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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are going to have a look at a new type of fixed income ETF that will soon be available to Canadian investors. TD Security is Andres Rincon joins us. MoneyTalk's Anthony Okolie is when have a look at a new report from TD Economics on growth in electric vehicle space.
And in today's WebBroker education segment, Bryan Rogers this is going to answer a viewer question on whether you can buy GICs using US dollars. So here's how you can get in touch with us. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before he gets our guest today, let's get you an update on the markets. We want to check in on the TSX Composite Index.
A bit of a down day south of the border, the price of crudekeeping us above water. At 20,228, we are up 45 points on the TSX, about 1/4 of a percent.
Among the most actively traded names on the TSX is a big basket of energy names. I could affect any of them out of the top 10. Baytex is among those movers today.
At five bucks and $0.88 per share, you're up about 4%.
We do have the price of American benchmark crude grinding even higher today, another 2% above 89 bucks a barrel.
That does reignite, though, some concerns around inflation andwhat central banks are going to do about all that.
Want to check in on Kinross Gold right now. It's a bit of a mixed picture in the mere materials space today.
Kinross at six bucks and $0.66 per share, up a little more than 2%. South of the border, not the price of oil moving higher, it does love the energy names and get some market participants a little concerned about the stickiness of inflation and what central banks do with that.
Got the S&P 500 down about 13 points we will colour, a little shy of 1/3 of a percent.
Tech heavy NASDAQ, want to check in on that, how is it pacing against the broader market. It's a bit weaker, down 87 points, a little more than half a percent.
Oracle in the spotlight today, gonna tell you more about that later on the show, but basically coming out with earnings in the market not impressed with the corridor behind it or perhaps some forecasts ahead. Got Oracle down to the tune of a little more than 12%.
And that's your market update.
While there are plenty of different types of equity focused exchange traded funds, you don't see the same sort of diversity when it comes to ETFs that are focused on fixed income. Well, that is starting to change. Joining us now to discuss, Andres Rincon, head of ETF sales and strategies with TD Securities.
Great to have you back on the program.
>> Thank you, thank you for having me.
It's been a couple of times this year that I've been on the show.
>> We had some very interesting conversations about the ETF space and some of the trends you are seeing. This one is very interesting.
I knew cover call bond ETF is launching in Canada in the coming days. What are they, how they work, what do we need to know?
> We are very excited about this launch and generally speaking, Canada's sense to be a leader in innovation when it comes to ETFs but this time the US launched the first bond cover call ETF in August of last year but starting this Friday, in Canada, we will have listed the first bond cover call ETF in Canada. Hamilton ETFs will launch that ETF.bbasically it will give you exposure to bonds in this case and very likely treasuries and sales calls over these names. It's just the start of it.
Shortly after they filed, then you had harvest ETFs launchor file for their own bond cover call ETF and the trigger on that was HP YTD, I believe.
And they are launching soon, so we don't have a lot of details on that one because it hasn't launched yet but it will launch over the next few weeks or so.
Soon we will have to cover call bond ETF here in Canada and I know there are many more to come because this is a very exciting area.
You want to ask, why is it exciting? Well, it's simple.
Investors in Canada want yield and these ETFs pay more than 10% in yields.
And a big chunk of that yield as capital gains, so it's tax efficient.
From the investor's perspective, this is a very attractive product.
Basically, with these products do is they give you exposure to government bonds, which is where we are going to see in Canada to start, but in the US we also have a high yield investment grade. It gives you exposure to an ETF that gives you an exposure to these bonds in them what they do is they sell calls on these names.
>> Generating extra income to make extra yield.
>> They're capping your upside on that specific exposure in that specific ETF, and by doing so they are generating yield. So basically you are exchanging growth for yield in these ETFs.
>> Is that the big trade-off? Is that the big risk if someone is trying to assess this, they yield is better than a regular bond ETF, the cover call portion means that if the bond market does start to recover in a way that's been excited for a while, ifthose cuts come from central banks, you lose some of that upside?
>> 100%. People tend to own, especially on the government bond side, they will own, to start in Canada, long-term government bonds. Generally speaking right now, investors own these as a hedge against a recession.
Markets going lower, markets go lower and interest rates go up. Sorry, interest rates go down, and these ETFs do fairly well.
So when we sell a call on the specific exposures, then you are capping some of that.
While you wait for the recession to happen, this is a good moment then to look at these names and that's why they are now launching these ETFs because people see it as an opportunity to get some yield while they are waiting for a recession, if there is going to be what.
>> In then ETF, it's a liquid market, an investor can come in and out of these investments as they read the market.
>> Yes.
The underlying is treasuries, US treasuries. You can buy and sell it very easily in the USA you can get out of that into your traditional long federal bond ETF or long treasury ETF. And you know it's interesting, on the other side of that is that you, it's very hard to get any more than 5% in an ETF, in a bond ETF, without really going up their credit or risk her. So the average high-yield ETF in Canada pay 6.7% let's say.
I you're getting over 10% very likely in these ETFs but you don't have to go up the credit curve, what you are doing is basically capping your upside.
>> Interesting development.
You always bring a lot of interesting develop into our conversations.
We have seen, abusive, by the very nature of the fact that central banks hiked aggressively, yields have moved higher in fixed income, we see interest there in that space. Let's talk about some of the potentials in that market more broadly.
>> You know it's interesting, I recently hosted the global head of iShares in ourpodcast, Buyside Views, and one of the key things that were mentioned in that podcast is that right now, the fixed income market, on the ETF side, is about 2 trillion. It's a big number but 2% of the bond market in total. It's a tiny part of the bond market.
In this case, Salim expects the bond market to go to 6 trillion, two triple, in this decade alone.
So that's how the prospects of the specific part of the ETF space are massive, really.
What we are seeing in Canada today, for example, is a lot of the money is going to safety in yield.
We are going to catch manage ETFs and government bond ETFs.
More than 40% the amount this year is in these two.
almost 60% of all that all is going into ETFs is going into fixed income.
The ETF part of the… The fixed income part of the ETF world is much smaller than the equity part.
You mentioned it earlier.
So it's really pulling above its weight.
>> Model portfolio ETFs, asset allocation ETFs. We've been hearing about this. Touched on it last time we had a discussion. What's the rule here? I think advisors, both have an eye on this kind of thing but as do investors?
>> 100%. This is huge in the US. Model portfolios are a huge driver of flows in US ETFs. A little bit less in Canada. Model portfolios start with advisors. They need to add an easy way to allocate assets to different regions, different markets and asset classes and almost produce just that.
a lot of issuers provide model portfolios and basically team up with different channels to be able to offer these models.
nnow for mom and pop on the retail side, it's a bit harder to get exposure to a model portfolio because they are generally in partnership with specific channels.
But what the issuers have done to address this and to get exposure to the retail channel is produced asset allocation ETFs which in Canada are very big.
It's interesting.
Model portfolios are very big in the US, asset allocation ETFs are very big in Canada.
This is really a story about mom-and-pop getting exposure to a big portfolio.
These asset allocation ETFs give you exposure to let's say a balanced portfolio, or conservative portfolio, all the way from pure equity to fixed income. So the full spectrum, you getexposure.
You get exposure to ETFs.
In Canada, it's a very big area.
We have many issuers in that space.
Vanguard, iShares, the Fimo of this world.
What is interesting is that in Canada, Salim mentioned this in the video, they just launch their first model portfolios in Canada and obviously they already have a fairly sizable lineup of asset allocation ETFs.
