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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 will discuss what the fall may have in store for investors with Ben Gossack, portfolio manager with TD Asset Management.
MoneyTalk's Anthony Okolie is going to have a look at whether consumers are tightening their purse strings amid these higher interest rates. And in today's WebBroker education segment, Hiren Amin is going to walk us through how Canadian Depository Receipts work and how you can find them on the platform. 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 we get our guest of the day, let's get you an update on the market. We got some green on the screen.
A little more modest than yesterday but still upside.
20,361 on the TSX Composite Index, we are up about 1/3 of a percent. Of course, the trading volumes get a little lighter this time of year about among most actively traded names on that list include Cenovus Energy.
We've had crude oil moving up over the past couple of days. Nothing too dramatic but well above 80 bucks per barrel for WBT. You gotta name at like Cenovus at 2677, up about 1 1/2%. And BlackBerry has been in the spotlight for the last couple of days amid these unconfirmed reports that they may be the target of a takeover offer. Seven bucks and $0.50 per share for blackberry, that's up to .7% today, but you see that pop in the past couple of sessions on the right side of your screen there. South of the border, we are getting further indications that perhaps the US economy is starting to feel the effects of higher interest rates.
The pace of job hirings, according to ADP and private payrolls, is coming down.
They revise the latest GDP report, Americans do tons of revisions on their GDP report, down a little bit as well. Perhaps some of that is starting to take hold.
You're up 16 points, pretty modest, about 1/3 of a percent.
The tech heavy NASDAQ, how is it pacing against the broader market right now?
If the S&P 500 is up 1/3, the NASDAQ is up about half a percent. HP Inc. though, this is HP enterprises, they sell personal computers. Apparently, it's not going all that well for them.
They said that PC sales particularly in China weighing on them, HP Inc. down to the tune of almost 8%. An aftermarket update.
As we get towards the end of summer, it can be a good time for investors to reflect on what's been happening in the market so far this year and also to sharpen your pencils to prepare for the rest of this year.
Joining us now to discuss is Ben Gossack, Port blue manager at TD Asset Management. Ben, great to have you with us. Things are coming in on this last week of August.
>> Well, I appreciate our chat. So thanks for having me back.
>> Let's talk about the year we have had.
And the fact that we are in August right now and people want to know what's going to happen in the fall.
Sinner trading volumes, people don't at their desks, pretty hard month to figure out what's been going on.
What have you been thinking about?
>>Summer is short and fleeting in Canada, so I encourage people to get out there, spend time with your family, especially now we are into the last week of August. Arguably, I was in the last week of summer. But August can be a tough time. Trading volumes are seasonally low. We do get a lot of movements in stocks and people try to build narratives and they will think that certain things are going.
It's very difficult to detect if there is a good signal. I find, for August, great time to catch up on project, do some reading, work on some research, and then prepare for the inevitable September where everything sort of comes about and everyone wants to know where things are going.
I would say one interesting thing that I did in my summer, what did you do in your summer?
I was going back to, I was reading a lot of headlines on China. A lot of negative headlines on China. All very justified. But I was thinking it wasn't that long ago, especially at the beginning of this year, we were talking about how amazing China was going to be following reopening and I started to look back and see what happened and what we have been able to detect what we are seeing today in terms of the headlines in the negative momentum?
>> I think you some pictures to show us of that work.
You not only have a story to tell us about your summer homework but some pictures as well.
>> Why don't we queued up?
>> Let's take a look. Shanghai stock index composite index. What is this telling us?
>> Okay.
I think I've come on your show many times and we talk about fractions. I love fractions.
Kids are going back to school, they are going to do math and they say, why my learning about fractions? You can tell them it's because they can make you money. And therefore, we will pay more attention to fractions. We were looking at, you're looking at the Shanghai composition stock index, this is the local stocks in China.
The upper chart is the actual price index and then below it is our fractional. We'll get to that in a second. But I want people to focus on the upper half of this chart.
I drew a big great arrow. About halfway through November, you can kind of see the bottom in the chart and we start to get rumours that very strict COVID 19 policies might get softened and I think it was around early December where we saw a change in tone and then we just saw a rush in. We see the chart moves up and we get a lot of strength.
Around this time, Greg, everybody is pitching every China idea across every sector. So it could be materials, maybe they are going to use more infrastructure, there is pent-up demand. People have been sort of lockdown, and others that revenge spending that we all experienced in terms of Western developed economies, so transportation, you look at the gaming stocks, they were up 100% off their lows, so there was the sort of euphoric fear of missing out, need to follow the herd.
So there was a real push into China.
If we look at the fractions, that's the lower half of our chart, again, I was kind of playing with our charts the other week and I was shocked by what I saw.
So what we're doing is we're taking that same Shanghai composite index, the price, and we are dividing it by a MSc IAI.
That's the developed Europe and Asia. The reason I picked that as our denominator is typically when you are allocating capital outside of North America, you'll take it from the US or Canadian investor, you thinking about FAC i.e. as you are pooled kind of pick stocks and and if you are going out into emerging markets, you will look at that investment versus what you could do it in the developed Western, Asian economies.
So what you can see is we do have a move in the Shanghai composite index the line is actually very horizontal and study relative to the MSc IFC and what that tells you is there is no outperformance.
The local investor was not giving any credit to any of these Chinese companies in totality to say there was a relative performance. Now this is with the benefit of hindsight. Again, we are all looking at these restaurants, we are seeing all these movements, our minds are crackling numbers and performance.
>> You get the fear of missing out.
>> I tell people to look at things on a relative basis, on a fractional basis.
It says that it was possibleto have benefits elsewhere, not in China. Maybe it was in Europe or other parts of Asia.
They were going to potentially benefit more from China's reopening. But piling into China, that M plus one China trade, was going to add value and we saw there was that move. Was also very interesting about the chart is we have done horizontal line and that it breaks at the end of the margin, it starts to underperform.
But if you are only looking at the Shanghai composite index, that continues to try to push till maybe April, the day.
It kind of goes sideways and it's only until this month, they won't report youth unemployment, we are seeing deflation, there are some moves in terms of stimulating the economy, but you also have to have demand for capital.
We are not seeing that.
So digressing a breakdown on the chart.
But that breakdown had probably started already in March, plus you had no relative performers for when the policy start to come down.
>> Those graphs and fractions, the process you talk about there, it gives insight into how you think about the world and investing. Thinking through the process a bit more and what we might be able to think about the fall?
>> Every time you end the show, I think you always asked me, any final thoughts, any closing words? And I say, no matter what's going on in the market, always stick to your process. And so I thought, now that we are going back to school, when we talk a little bit about our process, my process, and look, I like a good FOMO situation too. That's just me, that's my personality. I have to manage that. But it is the process that helps teach us to manage your fear and your greed, to manage your structure, and it delivers over time. I want to start with building blocks in the process. What we are looking for is high quality companies that have a cash flow stream and can compound that cash flow stream. We think if you have compounded cash flow streams, that can create value and outperformance.in order to do that, we think there for building blocks. Use have a company that has a competitive advantage, so something they do better than others. And that can make money.
back to me new products, new services, entering new markets.
maybe it's a shift to a new structure. We might see cash flow accelerate because they change their manufacturing process or they are doing more software versus hardware. We try to understand where the growth is coming from.
Fundamental excellence, you want a well-managed company.
We want management allocating capital in the most efficient way, getting returns on it.
The last thing I want to talk about is this thing we called underestimated free cash flow.
So if you think about it, a company generates cash flow from operations.
