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[music] Hello I'm Greg Bonnell and welcome to MoneyTalk Live.
Coming up a today show Ben Gossett will talk to us about recent volatility and in today's WebBroker education segment, Hiren Amin will show us how you can assess the company's value using the platform.
Here's how you can get in touch with us. Just email moneytalklive@td.com or follow that viewer response box right into the video player here on WebBroker.
Before we get to our guests of the day let's get to an update on the markets.
Only two hours away from that Fed rate decision. So a bit of caution out there.
Nothing too outsized in terms of moves. I'll start with the TSX Composite Index.
19,601 91 a little shy of a 15%. Crescent Point Energy, a sense that it's got some more money moving into this direction while the stocks are modestly positive or negative. Up almost 5%.
Manulife will be representative of the financial stocks today, life Co.
right now basically flat ahead of the Fed. That's not unusual to see the markets just showing a little bit of weight and see. So let's take a look at the S&P 500 and see what's happening there.
… A modest 1.9. We will give that to points to be generous. It just five tics right now. Of course on the programming, as we talk about waiting for the Fed, we will have full reaction to the Fed rate decision at 2 PM Eastern time and analysis.
We will make the Fed make its decision and will hear from Jerome Powell. Hafiz Noordin, Portfolio Manager at TD Asset Management will join us and going forward you can find our conversation this afternoon on the website, money talk.
go.
The NASDAQ fairing up a modest 30 points and about 1/4 of a percent. First Republic Bank, we want to see how one of the US regionals, especially one of the spotlight, as in recent days : 15, 18 after a big jump from yesterday down 3 1/2%. You can see obviously the big pullback in the share price in the past two weeks and all these concerns about the US regional banks. And that's a market update.
A year of aggressive rate hikes had some investors worried about unexpected stress points and the economy.
And while markets have been volatile in recent days amid the turmoil in the US regional banks, our guest today says the underlying market trends are still intact.
Joining us now is Ben Gossett, Portfolio Manager at TD Asset Management. Always rectangular show.
>> Thanks for having me back and I always feel like I'm back on a Fed rate decision day.
>> Your the precursor to all that. What's been interesting in the past two weeks, and we had plenty of things going on in terms of concerns of the health, not of the US regionals or the credit Suisse situation… The effect of everything that we've seen in terms of policy.
People are just worried that something would show signs of cracking. What if something did?
What with the market reaction obviously be on the headline be volatile?
… > I think it's interesting that we had four banks fail.
There's another on life support. Fears about where to park your money.
And yet, from a volatility perspective, from a dollar/flight perspective, it's been quite pedestrian.
I think it goes back to how we've kind of been on this doomsday clock or this 11th hour for almost a year given how much we have hiked to the rates.
We have a war that started in February of last year… We thought there would be an energy crisis and Europe would be in recession. Even in September, we were worried about the impact of UK pension plans. In the UK budget. So if anything was going to break, it felt like it was in the last year.
And then that fear of something breaking, well, we may not like it but that fear of something breaking has happened now.
And so I think the market is kind of like… Okay now I know what I was worried about and I can deal with this and try to see what happens going forward.
>> Let's talk about what's happening going forward.
What if you even notice beneath the surface in terms of what has been happening in the markets?
I'm not sure what you want to start with. Maybe just a volatility gauge.
>> Yeah. We will start with volatility and kind of, what this looks like in keeping with historical issues and then what we see going forward is kind of what we have been saying for quite some time.
Which I find very fascinating. So in terms of our first chart, this is the standard sort of, volatility measure, the VIX.
The S&P 500. We saw jump to 30 and that is quickly dissipated.
In times of crisis, we have seen this go as high as 80.
Some around 40. You think things are really bad. But again, I think it goes back to the fact that the reason why the volatility seems somewhat contained and we are not seeing dollar flight is that we have been on this watch wave for something to break and again, I don't know if anyone had forecasted this specific failure but we have seen some type of failure and so, yeah, what we knew was in happen happened.
>> Okay. Let's talk about other parts of the market now. Homebuilding is interesting considering how much the cost of borrowing is gone up in the past year. You would think there would be an impact.
US homebuilders. What does that tell you?
>> This is the part I find fascinating.
The trends we identified at the end of last year going into this year were unwavering in all this volatility last week and this week of the banks failing.
We are actually on the anniversary of the first Fed rate hike.
And it seems very counterintuitive and almost like a countertrend to the prevailing wisdom. But the time to go along with US homebuilders, these are the most sensitive to interest rates, was at the time of the first… >> That does feel counterintuitive ^laughing¸>> Think of them as a tug-of-war charts. If it's going up to the right that means the homebuilders or will winning the battle against the S&P 500.
So if it's going long, homebuilders a short period S&P 500, you probably would be considered an All-Star hedge fund manager on this particular trade. But what it tells us and what is informative about the specific chart is that the market and all its wisdom knew housing was going to be a problem because we did see 7% mortgage rates.
We have seen existing home sales slide.
We've seen new homebuilding applications come down and they have absorbed all that bad news. Even though the bad headlines didn't come until almost 8 months, nine months, 10 months later.
And we found that very informative.
Especially with other areas that are, again, early cycle, start to bottom and lift up.
>> When I think about the next picture you have to show us about the semiconductors, this one should be sensitive as well to the economic cycle.
We've had a lot of concern in recent months to if there will be a recession? What will it look like?
How deeply be?
How wide is good to be?
What are the semiconductors telling us?
>> They are also early cycle.
We did see an extended cycle through COVID with supply chains and shortages but that cycle broken we had oversupply. So while we still haven't seen a bottom in the earnings for semiconductor companies, from our charts, again, our ratio relative the S&P 500, they bought in October of last year they continued to improve. And again, looking at our chart, they got even stronger last week.
Again, four banks fail and everyone says "here comes the recession." But is this a recession on top of the recession that we've been talking about since last year?
Again, similar to our housing example, the semiconductor stocks have already looked through some of this noise and slow down in recession and continue to get stronger relative to the market.
>> Let's take a look at this chart.
This will be interesting in terms of times of economic stress and concern payment. Maybe you don't spend of the big expensive things.
You get down to basics but luxury goods.
>> Yeah.
>> What story is this selling?
It's quite the story.
>> The preeminent luxury house with brands such as Dior.
.
This is gotten stronger and I even started last year.
But luxury has worked relative to the market. Also got stronger last year.
But I can also show you Hermes and Ferrari.
Every luxury stock is improved. Part of it is that there is us can vary growth trend in luxury. They can grow top line 8 to 10% each year.
The other part is that the people that can afford these types of items have been unaffected by inflation. Even with a bit of concerns around regional banks.
Again, their wealth will not stop them from buying the next marginal purse or the next other sort of letter good.
But it does tell me a lot that given fears about economic recession, luxury his look through this and said "there might be bad news." I'm not saying, Greg, that there isn't bad news. There are concerns and slowdowns. There might be a rise in unemployment but I'm saying the wisdom of the market has said "we've taken that into consideration and we still see strengths in these areas that I would consider to be early cycle sectors." >> Choose to be told before the central banks hike aggressively even a year ago. My family really was not in the market for a Ferrari.
We take all these things together. What we make of the underlying movements in the market compared to all the headlines we've seen recently?