>> This was on your Buyside Views program, and this was a fairly notable person in the space, the global head of iShares, Salim Ramji. I think we have a clip of it.
Let's show to the audience and talk about it on the other side.
>> What bond ETF's are doing is they are really taking the bond market from the analog age to the digital age.
It's really hard to buy an individual bond. And that's true if you're an individual investor and you're trying to find a particular… Online.
It's really difficult, near impossible, depending on the country live in. It's also really hard if you are a financial advisor to sort through thousands of different optionsin bonds and what I think bond ETF's are doing is that they are making it just as easy to buy bond as it is to buy an equity.
>> Alright, Salim Ramji, global head of iShares at Blackrock. Pretty big get in terms of getting a guest for your program. What else did you guys discuss?
>> We discussed fixed income, model portfolios. Most importantly, we discuss the evolution of ETFs. Look, was interesting about Salim is that he is at the top of the food chain when it comes to ETFs. He has a global perspective on what's happening in the world, flows from regions, asset classes. It was great to have him on our show and have his insights on what they are seeingin their ETF specifically.
If you want to listen to Buyside Views, the extended version, you can do so on our website, and saponify, Google podcast, Apple podcast and make sure to subscribe there.
>> Alright. Always great to have Andres Rincon on our show as well. It's a good get for us.
We are going to get your questions about exchange traded funds for on dress in a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
We've got shares of Oracle in the spotlight today. The database software maker is touting future opportunities in the growing market for artificial intelligence, but, as you can see with the stock and 12%, this might not be enough for investors in the here and now. Oracle revenue did fall short of expectations in the most recent quarter and that sales forecast doesn't appear to be impressing the street either.
While Roots says a competitive retail environment and an uncertain economy weighed on its courtly results, the retailers loss has widened compared to the same period last year , coming in at $5.3 million. Roots has a direct to consumer sales, which includes e-commerce, were also lower compared to last year. And promotions weighed on the bottom line.
It's down a bit more than 4%. Cineplex says Barbie and Oppenheimer continued to draw moviegoers into theatres in August. The company says it was the third-best box office showing for the month of August in its history.
And Cineplex is touting the upcoming Taylor Swift filmthat's coming I think in October. That's expected to be a big one as well. The stock up a little bit more than 4%.
A quick check in on the main benchmark indices. We will start here at home with the TSX Composite Index. We got the price of crude oil continuing to grind higher. West Texas intermediate at 89 bucks, it's high of the year.
Have to go back to last November to find crude prices at this height so it is keeping the energy sector higher and the TSX in positive territory to the tune of 47, 40 points, up about 1/4 of a percent.
South of the border, the run and the price of crude has investors wondering what it means for sticky inflation and central bank policy.
Some of their energy names or to the upside but it's not enough to keep the S&P 500 above water. You're down a modest 11 points, about 1/4 of a percent.
We are back with Andres Rincon, take your questions about exchange traded funds. Let's get to them.
I viewer wants to know if there is an ETF for the lithium miners.
>> Yeah, in Canada, there is no lithium pure play.
You have lithium pure plays in the US market. In Canada, what you have more of it is centre aroundthe growth of the automobile, the electric automobile.
>> Is that what this question is really getting at?
>> I think so. Because that's where a lot of those lithium batteries are going towards.
In the ass, you have one that gives you exposure to the minors, the lithium miners.
There's another one that similar.
It tends to be more exposure toChina and some of the developing world mining these specific materials, and some exposure to other areas. But it's mostly to the batteries itself. If you want exposure to the self driving car and the electric car, then you have ETFs that have exposure to that.
Last time I was here, I talked about cars. You have asked DRV for my shares which is very popular. It and these ETFs, what they give you is exposure to not just the lithium producers but also the software in these cars, also to the manufacturers of the cars. So the whole supply chain that actually produces the electric car.
>> That's an interesting thing for the viewers to do some homework on.
Another viewer wants to get your thoughts on low volatility ETFs. They want to know how they work.
>>the way we would put it is into basically two camps.
At the end of the day, the goal of these ETFs is to give you exposure to a subset of low volatility ETFs.
You can do that via a low standard deviation or a low beta.
they will have different mechanisms on how to do it.
You go further level and you will see that they will have different ways to do it. So you can go and give an investor exposure to a basket of low standard deviation stocks. Now you can say how low.
What we see as we have ETFs that are index hugging and ones that are not. And the reason being is if you want let's say your exposure to the S&P 500 but like a slightly lower volatility, we have a product for that or the market is a product for that.
But if you want a product that's the US market, there is also a product around that.
There's a huge variety where we have low standard deviation, low beta and then to which degree.
It really depends on how you want to fit that into your portfolio.
So if you say, I want this as my beta on my portfolio, my core, then you want one that hugs the index or the benchmark. It but if you want one that's really low volatility and has low correlation with the rest of your beta in your profile, then you want something that is not really that close to index hugging. So there is a huge range and very generally speaking Canada, for example, iShares tends to be a little bit more index hugging and BMO tends to be a bit further from that and BMO is low beta where the others are low standard deviation.
>> If we are generally speaking about these low volatility fund, is this also a case of the way that they are structured that whilethey will lower your volatility, by the very name, you might not take part in some of the rapid upside of the underlying index if that's the way the market moves?
>> Yeah, they will own names that are generally speaking more defensive in nature. For example.
Just by the nature of owning more defensive names, they will have a little bit less of a growth factor within the basket.
>> Let's get to another question.
This is an interesting one.
People trying to figure out the differences between ETFs.
In this case, can your guest discuss buying physical gold versus a gold ETF?
This is one I find personally fascinating.
>> The physical gold world is very interesting because that piece of gold has to go through many hands until you get that point and that last price that you pay for it already in grains all those costs that I had to get to your hands and then to your couch, let's say, you're putting it there.
>> The couch! When we go to Andres's house, I will check onto the cushions.
>> Wherever you are putting your gold or cash.
With ETFs, the gold is stored in a vault somewhere. There is still a fee. That goes to custody fear use, insurance. At the end of the day, your gold is safe in a vault somewhere.
an incentive you, the investor, the owner owning the gold in their hands,they own shares of that gold or part of that gold through the fund.
the ETFs tend to own in both. They own these huge piles of gold in a bank, let's say, in London, when I was in London, our offices were right next to the bank of England which holds a lot of this golden basically low cost because you are sharing the cost across a lot of different unitholders.
So it's hard to see the ultimate cost when you buy a piece of gold but ETFs are fairly transparent and you can see those calls on a regular basis. Most important, you're not gonna lose it.
You know where your gold is at the end of the day wears with a bar of gold, someone he might take it or might get lost.
>> Yeah, the security in my house consists of a small dog, about 22 pounds. If a squirrel tried to steal the gold, there would be some real trouble. But if the human came into the house, the tale would be waiting and the gold would be gone.
All right. As always, make sure you do your own research before making any investment decisions.
we are going to get back to your questions for Andres Rincon on ETFs in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now let's get our educational segment of the day.
In today's education segment, we are bringing a question that was recently sent in by a viewer. Amir wrote into us and said, I was wondering if someone can buy US dollar GICs using TD direct investment portal and how? All I see are GICs in CAD. I'd also appreciate it a lot if you can explain the market linked GICs.
Are they both in CAD and USD?