Then, they have to invest some capital back in the business keep it going.
We call it capital expenditure.
And whatever is left over is free cash flow. What management does with that free cash flow can directly correlate with how the stock performs.
If you can find a company that is compounding, we see time and time again, it gets underestimated by the market, and it's this unusual feature of human beings where we like to model the world in a very linear fashion. And if you look at any model that's trying to capture the financial performance of any company from any let's call it banking institutions, they are always managing in a linear fashion.
And so if Euronews 10% this year, the base got bigger, maybe you can only go seven and then six and then five.
But if if you are compounding, it's nonlinear and that's what creates a surprise.
that sort of the building box in terms of how we find our stocks. So yes, you can have a China reopening trade, maybe Japan looks exciting because it's hitting levels we haven't seen since the 90s. Maybe it's about seven stocks that the market seems to be obsessed about.
For us, no matter what's going on, we start with for building block.
>> Fascinating stuff.
We are going to get a lot of questions for Ben Gossack in just a moment's time.
We are going to talk about global stocks.
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.
There are signs today that interest rate hikes are slowing the US economy.
Private payroll numbers released by ADP show 177000 Jobs Were Added in August, and is well below July's reading and lower than expectations.
The report also suggests pay growth is slowing for workers who are changing their jobs.
And it GDP growth was revised lower. Still 2.1% on an annualized basis, but lower than that initial reading for the second quarter.
Let's take a look at shares of HP Inc. that are in the spotlight today. Down right now 7 1/2%. The company says a year-long slump in demand for personal computers and weak sales in China are weighing on the bottom line.
HP Inc. says computer sales in China dropped almost 20% in recent months, adding a dozen see recovery anytime soon in that market.
The maker of Jack Daniels says lagging whiskey sales hit the bottom line in its latest quarter.
The Tennessee-based Brown foreman is pointing to supply challenges, namely its inventory of glass for those bottles that you put the whiskey in. The company did, however, see strong demand growth for its ready to drink offerings and tequila brands.
You can see right now the maker of Jack Daniels down a little bit more than 4%. A quick check in on the market. We will start your own Bay Street with the TSX Composite Index.
Another Dave Green on the screen. It's pretty modest but if you're on the market, it's green. Europe 66 points or 1/3 of a percent.
And south of the border, that brought a read of the market, the S&P 500, putting another 17 points up today, a little more than 1/3 of a percent.
We are back with Ben Gossack, we are taking your questions about global stocks. Here's one right off the bat. Would you consider stocks in Internet security to be defensive? I think that large companies are pretty well dependent on continued protection from the bandits out there! Full disclosure, I own Palo Alto Networks and I have for a few years. What we think about the bandits out there?
>> We don't like the bandits.
If you are in security sales, you probably do like the bandits because it keeps up demand for your product. So security software, it's something that I've been studying since I was a technology analyst.
You have various companies like Home Depot or Target have breaches.
As a board, you're trying to think about how to protect the company. We saw many companies lose value because of breaches. I think it's really important when you look at this, again, I like stocks that have a secular growth. I do think security is a secular growth trend.
The only thing that I would always, the opposite or cautionary side, is that this goes in waves.
I think boards know they have to spend a certain amount of their cash flows on security, but they also know that the marginal dollar isn't going to stop the bandits. So there's only so much they can do, but they know they are going to get breached.
So you spend what you need to spend, you get the insurance that you need to get, and so it's not like it's just going to go up and to the right always, you're going to get. It's where it's going to grow because there was an event and borrowers want protect themselves, and then you're going to get some slump in growth and stocks could take a breather.
Usually when I get that question, it's like, this is a no-brainer. In theory, it is. In practice, it's a bit up-and-down.
And the other thing is, he goes through periods of consolidation. So newest that comes out, you will get a lot of point solutions, startups come in and target that threat, and thenas a company, you're like, why do I have 30 security vendors? I need to simplify my IT process and so you have this consolidation period.
Some might get acquired, as some might you share quality so you will have to be careful what companies you own.
>> An interesting rate and on the space. Here's one with the plain makers. What you're viewing on Boeing and Airbus?
Has Boeing turned a corner on their past problems?
Who is winning the race to dominate the global airline industry?
>> I think the very simple answer is the world is going to have Boeing and Airbus and some other airplane manufacturers. We like Aerospace as a category. It had an amazing secular story of growth prior to COVID. You could look at passenger miles travelled and it was up and to the right and we are getting a lot of growth out of Southeast Asia. If you think, as companies increase their GDP per capita, people get a little bit more wealthy. They have an opportunity now to travel, and then they realize the world is pretty cool and there are a lot of amazing things to do, either sightseeing or going to places you've never seen before. People get addicted to travel. Canadians in particular are addicted to travel. Most of our credit cards are tied to some sort of travel related points.
And so yes, there is long-term demand for airframes and again, the way we like to look at it is, yes, you could make bets on the airframe manufacturers.
There's aftermarket supply and services that is interesting.
There are companies that supply parts to the companies, even in Canada we have a company that trains the pilots.
So I would just stop your research and just look to airframes.
There is a whole other way to go about it.
At the end of the day, what you're really try to capture is the trend of passenger miles travelled in the demand for travel.
>> You talk about different ideas, investing ideas, being beholden to cycles. We are talking about cyber security and cycles that companies go through.
Economic cycles, does this way on names like Boeing and Airbus and the others?
>>it can, or can run counter cycle.
Again, it depends.
My background was in aerospace.
And so we would have a lagging effect.
As aerospace engineers, we always commit ourselves to the automotive engineers and they might be at the beginning, ahead of the cycle, and we are always kind of near the tail end of a cycle. So the economy might be moving and then you're questioning, why are they telling us now that we might not get bonuses this year?
Every industry and subsector has its cycles. Again, when you are looking at companies, when you are investing your hard earned capital, it's important to understand these stories and cyclesand the pull forward of demand versus something that can continue to compound.
>> Interesting things to think about when you're taking a look at that space.
Now we are going to move on to EVs. Your thoughts about Rivian?
>> I can't speak about any specific company.
Electrification, electric vehicles, I think we can all agree there is exhilaration. There are couple of staff, I know we talked about specific companies in other venues, but it took eight years to get to a million battery-powered EV cars in the US. It took three years to get to 2 million you and… We definitely see the penetration of electric vehicles.
Again, going back to what we were talking about Aerospace, where we try to add value and where we think about our process of who has a competitive advantage, where is the growth coming from, or they will run and are they underestimated? That's where we go through the entire value chain.
So yes, you could look at Rivian, you could look at Tesla, you could look at Volkswagen and BMW and ask yourself, these companies have a competitive advantage?
Maybe a competitive advantage are the people pulling the lithium and the nickel from the ground. Or maybe that's a commodity.
And then you start to say, well, there's only three or four battery suppliers. Maybe that's where the value is being captured. So you try to go through that and where they are located. We have had battery fires and needed to replace them.
You have to look at what happens when kind of check to fix and replace cars that were on fire.
Then there are people that supply different parts. And then sometimes you can think of the infrastructure. I think we talked on shows past about if everyone in your condo or everyone on your street bought an electric vehicle and tried to plug-in, we have an electrical grid that can't handle that infrastructure today.
So that's a multiyear process in terms of upgrading the grid. I think it's an exciting area.
The hard part is now how to capture that value.
>> As always, make sure you do your own research before making any investment decisions.
we will get back to your questions were Ben Gossack on global stocks 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 to our educational segment of the day.