>> We still remain vigilant about the market and employment and valuations and we will always stay that way and we always skew towards quality. Prior to the banks failing, we already started to increase the cyclicality within our portfolios. Again, given the green shoes in the trends and we were receiving. So coming out through last week into this week, we haven't changed anything. The fact that semiconductors got stronger and luxury got stronger it gives us further confidence there is still bad news to come but the market, again, in its wisdom has sort of factor that in. Now, you never know the magnitude so maybe we factor in this much and there is this much more. That's always the risk in terms of portfolios.
But a well constructed portfolio following a process in quality and cash compounding, deals very confident that this these thesis are better than other thesis we've been working on and continue to have legs.
>> Fascinating stuff and a great start to the program.
We will get to your questions with Ben Gossack about global stocks in just a moment's time. A reminder to get in touch as any time by emailing MoneyTalkLive@td.com or fellow that your response box under the video player and WebBroker. Now let's get you updated on some of the top stories and take a look at how the markets are trading.
Nike says it's seeing strong demand for its sneakers but it is warning that margins will be pressured as it continues to work through excess inventory. The company says discounts to move those goods along with the stronger US dollar and freight costs will hit the margins by some 250 basis points. That said Nike's forecasting stronger sales this year than previously expected.
Shares of Gamestop are in the spotlight today. That is the videogame retailer posted its first quarterly profit in two years.
Gamestop also worked down its inventory levels by 25% compared to year ago levels. Gamestop is among a handful of names whose Mimas stock status resulted in big swings in the share price in recent years.
The shares today are up 37%.
We have an activist investor pushing for change at Calgary-based Parkland Fuels. In a letter to the board, Engine Capital LP is urging the company to streamline its business to focus on gasoline bars and convenience stores. And it suggests parkland should sell off its BC refinery among other assets.
A quick look at the main benchmark indices.
Starting at home with the TSX compass and index not unusual market activity when you are counting down to a Fed rate decision in less than two hours. A caution out there, seven text to the upside.
South of the border, the S&P 500 as we wait for Jerome Powell and Co.
down a modest three points now.
We are back now with Ben Gossack.
Portfolio Manager at TD Asset Management taking your questions about global stocks.
Lots of questions coming in let's get to them.
[reads question] >> The first section to come to mind is insurance.
First sector.
They have to match in the future. So they have to build an asset base in order to meet those liabilities. I would say for the last couple of years, we've had this low interest rate environment so they have have this mismatched. Higher interest rates allow them to earn the income they need and find the assets available in order to sort of manage those liabilities.
And what we have seen also, going back in our portfolios and looking at strengths, we've seen the weakness in banks. Since the financial crisis, US insurers has had actually outperformed US banks.
Too much focuses on US banks and not US insurers.
That's one thing we sort of rotated into. Going forward, I don't know if interest rates can stay at these levels.
>> The fact of interest rates being staying high higher for longer.
>> I think interest rates are a reflection of the output potential of the economy. When someone looks at, let's say, the US government 10 or 20 year, they can use as a proxy for what real GDP growth is. So we have seen a two-year rate go up.
But we haven't seen, we have this inverted yield curve where the tenants moves but the 30 really hasn't moved much. So it's a reflection of "yeah interest rates are high near-term but are output in the long term will be a lower interest rate yielding environment.
And the reason" and the reason I'm confident about that is, well, growth comes from a labour supply and productivity. Which is not making enough babies. If we are the home team,there are not enough people coming up in the ranks. We saw this with more debt. That is stealing from the future.
So between debt and our demographics, the only way for us to generate real growth going forward is productivity.
To me that means technology. I think we've all experienced that technology is inherently deflationary.
So that, again, would weigh on interest rates.
So all in all, I do see going forward, real GDP probably around two or 3%. That's probably where I think interest rates go in the long run.
> Interesting stuff.
Another question now.
This one about the Canadian financials obviously. We've had all these headlines about global banks.
What about the Canadian banks?
The question specifically is "would you buy Canadian banks right now?" We can definitely talk of the Canadian financials.
>> I think in our quality portfolio in our process, there is a place for Canadian financials and, in particular Canadian banks.
Not all Canadian banks.
There's a very specific set that we own. But there is something very unique about Canadian banks. And we saw that demonstrated last week.
They can be sort of painted as being boring or not is risk seeking as other banks. And yet in times of stress and uncertainty, it's that sort of boring risk managed tight institutions that end up outperforming on a relative basis to all banks. And while we did see many banks, especially the regionals, came down, you were European banks, Australian banks fell, the best performer of the lot where the Canadian banks.
And also US insurance companies were as strong as Canadian banks.
I feel they did exactly what they were supposed to do in that time of uncertainty.
And so we may see, again, new compliance, new regulatory pressures in place on US banks and maybe some other global institutions.
But again, Canadian banks and all that sort of boring and risk prudence, again, proves that that model does work and can work for the long run.
> We actually have another question about financials.
A good follow-up to this one. What is your expectation for financial sector performance?
Talking insurance, also talking banks, domestic, foreign… How do you see at all?
>> In particular in the US, as they break it down, we had favourite sort of J.P. Morgan. That was our last remaining bank.
I think we've seen sort of the global systemic important banks and in times of crisis, people gravitate toward J.P. Morgan and the Canadian banks.
Those from an Outlook perspective, I think are unchanged.
Hopefully, this does create more of a spotlight on the importance of certain insurers.
And so I think that's where we have added. Took from our banks attitude of insurance and I think there is a good place for insurance.
Again you have to be very selective with insurance. You can't just buy insurance.
There are some jumps in Canada and the US and in Europe.
Again, I don't have a crystal ball.
What I do worry and I hoped doesn't happen is we see further consolidation of US regional banks in the US.
We are used to about five, 6 Major Banks in Canada.
I know there are a couple other small banks but that's the bulk of our bankers in Canada. In the US, we spend a lot of time talking about J.P. Morgan and Wells Fargo and city.
But they are almost 5000 banks in the US. It's quite a lot.
A lot of them are small regionals, community banks.
We know the life and the blood in the growth of the US economy is a small business.
And I do believe small business meets small… Someone in the community I'm going to lend to you, Greg because I know you're expanding your warehouse and manufacturing.
I can understand your needs and your growth helps our community and there is that sort of symbiotic nature were as if all of a sudden you go to J.P. Morgan and Wells Fargo, you're not going to get that level.
What it means for the community. So we do see some more models in Germany as well where they have lots of small businesses and small banks and that works in terms of creating GDP.
So again, I don't know what the pendulum will be in financials. I do know it probably does mean that the margin will be more regulatory and compliant. It's very expensive for small banks but I do help we are able to keep these small banks in the US.
>> Interesting stuff is always remember to do your own research before making any investment decisions. We will get back to your questions with Ben Gossett on global stocks and just moments time.
A reminder that you can get in touch with us in a moment's time by emailing moneytalklive@td.com.
Now let's get to our educational segment of the day.
If you're doing research on a potential investment, you may have come across the company's book value.
Here to explain what it means and how you can find out more information on the WebBroker platform is Hiren Amin, Senior Client Education Instructor and td direct investing.
Great to see you.
Walk us through you can get book values in this platform.
>> Absolutely great.
Great to be back.