I'm not answer this question, I'm going to bring in someone with their finger on the pulse of this. We got Bryan Rogers, Senior client education instructor with TD Direct Investing. Bryan, great to see you. I think you are the question as I laid it out, so let's talk about it. Are there GICs available in US dollars?
>> Greg, this is a nice easy one for me. There are some US dollar GICs that are there in WebBroker.
We will pop over and take a look.
the first part of the question was, how do I buy this?
If I was an investor looking at GICs, I know about a week ago, we had Caitlin gave some information on GICs but it could have been missed because it goes bypretty fast. You can go to the research tab and click on GIC Rate Sheet. That's going to automatically take you to an area where you have all GICs. There are a few initially, they are not a ton of them, I think there's about nine or so in total.
There are usually a few at the very top if you are looking for a shorter term, one year or up to I would say about one year.
These are just multiple day frames are time frames.
You can look at US dollar from TD Bank.
Almost all of them are from TD Bank.
We don't have a huge selection of other offerings from other companies or financial institutions.
We do for Canadian but for the US it's limited to TD Bank US dollar GICs. So you can see all along here or you have the different raids and I would say an easy way to do it if you're alright with this from a computer standpoint, you a control of any type and at the top US dollar, I see that I have nine selections and if I just click the arrows down below, they are the top, you can go down, see there is a TD mortgage US dollar, there is a two-year, and so on.
So just keep going through and you'll find these US $.
All I did was type and US and the $, and you will find different offerings.
if I click on the 4.75% and I put in my dollar amount, as long as it's within the same timeframe as the market, 9 AM to 4:30 PM, then you can buy those during the day.
Just enter it in online and you will have that entered into your account right away.
Okay.
So there was a second question, right to make >> There was a second part.
Amir was asking about market linked GICs and he wants to know how they work.
>> Yeah, this is always a fun one to answer because it is pretty interesting.
If you're somebody who likes the idea of a GIC and the guarantee principle, I know I'm going to get my money back if I put into a $10,000, I'm gonna get my money back at the end and I'm going to get some intereston a regular GIC. You might be pretty happy with the way that they are right now.
He saw them on the screen there, it could be anywhere from four to possibly 5 1/2, maybe close to 6% in some cases, depending on the issuer.
If you're looking for something a little bit more to say you want the principal protection and you don't want to have that downside risk but maybe you want a little bit more upside potential on a return, you can look up market linked GICs. If we jump back into WebBroker, I find it easiest to show an example of where you find those and then just give you a quick explanation on how they work.
So if I go to the top and I go to research into the GIC Rate Sheet, you can see on the top right-hand side I have market link.
There's not a lot of these. There's only a few but that's good because they are all kind of achieving the same thing.
You can see on the right-hand side, the use of the rates that are potential. You might think, that's great! I see 22% Tory 35% or even 50% for one like if you look across the road to see what that is, that showing that that is in S&P TSX Banks, S&P TSX Utilities or if I look up a little bit, there's one for the S&P 500.
So the way these work is you're gonna put in the principal amount, the amount you're going to invest, and they may, all of them are usually for a longer time period.
You can see 3 to 5 years.
So remember, the rates are, you have to divide that by the time frame that's there.
So really easy math.
If we know, not super easy, but we know three years of 21%, we're gonna be getting about 7% annually, on an annual basis after that for your time period, but it pays out everything all at the end, but you would get up to 22% if the S&P TSX bank index was higher, was up to or higher than that 22%, you can get that maximum amount in the way these work, they go by a point in time, whatever the index or those indexes were if they were multiple, what they were at in the beginning and what they are at the end of that three years. If it's up a significant amount or much higher rate than when you started, you're getting a higher return potentially. And if it doesn't, then you still do get the bottom, you can see the guaranteed, guaranteed minimum. You gonna get that 12%. If I divide that by three would be an average of around 4% per year that I'm getting it paid out at the end if those indexes don't do that well.
So you're getting the best of both worlds with the market linked potentially.
>> Alright. Interesting stuff as always, Bryan. Thanks for answering that question from our viewer.
>> Alright. Thanks, Greg. Dad Bryan Rogers, Senior client education instructor at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
before I get back to your questions about ETFs for Andres Rincon, a reminder of how you can get in touch with us.
Do you have a question about investing or what's 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 in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker.
Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Andres Rincon, taking your questions about exchange traded funds.
A viewer wants to know, our fixed income ETFs safer than investing in fixed income on its own?
Okay, I guess we can't proclaim this on the program but what's the relationship here? If you get a fixed income ETF, is going to behave differently from the fixed income market?
> No, not at all. We like to say that the ETF is just a wrapper for the underlying basket.
There is no magic potion that the ETF has over the underlying basket of bonds.
So what we say is, look, whatever happens to the bonds happens to the ETFs.
Now one thing to bear in mind is that there are differences in terms of how they are put together.
An ETF basically gives you all-in-one exposure to a group of many bonds. There might be thousands of bonds within one ETF. And the pricing for those bonds… At the end of the day, who is buying the bond? The market makers. We have institutional level pricing for a lot of these bonds. There might be small differences here and there between an individual buying a single bond or thousand bonds, which would be very difficult to do on your own, you buy an ETF and you get exposure to all of those. At the end of the day, the ETF wrapper just holds bonds.
>> Whatever the underling performance is going to be is going to be the performance of the ETF, basically.
>> That's correct.
>> Another great one here. Can you take us through different types of healthcare sector ETF? Healthcare is a big space. There must be a lot going on here.
>> How we like to separated is in Canada, specifically the Canadian market, we have very general healthcare ETFs to give you exposure to everything, Biotech, Pharma. It's basically a big group of healthcare related securities. Then, you have your cover call ETFs. For some reason, well, the reason is a a low yielding sector generally speaking, there are a lot of cover call ETFs in Canada and a big portion of them… We have, for example, life gives you exposure to healthcare ETFs with cover call.
On the noncovered call side, you have… From harvest and XHC from iShares they give you an exposure to just the healthcare sector in general.
In the US, what you do find is a little bit more intricate exposure. To get exposure to instead of just brought healthcare, you can get exposure to biotech only or you can get exposure to pharmaceuticals on their own if you really want to go that route.
So too from the neck are examples of ETFs that apply to those specific subsectors.
>> A lot of information there for years to take away and do research on.
Let's get to another question here about geography. Any good ETFs for investing in India?
>> Yeah, in Canada, there's a small market for India focused ETFs.
You have the INDA in the US from iShares being the largest really in that space. In Canada you have two the give you exposure to India specifically but in general it's fairly broad market exposure to that market, it will give you banks, oil and gas, the Computerworld, so that's generally what you are getting with exposure to India in local securities.
>>I think this viewers questions based on the fact that they are looking at emerging markets and economies that have a middle class that appeared in recent years that they didn't have before and that perhaps there will be economic growth there that may or may not outstrip the West.
>> That's right, people don't necessarily want just EM exposure, they will want China or India separately for XYZ reasons.
There is demand for many of those countries.
>> This leads nicely into the next one. Are there any special considerations when looking at ETFs that cover China? Specifically this viewers says they are looking at the KraneShares CSI China Internet ETF. That's pretty specific.
>> Without going into detail about that one specifically, I will say was really important to understand is what sort of exposure you are getting to these Chinese companies.
Generally speaking, you can buy a China ETF that gives you exposure to stocks that are from mainland China.