If you are looking to get access to foreign equities, Canadian Depositary Receipts it may be worth a look.
Hiren Amin, Senior client education instructor with TD Direct Investing joins us now.
Hiren, great to see you as always. Let's talk about what depositary receipts are and how Canadians can access them.
>> Absolutely, great. Great to be back again. Yeah, very timely, because we are talking about global stocks today. I'm going to harp on the topic of been talking about fraction. We are going to be talking about ratios as well. A little bit of arithmetic theme going on today. Let's talk about depositary receipts first. What are they? They are a time-tested way for investors to access shares of foreign listed companies. We know that sometimes if you want to invest in a company in China, it's very difficult to directly access that market and that's where depositary receipts come in and help us do it domestically. Now, when it comes to depositary receipts, we are going to be kind of accustomed to familiar names. One is more popular which is American depositary receipt, called ADRs, but our focus is going to be on the counterpart locally here, Canadian Depositary Receipts. They are designed to make it easier for Canadians to access the most popular US companies. This is going to be specific exposure to US companies with the added benefit that is going to be in Canadian dollars that you will be trading and it also has a built-in currency hedge. There are relatively new in our market space.
They allow Canadians to buy partial shares of these large US companies. We are going to look at that in a moment.
And you would've noticed, if you are in WebBroker, any trader, if they been looking at some of these big FAANG companies, the mega-cap's, people dissemble, there is a Canadian flag beside the name as well as a US flight.
Whenever you see the Canadian flag, that's going to be indicative of the CDR itself. So you are, by investing in the CDRs, your exposure to US dollar currency risk is minimized with the built-in currency hedge they have allowing you to own the company but not the currency itself.we're going to look at some examples.
coming onto WebBroker, I have Apple queued up but I did want to look at some of the bigger priced stocks. Let's look at Nvidiasemiconductor.
For some of us it may feel, I'm going to bring up the underlying first, the one the trades on the US market, the NASDAQ. You can see that it's 497 and change in US dollars. If you were to convert that into equivalent Canadian dollars, that would be in the ballpark of $650 and that's quite a big hi to be able to chew on at once for some of us. So in that case, how can I get exposure to Nvidia without having to spend all that money? That is where the CDR comes in.
If I type in Nvidia one more time, we have our good old CDR with the Canadian flag. Be cautious of this. When you are looking through some of the stocks and you notice that there are both, the ones that have the Canadian flag and you know it's US company, that would be indicative of it being a CDR. They have expanded this program recently, Greg, was CDRs. They have 41 CDRs currently in the marketplace for us over here. So a lot of the bigger communication companies, the tech companies, are going to be found here.
You can see this one is trading at $47.
41 and so that brings us to the question of, well, how does this represent the ownership?
Well, the CDR is a fractional ownership of the actual company. If you are not directly buying a fractional share on the company, but it represents a fractional share. And part of the knowing how much it represents is what is called the CDR ratio.
You'll notice that this one, if you eyeball it, 4741 Canadian, if you were to look at the US price, which is trading at that, I think we just look at, 400 and change in US dollars, roughly the ratio would be about 1/10, 1/10 or slightly more than that. Now, the simple math is, when you are looking at a CDR, if you want to own one economic equivalent of the underlying share of Nvidia, you would roughly have to buy about 10 CDRs of this CDR to equal one Nvidia share there.
Final note, we will talk about CDRs, it's this.
Advantages and disadvantages.
You're getting an attractive price point that's available to you. There is a built-in currency hedge that is going to be available and there are low barriers of entry. When I say low barriers of entry, you don't need to set up a US account, you don't have to worry about converting money into US dollars and then having to worry about currency hedge. So you have this little, accessibility is much easier.
Disadvantages we want to talk about is growth can be a little bit small with this because it is a relatively new offering. Along with that as well, the volume.
Liquidity, when we talk about that, comparatively, it could be much more smaller than the underlying stock itself there.
And finally, one thing I would mention is, depending on which one you do choose, they do pay dividends on them and when we are talking about the dividends, you may not be eligible to get the dividend tax credit and this is designed to avoid the double taxation on those dividends that are already paid by the companies on their profits. So just keep that in mind and also there are going to be US withholding tax applied if you are investing in the CDRs in an account that is outside of an RSP account there. So that's kind of a run down there for you, Greg, on CDRs. That's very instructive rundown indeed. Thanks for that.
>> You're welcome.
>> Thanks to Hiren Amin, 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.
We are back with Ben Gossack, take your questions about global stocks. Plenty coming in. Let's get to this one.
What is your guest think about Alimentation Couche-Tardand how is the transition to EV progressing?
If you own gas bars that have convenience stores attached, what is the world of EV mean?
[overlapping conversation] >>the company has done an amazing job growing the gas stations and the network. There was a symbol a few years back when the management team went into Europe to buy a European grocer and many investors were… >> Carrefour?
>> Carrefour, yes. The stock fell on that. That's the issue that you have with companies like this.
If the company gives you credit and evaluation premium in your stock, why not go and roll upyour industry, get a better margin? Effectively, the market is giving you currency and also some value on a financial engineering basis. So it makes sense. I think that was a big lesson for management. They have done some acquisitions in Europe but again, it sorted within their area of expertise.
There have been rumours about them getting into sort of fast food, quick service type restaurants.
And so you would think, okay, is that like the Carrefour acquisition?
But you think about what does the future look like when you're not coming to a Circle K for gasoline?
But maybe for a charge point?
And if it does take 30 to 45 minutes to recharge her car, what are you doing for that 30 or 45 minutes? So it's interesting.
It's definitely a future that's a bit unknown, and so management is trying to figure out that expertise so very interesting company, very interesting story.
So yeah, we are going to have to see how they make the play with electric vehicles.
>> Question was from Jeff who has been sending in questions pretty regularly. We thank you for that one, Jeff.
The next question here is about artificial intelligence.
There's a ton of hype on AI. Are there any interesting plays that still exist?
Nvidia has been the big story of the year. We have seen the stock jump.
>> Yeah, and this is an interesting cycle. Looking back at our charts and fractions, semis in general do a cycle. The bottom of that cycle would've been October last year. Regardless if we had the sort of AI hype, there would've been a semiconductor cycle happening anyway.
Nvidia reported last week sequential growth of 88% on the top line, so quarter to quarter. You don't see numbers like that.
what I find fascinating about AI, you can see a lot of people are very frustrated and so typically let's say the last sort of big cycle intake was software as a service. Companies like Amazon and Google, Microsoft, created the utility for software as a service to flourish, that would be the data centre, the cloud. And many companies could raise capital and not even have to buy the equipment. They would put it all towards customer acquisition and sales fuelled growth.
we had lots of software companies thateventually develop. Can you imagine running a venture capital, trying to raise private capital from endowments and all the value right now is being captured in the public market, specifically by few stocks?
So that's where we stand right now. What we don't know is, fine, let's build the infrastructure, and then we will see what comes out of it. When companies like Cisco, maybe Qualcomm were the darlings in the late 90s, they did not become the darlings later and no one would've able to predict companies like Uber or DoorDash.
There will be stuff that comes later. But for now, I would argue that it's focus now on a select group of companies because we have to build the infrastructure.
>> There is a question here, just came in the past couple moments. If you want to get your thoughts on Japanese equities. You talk about some of the ideas floating around this year about Japan.
>> Yeah, so there are a lot of interesting Opportunities in Japan. Lots of opportunities for active management. I thinkJapanese stocks got a lot of attention this year.
We did see inflation come back.
