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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 show, will discuss a growing trend in the ETF space as investors hunt for yield with TD Securities Andres Rincon.
MoneyTalk Anthony Okolie is going to have a look at whether the recent run-up in US dollar strength is here to stay. And in today's WebBroker education segment, Bryan Rogers will show us how you can find trending stocks using the platform.
So here's how you can get in touch with us. Just email moneytalklive@td.com or you can follow that viewer response box under the video player here on WebBroker.
Before we get to our guest of the day, let's get you an update on the markets.
Last week was a money-losing week on Bay and Wall Street.
We have some green on the screen to start things off of this Monday.
It's up about 66 points. Let's take a look at some names that are moving. I've noticed the miners getting a bid. We will start with Hudbay right now, six bucks $0.68.
That stock is up about 6%. Denison Mines in the uranium space, they seem to be getting some attraction to. Not quite as to the upside as Hudbay but at a Buck 67, you're up about 2.8% on Denison.
Now south of the border, investors perhaps making some peace, trying to look to the fact that what the Fed has been telling us all along, that they felt the need to continue raising the cost of borrowing and then keep the interest rates high in the battle against inflation, the market seems to be coming around to what the Fed has been saying. There was a lot of consternation last week. There's nothing too impressive to the upside, but up about 19 points, or about half a percent on the S&P 500. How is the tech heavy NASDAQ going against the broader market, a bit more strongly. Up three quarters of a percent.
Today, for it is up about 2%, 12 bucks and $0.13 per share. That's a market update.
As investors hunt for yield, a somewhat surprising segment of the ETF market is beginning to come popular.
Joining us for more and some of the other trends we are seeing in the spaces Andres Rincon, and of ETF sales and strategy at TD Securities. Good to have you on the program for the first time.
Before we get into the conversation about the trends, tell me what your team does.
>> Thank you for having me, for starters.
I had ETF sales and strategies at TD Securities, and I review a group of traders and sales at TD when it comes to ETFs specifically.
In short, what we do is we are liquidity providers of ETFs.
Some of you might wonder what that is exactly. But we are the ones that make sure the market functions.
We come in every day and we look it over a thousand ETFs on a daily basis. This goes across a variety of asset classes and regions. We are very active in our traders sit in front of that screen all day, making sure they are making markets on ETFs in Canada.
We are a technology business, making sure there is a bid and ask if there every single day.
If I had to put it into perspective, let me step back for a second.
ETFs, the word ETF. The key word here is exchange.
So it trades on an exchange. And how does it trade on an exchange? You need a liquidity provider.
We are the ones doing that.
When you as an investor go and buy or sell and ETF, you are interacting with either another buyer seller or you're interacting with a market maker.
That's in essence what we do, we provide bids and asks on the board for many ETFs across a variety of providers.
another responsibility is to create and redeem a fun.
If you look at the mutual fund space, there are generally only two participants, the buyer seller and the fund.
In the ETF world, there is actually 1/3 participant which is us, the AP, the approved participant.
Our job, once again, is to make markets.
As we accumulate decisions in these ETFs, we create or redeem in the fund and we are the only ones that are allowed to do that in the market and on behalf of TD, we are the major market of ETFs and we are considered the product experts when it comes to ETFs.
>> I would say that in that market-making role, you are seeing the trends as they pass by your screen.
You have eyes on it.
Let's talk about some of those trends. The hunt for yield. Obviously people are looking at yield in a different way than they have in years. What does that mean for ETFs?
>> We have seen incredible growth in our space in the last few years and yields has been one of the key areas but I also want to touch on some of the other trends we are seeing in our space.
Number one, the majority of flow is still in the passive world.
ETFs, that's the baby of ETFs.
We are seeing a lot of money going into passive ETFs.
But now we are also seeing a lot of money going to asset allocation ETFs, cover call ETFs, on the topic of yield, and also fixed income is another yield centric product.
In asset allocation, it is one of the main areas for ETFs and these are relatively new ETFs. They launched call it… Five years ago or so.
But they are seeing a ton of flow from advisors, from mom and pop on the direct investing side. So it's a fast growing area. These ETFs, what they do and say build an entire portfolio for you.
It's a one-stop shop investing for you as an investor.
So you can have your 6040 for conservative growth, the whole spectrum, you can have it in ETF form. These are very, very popular.
Now, you can also have cover call ETFs or any yield centric ETFs and these are very popular.
We were talking earlier about how a big part of the ETF space is now yield focus, especially for the direct investor.
So cover calls is a great example of that.
That's long a stock and short a call.
These are very new in Canada. These are ETFs that give you a little bit of leverage, very, very small, and in some cases they also do cover calls on those ETFs.
These have become very popular because of their yield, sometimes 10%, 13%, that's very attractive to a lot of the investors.
And we even have some new products called yield shares which are doing the same thing but in single stocks, like Amazon or Apple.
So these are really fascinating products that we are seeing here in Canada.
>> How is Canada different in the US? In a way, I feel that perhaps we have a bit of a different market than they do.
>>.com is a relatively similar across the board in coverage of the space, but we have a couple of areas that are really interesting. Number one, cover call.
About 5% of all the market in Canada. In US, it's just .5. It's tiny in the US. We are almost the same size as the US and that's really fascinating how big it is in Canada.
Crypto ETFs, we have physically backed crypto ETFs which we don't have in the US.
Yield shares I mentioned is a new product that's only available here in Canada.
But also there are a couple of different notes here and there. There are active she managed ETFs, their 25% of the market in Canada. In the US, it's a very small portion.
It's interesting as well that because we are in Canada and not the US, US dollar-based or hedge products are also very big in Canada.
>> Is going to ask you, amid all these fascinating trends, you have launched a new show, I think it's called Buyside Views.
We want to the audience a little clip of it and then we will continue talking.
>> We think that the role of the financial advisor is only going to increase from here.
And it's especially true for more affluent investors.
I think that the financial advice is not going to get commoditisize. Froboticized.
In Canada, you start with sizable IRAs, it's better on a lot of fronts in terms of cross-sectional functions but also in the way that you can approach external managers and get better terms.
>> Alright, undress. There you are in the anchor chair, asking the questions.
The conversation was a bit about the future of advice considering Robo advisors and all the chat about artificial intelligence. What other kinds of things can people expect in the show?
> Basically, we are giving our clients, our institutional clients, access to different clients that we have here at TD and we are allowing them to showcase their expertise on trends in the markets. We are going to see a lot more of that going forward.
In this first case, we had the CIO.
We are very excited to see more on that.
These are publicly available so you can have them on Apple podcast, Google podcast and spot of five.
> Interesting stuff and great start to the show.
We'll get back to your questions on ETFs for Andres Rincon in a moment's time.
You can get in touch anytime. Email moneytalklive@td.
com mortal of the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world business and take a look at how the markets are trading.