You can also get exposure to China through Hong Kong stocks or you can get exposure to China through US listed stocks.
So you have agent shares and a variety of different shares to give you exposure to China.
So we really need to understand is what kind of exposure do you want?
The US wants to be a lot more technology focus because a lot of them are listed in the US. The mainland wants it to be a little bit more diverse given that they have real estate and a couple of different areas. So it's really, what part of China do you want to be exposed to? And that's how you should start your journey in looking into a China ETF.
> I saw a headline the other day in a camera member what the investment was but they said often people use New Zealand or Australia as a proxy it for something else, just to the point that there are a lot of different ways if you're thinking about China exposure about what level of exposure you want.
>> Getting exposure to shares is an easy, you have to work with a local partner.
A lot of the issuers that we have here in the US or Canada, you need to partner with a local dealer in China to be able to get access to a shares. It's a little bit more complicated and expensive but that's what you getin real mainland China exposure.
>> Interesting things there indeed. We'll get back to your questions for Andres Rincon on ETFs in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get in touch with us at any time.
Do you have a question about investing or what's 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 in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
The transition to electric vehicles in the US has seen significant progress.
Sales are expected to surpass 1 million units for the first time this year. But increasing competition for critical mineral inputs presents challenges to the story. Anthony Woolley has been looking at a new TD Economics report on the state of the sector, opportunities and challenges.
>> Thanks very much, Greg. Yes, electric vehicles have historically it accounted for a small share of the US auto market for the past decade.
However, US EV sales soared 50% year-over-year in 2022.
As you mentioned earlier, they are on track to hit 1 million units this year. Electric vehicle sales have been benefiting from the introduction of consumer tax credits through the 2022 US inflation reduction act for households buying electric vehicles in the US. But they must meet domestic content requirements. I brought along a chart that sort of highlights that over the next couple of years, some of the requirements.
Just an example, for 2023, 50% of battery components and purchase EVs must be sourced from North America and 40% of critical minerals used in these electric vehicles must be extracted or processed in the US or country that has a free-trade agreement with the United States.
Starting next year, battery components can be sourced from an entity of a concerned nation or an EEOC as TD Economics notes, that includes countries like China, Russia, Iran and North Korea.
Now that present some challenges because the US has minimal critical mineral reserves that are used in electric vehicle production. For example, graphite is a product that's a major product for China.
Cobalt is produced by the democratic Republic of Congo, but of course China has substantial ownership stakes there. Nickel is produced in Indonesia, just to name a few examples.
Meanwhile, the US has made some progress in recent years to develop its critical mineral reserves but it can take up to a decade or longer in order for them to get there. There are some challenges there. Some other challenges that this presents is competition for demand from other nations for these critical minerals and the competition from China, for example, Europe, as well as other industries that use these critical minerals for their products and I'm talking about wind turbines or electronics so the clock is ticking for automakers to establish the supply chains needed to make their EV goals and capitalize on the IRA subsidies.
Finally, when we move one step down the supply chain, a battery components and production. A growing percentage of the US EV market and Ire requirements has motivated many battery manufacturers to locate their manufacturing facilities in North America.
In total, there are about 25 new North American battery manufacturing facilities which have either been announced or are actively under construction as of July 2023. Many of these new plans are actually moving southward, especially in the US, where the population shift move towards the south. Overall, the automakers are intent on wrapping up their EV productions to meet the sales targets. While this will present many opportunities, there will be no shortage of challenges along the way. Greg?
>> Let's talk about those sales targets because if we are trying to balance the opportunity in the marketplace versus getting the critical minerals you need, are they realistic?
>> In terms of targets, many companies have been very aggressive in setting their goals. We will start Tesla, the current market leader. They have an ambitious goal of 25 million annual global sales by 2030, that equates to just over 7 million annual electric vehicle sales in the US alone and TD Economics says, just as a reference, Toyota, currently the largest worldwide producer of cars, they sold just 10 million units worldwide in 2022 so Tesla schools are quite ambitious.
I will name just a few others, the 3 Largest in North America, GM, Ford and Olanta.
they had targets of 40 to 50% of annual US volume by 2030. So again, very ambitious targets but there are a lot of challenges in order to meet those goals going forward.
>> Very interesting stuff. Thanks, Anthony.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing. This is the heat map function, gives you a view of the market movers.
We are screening, to begin with, the TSX exceed by price and volume. No surprise with American benchmark crew now at its highest level since last November.
Using a bid also on some of the energy names and that is lifting the topline TSX number.
You got a name like Suncor of almost 2 1/2% on the session and CVE, the Cenovus beneath it, up about 2%.
It's not all just about oil and gas names. You can see Cameco down there at the bottom of the grid, CCO, up about 2 1/2%. If you're looking for weakness, you're seeing it in the tech space today.
You got Shopify down about 1 1/2%.
South of the border, let's check in on the S&P 100.
Oracle down to the tune of almost 12 1/2% this hour on the back of its earnings.
you can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
All right, we are back now with Andres Rincon from TD Securities talking ETFs. A lot of questions coming in the past few moments.
Got a question here. Any interesting AI ETFs out there?
Artificial intelligence is all the buzz.
>> It is all the buzz.
I think whenever I get a question on AI, it's very popular and there's a lot of interest in the space.
In the US, the most popular ETF is BOT S from global accident basically gives you exposure to robotics and hardware which is really what you are getting with AI, you want the hardware, that gives you the ability to generate AI systems, right?
and that's a very popular one. In Canada,a local affiliate of that company, Horizons ETFs, actually has RBOT. They don't have artificial intelligence in the name as BOT S has, butgives you access to similar stocks.
And another one in Canada that gets you exposure is edge from evolve.
a big chunk of it is Nvidia as you probably talk about quite a bit too. Those are different ways that you can get exposure to AI in Canada and the US.
>> Alright, see you get the exposure obviously, I guess the risk is, as you talk before, this is a wrapper around some of these names.
>> It's a very fast moving market.
Like you talked about earlier on Oracle, technology is a gross space and it can move quite quickly.
>> We are all set of time. We will squeeze in one more question.
A viewer wants to know what ETFs that cover Canadian bonds.
>> So the question is what it looks like in general.
How we split it is more like a grid.
So you have different maturities for the bonds and you have your credit exposure. That's how it is, generally speaking. There are a lot of bonds around the world and in the periphery, like preferred shares and floating rate in different areas but let's not focus too much on those areas right now. Let's focus on the current core.
So what you have is an investor, you can invest in the ultrashort end, the short end, the mid and the long end of the curve. And along those lines, you can also invest around, on the other side of that, around different types of bonds.
Even you government bonds, you can do municipal bonds in the US, for example, provincials in Canada, government bonds here in Canada too.
And in the US to. It depends on how much risk you want to take and how much duration risk you want to take.
See you can literally invest in all corners of that box and it just depends on what you want. Do you want interest rate risk or do you want credit risk or do you want none?
And you can invest in any of those areas.
>> It's always a fascinating conversation. I appreciate you dropping by.
>> Thank you.
>> I look forward to the next time.
Andres Rincon, head of ETF sales and strategy at TD Securities. As always at home make sure to do your own research before making any investment decisions. Stay tuned for tomorrow's program. Scott Colbourne, managing Dir.
and head of active fixed income at TD Asset Management will be our guest taking your questions about fixed income. You can get a head start with your questions.
Just email moneytalklive@td.com.
That's all the time we have for the show today.