So we want to be in a deflationary environment and that curb spending and so that's how the Japanese indices move up.
We start to see levels that we hadn't seen since the real estate property bubble in the 90s so that gets the headlines, gets people focus.
We talked about putting let's say the Shanghai cops it onto the MSC i.e.
, if I do the same thing with Japan, shockingly or maybe not shockingly, I get a horizontal line.
we are seeing what looks to be a breakout in Japan but effectively it is in line with how the broad developed European and Asian markets are moving.
So it's not, I would argue, special or unique.
It is not the source of strength.
Having said that, there are companies in Japan that are doing interesting stuff.
So I was just talking to a colleague and he was saying, on an equal weight basis, treating every company is equal there, it's outperforming. You have to do your work.
I would argue Japan is very difficult.
Many companies don't have English translation. You're gonna have to use translators.
Don't put up all the information. I think that's what creates the opportunity.
But you really have to do the work on Japanese companies.
And it's not even easy for let's say large financial institutions.
Opportunity, but you have to put in the homework.
>> Okay.
like many things in life, have put in the work. We are going to back to questions for Ben Gossack on global stocks 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.
It has been well over a year of aggressive rate hikes.
Yet, consumer spending defies a cottage this expectations. However, we are seeing a cumulative effect now on these pass rate hikes.
They're starting to have a real impact on household budgets. Our Anthony Okolie has been digging through a TD Economics report about the soft path we are seeing here and spending that may be here to stay. What's going on to Mark >> Thanks very much. TD Economics latest debit and credit card spending data suggests that consumers are tightening their wallets.
Although seasonally adjusted nominal card spending rose to just above 8% month over month in July, it actually follows a big drop that we saw in June, near zero pace of spending in spring, as the churches. Now the July spending rebound was likely boosted by federal government grocery rebates paid out earlier in the month.
the trend is relatively flat.
The pace of growth of only .1% in July. However, TD Economics expects spending to shift into lower year in the medium term, given the cooling in the job market.
As this next chart shows, employment growth has slowed recently which should contribute to softer spending trends, according to TD Economics. When we bring apart spending, we see some pattern in June and July for both goods and services.
However, a softer environment in late spring it resulted in a relatively weaker three-month average growth in goods spending.
When we take a closer look at the data, it points to discretionary items like home related goods falling out of favour with consumers.
This really aligns with what we saw in the June retail sales data from stats Canada where sales actually fells 6/9 categories led by furniture, electronics, appliance retailers as well as general merchandise department stores.
And TD Economics notes that the turnaround in home sales earlier in the spring didn't actually produce or generate the same spending in home related items. Now, when, that's a good sector, when we take a look at the services sector, TD Economics points to recreational and entertainment spending as the biggest driver of activity.
this category drove the drop in June and the rebound in July. It shows the people are so willing to spend to see concerts like Taylor Swift or pay for movies such as Barbee and Oppenheimer.
But TD Economics is warned that services spending may be peeking along with transportation as well as travel.
The reason for this is that higher prices may be the reason why inflationary households may not be willing to shell out as much money for these activities going forward. Finally, TD Economics says that trend growth remains positive for financial services as well as miscellaneous items as we see people returning to the office.
Overall, TD Economics is spending could benefit from fiscal support and excess savings in the near term.
However, for the longer term, they see, believe that further slowing may come due to higher debt servicing costs that continue to hit household budget.
>> You got some push and pull in there. According to the report, how much longer do you think we have to wait before we see the slowdown?
>> Since the Bank of Canada began raising rates, Canadians are paying about $37 billion more to service their debt.
Now TD Economics estimates that a further increase of 44 billion by the second half of 2024. Now, this amounts to 6% of consumer spending in 2022.
Canadians will have to switch spending away from other areas and this is a key reason why TD expects consumer spending growth to be below 1% in 2024.
>> Curbs your spending and this is just anecdotal, my advice, putting two kids in university, got two kids in university, I spent nothing on myself. That is me.
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. He gives us a nice picture of the market movers. We are screening for the TSX 60 by price and volume. You can see the energy names getting a bit today. Cenovus seems to bethe leader in the pack there at 1 1/2%.
Among the oil and gas, we have Cameco there as well. Of course, it's a uranium play. Up about 1.7%.
The notable on the screen would be a national bank. It reported today and that is a market reaction to what they are getting. South of the border, let's check in on the S&P 100. Two names the pothead earlier this morning, I wonder if they are still popping out now.
Tesla right now is just sort of flat.
It's not popping like it was when catching my attention this morning.
Apple of almost 2%.
IPhone 15 is rumoured to be coming out next month. And the chipmaker Nvidia, we chatted about them a few times during the show, up about 2%.
You can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back with Ben Gossack, portfolio manager at TD Asset Management. Let's get the more of your questions.
So it's got a question about the ETF KWEB. It seems to track China large caps.
Is that a good prospective investment for one to five years?
You're on the platform, we cannot give specific investing advice, but what about stocks in China?
>> The issues that are facing China today Are not new and have probably been talked about for over a decade.
The macro can work out very slowly.
and so the people that were saying their issues with real estate, it could've been 2011 that they were sort of banging the walls about it.
And then early wrong and long-term right, which is always very tough when you are trying to sort of apply this thesis into actual items in the market.
So yeah, I think the government is going to have to figure was to do here, and is going to be challenging.
So yes, does it look like prices have been depressed and that creates opportunity? Maybe.
What if we have to go through 10, 15 years to work through an economy that was basically driven by debt?
And that created the 5 to 7% GDP growth numbers that we saw. But most of that debt, I would say, for maybe 10 or 15 years, has been unproductive infrastructure and real estate.
Undirected means you are not going to get great returns on your capital.
So how do you absorb that and who takes a hit?
So that leads to a lot of social issues.
Yes, will the future be consumer lead and consumption like other economies?
Sure, but how do you rebalance the economy as he gets hurt in the process and may be they like to have tried in the infrastructure was before that. This is difficult. I don't know the answers.
And so again, I think when you're making investments, you should now where you believe you have an edge and if you don't, you don't have to participate. I think it goes back to our theme at the beginning. You don't have to chase the herd and you can manage, hopefully manage your FO MO and it's always good to do that within some type of structure or process. >> Technically we've run out of time for question. Let's squeeze this one in quickly. You gotta view or wondering any global equities that are leveraged to a supercycle in nuclear?
Nuclear seems to be back.
>> It's an idea and the question is can you make any money from that idea? It's difficult. we have a company in Canada that you reference set aside to uranium.is going to give you good exposure there. There companies, many of them in Japan, that will buildnuclear power plants. The challenge, as an investor, is that they are part of a large conglomerate. So great, you found the one segment within that company but now you got a deal with all the other segments. this is a challenge that we've had. We know there's something there.
what you need to ask yourself is, can you actually make money on this? And that can be a challenge.
Sometimes you just have a great idea. Somehow you just have to watch it. It can be difficult to find a vehicle with in public equities or even the public debt market to get a return on that idea.
>> Always a great conversation.
I look forward to the next time.
>> Appreciated.
See you next time.
>> Already, in the fall, probably.
Enjoy what's left of summer.
Ben Gossack, were fully a manager with TD Asset Management.
Thanks to him for being our guest. As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. Alex Gorewicz is going to be here, portfolio manager, active fixed income at TD Asset Management. We are talking about fixed income.
Always an insightful show with Alex.
A reminder that you can get a head start with your questions. Go to moneytalklive@td.com. That's all the time here for the show today. Thanks for watching.
We will see you tomorrow.