Let's chat about book value.
It's the valuation of a business or corporation so to speak.
So essentially, it's the amount of money that your holders receive if a company has their assets liquidated or sold off and all of its liabilities paid off. In other words whatever was owed, whatever money does, was to be paid off.
Now, in the book value calculation, referred shares are generally excluded from this because they have a higher ranking than those from common shareholders.
During the liquidation process.
So really, in a nutshell, book value tells us with the net asset value of the company is.
In other words, what the net worth of the company is.
Now, you can actually break the book value down on a per share basis and really, this is important for investors.
As you when you compare a book value, let's say the book value per share is higher than the market value, in other words what the stock prices, investors may consider that opportunity or that company to be undervalued. So, to main use cases of book value.
Number one, it tells us some of the liquidation process, how much are we going to get out of the business if it does come to be liquidated.
But second, it also allows us to compare the book value against the current stock price and he informs investors whether that investment is kind of overvalued or undervalued.
That's actually going to the balance sheet.
Let's go to the balance sheet on WebBroker. That's where we will be able to extract some of that information. On WebBroker, we will be using Tesla as an example and peel the layers on that.
To access the balance sheet, keep in mind it's one of those three financial statements issued by publicly traded companies on a quarterly basis and at the end of the fiscal year. So to get to that, we will click on our fundamentals tab over here. With Tesla loaded up.
You can see we will head to the financial statements sub- tab.
You can see the three main statements we were referring to.
Last week we went over the income statement. We are gonna focus in on our balance sheet today.
On the balance sheet, it really tells us, again, it goes back to that in tells us a bit about the net worth of the company or the book value of it.
It's divided into three main categories broadly here.
Assets, liabilities and shareholder equity there. So really, within the assets, you have two sections.
The current assets in the long-term assets. These are things easily converted into cash over the short term which is what the shorter assets are in the long term, will have those longer than the one year timeframe.
Things like what is cash on hand that the company has?
For example for Tesla we can see cash on hand is 22… The total receivables, what money is expected to come in the next year to Tesla? 2.9 billion.
You can see the inventory they hold.
That is essentially the cars making up the bulk of that value, 12.8 billion. So in this way you have the total current assets that is on Tesla's book.
Then you have the long-term or noncurrent assets which which would include the manufacturing facilities, the equipment, property, any goodwill or intangibles which consist of kind of those trademarks or patents that they have.
The combination of the current and noncurrent is it gives us the total asset value that they have. Then you go to the liabilities. These are things that the company owes. What is its data essentially? And you can see Tesla spoke over here on the accounts payable and what it's been all of the short term basis again.
This is divided by current liabilities and noncurrent liabilities.
15 billion. Some of the expenses they have to pay. If they are taking on debt they usually up to pay interest on those earning bonds that might be due and what's coming up for that.
So you can see in this way they've got this and they have the taxes laid out that they will set aside from what they Mido as well.
This includes the liabilities. Things that they owe.
Now, the equation becomes at the assets minus liabilities once everything is paid off gives us what's known as shareholder equity. In other words that book value we are looking for.
In this case, just to break it down, the number is already presented to us. 44 billion.
I can appreciate that investors are kind of it's a lot to make sense of these numbers. That's where financial ratios come into play.
We will talk about two financial ratios. The current ratio and the… Ratio.
Let's go to industry comparison section in one thing you can notices Tesla's book value per share is $14.13.
So just to give a sort of reference what that means is if Tesla were to wind up its business or go into liquidation, the common shareholder would only walk out with $14.13 as of the last report that we have.
And they are in fact paying a market price of $195 for it.
So this gives us another kind of ratio that tells us that investors are willing to pay 14 times the price of the book value to acquire Tesla shares right?
Those are important ratios to keep in mind.
Going down, talking about the current ratio, we will find out here, the current ratio is really taking the current assets. The ones that they have a short-term basis dividing it by the short-term liabilities were the current liabilities and coming up and telling us does Tesla have enough assets or cash in hand to service its ongoing short-term liabilities and debt? We can see this ratio is greater than one.
That's usually what they would say they can remain solvent if those debts are coming to at once.
If that ratio falls below one, if that debt comes all at once, they may not have the solvency to meet those obligations. Now, one we don't talk about here is the final one. Debt-to-equity ratio. This is taking the total liabilities.
So in other words the total amount the Tesla owes on its balance sheet and dividing it by the shareholders equity.
This really gives investors a sense of how much leverage as the company taking on to be able to generate value for shareholders?
So in that, what shareholders really want to see is if it's a higher ratio, we are seeing that the company is taking financing a lot more adept to finance its operations and growth versus companies that may be below one, maybe not taking on enough debt to do its expansion and growth. Right now, in an interest rate environment you can probably see companies taper down on how much debt they are taking on.
Just for the fact that it can be expensive.
One of the last things you want to mention just as a tip for investors, usually of the total liabilities they tend to disregard the short-term ones. The main reason being is a long-term debt is considered to be the more high-risk one and so that is what some sort of investors may decide to do when doing this calculation.
So Greg, that's all. This is just a way of doing research for investors to take a lens through the more balance sheet and help them make a comparison against a company they might be evaluating against its peers and using some of these ratios and balance sheet metrics there.
> Great stuff is always here and thanks for that.
>> Are welcome.
>> Hiren Amin, Senior Client Education Instructor TD Direct Investing.
Keswick check out the WebBroker for upcoming webinars and live master classes. Before we get back your questions with global stocks with Ben Gossett, a reminder of how you can get in touch of us.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live.
We are back now with Ben Gossack taking your questions about global stocks. This one coming in the past couple of minutes. What is your guest think of… (Reads the question) > Obviously gas stations and convenience stores, I know you're a movie buff. So I always think of the Circle K from Bill and Ted's excellent adventure.
>> Community meeting place (laughing) >> A scale platform and you by other businesses and drop it onto your cost pay so you see improvements.
At one point they want to touch too far and they tried to go after a European grocer and there was a bit of a panic in the stock because that is going a little bit beyond. But I think the management team has sort of understood the message and is back on track.
I think that's where we have to watch for their next level or next sets of acquisitions. So there has been chatter and talk of them going into more quick service.
So you would say "what is what does a gas station and quick service have to do with each other?" With an EVA could take me half an hour 45 minutes to charge my car versus that five-minute transaction at the gas station. So what you do with that 45 minutes?
So I think many gas stations will have to rethink about that time and so a quick service restaurant or something along that format is another reason to get you in the store were it's more high-margin and number two, what to do with that time. So it's definitely being thought of so when you see that headline that Couche Tard, by some sort of quick service restaurant, that's probably the path they're taking.
> I think about doing something with that time. There's at times when I'm on a road trip with the family, you have to guess up and even though there's a bunch of tempting banners of either food or snacks, I think I just want to get fuel in the car and hit the road.
If I'm forced to have a bit of downtime, maybe there's a different opportunity if you capitalize an opportunity.
>> But you'll be in your Ferrari.
(Laughing) >> Yes on a family road trip (laughing) is now a good time to get into semiconductor stocks like in Taiwan semiconductor?
Let's talk about the semiconductors especially with what you are telling us on the top of the show.