We've got shares of Québec-based Uni-Select in the spotlight today.
That's on news that the automotive parts and paints distributor is being purchased by American firm LKQ Corp for some $2.8 billion.
The deal requires approval of shareholders and regulators.
The shares are up right now to the tune of a little more than 16%.
Union Pacific CEO Lance Fritz says he'll step aside this year to allow a new leader to take the helm. The move follows pressure from activist investor Sorobancapital partners have Fritz replaced.
Union Pacific has been hit recently by labour shortages and delayed shipments.
The Oracle of Omaha is defending share buybacks in Berkshire Hathaway's annual letter released over the weekend, Warren Buffett said criticism of buybacks come from the economic illiterate.
Berkshire spent $27 billion on buybacks in 2021.
A quick check and in the market, we will start here in Canada with the TSX Composite Index.
The first trading day of the week after a money-losing session last week on rate fears, economic worries, we are up 61 points. Nothing too dramatic but it is green on the screen, about 1/3 of a percent.
South of the border, lest I can on the S&P 500.
Right now, it is up 16 points, a little shy of half a percent.
We are back now with Andres Rincon, the head of ETF sales and strategy at TD Securities.
Let's get your questions.
Are there ETFs that cover real estate investing?
> Yes, it's one of the most popular areas right now. It's about 19 to 20 ETF that cover that space.
One thing to bear in mind is that unlike mutual funds, in ETFs, you need daily liquidity.
These ETFs invest in public companies, either REI TS or REI TS plus companies involved in the real estate space.
That's generally what we get in Canada.
>> What's fascinating about the spaces that when you start thinking about exchange traded funds and how they cover the real estate space and you start to dig down, you are talking office, industrial, retail.
There is a whole universe of real estate out there.
>> Yeah, and generally speaking, they are broader in ETF lane.
You're not gonna get all of the specific areas but you are going to get them all in one specific shell and that's the ETF. For the most part, a lot of them you can get in Canadian exposure, US, global. You have a big variety of products.
>> As far as trends and flows, obviously real estate has been front and centre on a number of fronts whether it's the pandemic's effect on the office, residential real estate.
The rate hikes we've had last year and the aggressiveness of that. What are you noticing in terms of trends in the space?
>> What we are seeing is a lien into the yield they provided as well as a move to… Within the subsection of REI TS and real estate, we see a bigger need for real assets, for their security, their stability. We are seeing a big push for that. Once again, what they do is they invest in companies that invest in real assets.
>> Let's take another question now. Lots coming in on ETFs. Any insights on the TQQQ ETF? What's this all about?
>> Let's talk about what it is. It is a triple leveraged version of the QQQs which is the NASDAQ. They give you three times daily leverage to the index in this case, the triple cues ETF. The first I will say that's really important is that this is not an investment vehicle. This is a trading vehicle.
They rebalance on a daily basis and because of that, they do tend to be path dependent and volatility dependent.
What will happen is that you will see some attrition over time. And what we see investors do sometimes which they shouldn't is hold it for long periods of time. This is really a 1 to 2 day product.
You should not hold it for a long period of time.
>> That's a pretty important caveat.
>> I'll give you a quick example.
If you have an ETF that goes up let's a $10 and then goes down by 50% the next day, so it ends today at five dollars and the next day goes up by 50%, that's only 2 1/2 dollars on that five, so that ends up over two days up, sorry, down 50%, 50%, and it's only at 750.
So the ETF in two days although they had the same percentage changes is down 25%.
So if you compound that over long periods of time and performance is not what the long-term performance would be in a triple leverage. It's daily rebalanced in his leverage.
>> The swings built into the very product are supposed to be more pronounced.
But that can be tough to handle from an investment perspective.
>> Yeah, and I would consider them high risk for starters.
If we had a rating, which we don't, I would consider these high-risk products for investors.
Once again, you can use this for hedging purposes, you can use this for other similar purposes but itched only be short-term.
>> More caveats there on that one. Another question we have is about other than the ticker COW, is there another ETF in the same space? I believe COW has to do with agriculture, cleverly enough.
>> That's one thing that the ETF industry does really well, the takers. They are easy to read and catchy. So another one in this space is ZEAT.what they do is very similar between these two. In the case of COW, it's an index space, ZAAT,which is actively managed.
But they both have exposure to the agricultural space and these companies.
Into the equity, specifically.
One thing to bear in mind that there are different ways to get exposure to the agricultural space.
In Canada, you have cow, DAT, but you also have a lot of future space product. They are popular in the US. What they do is they give you exposure to cattle and soybeans and coffee and went on all in one product and it's mostly future space.
Those are by far the biggest products and you see them quite often in the US. Not very often in Canada.
>> The fascinating because I was thinking about agricultural ETFs, the Hebrew companies, but this is a massive marketof futures contracts when it comes to commodities.
Probably an important distinction to be made here.
>> Yeah, no, for sure.
When you are investing in traditional companies, like Nutrien and General Mills, isn't it different.
And the structures are very different.
It's important to understand those.
>> Let's get another question now.
That had to do with agricultural ETFs.
This is an interesting one. Are there ETFs for short-term bonds?
Everyone's talking about fixed income again after all this aggressive central bank action.
> Yeah.
There are days where we have spent almost our entire day looking at short-term bonds and dealing in short-term bond products.
I'll give you an example.
Last Friday, we spent a good chunk of our day trading these products and it's because they become so popular across all of our channels here at TD and across our institutional clients. It's interesting.
we have a very wide array of products. We have 60 ETFs just in this little space. He can go from North America, US, Canada, global. It can also go to corporate aggregate. You can get government exposure.
There are different types, different risks that you can get exposure to. You can also go from money market to alter short term.
at the short end of the curve, you can get a broader range of options for you. It's important to understand the mall and what specifically you are looking for.
>> What is the distinction there? Some people thinking about bonds themselves.
That's obviously a place at a retail investor through this platform can take a look at. But the ETF obviously is bit of a different experience. Similar exposure but different construct. How does that work?
>> So you own a bond and especially if it's short-term, it goes to maturity and then you'll have to buy another one.
Within ETF, you by the ETF and they do it itself. Thereby short-term bonds, let them run off and buy new ones. They do the work for you.
> Okay. Interesting stuff. That's a good section. As always at home, make sure you do your own research before you make any investment decisions.
We are going to get back to your questions are Andres Rincon on ETFs in just a moment time. A reminder that you get in touch with us at any time. Just email moneytalklive@td.com.
Now let's get to the educational segment of the day.
If you are interested in which stocks are catching I've analysts, WebBroker has tools which can help. Joining us now for more as Bryan Rogers, Senior client education instructor with TD Direct Investing.
Great to see you again.
Let's talk about how we are going to use the WebBroker platform to figure out what the analysts are talking about.
[guest muted] We seem to be having some technical problems right now. I'm not sure if you can hear me, Bryan, but I can't hear you.