[music]
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 will discuss what the fall may have in store for investors with Ben Gossack, portfolio manager with TD Asset Management.
MoneyTalk's Anthony Okolie is going to have a look at whether consumers are tightening their purse strings amid these higher interest rates. And in today's WebBroker education segment, Hiren Amin is going to walk us through how Canadian Depository Receipts work and how you can find them on the platform. 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 we get our guest of the day, let's get you an update on the market. We got some green on the screen.
A little more modest than yesterday but still upside.
20,361 on the TSX Composite Index, we are up about 1/3 of a percent. Of course, the trading volumes get a little lighter this time of year about among most actively traded names on that list include Cenovus Energy.
We've had crude oil moving up over the past couple of days. Nothing too dramatic but well above 80 bucks per barrel for WBT. You gotta name at like Cenovus at 2677, up about 1 1/2%. And BlackBerry has been in the spotlight for the last couple of days amid these unconfirmed reports that they may be the target of a takeover offer. Seven bucks and $0.50 per share for blackberry, that's up to .7% today, but you see that pop in the past couple of sessions on the right side of your screen there. South of the border, we are getting further indications that perhaps the US economy is starting to feel the effects of higher interest rates.
The pace of job hirings, according to ADP and private payrolls, is coming down.
They revise the latest GDP report, Americans do tons of revisions on their GDP report, down a little bit as well. Perhaps some of that is starting to take hold.
You're up 16 points, pretty modest, about 1/3 of a percent.
The tech heavy NASDAQ, how is it pacing against the broader market right now?
If the S&P 500 is up 1/3, the NASDAQ is up about half a percent. HP Inc. though, this is HP enterprises, they sell personal computers. Apparently, it's not going all that well for them.
They said that PC sales particularly in China weighing on them, HP Inc. down to the tune of almost 8%. An aftermarket update.
As we get towards the end of summer, it can be a good time for investors to reflect on what's been happening in the market so far this year and also to sharpen your pencils to prepare for the rest of this year.
Joining us now to discuss is Ben Gossack, Port blue manager at TD Asset Management. Ben, great to have you with us. Things are coming in on this last week of August.
>> Well, I appreciate our chat. So thanks for having me back.
>> Let's talk about the year we have had.
And the fact that we are in August right now and people want to know what's going to happen in the fall.
Sinner trading volumes, people don't at their desks, pretty hard month to figure out what's been going on.
What have you been thinking about?
>>Summer is short and fleeting in Canada, so I encourage people to get out there, spend time with your family, especially now we are into the last week of August. Arguably, I was in the last week of summer. But August can be a tough time. Trading volumes are seasonally low. We do get a lot of movements in stocks and people try to build narratives and they will think that certain things are going.
It's very difficult to detect if there is a good signal. I find, for August, great time to catch up on project, do some reading, work on some research, and then prepare for the inevitable September where everything sort of comes about and everyone wants to know where things are going.
I would say one interesting thing that I did in my summer, what did you do in your summer?
I was going back to, I was reading a lot of headlines on China. A lot of negative headlines on China. All very justified. But I was thinking it wasn't that long ago, especially at the beginning of this year, we were talking about how amazing China was going to be following reopening and I started to look back and see what happened and what we have been able to detect what we are seeing today in terms of the headlines in the negative momentum?
>> I think you some pictures to show us of that work.
You not only have a story to tell us about your summer homework but some pictures as well.
>> Why don't we queued up?
>> Let's take a look. Shanghai stock index composite index. What is this telling us?
>> Okay.
I think I've come on your show many times and we talk about fractions. I love fractions.
Kids are going back to school, they are going to do math and they say, why my learning about fractions? You can tell them it's because they can make you money. And therefore, we will pay more attention to fractions. We were looking at, you're looking at the Shanghai composition stock index, this is the local stocks in China.
The upper chart is the actual price index and then below it is our fractional. We'll get to that in a second. But I want people to focus on the upper half of this chart.
I drew a big great arrow. About halfway through November, you can kind of see the bottom in the chart and we start to get rumours that very strict COVID 19 policies might get softened and I think it was around early December where we saw a change in tone and then we just saw a rush in. We see the chart moves up and we get a lot of strength.
Around this time, Greg, everybody is pitching every China idea across every sector. So it could be materials, maybe they are going to use more infrastructure, there is pent-up demand. People have been sort of lockdown, and others that revenge spending that we all experienced in terms of Western developed economies, so transportation, you look at the gaming stocks, they were up 100% off their lows, so there was the sort of euphoric fear of missing out, need to follow the herd.
So there was a real push into China.
If we look at the fractions, that's the lower half of our chart, again, I was kind of playing with our charts the other week and I was shocked by what I saw.
So what we're doing is we're taking that same Shanghai composite index, the price, and we are dividing it by a MSc IAI.
That's the developed Europe and Asia. The reason I picked that as our denominator is typically when you are allocating capital outside of North America, you'll take it from the US or Canadian investor, you thinking about FAC i.e. as you are pooled kind of pick stocks and and if you are going out into emerging markets, you will look at that investment versus what you could do it in the developed Western, Asian economies.
So what you can see is we do have a move in the Shanghai composite index the line is actually very horizontal and study relative to the MSc IFC and what that tells you is there is no outperformance.
The local investor was not giving any credit to any of these Chinese companies in totality to say there was a relative performance. Now this is with the benefit of hindsight. Again, we are all looking at these restaurants, we are seeing all these movements, our minds are crackling numbers and performance.
>> You get the fear of missing out.
>> I tell people to look at things on a relative basis, on a fractional basis.
It says that it was possibleto have benefits elsewhere, not in China. Maybe it was in Europe or other parts of Asia.
They were going to potentially benefit more from China's reopening. But piling into China, that M plus one China trade, was going to add value and we saw there was that move. Was also very interesting about the chart is we have done horizontal line and that it breaks at the end of the margin, it starts to underperform.
But if you are only looking at the Shanghai composite index, that continues to try to push till maybe April, the day.
It kind of goes sideways and it's only until this month, they won't report youth unemployment, we are seeing deflation, there are some moves in terms of stimulating the economy, but you also have to have demand for capital.
We are not seeing that.
So digressing a breakdown on the chart.
But that breakdown had probably started already in March, plus you had no relative performers for when the policy start to come down.
>> Those graphs and fractions, the process you talk about there, it gives insight into how you think about the world and investing. Thinking through the process a bit more and what we might be able to think about the fall?
>> Every time you end the show, I think you always asked me, any final thoughts, any closing words? And I say, no matter what's going on in the market, always stick to your process. And so I thought, now that we are going back to school, when we talk a little bit about our process, my process, and look, I like a good FOMO situation too. That's just me, that's my personality. I have to manage that. But it is the process that helps teach us to manage your fear and your greed, to manage your structure, and it delivers over time. I want to start with building blocks in the process. What we are looking for is high quality companies that have a cash flow stream and can compound that cash flow stream. We think if you have compounded cash flow streams, that can create value and outperformance.in order to do that, we think there for building blocks. Use have a company that has a competitive advantage, so something they do better than others. And that can make money.
back to me new products, new services, entering new markets.
maybe it's a shift to a new structure. We might see cash flow accelerate because they change their manufacturing process or they are doing more software versus hardware. We try to understand where the growth is coming from.
Fundamental excellence, you want a well-managed company.
We want management allocating capital in the most efficient way, getting returns on it.
The last thing I want to talk about is this thing we called underestimated free cash flow.
So if you think about it, a company generates cash flow from operations.