>> I think people do get a lot of price sensitivity because they will look at the beginning of the year they will see certain stocks are up, 50 or 60%. You have to imagine to, they were down 60% from their previous highs.
So again from our perspective, what we are seeing is another cycle and semiconductor cycles last years so they might be up 60% they might be up to hundred 50%.
This year, as we begin the cycle, but the reason they'd be up to hundred 50% is you have to consider the base that they started at.
So I think, looking forward, the world needs more semiconductors.
And so, again, it could be for the ATVs, it could be for the data centre's… AIA all of a sudden is the hot topic of the day now. But more and more stuff needs to be connected, more and more stuff needs to be semis.
But it doesn't mean it's a straight path from point A to point B. And every time people tell you that the cycle is different or semis or the new Staples, that's your time to kind of hit the pause on the brakes and sort of step off.
That's where you go too far. Because there is a cyclicality of overbuilding and under building.
But the fact that this is a major topic for every government tells you how important semiconductors are.
>> This question plays nicely off the backs of semiconductors. All this artificial intelligence does need computer chips.
Please discuss the AI industry and companies to follow.
>> So AI all of a sudden is the new crypto. So like everyone else, I have a Twitter account.
I feel like whatever was crypto everything has been replaced by AI everything and how if you do these 10 things, you can make $10,000 and all this type of stuff.
It just tells me there's a lot of hype. We have had a lot of AI in the background and everyone keeps talking about how Google doesn't have AI. They bought this company called deep mind. They just haven't been pushed into the mainstream for a product that you and I can all of a sudden interact.
>> CHAT GPT.
> All of a sudden the mainstream has a toy, a shiny object that we can play with now the question is "okay, what we do with it?" I think the other sort of ways where we had the 3D printers, not to say that 3D printers are not important but they were 3D printers… >> Why by a bag of Oreos when you can print a bag of Oreos at home?
>> Like Legos… When the 3D printers came out.
There is a hype cycle and then there is more hype than there are use cases and then the future is even better than we could've imagined it.
And I'm more about the picks and shovels and finding the companies that always win as opposed to finding the winners.
So there are semiconductor stocks that will benefit from more AI and more workloads.
So that's typically how we've played that as opposed to Microsoft having the better AI machine versus Google.
Everybody will have AI and at the end of the day it's just… If it means a better interaction with a chat bought because I'm having trouble with an app and I don't need to go and call someone, that's good customer service. But then everybody will have it and it's not special.
So my whole thing is "yes, it's exciting but managed to hide." >> The 3D printers, I forgot how were close to all have it in our house to print everything we need at the snapper of a finger. We will get back to your questions with Ben Gossack on global stocks but first a reminder of how you can get in touch with us at any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live.
Just a quick check in on the markets of course he of the US Federal Reserve rate decision coming at 2 PM Eastern time.
A little less than an hour and 1/2 away. As is custom on days like these, particularly this being one that is, they are all closely watched, by investors, you see some conscious activity in the markets.
Parkland Fuels, we were talking about how they were pushing for change, that name up more than 9%(…) Of course we know on a fed day what happens, usually the markets is in the story by the closing bells. The tech heavy NASDAQ right now, the broader market, pretty much doing the same thing. But Gamestop, of course one of those meme stocks that went on a pretty wild ride during the pandemic up 35% today.
This on a piece of news that they showed quarterly profit for the first time in two years.
Beyond all the memes frenzy, this is a company that was talking but it's turnaround strategy. Some tension on that front today, 24 bucks a share.
Back now with Ben Gossack from TD Asset Management.
Getting back your questions. Here's one, (Greg reads the question).
Energy is been very interesting particularly in the past couple weeks.
> Yeah. And I think what was interesting to me when I look at portfolio performance last week, the areas where I thought we had some headwinds and financials, if anything, the headwinds that we saw were in the energy sector.
And so we saw companies like Suncor around six or 7%.
Some days. Now getting to this week and looking forward, we look at the charts and it's still somewhat contained and sideways.
It's just the magnitude of how much we lost in we will say, three or four days that creates that. We did see oil will fall below $70. So I think that sort of that knee-jerk reaction times the stress. That will really be a pause in the economy okay.
Let's express that an oil. And energy stocks.
I think, that's always been that game we've been playing from last year to this year which is "okay, China's not reopening, let's bring down our energy.
Okay it's back on! That's a drawn energy, we need to move things up." What's interesting to me is that US… Isn't the marginal supply of oil anymore. Shell. If anything they lost a lot of productivity.
And so, the marginal suppliers will be OPEC. We have seen OPEC be quite rational and sort of manage around oil. So I think there is still floor at their and so I don't know if oil is going on 120.
As much as it it's unlikely to go to 50. Oil kind of continues to go sideways and from our perspective, there still a ton of cash flow being generated by these energy companies and so we are not overweight the way that we used to be. I would say Laster. But I think they still play an important role in the portfolio in terms of cash flows and return of cash to shareholders.
> Interesting stuff.
This next viewer wants to be a fan of Shakespeare.
Tesla? Just one word.
>> That's it.
(Laughing) I don't know what to ritorno that I did not do well in English.
Yeah.… Tesla is, yeah, it goes back to RTV. It goes back to it trading on its own. From our portfolio, it did meet sort of our quality metrics but having said that, it moves up and down with some volatility.
This is one of those fights were I'm happy to stand on the sidelines and let people, fight this one out. I think we do know that TVs continue to penetrate internal combustion engines.
We know that the secular trend. We talked about that for semiconductors.
So again, from our perspective, I don't know if you win by picking the winner whether it's Tesla for GM or Volvo. I think you will look for the companies that always win.
So there is a role for semiconductors and TVs. There's a role for copper.
And so there's also a role in the electrification. So if all of us went to Tesla and said Tesla's the winner, our electrical grid could not even handle that.
So there's a lot of work within the electrical grid and a lot of exciting companies and industrials that will participate in the upgrade cycle.
So you can get excited about TVs in the future and you don't have to express express that within Tesla.
>> Okay. We can squeeze in a final thought before we signify for the day.
The fact that we are an hour and 20 minutes away from the Fed giving a pretty pivotal rate decision depending on everything that we have lived through in the past couple of weeks. How you see it all?
>> Again, this reinforces to have a plan and a process and so… We can, that thing we always feared showed up and we had some volatility, I'm sure there was panic but I do believe that panic can often lead to suboptimal decision-making. Especially if you are trying to compound your hard earned money. At the end of the day, the big thesis is that the world keeps spinning.
And if it doesn't we have bigger problems.
It's about compounding money and it's a long term game.
So headlines about budgets and debt ceilings and interest rate hikes are short-term and their noise. If you stick take capital compounders, then that gets you through the process. You're not the most exciting person at any sort of mixer event but at least you know your money keeps growing.
>> Then. Always a pleasure to have you here.
>> Always love chatting.
>> Our thanks to Ben Gossett Portfolio Manager at TD Asset Management.
A program know, after we do get the Fed at 2 PM Eastern time today, Hafiz Noordin will come and visit us here.
We will watch the press conference together and crank out a video for you with his reaction and you will be able to find that on the money talk website.
moneytalkgo.
com and then tomorrow James Marple Senior Economist to eat talking what interest rates. You can email us anytime at moneytalklive@td.com that's all the time we have for today thanks for watching we will see you tomorrow.
