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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 discussed the outlook for the auto sector amid a slowdown in demand in electric vehicles.
TD Asset Management's David Mau as our guest. MoneyTalk Anthony Okolie is giving us a preview of what to expect from tomorrow's Canadian inflation report.
And in today's education segment, Jason Hnatyk will shows how to set up a watchlist using Advanced Dashboard. Here's how you can get in touch with us. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before he gets our guest of the day, let's get you an update on the markets. We will start here at home with the TSX Composite Index.
We've got 62 points on the board, good for 1/3 of a percent to the upside. West Texas intermediate, American benchmark crude, up about 2 1/2%. There are some stories out there based on unconfirmed sources saying OPEC+ wants to see the price of crude a bit higher than it was last week and may be talking about more production cuts going forward. We will see. I think they go into a meeting this weekend. Amongst most actively traded names on the TSX at this hour include uranium play Denison Mines, up 2%, two bucks and $0.49 per share. First Quantum having problems in Panama where there is a lot of public opposition to their Cobre Panama mine and they are saying now that if a keyboard that they use is still blockaded by the end of the week, they might have to start shedding its production. You've got First Quantum down another 1% today but it's been a precipitous drop in the last couple of weeks based on the problems they are having with the project.
South of the border, want to get on their S&P 500. This is the Americans think living week. Still a couple of days away but some sense there than it might not be too eventful for the week. The S&P 500 up 20 points right now, a little less than half a percent.
Let's check in on the tech heavy NASDAQ, see how it's bearing against the broader market. A bit more strength here, 108 points on the board good for three quarters of a percent the upside.
Nvidia, they are reporting tomorrow.
This has been the big success story of the are based on artificial intelligence. We will see how that demand is holding up for the chipmaker. And that is your market update.
While many countries are pushing electrification as crucial to the fight against climate change, one of the big takeaways from earning season is that consumers may not be snapping up EVs.
Joining a staff discusses David Mau, VP, Dir. and partly a manager at TD Asset Management. Great to have you back.
Thanks for having me.
This has been an interesting turn of events in the past little while. There's been the electrification of everything, a lot of interest in height. Then we see consumers are not snapping them up. What is going on there?
We are seeing a slowdown in demand for electric vehicles. Probably started since about the beginning of the year. Don't get me wrong, the EV market is still growing, it's just not growing as fast as it used to grow. There are couple of reasons for that.
It looks like demand is falling off because the pool of electric vehicle buyers has may be reached and early saturation point, so pre-much most of the people who had intentions to buy electric vehicles have, in the past two years, have already bought them.
That pool of potential buyers is getting smaller over time.
And we are seeing electric vehicle sitting on dealer lots for a lot longer now.
Previously, and EV would reach a dealer and it might sit in inventory for 30, 40, maybe 50 days.
More recently, in the past couple of months, we are seeing electric vehicles at all lots were closer to 90 days. That's a big difference.
Admittedly, we are seeing a lot more supply, a lot more manufacturers have been rolling out models, production has ramped up.
So there's more supply, more inventory and less buyers. So we are seeing that slowdown in demand. As far as what goes to explain the slowdown, there are couple of things.
I talked about the pool of buyers getting smaller. The other thing is price is still a very important consideration. Price and affordability. It was electric vehicle still costing probably 20 to 30% more than a comparable internal combustion car, consumers, especially in this high interest rate environment, where affordability is actually a lot harder now, consumers are just looking for a cheaper option.
If you're financing the car, you are not financing it at 1 1/2 or 2%, it's much higher. I think Elon Musk has said that.
Not saying that there's anything wrong with that has low business but there is a slowing economy, higher interest rates and the buyer is hurting.
If you think back a couple of years ago, you could get a car loan at one, maybe two, 3%. Nowadays, auto loans are going for seven, 8%. It's having a pretty big impact.
When it comes to car loans, last year, early this year and that it sort of went to the wayside, this idea that you would perhaps start to see some problems with auto loans in the United States, particularly subprime. What's happening there?
That's a good point. We are starting to see a pretty significant take up in subprime auto defaults.
So right now, I think most recent numbers show that subprime auto defaults are above 6% of all subprime borrowers are defaulting on their loans. Thus the highest it's been I think for the last 30 to 40 years. That's even higher than the default rates that we saw during the financial crisis in 2008 2009.
So it is starting to be a little bit worrisome.
The thing is, for the subprime borrowers, they usually don't have the best credit to begin with. So when the economy starts to weaken even a little bit, these guys are the first ones to be affected.
And subprime borrowers are paying a lot for a car loan. They are paying somewhere between 15 to 20% per carload.
When things start to soften or weaken, these are where you start to see the first cracks.
What does that mean for the industry going forward, if you're starting to see those cracks right now with those borrowers? Is a very high rate, much higher than hopefully a lot of people are paying for their car loans. But what does it mean for the industry going forward in the next a while?
Is going to be challenging for the sector because subprime really only make up about 7 to 8% of the overall buyer pool for cars but that 78%, if that disappears, it's still pretty meaningful and can have a pretty big impact on sales going forward.
All right, so we are seeing a slowdown in demand for electric vehicles for various reasons. We are seeing some rising subprime defaults in the auto space. On top of all that for the autos, it's been pretty busy in the sector for the last little while, we had those strikes and now labour deals and pretty big pay raises and those labour deals.