I don't think the audience can hear you either.
Let's see if we get that fixed up and get Bryan back into the program a little bit later to sign the concept to us because I'm a little bit intrigued myself.
Alright. So, you know what? We are talking ETFs.
Why don't you find out a way to get in touch with us. Do you have a question about investing or what's driving the market?
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 writing your question and hit send.
we will see if one of our guest can get you the answer right here at MoneyTalk Live.
We are back with Andres Rincon, taking your questions about exchange traded funds so let's get back to them. Our viewer wants to know, is it better to hedge your ETF's against US currencies?
I've noticed this in ETFs two, whether they are hedged or unhedged. Walk us through with going on here.
>> That's quite a complex question. The very good question actually. We see this all the time. As I mentioned earlier, Canada is one of the few places that has US dollar hedged product. They're popular, but 21% on the entire market.
Really, it comes down to the preference of the investor but also the cost of hedging is very important to understand.
And also, it can be, on a technical level, it can be depending on the asset class.
So I will touch really briefly on all those. If you look at the investor, they have a US focus ETF and they want to avoid the US dollar… Is a pretty easy decision.
Now it's important to understand that these ETFs to do, when they had, they do carry costs.
And they do buy and sell forwards to offset that exposure or that currency hedge. And sometimes, those can have capital gains or losses over the years and it's very important to understand.
And the hedge itself can cost money depending on a variety of factors.
What we like to look at is the asset class. If you are looking at a currency that moves let's say 10% on an analysed basis, and you're going to hedge it against a bond portfolio that moves also 10%, then you have to really question whether you should do it because at the end of the day, the currency moves almost as much is the asset.
But compare that to a stock portfolio which was a lot more, then maybe it's a little bit less necessary. So it really depends on the differential in volatility between the currency and the asset class you are looking at.
>> So looking at an ETF, you'll see the ETF gives you exposure to this in here is the CAD hedged version of this. Investors doing their own homework would have to have some kind of thesis in their mind as to where they think the currency is going.
>> Yes, I think you have to have a good opinion as to why you are going to hedge it.
>> Okay, let's get to another question.
This one about healthcare.
Your view please on ETFs for the healthcare space. XLV and VHT it seemed to have caught this viewers I was a solid performance. What do you think about healthcare ETFs?
>> I will just comment really broadly on healthcare and not necessarily on these two ETFs.
These two are US-based healthcare ETFs that are broad-based. So they are generally fairly good ETFs. But I would say in healthcare is right now, because of the pandemic we just had and because it's a staple as an industry, we are seeing a lot of demand in that space.
I think that we are likely to see is a long trend and spending in that space.
Currently, we have the Ontario bill that's being placed, the health bill, let's say, and that we see as incentive to spend more money in these areas, and I just think that they are going to provide for more growth in the space.
This is why we are seeing a lot of investments in the space.
In Canada, it's fairly unique because there are 28 ETFs in healthcare and many of them are covered call.
Many times, these companies don't pay dividends. Sometimes they do.
Also to reduce the volatility.
It's very common that we have a lot of alternatives here in Canada.
>> When I hear people talk about healthcare from the US market perspective, they will say with, aging society, drug costs.
But then you start thinking about what is in the healthcare space, what is an offer.
On one side you have the robotic surgery, then you have the Pharma companies. I would imagine the ETFs reflect this diversity of health options in the state.
>> Completely.
You get the parts makers, biotech, Pharma, all these areas in one single ETF.
>> Okay, that was the healthcare space.
Another question, lots coming in.
What should be keep in mind when looking at bond ETF? We talked about short-term bond ETF's, but what about bought ETFs in general?
>> I think there are couple of things you can look at when you are assessing whether to buy a bond ETF or which one to buy.
And a couple of the key ones are the risk rating.
You can also look at that duration or the average maturity of the bonds in the ETF.
The reason you are looking for exposure to is all these are key areas when you are considering buying an ETF. Why? Because on the duration side, it measures the sensitivity of your fund to interest rates.
That's important as we now have rising rates and you want to be able to manage that risk. Also whether you want to invest in greater high-heeled.
Some people forget that they are buying a bond but it's up by yield so it means more risk.
So it's not just the component of rates but the component of credit.
And that is something that's very important to remember when you're buying a bond ETF. If you're buying a government bond, you are buying a bond ETF with credit exposure.
You need to be able to manage that credit risk.
>> We got a question that just came in.
This person wants to talk about bond ETFs.
They want to know about the price change.
Is it based on trading activity similar to stocks or is it purely based on the bond market?
If you see a bond ETF fluctuating and value, what's driving the fluctuations?
>> Number one is rates, what rates are doing in the market.
Depending on what kind of bond ETF you have. But also credit. Credit behaves similar to stocks, especially on the high-yield end. If you have the sentiment of the market moving towards a more bullish sentiment, generally Orbán portfolio should perform and the same goes in the other way. If you have a degrading market, then you will see the credit of that bond go lower and the bond market also go lower.
>> Fascinating stuff.
We are going to get back to your question for Andres Rincon on exchange traded funds in just a moment time.
As always at home, make sure you do your own research before you make any investment decisions and 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 writing your question and hit send.
We will see if one of our guests can get you the answer right here at MoneyTalk Live.
After we start to the year, the US dollar has rebounded recently on the back with some strong US inflation data, hawkish fed comments for higher rates. Is this the start of a new bull market for the US buck or is this downturn that we were anticipating going to persist? Our Anthony Okolie has been joining us with a new report from TD Securities about this a resurgent greenback.
What are they saying?
>> TD Securities is saying that the recent US dollar strength in terms of magnitude and potential duration has been a surprise for them.
The US dollar just recently hit a seven-week peak against the euro just last Friday, following hotter than expected US inflation data, so a strong US jobs report and consumer spending data.
As a chart of the US dollar ETF shows.
US dollar has been peeking since back in September and we saw drawdown late last year intoearly this year but the US dollar has since rallied this month.
Now, the more hawkish comments from the Fed officials about the openness to high rates to tame inflation has also helped to boost the US dollar and helped to raise its year-to-date losses.
The US dollar is now flat on the year in terms of performance.
TD Security says that it's hard to see a turnaround in US dollar strength in the near term as the market tries to navigate the balance of global growth and higher interest rates. TD Securities sees few catalysts in the very near term that could reverse the US dollar momentum. But they are closely watching upcoming China data and of course a strong China reopening increases the risk in the reversal of US dollar strength.
But TD Securities believes there is likely more US dollar upside in the short term.
Particularly as a bit of tightening in US dollar rate expectations and positive US data surprises.
When you look at when money markets are pricing in right now, they are pricing in US dollar interest rates at a terminal rate of 5.4% in July and expected to stay above 5% all year versus the current target rate right now of 4 1/2 to 4.75%.