Then, they have to invest some capital back in the business keep it going.
We call it capital expenditure.
And whatever is left over is free cash flow. What management does with that free cash flow can directly correlate with how the stock performs.
If you can find a company that is compounding, we see time and time again, it gets underestimated by the market, and it's this unusual feature of human beings where we like to model the world in a very linear fashion. And if you look at any model that's trying to capture the financial performance of any company from any let's call it banking institutions, they are always managing in a linear fashion.
And so if Euronews 10% this year, the base got bigger, maybe you can only go seven and then six and then five.
But if if you are compounding, it's nonlinear and that's what creates a surprise.
that sort of the building box in terms of how we find our stocks. So yes, you can have a China reopening trade, maybe Japan looks exciting because it's hitting levels we haven't seen since the 90s. Maybe it's about seven stocks that the market seems to be obsessed about.
For us, no matter what's going on, we start with for building block.
>> Fascinating stuff.
We are going to get a lot of questions for Ben Gossack in just a moment's time.
We are going to talk about global stocks.
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.
There are signs today that interest rate hikes are slowing the US economy.
Private payroll numbers released by ADP show 177000 Jobs Were Added in August, and is well below July's reading and lower than expectations.
The report also suggests pay growth is slowing for workers who are changing their jobs.
And it GDP growth was revised lower. Still 2.1% on an annualized basis, but lower than that initial reading for the second quarter.
Let's take a look at shares of HP Inc. that are in the spotlight today. Down right now 7 1/2%. The company says a year-long slump in demand for personal computers and weak sales in China are weighing on the bottom line.
HP Inc. says computer sales in China dropped almost 20% in recent months, adding a dozen see recovery anytime soon in that market.
The maker of Jack Daniels says lagging whiskey sales hit the bottom line in its latest quarter.
The Tennessee-based Brown foreman is pointing to supply challenges, namely its inventory of glass for those bottles that you put the whiskey in. The company did, however, see strong demand growth for its ready to drink offerings and tequila brands.
You can see right now the maker of Jack Daniels down a little bit more than 4%. A quick check in on the market. We will start your own Bay Street with the TSX Composite Index.
Another Dave Green on the screen. It's pretty modest but if you're on the market, it's green. Europe 66 points or 1/3 of a percent.
And south of the border, that brought a read of the market, the S&P 500, putting another 17 points up today, a little more than 1/3 of a percent.
We are back with Ben Gossack, we are taking your questions about global stocks. Here's one right off the bat. Would you consider stocks in Internet security to be defensive? I think that large companies are pretty well dependent on continued protection from the bandits out there! Full disclosure, I own Palo Alto Networks and I have for a few years. What we think about the bandits out there?
>> We don't like the bandits.
If you are in security sales, you probably do like the bandits because it keeps up demand for your product. So security software, it's something that I've been studying since I was a technology analyst.
You have various companies like Home Depot or Target have breaches.
As a board, you're trying to think about how to protect the company. We saw many companies lose value because of breaches. I think it's really important when you look at this, again, I like stocks that have a secular growth. I do think security is a secular growth trend.
The only thing that I would always, the opposite or cautionary side, is that this goes in waves.
I think boards know they have to spend a certain amount of their cash flows on security, but they also know that the marginal dollar isn't going to stop the bandits. So there's only so much they can do, but they know they are going to get breached.
So you spend what you need to spend, you get the insurance that you need to get, and so it's not like it's just going to go up and to the right always, you're going to get. It's where it's going to grow because there was an event and borrowers want protect themselves, and then you're going to get some slump in growth and stocks could take a breather.
Usually when I get that question, it's like, this is a no-brainer. In theory, it is. In practice, it's a bit up-and-down.
And the other thing is, he goes through periods of consolidation. So newest that comes out, you will get a lot of point solutions, startups come in and target that threat, and thenas a company, you're like, why do I have 30 security vendors? I need to simplify my IT process and so you have this consolidation period.
Some might get acquired, as some might you share quality so you will have to be careful what companies you own.
>> An interesting rate and on the space. Here's one with the plain makers. What you're viewing on Boeing and Airbus?
Has Boeing turned a corner on their past problems?
Who is winning the race to dominate the global airline industry?
>> I think the very simple answer is the world is going to have Boeing and Airbus and some other airplane manufacturers. We like Aerospace as a category. It had an amazing secular story of growth prior to COVID. You could look at passenger miles travelled and it was up and to the right and we are getting a lot of growth out of Southeast Asia. If you think, as companies increase their GDP per capita, people get a little bit more wealthy. They have an opportunity now to travel, and then they realize the world is pretty cool and there are a lot of amazing things to do, either sightseeing or going to places you've never seen before. People get addicted to travel. Canadians in particular are addicted to travel. Most of our credit cards are tied to some sort of travel related points.
And so yes, there is long-term demand for airframes and again, the way we like to look at it is, yes, you could make bets on the airframe manufacturers.
There's aftermarket supply and services that is interesting.
There are companies that supply parts to the companies, even in Canada we have a company that trains the pilots.
So I would just stop your research and just look to airframes.
There is a whole other way to go about it.
At the end of the day, what you're really try to capture is the trend of passenger miles travelled in the demand for travel.
>> You talk about different ideas, investing ideas, being beholden to cycles. We are talking about cyber security and cycles that companies go through.
Economic cycles, does this way on names like Boeing and Airbus and the others?
>>it can, or can run counter cycle.
Again, it depends.
My background was in aerospace.
And so we would have a lagging effect.
As aerospace engineers, we always commit ourselves to the automotive engineers and they might be at the beginning, ahead of the cycle, and we are always kind of near the tail end of a cycle. So the economy might be moving and then you're questioning, why are they telling us now that we might not get bonuses this year?
Every industry and subsector has its cycles. Again, when you are looking at companies, when you are investing your hard earned capital, it's important to understand these stories and cyclesand the pull forward of demand versus something that can continue to compound.
>> Interesting things to think about when you're taking a look at that space.
Now we are going to move on to EVs. Your thoughts about Rivian?
>> I can't speak about any specific company.
Electrification, electric vehicles, I think we can all agree there is exhilaration. There are couple of staff, I know we talked about specific companies in other venues, but it took eight years to get to a million battery-powered EV cars in the US. It took three years to get to 2 million you and… We definitely see the penetration of electric vehicles.
Again, going back to what we were talking about Aerospace, where we try to add value and where we think about our process of who has a competitive advantage, where is the growth coming from, or they will run and are they underestimated? That's where we go through the entire value chain.
So yes, you could look at Rivian, you could look at Tesla, you could look at Volkswagen and BMW and ask yourself, these companies have a competitive advantage?
Maybe a competitive advantage are the people pulling the lithium and the nickel from the ground. Or maybe that's a commodity.
And then you start to say, well, there's only three or four battery suppliers. Maybe that's where the value is being captured. So you try to go through that and where they are located. We have had battery fires and needed to replace them.
You have to look at what happens when kind of check to fix and replace cars that were on fire.
Then there are people that supply different parts. And then sometimes you can think of the infrastructure. I think we talked on shows past about if everyone in your condo or everyone on your street bought an electric vehicle and tried to plug-in, we have an electrical grid that can't handle that infrastructure today.
So that's a multiyear process in terms of upgrading the grid. I think it's an exciting area.
The hard part is now how to capture that value.
>> As always, make sure you do your own research before making any investment decisions.
we will get back to your questions were Ben Gossack on global stocks 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 to our educational segment of the day.
