good diversify her.
It's a good hedge. I like hedging with things where I can get cash flows and dividends out of. So, I would definitely see two parts.
Two parts to that answer.
Gold is a very good diversify her in this environment and makes sense as part of somebody's portfolio.
I also like the idea of saying "I can go out in with the areas I'm uncomfortable with, when you're market neutral, you have your cash return and that's one of the things we know.
Cash returns are a lot higher right now.
So I can do things like in a gold like way but where I've got a cash return that I know that I'm getting and I'm protecting my downside with it. So in our ways of modelling that, that's a method that we would prefer to use over gold.
But gold in an environment like this does make sense.
>> We can squeeze one more question.
This one came in the show but grandparents talking about starting RESP for their grandchild.
Say the scenario is the grandchild was just born. You know you have a timer. 18 years before the post secondary hits.
>> One of the things that we do is an organization as we sit back and we look at it and we say that when we are managing for clients we think about "what are your immediate needs, those immediate cash flow needs?" The second one says "okay, what are the things I'm going to need in the intermediate?" So the next 3 to 5 years and how should I allocate on that?
If you think about when you're allocating capital, really what you're doing is you're saying "here's my capital today.
When am I going to need cash flows from things down the road?" So short-term, kind of medium-term, then your "how do I fund those with my taxation and how my working with that funding is I'm going out?
The next one is kind of your legacy asset. So I look at, with my own children, with their grandparents did.
I'm setting up RESPs that's legacy money.
You're young and you a 15 to 20 years, ultimately 15 or 20 years is over the long term away. It's also a good reminder of, I think, a lot of the discussion points are having today.
Lost in translation in the last decade, I think, is this is investing in things that are producing capital growth and greater earnings in paying that out.
So I think things that are based on corporations growing their earnings, developing products and services that people are gonna want in the future and attracting more capital because people want to benefit from that so you can ultimately find education down the road, that's where I think you want to look at for that. Time is on their side and also just flat out the core ambition of investment it's really structured in a way of what that RESP is all about.
>> Those 18 years come quicker than you think.
My youngest is 18.
I'm trying to watch my succession.
"Dad can we make that payment to the University?" It's always a pleasure to have you here Brad.
I enjoy the conversation and look forward to the next time.
>> Thank you.
>> Actually the next time will be tomorrow night where we will be on the program at 7 PM Eastern time.
BNN Bloomberg. Stay tuned on tomorrow's show, Scott Colbourne from TD Asset Management will be our guest taking your questions what fixed income.
Reminder that you get a head start by emailing moneytalklive@td.com. That's all the time we have for the show today. Thanks for watching and we will see you tomorrow.
[music]