Markets are also pricing and rate hikes over the next three months. As a result, the US dollar is currently outperforming a basket of international currencies across the D10, especially those currencies that have been hit hardest as geopolitics has trumped the China inflation theme recently.
> The thesis here is that in the short term, we are probably going to see more of this US dollar strength and we have been experiencing. What if we pull out a little bit of a longer time frame, say 3 to 6 months? Was the call there?
>> TD Securities believes that the downturn in the US dollar will persist over the next 3 to 6 months and they see weakening over that timeframe. Here's why.TD Security says that we are still in a high rate and weak growth environment despite recent improvements on growth.
they note that the possible transition to better growth and rates are still high has generated uncertainty.
>> Interesting stuff important to the markets. Thanks for that. Money talks Anthony Okolie.
Let's check in on the markets now and see how we are doing on this first trading day of the week. We have some green on the screen. Not overwhelming.
at 20,288, up 69 points on Bay Street, about 1/3 of a percent.
Uni-Select, we told you earlier about an American company getting a deal to buy Uni-Select. The shares are up about 16 1/2%.
Right now, they do distribution of automotive parts and paints. Loblaw, some downtrend.
hundred and 17 box per share, down almost 2%.
South of the border, the S&P 500, after a money-losing session last week is up 17 points, a little shy of half percent. The tech heavy NASDAQ last time we checked was faring a little bit better than the broader market. It's up about three quarters of a percent.
Tesla among the names today that are getting a bid, 205 bucks and $0.35 per share, you are up a little more than 4% on Tesla.
We are back now with Andres Rincon from TD Securities, we are talking about ETFs.
Let's get back to the question. This one just coming in in the past couple of minutes. Is there an ETF out there for gold or gold mining companies?
>> That area has been fascinating.
It has obviously been one of the staples of Canada, energy and gold or mining in general being very important.
There has been a huge uptick in interest in the space. So yes, we have a variety of ETFs in Canada that cover the mining space, both in Canada and globally.
And also we have ETFs that cover gold in itself, so the commodity itself.
That's one of the areas that we see a lot of growth in the institutional world. For example, somebody wants exposure directly to gold, you can have that exposure via an ETF. But if you want exposure to the minors, you can also do that via ETFs.
What's fascinating as you can get exposure to let's say it skewed towards silver producers or gold producers or minors in general across not just gold but a variety of base metals, let's say.
>> The ETF is a basket of whatever securities or assets held in there, when you think about, okay, different mining companies, there's a basket of them. I find it interesting when people say that all gold the ETF option, you can play the precious metal directly through the ETF.
>> They are relatively cheap ways of getting exposure. You just get on WebBroker and by those ETFs.
>> What is the construction of the ETF?
Are they holding physical gold, what's going on here?
>> Generally, how these work is holding physical gold at the custodial level. So you're buying basically shares in the assets that are held in custody somewhere.
>> Interesting set.
>> There are different structures to it but that's the main one.
>> Let's take another question now.
A member of our audience wants to know, are there any ETFs that play in the electrification space? We can hear about EVs all the time, electrification, what about the EV world?
>> Similar to mining. Obviously, the battery itself needs or requires mining.
So yes, you can buy ETFs in the US or Canada they give you exposure to the electrification of the world.
in Canada, you have cars that have been around quite a bit.
X Drive from a iShares. These are ETFs to give you exposure to the entire gamut of companies that are involved in the electrification of the industry from automakers to the battery makers to the minors to the semiconductors,the whole gamut.
It's a pretty exciting space to be in right now and we are seeing a lot more push in there too.
>> I think it's similar when you're talking about gold in the basket of gold mining companies, this is ETFs in general, you are not necessarily by its very nature paying one winner but a basket of names.
There can be pros and cons to that, right?
You can put all your money in one horse but at the same time you a bunch of different horses, some may do well and others not.
>> Yes, diversification is one of the main pieces why people buy ETFs and that's obviously seen in the lower volatility of ETF compared to single names and that's one of the reasons why people buy it.
>> Let's take another question now.
Someone wants to know if they have missed the boat on something.
Is it too late to invest in the energy sector?
Do you prefer X e.g. or Z EO? We can't give recommendations on the show but let's talk about some of the trends we saw last year.
We saw a lot of money move into energy names. Was it the same in the ETF space?
> Yes.
As you mentioned, I can't comment on the future of energy but I can comment a little bit on the space and also X e.g., Z EO as individual ETFs.
They are very similar.
The main difference is that Z EO is equally weighted versus X e.g. which is market Waited. What that really means is you have larger emphasis on the smaller companies in the basket of Z EO it also Z EO tends to be a little more gassy than just oil and gas.
What ends up happening is we have a little bit more torque on Z EO it then X e.g. as a product so depends on what you really want there. But Canada has a huge realm of possibility in that space, in energy specifically, and you have anywhere from ETFs they give you exposure to a broad set of companies but also the commodity itself.
See you can get all in gas in ETF form both here in Canada and in the US. It is a very popular product that you see here.
>> Lots of questions and interest. Before let you go, I want to get back to the themes in the ETF industry.
We talked about some of the things we have seen recently, the hunt for yield. What's most intriguing to you about ETFs going forward?
What should we be thinking about in space?
>> What you mentioned, how much innovation is happening in the ETF space to serve the needs of our clients when they are hunting for yield.
Every single day, we have investors that want to retire and want to retire with certainty of yield and the Canadian industry is doing an excellent job of creating products that allow you to get to that yield.
>> There is always risk and rewards.
If there was something we had to think about the ETF market that we had to be mindful of, what would it be?
>> I would say the leveraged product as I mentioned earlier, that's one of the areas where you should educate yourself on and always what I would say is you always need to understand what's under the hood of your ETF, understand the full risks of that ETF because they can vary from one ETF to the other.
>> Before let you go, you mentioned a new show off the top, Buyside Views.
What are you doing in planning on doing with that vehicle?
>> We are hosting our clients and providing them a platform to talk about the trends that they are seeing in capital markets and global markets in general and also at their firm. It's a publicly available series and we hope to interview some of the leading thought, some of the leading leaders I guess in the industry.
>> Interesting stuff. I appreciate you taking the time to come in. The audience has been asking questions about ETFs for a long time. This was our first ETF show.
It was a pleasure to have you here.
Andres Rincon, head of ETF sales and strategy at TD Securities. Always make sure to do your own research before making any investment decisions.
Will he be back tomorrow with an update to the markets, how they react… That's what we're doing tomorrow.
This is what we are doing tomorrow! Nugwa Haruna is going to be on the show, of course, for Tuesday. Senior client education instructor at TD Direct Investing. We are going to be taking your questions about the platform itself, how to do certain things on it. Nugwa and her team are always giving those tutorials.
This is your chance to ask pointed questions about how to better use this platform.