If you are looking to get access to foreign equities, Canadian Depositary Receipts it may be worth a look.
Hiren Amin, Senior client education instructor with TD Direct Investing joins us now.
Hiren, great to see you as always. Let's talk about what depositary receipts are and how Canadians can access them.
>> Absolutely, great. Great to be back again. Yeah, very timely, because we are talking about global stocks today. I'm going to harp on the topic of been talking about fraction. We are going to be talking about ratios as well. A little bit of arithmetic theme going on today. Let's talk about depositary receipts first. What are they? They are a time-tested way for investors to access shares of foreign listed companies. We know that sometimes if you want to invest in a company in China, it's very difficult to directly access that market and that's where depositary receipts come in and help us do it domestically. Now, when it comes to depositary receipts, we are going to be kind of accustomed to familiar names. One is more popular which is American depositary receipt, called ADRs, but our focus is going to be on the counterpart locally here, Canadian Depositary Receipts. They are designed to make it easier for Canadians to access the most popular US companies. This is going to be specific exposure to US companies with the added benefit that is going to be in Canadian dollars that you will be trading and it also has a built-in currency hedge. There are relatively new in our market space.
They allow Canadians to buy partial shares of these large US companies. We are going to look at that in a moment.
And you would've noticed, if you are in WebBroker, any trader, if they been looking at some of these big FAANG companies, the mega-cap's, people dissemble, there is a Canadian flag beside the name as well as a US flight.
Whenever you see the Canadian flag, that's going to be indicative of the CDR itself. So you are, by investing in the CDRs, your exposure to US dollar currency risk is minimized with the built-in currency hedge they have allowing you to own the company but not the currency itself.we're going to look at some examples.
coming onto WebBroker, I have Apple queued up but I did want to look at some of the bigger priced stocks. Let's look at Nvidiasemiconductor.
For some of us it may feel, I'm going to bring up the underlying first, the one the trades on the US market, the NASDAQ. You can see that it's 497 and change in US dollars. If you were to convert that into equivalent Canadian dollars, that would be in the ballpark of $650 and that's quite a big hi to be able to chew on at once for some of us. So in that case, how can I get exposure to Nvidia without having to spend all that money? That is where the CDR comes in.
If I type in Nvidia one more time, we have our good old CDR with the Canadian flag. Be cautious of this. When you are looking through some of the stocks and you notice that there are both, the ones that have the Canadian flag and you know it's US company, that would be indicative of it being a CDR. They have expanded this program recently, Greg, was CDRs. They have 41 CDRs currently in the marketplace for us over here. So a lot of the bigger communication companies, the tech companies, are going to be found here.
You can see this one is trading at $47.
41 and so that brings us to the question of, well, how does this represent the ownership?
Well, the CDR is a fractional ownership of the actual company. If you are not directly buying a fractional share on the company, but it represents a fractional share. And part of the knowing how much it represents is what is called the CDR ratio.
You'll notice that this one, if you eyeball it, 4741 Canadian, if you were to look at the US price, which is trading at that, I think we just look at, 400 and change in US dollars, roughly the ratio would be about 1/10, 1/10 or slightly more than that. Now, the simple math is, when you are looking at a CDR, if you want to own one economic equivalent of the underlying share of Nvidia, you would roughly have to buy about 10 CDRs of this CDR to equal one Nvidia share there.
Final note, we will talk about CDRs, it's this.
Advantages and disadvantages.
You're getting an attractive price point that's available to you. There is a built-in currency hedge that is going to be available and there are low barriers of entry. When I say low barriers of entry, you don't need to set up a US account, you don't have to worry about converting money into US dollars and then having to worry about currency hedge. So you have this little, accessibility is much easier.
Disadvantages we want to talk about is growth can be a little bit small with this because it is a relatively new offering. Along with that as well, the volume.
Liquidity, when we talk about that, comparatively, it could be much more smaller than the underlying stock itself there.
And finally, one thing I would mention is, depending on which one you do choose, they do pay dividends on them and when we are talking about the dividends, you may not be eligible to get the dividend tax credit and this is designed to avoid the double taxation on those dividends that are already paid by the companies on their profits. So just keep that in mind and also there are going to be US withholding tax applied if you are investing in the CDRs in an account that is outside of an RSP account there. So that's kind of a run down there for you, Greg, on CDRs. That's very instructive rundown indeed. Thanks for that.
>> You're welcome.
>> Thanks to Hiren Amin, 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.
We are back with Ben Gossack, take your questions about global stocks. Plenty coming in. Let's get to this one.
What is your guest think about Alimentation Couche-Tardand how is the transition to EV progressing?
If you own gas bars that have convenience stores attached, what is the world of EV mean?
[overlapping conversation] >>the company has done an amazing job growing the gas stations and the network. There was a symbol a few years back when the management team went into Europe to buy a European grocer and many investors were… >> Carrefour?
>> Carrefour, yes. The stock fell on that. That's the issue that you have with companies like this.
If the company gives you credit and evaluation premium in your stock, why not go and roll upyour industry, get a better margin? Effectively, the market is giving you currency and also some value on a financial engineering basis. So it makes sense. I think that was a big lesson for management. They have done some acquisitions in Europe but again, it sorted within their area of expertise.
There have been rumours about them getting into sort of fast food, quick service type restaurants.
And so you would think, okay, is that like the Carrefour acquisition?
But you think about what does the future look like when you're not coming to a Circle K for gasoline?
But maybe for a charge point?
And if it does take 30 to 45 minutes to recharge her car, what are you doing for that 30 or 45 minutes? So it's interesting.
It's definitely a future that's a bit unknown, and so management is trying to figure out that expertise so very interesting company, very interesting story.
So yeah, we are going to have to see how they make the play with electric vehicles.
>> Question was from Jeff who has been sending in questions pretty regularly. We thank you for that one, Jeff.
The next question here is about artificial intelligence.
There's a ton of hype on AI. Are there any interesting plays that still exist?
Nvidia has been the big story of the year. We have seen the stock jump.
>> Yeah, and this is an interesting cycle. Looking back at our charts and fractions, semis in general do a cycle. The bottom of that cycle would've been October last year. Regardless if we had the sort of AI hype, there would've been a semiconductor cycle happening anyway.
Nvidia reported last week sequential growth of 88% on the top line, so quarter to quarter. You don't see numbers like that.
what I find fascinating about AI, you can see a lot of people are very frustrated and so typically let's say the last sort of big cycle intake was software as a service. Companies like Amazon and Google, Microsoft, created the utility for software as a service to flourish, that would be the data centre, the cloud. And many companies could raise capital and not even have to buy the equipment. They would put it all towards customer acquisition and sales fuelled growth.
we had lots of software companies thateventually develop. Can you imagine running a venture capital, trying to raise private capital from endowments and all the value right now is being captured in the public market, specifically by few stocks?
So that's where we stand right now. What we don't know is, fine, let's build the infrastructure, and then we will see what comes out of it. When companies like Cisco, maybe Qualcomm were the darlings in the late 90s, they did not become the darlings later and no one would've able to predict companies like Uber or DoorDash.
There will be stuff that comes later. But for now, I would argue that it's focus now on a select group of companies because we have to build the infrastructure.
>> There is a question here, just came in the past couple moments. If you want to get your thoughts on Japanese equities. You talk about some of the ideas floating around this year about Japan.
>> Yeah, so there are a lot of interesting Opportunities in Japan. Lots of opportunities for active management. I thinkJapanese stocks got a lot of attention this year.
We did see inflation come back.