[music]
Coming up a today show Ben Gossett will talk to us about recent volatility and in today's WebBroker education segment, Hiren Amin will show us how you can assess the company's value using the platform.
Here's how you can get in touch with us. Just email moneytalklive@td.com or follow that viewer response box right into the video player here on WebBroker.
Before we get to our guests of the day let's get to an update on the markets.
Only two hours away from that Fed rate decision. So a bit of caution out there.
Nothing too outsized in terms of moves. I'll start with the TSX Composite Index.
19,601 91 a little shy of a 15%. Crescent Point Energy, a sense that it's got some more money moving into this direction while the stocks are modestly positive or negative. Up almost 5%.
Manulife will be representative of the financial stocks today, life Co.
right now basically flat ahead of the Fed. That's not unusual to see the markets just showing a little bit of weight and see. So let's take a look at the S&P 500 and see what's happening there.
… A modest 1.9. We will give that to points to be generous. It just five tics right now. Of course on the programming, as we talk about waiting for the Fed, we will have full reaction to the Fed rate decision at 2 PM Eastern time and analysis.
We will make the Fed make its decision and will hear from Jerome Powell. Hafiz Noordin, Portfolio Manager at TD Asset Management will join us and going forward you can find our conversation this afternoon on the website, money talk.
go.
The NASDAQ fairing up a modest 30 points and about 1/4 of a percent. First Republic Bank, we want to see how one of the US regionals, especially one of the spotlight, as in recent days : 15, 18 after a big jump from yesterday down 3 1/2%. You can see obviously the big pullback in the share price in the past two weeks and all these concerns about the US regional banks. And that's a market update.
A year of aggressive rate hikes had some investors worried about unexpected stress points and the economy.
And while markets have been volatile in recent days amid the turmoil in the US regional banks, our guest today says the underlying market trends are still intact.
Joining us now is Ben Gossett, Portfolio Manager at TD Asset Management. Always rectangular show.
>> Thanks for having me back and I always feel like I'm back on a Fed rate decision day.
>> Your the precursor to all that. What's been interesting in the past two weeks, and we had plenty of things going on in terms of concerns of the health, not of the US regionals or the credit Suisse situation… The effect of everything that we've seen in terms of policy.
People are just worried that something would show signs of cracking. What if something did?
What with the market reaction obviously be on the headline be volatile?
… > I think it's interesting that we had four banks fail.
There's another on life support. Fears about where to park your money.
And yet, from a volatility perspective, from a dollar/flight perspective, it's been quite pedestrian.
I think it goes back to how we've kind of been on this doomsday clock or this 11th hour for almost a year given how much we have hiked to the rates.
We have a war that started in February of last year… We thought there would be an energy crisis and Europe would be in recession. Even in September, we were worried about the impact of UK pension plans. In the UK budget. So if anything was going to break, it felt like it was in the last year.
And then that fear of something breaking, well, we may not like it but that fear of something breaking has happened now.
And so I think the market is kind of like… Okay now I know what I was worried about and I can deal with this and try to see what happens going forward.
>> Let's talk about what's happening going forward.
What if you even notice beneath the surface in terms of what has been happening in the markets?
I'm not sure what you want to start with. Maybe just a volatility gauge.
>> Yeah. We will start with volatility and kind of, what this looks like in keeping with historical issues and then what we see going forward is kind of what we have been saying for quite some time.
Which I find very fascinating. So in terms of our first chart, this is the standard sort of, volatility measure, the VIX.
The S&P 500. We saw jump to 30 and that is quickly dissipated.
In times of crisis, we have seen this go as high as 80.
Some around 40. You think things are really bad. But again, I think it goes back to the fact that the reason why the volatility seems somewhat contained and we are not seeing dollar flight is that we have been on this watch wave for something to break and again, I don't know if anyone had forecasted this specific failure but we have seen some type of failure and so, yeah, what we knew was in happen happened.
>> Okay. Let's talk about other parts of the market now. Homebuilding is interesting considering how much the cost of borrowing is gone up in the past year. You would think there would be an impact.
US homebuilders. What does that tell you?
>> This is the part I find fascinating.
The trends we identified at the end of last year going into this year were unwavering in all this volatility last week and this week of the banks failing.
We are actually on the anniversary of the first Fed rate hike.
And it seems very counterintuitive and almost like a countertrend to the prevailing wisdom. But the time to go along with US homebuilders, these are the most sensitive to interest rates, was at the time of the first… >> That does feel counterintuitive ^laughing¸>> Think of them as a tug-of-war charts. If it's going up to the right that means the homebuilders or will winning the battle against the S&P 500.
So if it's going long, homebuilders a short period S&P 500, you probably would be considered an All-Star hedge fund manager on this particular trade. But what it tells us and what is informative about the specific chart is that the market and all its wisdom knew housing was going to be a problem because we did see 7% mortgage rates.
We have seen existing home sales slide.
We've seen new homebuilding applications come down and they have absorbed all that bad news. Even though the bad headlines didn't come until almost 8 months, nine months, 10 months later.
And we found that very informative.
Especially with other areas that are, again, early cycle, start to bottom and lift up.
>> When I think about the next picture you have to show us about the semiconductors, this one should be sensitive as well to the economic cycle.
We've had a lot of concern in recent months to if there will be a recession? What will it look like?
How deeply be?
How wide is good to be?
What are the semiconductors telling us?
>> They are also early cycle.
We did see an extended cycle through COVID with supply chains and shortages but that cycle broken we had oversupply. So while we still haven't seen a bottom in the earnings for semiconductor companies, from our charts, again, our ratio relative the S&P 500, they bought in October of last year they continued to improve. And again, looking at our chart, they got even stronger last week.
Again, four banks fail and everyone says "here comes the recession." But is this a recession on top of the recession that we've been talking about since last year?
Again, similar to our housing example, the semiconductor stocks have already looked through some of this noise and slow down in recession and continue to get stronger relative to the market.
>> Let's take a look at this chart.
This will be interesting in terms of times of economic stress and concern payment. Maybe you don't spend of the big expensive things.
You get down to basics but luxury goods.
>> Yeah.
>> What story is this selling?
It's quite the story.
>> The preeminent luxury house with brands such as Dior.
.
This is gotten stronger and I even started last year.
But luxury has worked relative to the market. Also got stronger last year.
But I can also show you Hermes and Ferrari.
Every luxury stock is improved. Part of it is that there is us can vary growth trend in luxury. They can grow top line 8 to 10% each year.
The other part is that the people that can afford these types of items have been unaffected by inflation. Even with a bit of concerns around regional banks.
Again, their wealth will not stop them from buying the next marginal purse or the next other sort of letter good.
But it does tell me a lot that given fears about economic recession, luxury his look through this and said "there might be bad news." I'm not saying, Greg, that there isn't bad news. There are concerns and slowdowns. There might be a rise in unemployment but I'm saying the wisdom of the market has said "we've taken that into consideration and we still see strengths in these areas that I would consider to be early cycle sectors." >> Choose to be told before the central banks hike aggressively even a year ago. My family really was not in the market for a Ferrari.
We take all these things together. What we make of the underlying movements in the market compared to all the headlines we've seen recently?