A reminder that you get a head start with this question, 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 show, will discuss a growing trend in the ETF space as investors hunt for yield with TD Securities Andres Rincon.
MoneyTalk Anthony Okolie is going to have a look at whether the recent run-up in US dollar strength is here to stay. And in today's WebBroker education segment, Bryan Rogers will show us how you can find trending stocks using the platform.
So here's how you can get in touch with us. Just email moneytalklive@td.com or you can follow that viewer response box under the video player here on WebBroker.
Before we get to our guest of the day, let's get you an update on the markets.
Last week was a money-losing week on Bay and Wall Street.
We have some green on the screen to start things off of this Monday.
It's up about 66 points. Let's take a look at some names that are moving. I've noticed the miners getting a bid. We will start with Hudbay right now, six bucks $0.68.
That stock is up about 6%. Denison Mines in the uranium space, they seem to be getting some attraction to. Not quite as to the upside as Hudbay but at a Buck 67, you're up about 2.8% on Denison.
Now south of the border, investors perhaps making some peace, trying to look to the fact that what the Fed has been telling us all along, that they felt the need to continue raising the cost of borrowing and then keep the interest rates high in the battle against inflation, the market seems to be coming around to what the Fed has been saying. There was a lot of consternation last week. There's nothing too impressive to the upside, but up about 19 points, or about half a percent on the S&P 500. How is the tech heavy NASDAQ going against the broader market, a bit more strongly. Up three quarters of a percent.
Today, for it is up about 2%, 12 bucks and $0.13 per share. That's a market update.
As investors hunt for yield, a somewhat surprising segment of the ETF market is beginning to come popular.
Joining us for more and some of the other trends we are seeing in the spaces Andres Rincon, and of ETF sales and strategy at TD Securities. Good to have you on the program for the first time.
Before we get into the conversation about the trends, tell me what your team does.
>> Thank you for having me, for starters.
I had ETF sales and strategies at TD Securities, and I review a group of traders and sales at TD when it comes to ETFs specifically.
In short, what we do is we are liquidity providers of ETFs.
Some of you might wonder what that is exactly. But we are the ones that make sure the market functions.
We come in every day and we look it over a thousand ETFs on a daily basis. This goes across a variety of asset classes and regions. We are very active in our traders sit in front of that screen all day, making sure they are making markets on ETFs in Canada.
We are a technology business, making sure there is a bid and ask if there every single day.
If I had to put it into perspective, let me step back for a second.
ETFs, the word ETF. The key word here is exchange.
So it trades on an exchange. And how does it trade on an exchange? You need a liquidity provider.
We are the ones doing that.
When you as an investor go and buy or sell and ETF, you are interacting with either another buyer seller or you're interacting with a market maker.
That's in essence what we do, we provide bids and asks on the board for many ETFs across a variety of providers.
another responsibility is to create and redeem a fun.
If you look at the mutual fund space, there are generally only two participants, the buyer seller and the fund.
In the ETF world, there is actually 1/3 participant which is us, the AP, the approved participant.
Our job, once again, is to make markets.
As we accumulate decisions in these ETFs, we create or redeem in the fund and we are the only ones that are allowed to do that in the market and on behalf of TD, we are the major market of ETFs and we are considered the product experts when it comes to ETFs.
>> I would say that in that market-making role, you are seeing the trends as they pass by your screen.
You have eyes on it.
Let's talk about some of those trends. The hunt for yield. Obviously people are looking at yield in a different way than they have in years. What does that mean for ETFs?
>> We have seen incredible growth in our space in the last few years and yields has been one of the key areas but I also want to touch on some of the other trends we are seeing in our space.
Number one, the majority of flow is still in the passive world.
ETFs, that's the baby of ETFs.
We are seeing a lot of money going into passive ETFs.
But now we are also seeing a lot of money going to asset allocation ETFs, cover call ETFs, on the topic of yield, and also fixed income is another yield centric product.
In asset allocation, it is one of the main areas for ETFs and these are relatively new ETFs. They launched call it… Five years ago or so.
But they are seeing a ton of flow from advisors, from mom and pop on the direct investing side. So it's a fast growing area. These ETFs, what they do and say build an entire portfolio for you.
It's a one-stop shop investing for you as an investor.
So you can have your 6040 for conservative growth, the whole spectrum, you can have it in ETF form. These are very, very popular.
Now, you can also have cover call ETFs or any yield centric ETFs and these are very popular.
We were talking earlier about how a big part of the ETF space is now yield focus, especially for the direct investor.
So cover calls is a great example of that.
That's long a stock and short a call.
These are very new in Canada. These are ETFs that give you a little bit of leverage, very, very small, and in some cases they also do cover calls on those ETFs.
These have become very popular because of their yield, sometimes 10%, 13%, that's very attractive to a lot of the investors.
And we even have some new products called yield shares which are doing the same thing but in single stocks, like Amazon or Apple.
So these are really fascinating products that we are seeing here in Canada.
>> How is Canada different in the US? In a way, I feel that perhaps we have a bit of a different market than they do.
>>.com is a relatively similar across the board in coverage of the space, but we have a couple of areas that are really interesting. Number one, cover call.
About 5% of all the market in Canada. In US, it's just .5. It's tiny in the US. We are almost the same size as the US and that's really fascinating how big it is in Canada.
Crypto ETFs, we have physically backed crypto ETFs which we don't have in the US.
Yield shares I mentioned is a new product that's only available here in Canada.
But also there are a couple of different notes here and there. There are active she managed ETFs, their 25% of the market in Canada. In the US, it's a very small portion.
It's interesting as well that because we are in Canada and not the US, US dollar-based or hedge products are also very big in Canada.
>> Is going to ask you, amid all these fascinating trends, you have launched a new show, I think it's called Buyside Views.
We want to the audience a little clip of it and then we will continue talking.
>> We think that the role of the financial advisor is only going to increase from here.
And it's especially true for more affluent investors.
I think that the financial advice is not going to get commoditisize. Froboticized.
In Canada, you start with sizable IRAs, it's better on a lot of fronts in terms of cross-sectional functions but also in the way that you can approach external managers and get better terms.
>> Alright, undress. There you are in the anchor chair, asking the questions.
The conversation was a bit about the future of advice considering Robo advisors and all the chat about artificial intelligence. What other kinds of things can people expect in the show?
> Basically, we are giving our clients, our institutional clients, access to different clients that we have here at TD and we are allowing them to showcase their expertise on trends in the markets. We are going to see a lot more of that going forward.
In this first case, we had the CIO.
We are very excited to see more on that.
These are publicly available so you can have them on Apple podcast, Google podcast and spot of five.
> Interesting stuff and great start to the show.
We'll get back to your questions on ETFs for Andres Rincon in a moment's time.
You can get in touch anytime. Email moneytalklive@td.
com mortal of the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world business and take a look at how the markets are trading.