So we want to be in a deflationary environment and that curb spending and so that's how the Japanese indices move up.
We start to see levels that we hadn't seen since the real estate property bubble in the 90s so that gets the headlines, gets people focus.
We talked about putting let's say the Shanghai cops it onto the MSC i.e.
, if I do the same thing with Japan, shockingly or maybe not shockingly, I get a horizontal line.
we are seeing what looks to be a breakout in Japan but effectively it is in line with how the broad developed European and Asian markets are moving.
So it's not, I would argue, special or unique.
It is not the source of strength.
Having said that, there are companies in Japan that are doing interesting stuff.
So I was just talking to a colleague and he was saying, on an equal weight basis, treating every company is equal there, it's outperforming. You have to do your work.
I would argue Japan is very difficult.
Many companies don't have English translation. You're gonna have to use translators.
Don't put up all the information. I think that's what creates the opportunity.
But you really have to do the work on Japanese companies.
And it's not even easy for let's say large financial institutions.
Opportunity, but you have to put in the homework.
>> Okay.
like many things in life, have put in the work. We are going to back to questions for Ben Gossack on global stocks 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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It has been well over a year of aggressive rate hikes.
Yet, consumer spending defies a cottage this expectations. However, we are seeing a cumulative effect now on these pass rate hikes.
They're starting to have a real impact on household budgets. Our Anthony Okolie has been digging through a TD Economics report about the soft path we are seeing here and spending that may be here to stay. What's going on to Mark >> Thanks very much. TD Economics latest debit and credit card spending data suggests that consumers are tightening their wallets.
Although seasonally adjusted nominal card spending rose to just above 8% month over month in July, it actually follows a big drop that we saw in June, near zero pace of spending in spring, as the churches. Now the July spending rebound was likely boosted by federal government grocery rebates paid out earlier in the month.
the trend is relatively flat.
The pace of growth of only .1% in July. However, TD Economics expects spending to shift into lower year in the medium term, given the cooling in the job market.
As this next chart shows, employment growth has slowed recently which should contribute to softer spending trends, according to TD Economics. When we bring apart spending, we see some pattern in June and July for both goods and services.
However, a softer environment in late spring it resulted in a relatively weaker three-month average growth in goods spending.
When we take a closer look at the data, it points to discretionary items like home related goods falling out of favour with consumers.
This really aligns with what we saw in the June retail sales data from stats Canada where sales actually fells 6/9 categories led by furniture, electronics, appliance retailers as well as general merchandise department stores.
And TD Economics notes that the turnaround in home sales earlier in the spring didn't actually produce or generate the same spending in home related items. Now, when, that's a good sector, when we take a look at the services sector, TD Economics points to recreational and entertainment spending as the biggest driver of activity.
this category drove the drop in June and the rebound in July. It shows the people are so willing to spend to see concerts like Taylor Swift or pay for movies such as Barbee and Oppenheimer.
But TD Economics is warned that services spending may be peeking along with transportation as well as travel.
The reason for this is that higher prices may be the reason why inflationary households may not be willing to shell out as much money for these activities going forward. Finally, TD Economics says that trend growth remains positive for financial services as well as miscellaneous items as we see people returning to the office.
Overall, TD Economics is spending could benefit from fiscal support and excess savings in the near term.
However, for the longer term, they see, believe that further slowing may come due to higher debt servicing costs that continue to hit household budget.
>> You got some push and pull in there. According to the report, how much longer do you think we have to wait before we see the slowdown?
>> Since the Bank of Canada began raising rates, Canadians are paying about $37 billion more to service their debt.
Now TD Economics estimates that a further increase of 44 billion by the second half of 2024. Now, this amounts to 6% of consumer spending in 2022.
Canadians will have to switch spending away from other areas and this is a key reason why TD expects consumer spending growth to be below 1% in 2024.
>> Curbs your spending and this is just anecdotal, my advice, putting two kids in university, got two kids in university, I spent nothing on myself. That is me.
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. He gives us a nice picture of the market movers. We are screening for the TSX 60 by price and volume. You can see the energy names getting a bit today. Cenovus seems to bethe leader in the pack there at 1 1/2%.
Among the oil and gas, we have Cameco there as well. Of course, it's a uranium play. Up about 1.7%.
The notable on the screen would be a national bank. It reported today and that is a market reaction to what they are getting. South of the border, let's check in on the S&P 100. Two names the pothead earlier this morning, I wonder if they are still popping out now.
Tesla right now is just sort of flat.
It's not popping like it was when catching my attention this morning.
Apple of almost 2%.
IPhone 15 is rumoured to be coming out next month. And the chipmaker Nvidia, we chatted about them a few times during the show, up about 2%.
You can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back with Ben Gossack, portfolio manager at TD Asset Management. Let's get the more of your questions.
So it's got a question about the ETF KWEB. It seems to track China large caps.
Is that a good prospective investment for one to five years?
You're on the platform, we cannot give specific investing advice, but what about stocks in China?
>> The issues that are facing China today Are not new and have probably been talked about for over a decade.
The macro can work out very slowly.
and so the people that were saying their issues with real estate, it could've been 2011 that they were sort of banging the walls about it.
And then early wrong and long-term right, which is always very tough when you are trying to sort of apply this thesis into actual items in the market.
So yeah, I think the government is going to have to figure was to do here, and is going to be challenging.
So yes, does it look like prices have been depressed and that creates opportunity? Maybe.
What if we have to go through 10, 15 years to work through an economy that was basically driven by debt?
And that created the 5 to 7% GDP growth numbers that we saw. But most of that debt, I would say, for maybe 10 or 15 years, has been unproductive infrastructure and real estate.
Undirected means you are not going to get great returns on your capital.
So how do you absorb that and who takes a hit?
So that leads to a lot of social issues.
Yes, will the future be consumer lead and consumption like other economies?
Sure, but how do you rebalance the economy as he gets hurt in the process and may be they like to have tried in the infrastructure was before that. This is difficult. I don't know the answers.
And so again, I think when you're making investments, you should now where you believe you have an edge and if you don't, you don't have to participate. I think it goes back to our theme at the beginning. You don't have to chase the herd and you can manage, hopefully manage your FO MO and it's always good to do that within some type of structure or process. >> Technically we've run out of time for question. Let's squeeze this one in quickly. You gotta view or wondering any global equities that are leveraged to a supercycle in nuclear?
Nuclear seems to be back.
>> It's an idea and the question is can you make any money from that idea? It's difficult. we have a company in Canada that you reference set aside to uranium.is going to give you good exposure there. There companies, many of them in Japan, that will buildnuclear power plants. The challenge, as an investor, is that they are part of a large conglomerate. So great, you found the one segment within that company but now you got a deal with all the other segments. this is a challenge that we've had. We know there's something there.
what you need to ask yourself is, can you actually make money on this? And that can be a challenge.
Sometimes you just have a great idea. Somehow you just have to watch it. It can be difficult to find a vehicle with in public equities or even the public debt market to get a return on that idea.
>> Always a great conversation.
I look forward to the next time.
>> Appreciated.
See you next time.
>> Already, in the fall, probably.
Enjoy what's left of summer.
Ben Gossack, were fully a manager with TD Asset Management.
Thanks to him for being our guest. As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. Alex Gorewicz is going to be here, portfolio manager, active fixed income at TD Asset Management. We are talking about fixed income.
Always an insightful show with Alex.
A reminder that you can get a head start with your questions. Go to moneytalklive@td.com. That's all the time here for the show today. Thanks for watching.
We will see you tomorrow.
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