>> We still remain vigilant about the market and employment and valuations and we will always stay that way and we always skew towards quality. Prior to the banks failing, we already started to increase the cyclicality within our portfolios. Again, given the green shoes in the trends and we were receiving. So coming out through last week into this week, we haven't changed anything. The fact that semiconductors got stronger and luxury got stronger it gives us further confidence there is still bad news to come but the market, again, in its wisdom has sort of factor that in. Now, you never know the magnitude so maybe we factor in this much and there is this much more. That's always the risk in terms of portfolios.
But a well constructed portfolio following a process in quality and cash compounding, deals very confident that this these thesis are better than other thesis we've been working on and continue to have legs.
>> Fascinating stuff and a great start to the program.
We will get to your questions with Ben Gossack about global stocks in just a moment's time. A reminder to get in touch as any time by emailing MoneyTalkLive@td.com or fellow that your response box under the video player and WebBroker. Now let's get you updated on some of the top stories and take a look at how the markets are trading.
Nike says it's seeing strong demand for its sneakers but it is warning that margins will be pressured as it continues to work through excess inventory. The company says discounts to move those goods along with the stronger US dollar and freight costs will hit the margins by some 250 basis points. That said Nike's forecasting stronger sales this year than previously expected.
Shares of Gamestop are in the spotlight today. That is the videogame retailer posted its first quarterly profit in two years.
Gamestop also worked down its inventory levels by 25% compared to year ago levels. Gamestop is among a handful of names whose Mimas stock status resulted in big swings in the share price in recent years.
The shares today are up 37%.
We have an activist investor pushing for change at Calgary-based Parkland Fuels. In a letter to the board, Engine Capital LP is urging the company to streamline its business to focus on gasoline bars and convenience stores. And it suggests parkland should sell off its BC refinery among other assets.
A quick look at the main benchmark indices.
Starting at home with the TSX compass and index not unusual market activity when you are counting down to a Fed rate decision in less than two hours. A caution out there, seven text to the upside.
South of the border, the S&P 500 as we wait for Jerome Powell and Co.
down a modest three points now.
We are back now with Ben Gossack.
Portfolio Manager at TD Asset Management taking your questions about global stocks.
Lots of questions coming in let's get to them.
[reads question] >> The first section to come to mind is insurance.
First sector.
They have to match in the future. So they have to build an asset base in order to meet those liabilities. I would say for the last couple of years, we've had this low interest rate environment so they have have this mismatched. Higher interest rates allow them to earn the income they need and find the assets available in order to sort of manage those liabilities.
And what we have seen also, going back in our portfolios and looking at strengths, we've seen the weakness in banks. Since the financial crisis, US insurers has had actually outperformed US banks.
Too much focuses on US banks and not US insurers.
That's one thing we sort of rotated into. Going forward, I don't know if interest rates can stay at these levels.
>> The fact of interest rates being staying high higher for longer.
>> I think interest rates are a reflection of the output potential of the economy. When someone looks at, let's say, the US government 10 or 20 year, they can use as a proxy for what real GDP growth is. So we have seen a two-year rate go up.
But we haven't seen, we have this inverted yield curve where the tenants moves but the 30 really hasn't moved much. So it's a reflection of "yeah interest rates are high near-term but are output in the long term will be a lower interest rate yielding environment.
And the reason" and the reason I'm confident about that is, well, growth comes from a labour supply and productivity. Which is not making enough babies. If we are the home team,there are not enough people coming up in the ranks. We saw this with more debt. That is stealing from the future.
So between debt and our demographics, the only way for us to generate real growth going forward is productivity.
To me that means technology. I think we've all experienced that technology is inherently deflationary.
So that, again, would weigh on interest rates.
So all in all, I do see going forward, real GDP probably around two or 3%. That's probably where I think interest rates go in the long run.
> Interesting stuff.
Another question now.
This one about the Canadian financials obviously. We've had all these headlines about global banks.
What about the Canadian banks?
The question specifically is "would you buy Canadian banks right now?" We can definitely talk of the Canadian financials.
>> I think in our quality portfolio in our process, there is a place for Canadian financials and, in particular Canadian banks.
Not all Canadian banks.
There's a very specific set that we own. But there is something very unique about Canadian banks. And we saw that demonstrated last week.
They can be sort of painted as being boring or not is risk seeking as other banks. And yet in times of stress and uncertainty, it's that sort of boring risk managed tight institutions that end up outperforming on a relative basis to all banks. And while we did see many banks, especially the regionals, came down, you were European banks, Australian banks fell, the best performer of the lot where the Canadian banks.
And also US insurance companies were as strong as Canadian banks.
I feel they did exactly what they were supposed to do in that time of uncertainty.
And so we may see, again, new compliance, new regulatory pressures in place on US banks and maybe some other global institutions.
But again, Canadian banks and all that sort of boring and risk prudence, again, proves that that model does work and can work for the long run.
> We actually have another question about financials.
A good follow-up to this one. What is your expectation for financial sector performance?
Talking insurance, also talking banks, domestic, foreign… How do you see at all?
>> In particular in the US, as they break it down, we had favourite sort of J.P. Morgan. That was our last remaining bank.
I think we've seen sort of the global systemic important banks and in times of crisis, people gravitate toward J.P. Morgan and the Canadian banks.
Those from an Outlook perspective, I think are unchanged.
Hopefully, this does create more of a spotlight on the importance of certain insurers.
And so I think that's where we have added. Took from our banks attitude of insurance and I think there is a good place for insurance.
Again you have to be very selective with insurance. You can't just buy insurance.
There are some jumps in Canada and the US and in Europe.
Again, I don't have a crystal ball.
What I do worry and I hoped doesn't happen is we see further consolidation of US regional banks in the US.
We are used to about five, 6 Major Banks in Canada.
I know there are a couple other small banks but that's the bulk of our bankers in Canada. In the US, we spend a lot of time talking about J.P. Morgan and Wells Fargo and city.
But they are almost 5000 banks in the US. It's quite a lot.
A lot of them are small regionals, community banks.
We know the life and the blood in the growth of the US economy is a small business.
And I do believe small business meets small… Someone in the community I'm going to lend to you, Greg because I know you're expanding your warehouse and manufacturing.
I can understand your needs and your growth helps our community and there is that sort of symbiotic nature were as if all of a sudden you go to J.P. Morgan and Wells Fargo, you're not going to get that level.
What it means for the community. So we do see some more models in Germany as well where they have lots of small businesses and small banks and that works in terms of creating GDP.
So again, I don't know what the pendulum will be in financials. I do know it probably does mean that the margin will be more regulatory and compliant. It's very expensive for small banks but I do help we are able to keep these small banks in the US.
>> Interesting stuff is always remember to do your own research before making any investment decisions. We will get back to your questions with Ben Gossett on global stocks and just moments time.
A reminder that you can get in touch with us in a moment's time by emailing moneytalklive@td.com.
Now let's get to our educational segment of the day.
If you're doing research on a potential investment, you may have come across the company's book value.
Here to explain what it means and how you can find out more information on the WebBroker platform is Hiren Amin, Senior Client Education Instructor and td direct investing.
Great to see you.
Walk us through you can get book values in this platform.
>> Absolutely great.
Great to be back.
Let's chat about book value.