Thanks for watching. We will see you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are going to have a look at a new type of fixed income ETF that will soon be available to Canadian investors. TD Security is Andres Rincon joins us. MoneyTalk's Anthony Okolie is when have a look at a new report from TD Economics on growth in electric vehicle space.
And in today's WebBroker education segment, Bryan Rogers this is going to answer a viewer question on whether you can buy GICs using US dollars. So here's how you can get in touch with us. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before he gets our guest today, let's get you an update on the markets. We want to check in on the TSX Composite Index.
A bit of a down day south of the border, the price of crudekeeping us above water. At 20,228, we are up 45 points on the TSX, about 1/4 of a percent.
Among the most actively traded names on the TSX is a big basket of energy names. I could affect any of them out of the top 10. Baytex is among those movers today.
At five bucks and $0.88 per share, you're up about 4%.
We do have the price of American benchmark crude grinding even higher today, another 2% above 89 bucks a barrel.
That does reignite, though, some concerns around inflation andwhat central banks are going to do about all that.
Want to check in on Kinross Gold right now. It's a bit of a mixed picture in the mere materials space today.
Kinross at six bucks and $0.66 per share, up a little more than 2%. South of the border, not the price of oil moving higher, it does love the energy names and get some market participants a little concerned about the stickiness of inflation and what central banks do with that.
Got the S&P 500 down about 13 points we will colour, a little shy of 1/3 of a percent.
Tech heavy NASDAQ, want to check in on that, how is it pacing against the broader market. It's a bit weaker, down 87 points, a little more than half a percent.
Oracle in the spotlight today, gonna tell you more about that later on the show, but basically coming out with earnings in the market not impressed with the corridor behind it or perhaps some forecasts ahead. Got Oracle down to the tune of a little more than 12%.
And that's your market update.
While there are plenty of different types of equity focused exchange traded funds, you don't see the same sort of diversity when it comes to ETFs that are focused on fixed income. Well, that is starting to change. Joining us now to discuss, Andres Rincon, head of ETF sales and strategies with TD Securities.
Great to have you back on the program.
>> Thank you, thank you for having me.
It's been a couple of times this year that I've been on the show.
>> We had some very interesting conversations about the ETF space and some of the trends you are seeing. This one is very interesting.
I knew cover call bond ETF is launching in Canada in the coming days. What are they, how they work, what do we need to know?
> We are very excited about this launch and generally speaking, Canada's sense to be a leader in innovation when it comes to ETFs but this time the US launched the first bond cover call ETF in August of last year but starting this Friday, in Canada, we will have listed the first bond cover call ETF in Canada. Hamilton ETFs will launch that ETF.bbasically it will give you exposure to bonds in this case and very likely treasuries and sales calls over these names. It's just the start of it.
Shortly after they filed, then you had harvest ETFs launchor file for their own bond cover call ETF and the trigger on that was HP YTD, I believe.
And they are launching soon, so we don't have a lot of details on that one because it hasn't launched yet but it will launch over the next few weeks or so.
Soon we will have to cover call bond ETF here in Canada and I know there are many more to come because this is a very exciting area.
You want to ask, why is it exciting? Well, it's simple.
Investors in Canada want yield and these ETFs pay more than 10% in yields.
And a big chunk of that yield as capital gains, so it's tax efficient.
From the investor's perspective, this is a very attractive product.
Basically, with these products do is they give you exposure to government bonds, which is where we are going to see in Canada to start, but in the US we also have a high yield investment grade. It gives you exposure to an ETF that gives you an exposure to these bonds in them what they do is they sell calls on these names.
>> Generating extra income to make extra yield.
>> They're capping your upside on that specific exposure in that specific ETF, and by doing so they are generating yield. So basically you are exchanging growth for yield in these ETFs.
>> Is that the big trade-off? Is that the big risk if someone is trying to assess this, they yield is better than a regular bond ETF, the cover call portion means that if the bond market does start to recover in a way that's been excited for a while, ifthose cuts come from central banks, you lose some of that upside?
>> 100%. People tend to own, especially on the government bond side, they will own, to start in Canada, long-term government bonds. Generally speaking right now, investors own these as a hedge against a recession.
Markets going lower, markets go lower and interest rates go up. Sorry, interest rates go down, and these ETFs do fairly well.
So when we sell a call on the specific exposures, then you are capping some of that.
While you wait for the recession to happen, this is a good moment then to look at these names and that's why they are now launching these ETFs because people see it as an opportunity to get some yield while they are waiting for a recession, if there is going to be what.
>> In then ETF, it's a liquid market, an investor can come in and out of these investments as they read the market.
>> Yes.
The underlying is treasuries, US treasuries. You can buy and sell it very easily in the USA you can get out of that into your traditional long federal bond ETF or long treasury ETF. And you know it's interesting, on the other side of that is that you, it's very hard to get any more than 5% in an ETF, in a bond ETF, without really going up their credit or risk her. So the average high-yield ETF in Canada pay 6.7% let's say.
I you're getting over 10% very likely in these ETFs but you don't have to go up the credit curve, what you are doing is basically capping your upside.
>> Interesting development.
You always bring a lot of interesting develop into our conversations.
We have seen, abusive, by the very nature of the fact that central banks hiked aggressively, yields have moved higher in fixed income, we see interest there in that space. Let's talk about some of the potentials in that market more broadly.
>> You know it's interesting, I recently hosted the global head of iShares in ourpodcast, Buyside Views, and one of the key things that were mentioned in that podcast is that right now, the fixed income market, on the ETF side, is about 2 trillion. It's a big number but 2% of the bond market in total. It's a tiny part of the bond market.
In this case, Salim expects the bond market to go to 6 trillion, two triple, in this decade alone.
So that's how the prospects of the specific part of the ETF space are massive, really.
What we are seeing in Canada today, for example, is a lot of the money is going to safety in yield.
We are going to catch manage ETFs and government bond ETFs.
More than 40% the amount this year is in these two.
almost 60% of all that all is going into ETFs is going into fixed income.
The ETF part of the… The fixed income part of the ETF world is much smaller than the equity part.
You mentioned it earlier.
So it's really pulling above its weight.
>> Model portfolio ETFs, asset allocation ETFs. We've been hearing about this. Touched on it last time we had a discussion. What's the rule here? I think advisors, both have an eye on this kind of thing but as do investors?
>> 100%. This is huge in the US. Model portfolios are a huge driver of flows in US ETFs. A little bit less in Canada. Model portfolios start with advisors. They need to add an easy way to allocate assets to different regions, different markets and asset classes and almost produce just that.
a lot of issuers provide model portfolios and basically team up with different channels to be able to offer these models.
nnow for mom and pop on the retail side, it's a bit harder to get exposure to a model portfolio because they are generally in partnership with specific channels.
But what the issuers have done to address this and to get exposure to the retail channel is produced asset allocation ETFs which in Canada are very big.
It's interesting.
Model portfolios are very big in the US, asset allocation ETFs are very big in Canada.
This is really a story about mom-and-pop getting exposure to a big portfolio.
These asset allocation ETFs give you exposure to let's say a balanced portfolio, or conservative portfolio, all the way from pure equity to fixed income. So the full spectrum, you getexposure.
You get exposure to ETFs.
In Canada, it's a very big area.
We have many issuers in that space.
Vanguard, iShares, the Fimo of this world.