We've got shares of Québec-based Uni-Select in the spotlight today.
That's on news that the automotive parts and paints distributor is being purchased by American firm LKQ Corp for some $2.8 billion.
The deal requires approval of shareholders and regulators.
The shares are up right now to the tune of a little more than 16%.
Union Pacific CEO Lance Fritz says he'll step aside this year to allow a new leader to take the helm. The move follows pressure from activist investor Sorobancapital partners have Fritz replaced.
Union Pacific has been hit recently by labour shortages and delayed shipments.
The Oracle of Omaha is defending share buybacks in Berkshire Hathaway's annual letter released over the weekend, Warren Buffett said criticism of buybacks come from the economic illiterate.
Berkshire spent $27 billion on buybacks in 2021.
A quick check and in the market, we will start here in Canada with the TSX Composite Index.
The first trading day of the week after a money-losing session last week on rate fears, economic worries, we are up 61 points. Nothing too dramatic but it is green on the screen, about 1/3 of a percent.
South of the border, lest I can on the S&P 500.
Right now, it is up 16 points, a little shy of half a percent.
We are back now with Andres Rincon, the head of ETF sales and strategy at TD Securities.
Let's get your questions.
Are there ETFs that cover real estate investing?
> Yes, it's one of the most popular areas right now. It's about 19 to 20 ETF that cover that space.
One thing to bear in mind is that unlike mutual funds, in ETFs, you need daily liquidity.
These ETFs invest in public companies, either REI TS or REI TS plus companies involved in the real estate space.
That's generally what we get in Canada.
>> What's fascinating about the spaces that when you start thinking about exchange traded funds and how they cover the real estate space and you start to dig down, you are talking office, industrial, retail.
There is a whole universe of real estate out there.
>> Yeah, and generally speaking, they are broader in ETF lane.
You're not gonna get all of the specific areas but you are going to get them all in one specific shell and that's the ETF. For the most part, a lot of them you can get in Canadian exposure, US, global. You have a big variety of products.
>> As far as trends and flows, obviously real estate has been front and centre on a number of fronts whether it's the pandemic's effect on the office, residential real estate.
The rate hikes we've had last year and the aggressiveness of that. What are you noticing in terms of trends in the space?
>> What we are seeing is a lien into the yield they provided as well as a move to… Within the subsection of REI TS and real estate, we see a bigger need for real assets, for their security, their stability. We are seeing a big push for that. Once again, what they do is they invest in companies that invest in real assets.
>> Let's take another question now. Lots coming in on ETFs. Any insights on the TQQQ ETF? What's this all about?
>> Let's talk about what it is. It is a triple leveraged version of the QQQs which is the NASDAQ. They give you three times daily leverage to the index in this case, the triple cues ETF. The first I will say that's really important is that this is not an investment vehicle. This is a trading vehicle.
They rebalance on a daily basis and because of that, they do tend to be path dependent and volatility dependent.
What will happen is that you will see some attrition over time. And what we see investors do sometimes which they shouldn't is hold it for long periods of time. This is really a 1 to 2 day product.
You should not hold it for a long period of time.
>> That's a pretty important caveat.
>> I'll give you a quick example.
If you have an ETF that goes up let's a $10 and then goes down by 50% the next day, so it ends today at five dollars and the next day goes up by 50%, that's only 2 1/2 dollars on that five, so that ends up over two days up, sorry, down 50%, 50%, and it's only at 750.
So the ETF in two days although they had the same percentage changes is down 25%.
So if you compound that over long periods of time and performance is not what the long-term performance would be in a triple leverage. It's daily rebalanced in his leverage.
>> The swings built into the very product are supposed to be more pronounced.
But that can be tough to handle from an investment perspective.
>> Yeah, and I would consider them high risk for starters.
If we had a rating, which we don't, I would consider these high-risk products for investors.
Once again, you can use this for hedging purposes, you can use this for other similar purposes but itched only be short-term.
>> More caveats there on that one. Another question we have is about other than the ticker COW, is there another ETF in the same space? I believe COW has to do with agriculture, cleverly enough.
>> That's one thing that the ETF industry does really well, the takers. They are easy to read and catchy. So another one in this space is ZEAT.what they do is very similar between these two. In the case of COW, it's an index space, ZAAT,which is actively managed.
But they both have exposure to the agricultural space and these companies.
Into the equity, specifically.
One thing to bear in mind that there are different ways to get exposure to the agricultural space.
In Canada, you have cow, DAT, but you also have a lot of future space product. They are popular in the US. What they do is they give you exposure to cattle and soybeans and coffee and went on all in one product and it's mostly future space.
Those are by far the biggest products and you see them quite often in the US. Not very often in Canada.
>> The fascinating because I was thinking about agricultural ETFs, the Hebrew companies, but this is a massive marketof futures contracts when it comes to commodities.
Probably an important distinction to be made here.
>> Yeah, no, for sure.
When you are investing in traditional companies, like Nutrien and General Mills, isn't it different.
And the structures are very different.
It's important to understand those.
>> Let's get another question now.
That had to do with agricultural ETFs.
This is an interesting one. Are there ETFs for short-term bonds?
Everyone's talking about fixed income again after all this aggressive central bank action.
> Yeah.
There are days where we have spent almost our entire day looking at short-term bonds and dealing in short-term bond products.
I'll give you an example.
Last Friday, we spent a good chunk of our day trading these products and it's because they become so popular across all of our channels here at TD and across our institutional clients. It's interesting.
we have a very wide array of products. We have 60 ETFs just in this little space. He can go from North America, US, Canada, global. It can also go to corporate aggregate. You can get government exposure.
There are different types, different risks that you can get exposure to. You can also go from money market to alter short term.
at the short end of the curve, you can get a broader range of options for you. It's important to understand the mall and what specifically you are looking for.
>> What is the distinction there? Some people thinking about bonds themselves.
That's obviously a place at a retail investor through this platform can take a look at. But the ETF obviously is bit of a different experience. Similar exposure but different construct. How does that work?
>> So you own a bond and especially if it's short-term, it goes to maturity and then you'll have to buy another one.
Within ETF, you by the ETF and they do it itself. Thereby short-term bonds, let them run off and buy new ones. They do the work for you.
> Okay. Interesting stuff. That's a good section. As always at home, make sure you do your own research before you make any investment decisions.
We are going to get back to your questions are Andres Rincon on ETFs in just a moment time. A reminder that you get in touch with us at any time. Just email moneytalklive@td.com.
Now let's get to the educational segment of the day.
If you are interested in which stocks are catching I've analysts, WebBroker has tools which can help. Joining us now for more as Bryan Rogers, Senior client education instructor with TD Direct Investing.
Great to see you again.
Let's talk about how we are going to use the WebBroker platform to figure out what the analysts are talking about.
[guest muted] We seem to be having some technical problems right now. I'm not sure if you can hear me, Bryan, but I can't hear you.