It's the valuation of a business or corporation so to speak.
So essentially, it's the amount of money that your holders receive if a company has their assets liquidated or sold off and all of its liabilities paid off. In other words whatever was owed, whatever money does, was to be paid off.
Now, in the book value calculation, referred shares are generally excluded from this because they have a higher ranking than those from common shareholders.
During the liquidation process.
So really, in a nutshell, book value tells us with the net asset value of the company is.
In other words, what the net worth of the company is.
Now, you can actually break the book value down on a per share basis and really, this is important for investors.
As you when you compare a book value, let's say the book value per share is higher than the market value, in other words what the stock prices, investors may consider that opportunity or that company to be undervalued. So, to main use cases of book value.
Number one, it tells us some of the liquidation process, how much are we going to get out of the business if it does come to be liquidated.
But second, it also allows us to compare the book value against the current stock price and he informs investors whether that investment is kind of overvalued or undervalued.
That's actually going to the balance sheet.
Let's go to the balance sheet on WebBroker. That's where we will be able to extract some of that information. On WebBroker, we will be using Tesla as an example and peel the layers on that.
To access the balance sheet, keep in mind it's one of those three financial statements issued by publicly traded companies on a quarterly basis and at the end of the fiscal year. So to get to that, we will click on our fundamentals tab over here. With Tesla loaded up.
You can see we will head to the financial statements sub- tab.
You can see the three main statements we were referring to.
Last week we went over the income statement. We are gonna focus in on our balance sheet today.
On the balance sheet, it really tells us, again, it goes back to that in tells us a bit about the net worth of the company or the book value of it.
It's divided into three main categories broadly here.
Assets, liabilities and shareholder equity there. So really, within the assets, you have two sections.
The current assets in the long-term assets. These are things easily converted into cash over the short term which is what the shorter assets are in the long term, will have those longer than the one year timeframe.
Things like what is cash on hand that the company has?
For example for Tesla we can see cash on hand is 22… The total receivables, what money is expected to come in the next year to Tesla? 2.9 billion.
You can see the inventory they hold.
That is essentially the cars making up the bulk of that value, 12.8 billion. So in this way you have the total current assets that is on Tesla's book.
Then you have the long-term or noncurrent assets which which would include the manufacturing facilities, the equipment, property, any goodwill or intangibles which consist of kind of those trademarks or patents that they have.
The combination of the current and noncurrent is it gives us the total asset value that they have. Then you go to the liabilities. These are things that the company owes. What is its data essentially? And you can see Tesla spoke over here on the accounts payable and what it's been all of the short term basis again.
This is divided by current liabilities and noncurrent liabilities.
15 billion. Some of the expenses they have to pay. If they are taking on debt they usually up to pay interest on those earning bonds that might be due and what's coming up for that.
So you can see in this way they've got this and they have the taxes laid out that they will set aside from what they Mido as well.
This includes the liabilities. Things that they owe.
Now, the equation becomes at the assets minus liabilities once everything is paid off gives us what's known as shareholder equity. In other words that book value we are looking for.
In this case, just to break it down, the number is already presented to us. 44 billion.
I can appreciate that investors are kind of it's a lot to make sense of these numbers. That's where financial ratios come into play.
We will talk about two financial ratios. The current ratio and the… Ratio.
Let's go to industry comparison section in one thing you can notices Tesla's book value per share is $14.13.
So just to give a sort of reference what that means is if Tesla were to wind up its business or go into liquidation, the common shareholder would only walk out with $14.13 as of the last report that we have.
And they are in fact paying a market price of $195 for it.
So this gives us another kind of ratio that tells us that investors are willing to pay 14 times the price of the book value to acquire Tesla shares right?
Those are important ratios to keep in mind.
Going down, talking about the current ratio, we will find out here, the current ratio is really taking the current assets. The ones that they have a short-term basis dividing it by the short-term liabilities were the current liabilities and coming up and telling us does Tesla have enough assets or cash in hand to service its ongoing short-term liabilities and debt? We can see this ratio is greater than one.
That's usually what they would say they can remain solvent if those debts are coming to at once.
If that ratio falls below one, if that debt comes all at once, they may not have the solvency to meet those obligations. Now, one we don't talk about here is the final one. Debt-to-equity ratio. This is taking the total liabilities.
So in other words the total amount the Tesla owes on its balance sheet and dividing it by the shareholders equity.
This really gives investors a sense of how much leverage as the company taking on to be able to generate value for shareholders?
So in that, what shareholders really want to see is if it's a higher ratio, we are seeing that the company is taking financing a lot more adept to finance its operations and growth versus companies that may be below one, maybe not taking on enough debt to do its expansion and growth. Right now, in an interest rate environment you can probably see companies taper down on how much debt they are taking on.
Just for the fact that it can be expensive.
One of the last things you want to mention just as a tip for investors, usually of the total liabilities they tend to disregard the short-term ones. The main reason being is a long-term debt is considered to be the more high-risk one and so that is what some sort of investors may decide to do when doing this calculation.
So Greg, that's all. This is just a way of doing research for investors to take a lens through the more balance sheet and help them make a comparison against a company they might be evaluating against its peers and using some of these ratios and balance sheet metrics there.
> Great stuff is always here and thanks for that.
>> Are welcome.
>> Hiren Amin, Senior Client Education Instructor TD Direct Investing.
Keswick check out the WebBroker for upcoming webinars and live master classes. Before we get back your questions with global stocks with Ben Gossett, a reminder of how you can get in touch of us.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live.
We are back now with Ben Gossack taking your questions about global stocks. This one coming in the past couple of minutes. What is your guest think of… (Reads the question) > Obviously gas stations and convenience stores, I know you're a movie buff. So I always think of the Circle K from Bill and Ted's excellent adventure.
>> Community meeting place (laughing) >> A scale platform and you by other businesses and drop it onto your cost pay so you see improvements.
At one point they want to touch too far and they tried to go after a European grocer and there was a bit of a panic in the stock because that is going a little bit beyond. But I think the management team has sort of understood the message and is back on track.
I think that's where we have to watch for their next level or next sets of acquisitions. So there has been chatter and talk of them going into more quick service.
So you would say "what is what does a gas station and quick service have to do with each other?" With an EVA could take me half an hour 45 minutes to charge my car versus that five-minute transaction at the gas station. So what you do with that 45 minutes?
So I think many gas stations will have to rethink about that time and so a quick service restaurant or something along that format is another reason to get you in the store were it's more high-margin and number two, what to do with that time. So it's definitely being thought of so when you see that headline that Couche Tard, by some sort of quick service restaurant, that's probably the path they're taking.
> I think about doing something with that time. There's at times when I'm on a road trip with the family, you have to guess up and even though there's a bunch of tempting banners of either food or snacks, I think I just want to get fuel in the car and hit the road.
If I'm forced to have a bit of downtime, maybe there's a different opportunity if you capitalize an opportunity.
>> But you'll be in your Ferrari.
(Laughing) >> Yes on a family road trip (laughing) is now a good time to get into semiconductor stocks like in Taiwan semiconductor?
Let's talk about the semiconductors especially with what you are telling us on the top of the show.
>> I think people do get a lot of price sensitivity because they will look at the beginning of the year they will see certain stocks are up, 50 or 60%. You have to imagine to, they were down 60% from their previous highs.