What is interesting is that in Canada, Salim mentioned this in the video, they just launch their first model portfolios in Canada and obviously they already have a fairly sizable lineup of asset allocation ETFs.
>> This was on your Buyside Views program, and this was a fairly notable person in the space, the global head of iShares, Salim Ramji. I think we have a clip of it.
Let's show to the audience and talk about it on the other side.
>> What bond ETF's are doing is they are really taking the bond market from the analog age to the digital age.
It's really hard to buy an individual bond. And that's true if you're an individual investor and you're trying to find a particular… Online.
It's really difficult, near impossible, depending on the country live in. It's also really hard if you are a financial advisor to sort through thousands of different optionsin bonds and what I think bond ETF's are doing is that they are making it just as easy to buy bond as it is to buy an equity.
>> Alright, Salim Ramji, global head of iShares at Blackrock. Pretty big get in terms of getting a guest for your program. What else did you guys discuss?
>> We discussed fixed income, model portfolios. Most importantly, we discuss the evolution of ETFs. Look, was interesting about Salim is that he is at the top of the food chain when it comes to ETFs. He has a global perspective on what's happening in the world, flows from regions, asset classes. It was great to have him on our show and have his insights on what they are seeingin their ETF specifically.
If you want to listen to Buyside Views, the extended version, you can do so on our website, and saponify, Google podcast, Apple podcast and make sure to subscribe there.
>> Alright. Always great to have Andres Rincon on our show as well. It's a good get for us.
We are going to get your questions about exchange traded funds for on dress in a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
We've got shares of Oracle in the spotlight today. The database software maker is touting future opportunities in the growing market for artificial intelligence, but, as you can see with the stock and 12%, this might not be enough for investors in the here and now. Oracle revenue did fall short of expectations in the most recent quarter and that sales forecast doesn't appear to be impressing the street either.
While Roots says a competitive retail environment and an uncertain economy weighed on its courtly results, the retailers loss has widened compared to the same period last year , coming in at $5.3 million. Roots has a direct to consumer sales, which includes e-commerce, were also lower compared to last year. And promotions weighed on the bottom line.
It's down a bit more than 4%. Cineplex says Barbie and Oppenheimer continued to draw moviegoers into theatres in August. The company says it was the third-best box office showing for the month of August in its history.
And Cineplex is touting the upcoming Taylor Swift filmthat's coming I think in October. That's expected to be a big one as well. The stock up a little bit more than 4%.
A quick check in on the main benchmark indices. We will start here at home with the TSX Composite Index. We got the price of crude oil continuing to grind higher. West Texas intermediate at 89 bucks, it's high of the year.
Have to go back to last November to find crude prices at this height so it is keeping the energy sector higher and the TSX in positive territory to the tune of 47, 40 points, up about 1/4 of a percent.
South of the border, the run and the price of crude has investors wondering what it means for sticky inflation and central bank policy.
Some of their energy names or to the upside but it's not enough to keep the S&P 500 above water. You're down a modest 11 points, about 1/4 of a percent.
We are back with Andres Rincon, take your questions about exchange traded funds. Let's get to them.
I viewer wants to know if there is an ETF for the lithium miners.
>> Yeah, in Canada, there is no lithium pure play.
You have lithium pure plays in the US market. In Canada, what you have more of it is centre aroundthe growth of the automobile, the electric automobile.
>> Is that what this question is really getting at?
>> I think so. Because that's where a lot of those lithium batteries are going towards.
In the ass, you have one that gives you exposure to the minors, the lithium miners.
There's another one that similar.
It tends to be more exposure toChina and some of the developing world mining these specific materials, and some exposure to other areas. But it's mostly to the batteries itself. If you want exposure to the self driving car and the electric car, then you have ETFs that have exposure to that.
Last time I was here, I talked about cars. You have asked DRV for my shares which is very popular. It and these ETFs, what they give you is exposure to not just the lithium producers but also the software in these cars, also to the manufacturers of the cars. So the whole supply chain that actually produces the electric car.
>> That's an interesting thing for the viewers to do some homework on.
Another viewer wants to get your thoughts on low volatility ETFs. They want to know how they work.
>>the way we would put it is into basically two camps.
At the end of the day, the goal of these ETFs is to give you exposure to a subset of low volatility ETFs.
You can do that via a low standard deviation or a low beta.
they will have different mechanisms on how to do it.
You go further level and you will see that they will have different ways to do it. So you can go and give an investor exposure to a basket of low standard deviation stocks. Now you can say how low.
What we see as we have ETFs that are index hugging and ones that are not. And the reason being is if you want let's say your exposure to the S&P 500 but like a slightly lower volatility, we have a product for that or the market is a product for that.
But if you want a product that's the US market, there is also a product around that.
There's a huge variety where we have low standard deviation, low beta and then to which degree.
It really depends on how you want to fit that into your portfolio.
So if you say, I want this as my beta on my portfolio, my core, then you want one that hugs the index or the benchmark. It but if you want one that's really low volatility and has low correlation with the rest of your beta in your profile, then you want something that is not really that close to index hugging. So there is a huge range and very generally speaking Canada, for example, iShares tends to be a little bit more index hugging and BMO tends to be a bit further from that and BMO is low beta where the others are low standard deviation.
>> If we are generally speaking about these low volatility fund, is this also a case of the way that they are structured that whilethey will lower your volatility, by the very name, you might not take part in some of the rapid upside of the underlying index if that's the way the market moves?
>> Yeah, they will own names that are generally speaking more defensive in nature. For example.
Just by the nature of owning more defensive names, they will have a little bit less of a growth factor within the basket.
>> Let's get to another question.
This is an interesting one.
People trying to figure out the differences between ETFs.
In this case, can your guest discuss buying physical gold versus a gold ETF?
This is one I find personally fascinating.
>> The physical gold world is very interesting because that piece of gold has to go through many hands until you get that point and that last price that you pay for it already in grains all those costs that I had to get to your hands and then to your couch, let's say, you're putting it there.
>> The couch! When we go to Andres's house, I will check onto the cushions.
>> Wherever you are putting your gold or cash.
With ETFs, the gold is stored in a vault somewhere. There is still a fee. That goes to custody fear use, insurance. At the end of the day, your gold is safe in a vault somewhere.
an incentive you, the investor, the owner owning the gold in their hands,they own shares of that gold or part of that gold through the fund.
the ETFs tend to own in both. They own these huge piles of gold in a bank, let's say, in London, when I was in London, our offices were right next to the bank of England which holds a lot of this golden basically low cost because you are sharing the cost across a lot of different unitholders.
So it's hard to see the ultimate cost when you buy a piece of gold but ETFs are fairly transparent and you can see those calls on a regular basis. Most important, you're not gonna lose it.
You know where your gold is at the end of the day wears with a bar of gold, someone he might take it or might get lost.
>> Yeah, the security in my house consists of a small dog, about 22 pounds. If a squirrel tried to steal the gold, there would be some real trouble. But if the human came into the house, the tale would be waiting and the gold would be gone.
All right. As always, make sure you do your own research before making any investment decisions.
we are going to get back to your questions for Andres Rincon on ETFs in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now let's get our educational segment of the day.
In today's education segment, we are bringing a question that was recently sent in by a viewer. Amir wrote into us and said, I was wondering if someone can buy US dollar GICs using TD direct investment portal and how? All I see are GICs in CAD. I'd also appreciate it a lot if you can explain the market linked GICs.
Are they both in CAD and USD?