I don't think the audience can hear you either.
Let's see if we get that fixed up and get Bryan back into the program a little bit later to sign the concept to us because I'm a little bit intrigued myself.
Alright. So, you know what? We are talking ETFs.
Why don't you find out a way to get in touch with us. Do you have a question about investing or what's driving the market?
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 writing your question and hit send.
we will see if one of our guest can get you the answer right here at MoneyTalk Live.
We are back with Andres Rincon, taking your questions about exchange traded funds so let's get back to them. Our viewer wants to know, is it better to hedge your ETF's against US currencies?
I've noticed this in ETFs two, whether they are hedged or unhedged. Walk us through with going on here.
>> That's quite a complex question. The very good question actually. We see this all the time. As I mentioned earlier, Canada is one of the few places that has US dollar hedged product. They're popular, but 21% on the entire market.
Really, it comes down to the preference of the investor but also the cost of hedging is very important to understand.
And also, it can be, on a technical level, it can be depending on the asset class.
So I will touch really briefly on all those. If you look at the investor, they have a US focus ETF and they want to avoid the US dollar… Is a pretty easy decision.
Now it's important to understand that these ETFs to do, when they had, they do carry costs.
And they do buy and sell forwards to offset that exposure or that currency hedge. And sometimes, those can have capital gains or losses over the years and it's very important to understand.
And the hedge itself can cost money depending on a variety of factors.
What we like to look at is the asset class. If you are looking at a currency that moves let's say 10% on an analysed basis, and you're going to hedge it against a bond portfolio that moves also 10%, then you have to really question whether you should do it because at the end of the day, the currency moves almost as much is the asset.
But compare that to a stock portfolio which was a lot more, then maybe it's a little bit less necessary. So it really depends on the differential in volatility between the currency and the asset class you are looking at.
>> So looking at an ETF, you'll see the ETF gives you exposure to this in here is the CAD hedged version of this. Investors doing their own homework would have to have some kind of thesis in their mind as to where they think the currency is going.
>> Yes, I think you have to have a good opinion as to why you are going to hedge it.
>> Okay, let's get to another question.
This one about healthcare.
Your view please on ETFs for the healthcare space. XLV and VHT it seemed to have caught this viewers I was a solid performance. What do you think about healthcare ETFs?
>> I will just comment really broadly on healthcare and not necessarily on these two ETFs.
These two are US-based healthcare ETFs that are broad-based. So they are generally fairly good ETFs. But I would say in healthcare is right now, because of the pandemic we just had and because it's a staple as an industry, we are seeing a lot of demand in that space.
I think that we are likely to see is a long trend and spending in that space.
Currently, we have the Ontario bill that's being placed, the health bill, let's say, and that we see as incentive to spend more money in these areas, and I just think that they are going to provide for more growth in the space.
This is why we are seeing a lot of investments in the space.
In Canada, it's fairly unique because there are 28 ETFs in healthcare and many of them are covered call.
Many times, these companies don't pay dividends. Sometimes they do.
Also to reduce the volatility.
It's very common that we have a lot of alternatives here in Canada.
>> When I hear people talk about healthcare from the US market perspective, they will say with, aging society, drug costs.
But then you start thinking about what is in the healthcare space, what is an offer.
On one side you have the robotic surgery, then you have the Pharma companies. I would imagine the ETFs reflect this diversity of health options in the state.
>> Completely.
You get the parts makers, biotech, Pharma, all these areas in one single ETF.
>> Okay, that was the healthcare space.
Another question, lots coming in.
What should be keep in mind when looking at bond ETF? We talked about short-term bond ETF's, but what about bought ETFs in general?
>> I think there are couple of things you can look at when you are assessing whether to buy a bond ETF or which one to buy.
And a couple of the key ones are the risk rating.
You can also look at that duration or the average maturity of the bonds in the ETF.
The reason you are looking for exposure to is all these are key areas when you are considering buying an ETF. Why? Because on the duration side, it measures the sensitivity of your fund to interest rates.
That's important as we now have rising rates and you want to be able to manage that risk. Also whether you want to invest in greater high-heeled.
Some people forget that they are buying a bond but it's up by yield so it means more risk.
So it's not just the component of rates but the component of credit.
And that is something that's very important to remember when you're buying a bond ETF. If you're buying a government bond, you are buying a bond ETF with credit exposure.
You need to be able to manage that credit risk.
>> We got a question that just came in.
This person wants to talk about bond ETFs.
They want to know about the price change.
Is it based on trading activity similar to stocks or is it purely based on the bond market?
If you see a bond ETF fluctuating and value, what's driving the fluctuations?
>> Number one is rates, what rates are doing in the market.
Depending on what kind of bond ETF you have. But also credit. Credit behaves similar to stocks, especially on the high-yield end. If you have the sentiment of the market moving towards a more bullish sentiment, generally Orbán portfolio should perform and the same goes in the other way. If you have a degrading market, then you will see the credit of that bond go lower and the bond market also go lower.
>> Fascinating stuff.
We are going to get back to your question for Andres Rincon on exchange traded funds in just a moment time.
As always at home, make sure you do your own research before you make any investment decisions and 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 writing your question and hit send.
We will see if one of our guests can get you the answer right here at MoneyTalk Live.
After we start to the year, the US dollar has rebounded recently on the back with some strong US inflation data, hawkish fed comments for higher rates. Is this the start of a new bull market for the US buck or is this downturn that we were anticipating going to persist? Our Anthony Okolie has been joining us with a new report from TD Securities about this a resurgent greenback.
What are they saying?
>> TD Securities is saying that the recent US dollar strength in terms of magnitude and potential duration has been a surprise for them.
The US dollar just recently hit a seven-week peak against the euro just last Friday, following hotter than expected US inflation data, so a strong US jobs report and consumer spending data.
As a chart of the US dollar ETF shows.
US dollar has been peeking since back in September and we saw drawdown late last year intoearly this year but the US dollar has since rallied this month.
Now, the more hawkish comments from the Fed officials about the openness to high rates to tame inflation has also helped to boost the US dollar and helped to raise its year-to-date losses.
The US dollar is now flat on the year in terms of performance.
TD Security says that it's hard to see a turnaround in US dollar strength in the near term as the market tries to navigate the balance of global growth and higher interest rates. TD Securities sees few catalysts in the very near term that could reverse the US dollar momentum. But they are closely watching upcoming China data and of course a strong China reopening increases the risk in the reversal of US dollar strength.
But TD Securities believes there is likely more US dollar upside in the short term.
Particularly as a bit of tightening in US dollar rate expectations and positive US data surprises.
When you look at when money markets are pricing in right now, they are pricing in US dollar interest rates at a terminal rate of 5.4% in July and expected to stay above 5% all year versus the current target rate right now of 4 1/2 to 4.75%.