So again from our perspective, what we are seeing is another cycle and semiconductor cycles last years so they might be up 60% they might be up to hundred 50%.
This year, as we begin the cycle, but the reason they'd be up to hundred 50% is you have to consider the base that they started at.
So I think, looking forward, the world needs more semiconductors.
And so, again, it could be for the ATVs, it could be for the data centre's… AIA all of a sudden is the hot topic of the day now. But more and more stuff needs to be connected, more and more stuff needs to be semis.
But it doesn't mean it's a straight path from point A to point B. And every time people tell you that the cycle is different or semis or the new Staples, that's your time to kind of hit the pause on the brakes and sort of step off.
That's where you go too far. Because there is a cyclicality of overbuilding and under building.
But the fact that this is a major topic for every government tells you how important semiconductors are.
>> This question plays nicely off the backs of semiconductors. All this artificial intelligence does need computer chips.
Please discuss the AI industry and companies to follow.
>> So AI all of a sudden is the new crypto. So like everyone else, I have a Twitter account.
I feel like whatever was crypto everything has been replaced by AI everything and how if you do these 10 things, you can make $10,000 and all this type of stuff.
It just tells me there's a lot of hype. We have had a lot of AI in the background and everyone keeps talking about how Google doesn't have AI. They bought this company called deep mind. They just haven't been pushed into the mainstream for a product that you and I can all of a sudden interact.
>> CHAT GPT.
> All of a sudden the mainstream has a toy, a shiny object that we can play with now the question is "okay, what we do with it?" I think the other sort of ways where we had the 3D printers, not to say that 3D printers are not important but they were 3D printers… >> Why by a bag of Oreos when you can print a bag of Oreos at home?
>> Like Legos… When the 3D printers came out.
There is a hype cycle and then there is more hype than there are use cases and then the future is even better than we could've imagined it.
And I'm more about the picks and shovels and finding the companies that always win as opposed to finding the winners.
So there are semiconductor stocks that will benefit from more AI and more workloads.
So that's typically how we've played that as opposed to Microsoft having the better AI machine versus Google.
Everybody will have AI and at the end of the day it's just… If it means a better interaction with a chat bought because I'm having trouble with an app and I don't need to go and call someone, that's good customer service. But then everybody will have it and it's not special.
So my whole thing is "yes, it's exciting but managed to hide." >> The 3D printers, I forgot how were close to all have it in our house to print everything we need at the snapper of a finger. We will get back to your questions with Ben Gossack on global stocks but first a reminder of how you can get in touch with us at any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live.
Just a quick check in on the markets of course he of the US Federal Reserve rate decision coming at 2 PM Eastern time.
A little less than an hour and 1/2 away. As is custom on days like these, particularly this being one that is, they are all closely watched, by investors, you see some conscious activity in the markets.
Parkland Fuels, we were talking about how they were pushing for change, that name up more than 9%(…) Of course we know on a fed day what happens, usually the markets is in the story by the closing bells. The tech heavy NASDAQ right now, the broader market, pretty much doing the same thing. But Gamestop, of course one of those meme stocks that went on a pretty wild ride during the pandemic up 35% today.
This on a piece of news that they showed quarterly profit for the first time in two years.
Beyond all the memes frenzy, this is a company that was talking but it's turnaround strategy. Some tension on that front today, 24 bucks a share.
Back now with Ben Gossack from TD Asset Management.
Getting back your questions. Here's one, (Greg reads the question).
Energy is been very interesting particularly in the past couple weeks.
> Yeah. And I think what was interesting to me when I look at portfolio performance last week, the areas where I thought we had some headwinds and financials, if anything, the headwinds that we saw were in the energy sector.
And so we saw companies like Suncor around six or 7%.
Some days. Now getting to this week and looking forward, we look at the charts and it's still somewhat contained and sideways.
It's just the magnitude of how much we lost in we will say, three or four days that creates that. We did see oil will fall below $70. So I think that sort of that knee-jerk reaction times the stress. That will really be a pause in the economy okay.
Let's express that an oil. And energy stocks.
I think, that's always been that game we've been playing from last year to this year which is "okay, China's not reopening, let's bring down our energy.
Okay it's back on! That's a drawn energy, we need to move things up." What's interesting to me is that US… Isn't the marginal supply of oil anymore. Shell. If anything they lost a lot of productivity.
And so, the marginal suppliers will be OPEC. We have seen OPEC be quite rational and sort of manage around oil. So I think there is still floor at their and so I don't know if oil is going on 120.
As much as it it's unlikely to go to 50. Oil kind of continues to go sideways and from our perspective, there still a ton of cash flow being generated by these energy companies and so we are not overweight the way that we used to be. I would say Laster. But I think they still play an important role in the portfolio in terms of cash flows and return of cash to shareholders.
> Interesting stuff.
This next viewer wants to be a fan of Shakespeare.
Tesla? Just one word.
>> That's it.
(Laughing) I don't know what to ritorno that I did not do well in English.
Yeah.… Tesla is, yeah, it goes back to RTV. It goes back to it trading on its own. From our portfolio, it did meet sort of our quality metrics but having said that, it moves up and down with some volatility.
This is one of those fights were I'm happy to stand on the sidelines and let people, fight this one out. I think we do know that TVs continue to penetrate internal combustion engines.
We know that the secular trend. We talked about that for semiconductors.
So again, from our perspective, I don't know if you win by picking the winner whether it's Tesla for GM or Volvo. I think you will look for the companies that always win.
So there is a role for semiconductors and TVs. There's a role for copper.
And so there's also a role in the electrification. So if all of us went to Tesla and said Tesla's the winner, our electrical grid could not even handle that.
So there's a lot of work within the electrical grid and a lot of exciting companies and industrials that will participate in the upgrade cycle.
So you can get excited about TVs in the future and you don't have to express express that within Tesla.
>> Okay. We can squeeze in a final thought before we signify for the day.
The fact that we are an hour and 20 minutes away from the Fed giving a pretty pivotal rate decision depending on everything that we have lived through in the past couple of weeks. How you see it all?
>> Again, this reinforces to have a plan and a process and so… We can, that thing we always feared showed up and we had some volatility, I'm sure there was panic but I do believe that panic can often lead to suboptimal decision-making. Especially if you are trying to compound your hard earned money. At the end of the day, the big thesis is that the world keeps spinning.
And if it doesn't we have bigger problems.
It's about compounding money and it's a long term game.
So headlines about budgets and debt ceilings and interest rate hikes are short-term and their noise. If you stick take capital compounders, then that gets you through the process. You're not the most exciting person at any sort of mixer event but at least you know your money keeps growing.
>> Then. Always a pleasure to have you here.
>> Always love chatting.
>> Our thanks to Ben Gossett Portfolio Manager at TD Asset Management.
A program know, after we do get the Fed at 2 PM Eastern time today, Hafiz Noordin will come and visit us here.
We will watch the press conference together and crank out a video for you with his reaction and you will be able to find that on the money talk website.
moneytalkgo.
com and then tomorrow James Marple Senior Economist to eat talking what interest rates. You can email us anytime at moneytalklive@td.com that's all the time we have for today thanks for watching we will see you tomorrow.
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