I'm not answer this question, I'm going to bring in someone with their finger on the pulse of this. We got Bryan Rogers, Senior client education instructor with TD Direct Investing. Bryan, great to see you. I think you are the question as I laid it out, so let's talk about it. Are there GICs available in US dollars?
>> Greg, this is a nice easy one for me. There are some US dollar GICs that are there in WebBroker.
We will pop over and take a look.
the first part of the question was, how do I buy this?
If I was an investor looking at GICs, I know about a week ago, we had Caitlin gave some information on GICs but it could have been missed because it goes bypretty fast. You can go to the research tab and click on GIC Rate Sheet. That's going to automatically take you to an area where you have all GICs. There are a few initially, they are not a ton of them, I think there's about nine or so in total.
There are usually a few at the very top if you are looking for a shorter term, one year or up to I would say about one year.
These are just multiple day frames are time frames.
You can look at US dollar from TD Bank.
Almost all of them are from TD Bank.
We don't have a huge selection of other offerings from other companies or financial institutions.
We do for Canadian but for the US it's limited to TD Bank US dollar GICs. So you can see all along here or you have the different raids and I would say an easy way to do it if you're alright with this from a computer standpoint, you a control of any type and at the top US dollar, I see that I have nine selections and if I just click the arrows down below, they are the top, you can go down, see there is a TD mortgage US dollar, there is a two-year, and so on.
So just keep going through and you'll find these US $.
All I did was type and US and the $, and you will find different offerings.
if I click on the 4.75% and I put in my dollar amount, as long as it's within the same timeframe as the market, 9 AM to 4:30 PM, then you can buy those during the day.
Just enter it in online and you will have that entered into your account right away.
Okay.
So there was a second question, right to make >> There was a second part.
Amir was asking about market linked GICs and he wants to know how they work.
>> Yeah, this is always a fun one to answer because it is pretty interesting.
If you're somebody who likes the idea of a GIC and the guarantee principle, I know I'm going to get my money back if I put into a $10,000, I'm gonna get my money back at the end and I'm going to get some intereston a regular GIC. You might be pretty happy with the way that they are right now.
He saw them on the screen there, it could be anywhere from four to possibly 5 1/2, maybe close to 6% in some cases, depending on the issuer.
If you're looking for something a little bit more to say you want the principal protection and you don't want to have that downside risk but maybe you want a little bit more upside potential on a return, you can look up market linked GICs. If we jump back into WebBroker, I find it easiest to show an example of where you find those and then just give you a quick explanation on how they work.
So if I go to the top and I go to research into the GIC Rate Sheet, you can see on the top right-hand side I have market link.
There's not a lot of these. There's only a few but that's good because they are all kind of achieving the same thing.
You can see on the right-hand side, the use of the rates that are potential. You might think, that's great! I see 22% Tory 35% or even 50% for one like if you look across the road to see what that is, that showing that that is in S&P TSX Banks, S&P TSX Utilities or if I look up a little bit, there's one for the S&P 500.
So the way these work is you're gonna put in the principal amount, the amount you're going to invest, and they may, all of them are usually for a longer time period.
You can see 3 to 5 years.
So remember, the rates are, you have to divide that by the time frame that's there.
So really easy math.
If we know, not super easy, but we know three years of 21%, we're gonna be getting about 7% annually, on an annual basis after that for your time period, but it pays out everything all at the end, but you would get up to 22% if the S&P TSX bank index was higher, was up to or higher than that 22%, you can get that maximum amount in the way these work, they go by a point in time, whatever the index or those indexes were if they were multiple, what they were at in the beginning and what they are at the end of that three years. If it's up a significant amount or much higher rate than when you started, you're getting a higher return potentially. And if it doesn't, then you still do get the bottom, you can see the guaranteed, guaranteed minimum. You gonna get that 12%. If I divide that by three would be an average of around 4% per year that I'm getting it paid out at the end if those indexes don't do that well.
So you're getting the best of both worlds with the market linked potentially.
>> Alright. Interesting stuff as always, Bryan. Thanks for answering that question from our viewer.
>> Alright. Thanks, Greg. Dad Bryan Rogers, Senior client education instructor at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
before I get back to your questions about ETFs for Andres Rincon, a reminder of how you can get in touch with us.
Do you have a question about investing or what's 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 in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker.
Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Andres Rincon, taking your questions about exchange traded funds.
A viewer wants to know, our fixed income ETFs safer than investing in fixed income on its own?
Okay, I guess we can't proclaim this on the program but what's the relationship here? If you get a fixed income ETF, is going to behave differently from the fixed income market?
> No, not at all. We like to say that the ETF is just a wrapper for the underlying basket.
There is no magic potion that the ETF has over the underlying basket of bonds.
So what we say is, look, whatever happens to the bonds happens to the ETFs.
Now one thing to bear in mind is that there are differences in terms of how they are put together.
An ETF basically gives you all-in-one exposure to a group of many bonds. There might be thousands of bonds within one ETF. And the pricing for those bonds… At the end of the day, who is buying the bond? The market makers. We have institutional level pricing for a lot of these bonds. There might be small differences here and there between an individual buying a single bond or thousand bonds, which would be very difficult to do on your own, you buy an ETF and you get exposure to all of those. At the end of the day, the ETF wrapper just holds bonds.
>> Whatever the underling performance is going to be is going to be the performance of the ETF, basically.
>> That's correct.
>> Another great one here. Can you take us through different types of healthcare sector ETF? Healthcare is a big space. There must be a lot going on here.
>> How we like to separated is in Canada, specifically the Canadian market, we have very general healthcare ETFs to give you exposure to everything, Biotech, Pharma. It's basically a big group of healthcare related securities. Then, you have your cover call ETFs. For some reason, well, the reason is a a low yielding sector generally speaking, there are a lot of cover call ETFs in Canada and a big portion of them… We have, for example, life gives you exposure to healthcare ETFs with cover call.
On the noncovered call side, you have… From harvest and XHC from iShares they give you an exposure to just the healthcare sector in general.
In the US, what you do find is a little bit more intricate exposure. To get exposure to instead of just brought healthcare, you can get exposure to biotech only or you can get exposure to pharmaceuticals on their own if you really want to go that route.
So too from the neck are examples of ETFs that apply to those specific subsectors.
>> A lot of information there for years to take away and do research on.
Let's get to another question here about geography. Any good ETFs for investing in India?
>> Yeah, in Canada, there's a small market for India focused ETFs.
You have the INDA in the US from iShares being the largest really in that space. In Canada you have two the give you exposure to India specifically but in general it's fairly broad market exposure to that market, it will give you banks, oil and gas, the Computerworld, so that's generally what you are getting with exposure to India in local securities.
>>I think this viewers questions based on the fact that they are looking at emerging markets and economies that have a middle class that appeared in recent years that they didn't have before and that perhaps there will be economic growth there that may or may not outstrip the West.
>> That's right, people don't necessarily want just EM exposure, they will want China or India separately for XYZ reasons.
There is demand for many of those countries.
>> This leads nicely into the next one. Are there any special considerations when looking at ETFs that cover China? Specifically this viewers says they are looking at the KraneShares CSI China Internet ETF. That's pretty specific.
>> Without going into detail about that one specifically, I will say was really important to understand is what sort of exposure you are getting to these Chinese companies.
Generally speaking, you can buy a China ETF that gives you exposure to stocks that are from mainland China.