Markets are also pricing and rate hikes over the next three months. As a result, the US dollar is currently outperforming a basket of international currencies across the D10, especially those currencies that have been hit hardest as geopolitics has trumped the China inflation theme recently.
> The thesis here is that in the short term, we are probably going to see more of this US dollar strength and we have been experiencing. What if we pull out a little bit of a longer time frame, say 3 to 6 months? Was the call there?
>> TD Securities believes that the downturn in the US dollar will persist over the next 3 to 6 months and they see weakening over that timeframe. Here's why.TD Security says that we are still in a high rate and weak growth environment despite recent improvements on growth.
they note that the possible transition to better growth and rates are still high has generated uncertainty.
>> Interesting stuff important to the markets. Thanks for that. Money talks Anthony Okolie.
Let's check in on the markets now and see how we are doing on this first trading day of the week. We have some green on the screen. Not overwhelming.
at 20,288, up 69 points on Bay Street, about 1/3 of a percent.
Uni-Select, we told you earlier about an American company getting a deal to buy Uni-Select. The shares are up about 16 1/2%.
Right now, they do distribution of automotive parts and paints. Loblaw, some downtrend.
hundred and 17 box per share, down almost 2%.
South of the border, the S&P 500, after a money-losing session last week is up 17 points, a little shy of half percent. The tech heavy NASDAQ last time we checked was faring a little bit better than the broader market. It's up about three quarters of a percent.
Tesla among the names today that are getting a bid, 205 bucks and $0.35 per share, you are up a little more than 4% on Tesla.
We are back now with Andres Rincon from TD Securities, we are talking about ETFs.
Let's get back to the question. This one just coming in in the past couple of minutes. Is there an ETF out there for gold or gold mining companies?
>> That area has been fascinating.
It has obviously been one of the staples of Canada, energy and gold or mining in general being very important.
There has been a huge uptick in interest in the space. So yes, we have a variety of ETFs in Canada that cover the mining space, both in Canada and globally.
And also we have ETFs that cover gold in itself, so the commodity itself.
That's one of the areas that we see a lot of growth in the institutional world. For example, somebody wants exposure directly to gold, you can have that exposure via an ETF. But if you want exposure to the minors, you can also do that via ETFs.
What's fascinating as you can get exposure to let's say it skewed towards silver producers or gold producers or minors in general across not just gold but a variety of base metals, let's say.
>> The ETF is a basket of whatever securities or assets held in there, when you think about, okay, different mining companies, there's a basket of them. I find it interesting when people say that all gold the ETF option, you can play the precious metal directly through the ETF.
>> They are relatively cheap ways of getting exposure. You just get on WebBroker and by those ETFs.
>> What is the construction of the ETF?
Are they holding physical gold, what's going on here?
>> Generally, how these work is holding physical gold at the custodial level. So you're buying basically shares in the assets that are held in custody somewhere.
>> Interesting set.
>> There are different structures to it but that's the main one.
>> Let's take another question now.
A member of our audience wants to know, are there any ETFs that play in the electrification space? We can hear about EVs all the time, electrification, what about the EV world?
>> Similar to mining. Obviously, the battery itself needs or requires mining.
So yes, you can buy ETFs in the US or Canada they give you exposure to the electrification of the world.
in Canada, you have cars that have been around quite a bit.
X Drive from a iShares. These are ETFs to give you exposure to the entire gamut of companies that are involved in the electrification of the industry from automakers to the battery makers to the minors to the semiconductors,the whole gamut.
It's a pretty exciting space to be in right now and we are seeing a lot more push in there too.
>> I think it's similar when you're talking about gold in the basket of gold mining companies, this is ETFs in general, you are not necessarily by its very nature paying one winner but a basket of names.
There can be pros and cons to that, right?
You can put all your money in one horse but at the same time you a bunch of different horses, some may do well and others not.
>> Yes, diversification is one of the main pieces why people buy ETFs and that's obviously seen in the lower volatility of ETF compared to single names and that's one of the reasons why people buy it.
>> Let's take another question now.
Someone wants to know if they have missed the boat on something.
Is it too late to invest in the energy sector?
Do you prefer X e.g. or Z EO? We can't give recommendations on the show but let's talk about some of the trends we saw last year.
We saw a lot of money move into energy names. Was it the same in the ETF space?
> Yes.
As you mentioned, I can't comment on the future of energy but I can comment a little bit on the space and also X e.g., Z EO as individual ETFs.
They are very similar.
The main difference is that Z EO is equally weighted versus X e.g. which is market Waited. What that really means is you have larger emphasis on the smaller companies in the basket of Z EO it also Z EO tends to be a little more gassy than just oil and gas.
What ends up happening is we have a little bit more torque on Z EO it then X e.g. as a product so depends on what you really want there. But Canada has a huge realm of possibility in that space, in energy specifically, and you have anywhere from ETFs they give you exposure to a broad set of companies but also the commodity itself.
See you can get all in gas in ETF form both here in Canada and in the US. It is a very popular product that you see here.
>> Lots of questions and interest. Before let you go, I want to get back to the themes in the ETF industry.
We talked about some of the things we have seen recently, the hunt for yield. What's most intriguing to you about ETFs going forward?
What should we be thinking about in space?
>> What you mentioned, how much innovation is happening in the ETF space to serve the needs of our clients when they are hunting for yield.
Every single day, we have investors that want to retire and want to retire with certainty of yield and the Canadian industry is doing an excellent job of creating products that allow you to get to that yield.
>> There is always risk and rewards.
If there was something we had to think about the ETF market that we had to be mindful of, what would it be?
>> I would say the leveraged product as I mentioned earlier, that's one of the areas where you should educate yourself on and always what I would say is you always need to understand what's under the hood of your ETF, understand the full risks of that ETF because they can vary from one ETF to the other.
>> Before let you go, you mentioned a new show off the top, Buyside Views.
What are you doing in planning on doing with that vehicle?
>> We are hosting our clients and providing them a platform to talk about the trends that they are seeing in capital markets and global markets in general and also at their firm. It's a publicly available series and we hope to interview some of the leading thought, some of the leading leaders I guess in the industry.
>> Interesting stuff. I appreciate you taking the time to come in. The audience has been asking questions about ETFs for a long time. This was our first ETF show.
It was a pleasure to have you here.
Andres Rincon, head of ETF sales and strategy at TD Securities. Always make sure to do your own research before making any investment decisions.
Will he be back tomorrow with an update to the markets, how they react… That's what we're doing tomorrow.
This is what we are doing tomorrow! Nugwa Haruna is going to be on the show, of course, for Tuesday. Senior client education instructor at TD Direct Investing. We are going to be taking your questions about the platform itself, how to do certain things on it. Nugwa and her team are always giving those tutorials.
This is your chance to ask pointed questions about how to better use this platform.
A reminder that you get a head start with this question, 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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