You can also get exposure to China through Hong Kong stocks or you can get exposure to China through US listed stocks.
So you have agent shares and a variety of different shares to give you exposure to China.
So we really need to understand is what kind of exposure do you want?
The US wants to be a lot more technology focus because a lot of them are listed in the US. The mainland wants it to be a little bit more diverse given that they have real estate and a couple of different areas. So it's really, what part of China do you want to be exposed to? And that's how you should start your journey in looking into a China ETF.
> I saw a headline the other day in a camera member what the investment was but they said often people use New Zealand or Australia as a proxy it for something else, just to the point that there are a lot of different ways if you're thinking about China exposure about what level of exposure you want.
>> Getting exposure to shares is an easy, you have to work with a local partner.
A lot of the issuers that we have here in the US or Canada, you need to partner with a local dealer in China to be able to get access to a shares. It's a little bit more complicated and expensive but that's what you getin real mainland China exposure.
>> Interesting things there indeed. We'll get back to your questions for Andres Rincon on ETFs in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get in touch with us at any time.
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The transition to electric vehicles in the US has seen significant progress.
Sales are expected to surpass 1 million units for the first time this year. But increasing competition for critical mineral inputs presents challenges to the story. Anthony Woolley has been looking at a new TD Economics report on the state of the sector, opportunities and challenges.
>> Thanks very much, Greg. Yes, electric vehicles have historically it accounted for a small share of the US auto market for the past decade.
However, US EV sales soared 50% year-over-year in 2022.
As you mentioned earlier, they are on track to hit 1 million units this year. Electric vehicle sales have been benefiting from the introduction of consumer tax credits through the 2022 US inflation reduction act for households buying electric vehicles in the US. But they must meet domestic content requirements. I brought along a chart that sort of highlights that over the next couple of years, some of the requirements.
Just an example, for 2023, 50% of battery components and purchase EVs must be sourced from North America and 40% of critical minerals used in these electric vehicles must be extracted or processed in the US or country that has a free-trade agreement with the United States.
Starting next year, battery components can be sourced from an entity of a concerned nation or an EEOC as TD Economics notes, that includes countries like China, Russia, Iran and North Korea.
Now that present some challenges because the US has minimal critical mineral reserves that are used in electric vehicle production. For example, graphite is a product that's a major product for China.
Cobalt is produced by the democratic Republic of Congo, but of course China has substantial ownership stakes there. Nickel is produced in Indonesia, just to name a few examples.
Meanwhile, the US has made some progress in recent years to develop its critical mineral reserves but it can take up to a decade or longer in order for them to get there. There are some challenges there. Some other challenges that this presents is competition for demand from other nations for these critical minerals and the competition from China, for example, Europe, as well as other industries that use these critical minerals for their products and I'm talking about wind turbines or electronics so the clock is ticking for automakers to establish the supply chains needed to make their EV goals and capitalize on the IRA subsidies.
Finally, when we move one step down the supply chain, a battery components and production. A growing percentage of the US EV market and Ire requirements has motivated many battery manufacturers to locate their manufacturing facilities in North America.
In total, there are about 25 new North American battery manufacturing facilities which have either been announced or are actively under construction as of July 2023. Many of these new plans are actually moving southward, especially in the US, where the population shift move towards the south. Overall, the automakers are intent on wrapping up their EV productions to meet the sales targets. While this will present many opportunities, there will be no shortage of challenges along the way. Greg?
>> Let's talk about those sales targets because if we are trying to balance the opportunity in the marketplace versus getting the critical minerals you need, are they realistic?
>> In terms of targets, many companies have been very aggressive in setting their goals. We will start Tesla, the current market leader. They have an ambitious goal of 25 million annual global sales by 2030, that equates to just over 7 million annual electric vehicle sales in the US alone and TD Economics says, just as a reference, Toyota, currently the largest worldwide producer of cars, they sold just 10 million units worldwide in 2022 so Tesla schools are quite ambitious.
I will name just a few others, the 3 Largest in North America, GM, Ford and Olanta.
they had targets of 40 to 50% of annual US volume by 2030. So again, very ambitious targets but there are a lot of challenges in order to meet those goals going forward.
>> Very interesting stuff. Thanks, Anthony.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing. This is the heat map function, gives you a view of the market movers.
We are screening, to begin with, the TSX exceed by price and volume. No surprise with American benchmark crew now at its highest level since last November.
Using a bid also on some of the energy names and that is lifting the topline TSX number.
You got a name like Suncor of almost 2 1/2% on the session and CVE, the Cenovus beneath it, up about 2%.
It's not all just about oil and gas names. You can see Cameco down there at the bottom of the grid, CCO, up about 2 1/2%. If you're looking for weakness, you're seeing it in the tech space today.
You got Shopify down about 1 1/2%.
South of the border, let's check in on the S&P 100.
Oracle down to the tune of almost 12 1/2% this hour on the back of its earnings.
you can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
All right, we are back now with Andres Rincon from TD Securities talking ETFs. A lot of questions coming in the past few moments.
Got a question here. Any interesting AI ETFs out there?
Artificial intelligence is all the buzz.
>> It is all the buzz.
I think whenever I get a question on AI, it's very popular and there's a lot of interest in the space.
In the US, the most popular ETF is BOT S from global accident basically gives you exposure to robotics and hardware which is really what you are getting with AI, you want the hardware, that gives you the ability to generate AI systems, right?
and that's a very popular one. In Canada,a local affiliate of that company, Horizons ETFs, actually has RBOT. They don't have artificial intelligence in the name as BOT S has, butgives you access to similar stocks.
And another one in Canada that gets you exposure is edge from evolve.
a big chunk of it is Nvidia as you probably talk about quite a bit too. Those are different ways that you can get exposure to AI in Canada and the US.
>> Alright, see you get the exposure obviously, I guess the risk is, as you talk before, this is a wrapper around some of these names.
>> It's a very fast moving market.
Like you talked about earlier on Oracle, technology is a gross space and it can move quite quickly.
>> We are all set of time. We will squeeze in one more question.
A viewer wants to know what ETFs that cover Canadian bonds.
>> So the question is what it looks like in general.
How we split it is more like a grid.
So you have different maturities for the bonds and you have your credit exposure. That's how it is, generally speaking. There are a lot of bonds around the world and in the periphery, like preferred shares and floating rate in different areas but let's not focus too much on those areas right now. Let's focus on the current core.
So what you have is an investor, you can invest in the ultrashort end, the short end, the mid and the long end of the curve. And along those lines, you can also invest around, on the other side of that, around different types of bonds.
Even you government bonds, you can do municipal bonds in the US, for example, provincials in Canada, government bonds here in Canada too.
And in the US to. It depends on how much risk you want to take and how much duration risk you want to take.
See you can literally invest in all corners of that box and it just depends on what you want. Do you want interest rate risk or do you want credit risk or do you want none?
And you can invest in any of those areas.
>> It's always a fascinating conversation. I appreciate you dropping by.
>> Thank you.
>> I look forward to the next time.
Andres Rincon, head of ETF sales and strategy at TD Securities. As always at home make sure to do your own research before making any investment decisions. Stay tuned for tomorrow's program. Scott Colbourne, managing Dir.
and head of active fixed income at TD Asset Management will be our guest taking your questions about fixed income. You can get a head start with your questions.
Just email moneytalklive@td.com.
That's all the time we have for the show today.
Thanks for watching. We will see you tomorrow.
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