How does that all work towards impacting autos?
You are probably talking about the United Auto Workers strike that is happening for the past few months. They were on strike for about six weeks and it seems like they have come to an agreement now.
I think the unions probably did a pretty good job for the employees.
I think most of the agreements for her for about a 25% increase in wages and when you add in all the other benefits improvements at the unions negotiated, their total comp is going to be going up by about 40% over the next 4 to 5 years for these unionized workers. So it is a pretty good deal for the workers.
But this adds to an increasingly difficult situation for the automakers, right, because like we already mentioned, higher interest rates are slowing demand, and now you have these labour costs that are going up.
What it all really comes down to is this is going to put pressure on margins, so profitability is going to go down.
Usually, what happens in these cases is that the automakers, when they are faced with these rising costs, they are going to try to pass those costs onto the consumer.
The consumer that's already showing slowing demand for EVs.
That's going to mean higher prices for consumers. We are not seeing that just for the Big Three in the US. There are other automakers in the US, some of the Asian brands like Honda, Toyota, Hyundai, even Tesla, all of those brands are not unionized. Their plants are not unionized.
So but because of this recent deal, a lot of those automakers have also increased wages for their employees because, A, they know that they need to stay competitive on the pay front to attract and retain employees and, be, they don't want unions to come into their plants. So if their employees are happy with their pay, it's less likely that the unions will be able to convince the employees to join the union.
If we take this altogether, what does it mean for the investment thesis for the auto space in the next little while? Will there be a bit of a choppy ride, I guess?
I think he, for the near term, it's going to be a little bit rough. We have these rising costs, slowing demand.
demand. are spending a ton of money on building out their EV capability, investing in plants, trying to ramp up production near to midterm before automakers.
We started talking about autos but we will talk about industrials. A reminder that you can get in touch with us at 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.
Microsoft making a high profile hired to lead his new AI team. Sam Altman has landed the job just days after being ousted from the CEO role at OpenAI.
Microsoft has invested billions into OpenAI which has been navigating a tumultuous couple of days since the board ousted Altman on Friday. That just the surface of the tail. It's a pretty interesting one. We continue to wash developments on that.
Microsoft now up 1.7%. First Quantum minerals reducing output from its mine in Panama amid a blockade at a local port.
There is strong opposition of the country to the companies Cobre Panama and copper mine and part of the pushback is the blockade. First Quantum says it might be forced to halt production later in the week of supplies can't get through that port.
Right now, First Quantum down 1% on the news. Got McDonald's increasing its stake in its business in China.
The fast food giant will take a 48% ownership in the business as it buys Carlyle's stake. McDonald's sold control of its China unit in 2017 for $2.1 billion.
A quick check on the market, we will start here at home on Bay Street with the TSX Composite Index. We have the price of crude firming up today to the scene of about 2 1/2%, almost 70 bucks per barrel for WBT. At your 52 points in the green for the TSX, about 1/4 of a percent.
South of the border, which will be perhaps a more muted week with Thanksgiving coming up for the Americans but we will get Nvidia earnings tomorrow and fed business on Wednesday. A few things to keep your eye on.
There up about half a percent.
We are back with David Mau, take your questions about industrial stocks. Let's get to them.
This is an interesting one. I had to find out what the reading was talking about here.
I was reading about the AOG Technics saga, what sort of impact is in having? Maybe for some people in the audience you haven't heard about what's going on here, what is going on?
This is a very interesting story.
So what AOG is, AOG Technics is a small company based in the UK, and they are a vendor, supplier/broker of airline parts, of airplane parts, sorry, and their customers are airlines.
And what they do is they will source parts directly from supplier to manufacture the parts were from other third parties, so say an airline is scrapping a plane and they will tear the plane down whatever parts that they can sell, they will sell into the secondary market. So AOG, that's where AOG plays, they buy and sell parts in the aftermarket. What has happened is recently, or I guess over the summer, there was a part that AOG had sold, and engine part that AOG had sold to a, I think it was a Portuguese airline and as the airline mechanics were putting in this part into the engine, they noticed that the part looked like it was kind of used, it didn't seem to be in brand-new condition. So they went, they looked at the part and said, well, it's probably still okay but let's go check the paperwork.
They went to check the paperwork, the safety certificate, and the safety certificate looks kind of suspicious to you. So this led to a wider investigation and what came out of it was that AOG has been forging safety certificates for these engine parts.
The engine? I mean, I was on a plane just two weekends ago the engine is pretty critical.
It is pretty critical. What's happened is airlines around the world have bought parts from AOG as part of their regular maintenance or repair and overhaul program so it's been found out that there is at least currently the number could grow over time but at least currently there has been about 150 planes that have installed parts from AOG where the safety certificate is either proven to be fake to or is suspected to be fake.
So that's a pretty big deal, right, because engine parts are pretty critical.
It is, you know, the safety of the airplane relies very heavily on the right parts being in the right place at the right time.
And you can imagine, if AOG is selling used parts and representing them as new, that could be a pretty big problem because for parts, you might, and I will make up a number here, you might have a part that showed last 50,000 flight hours, but, if it was new, but if AOG is selling a part that already has 20,000 flight hours…
You don't get the expected life.
And also the airline doesn't know that there is already a 20,000 flight hours on this part. They expected to be new.
There are 150 planes out there that have been done with these parts. Half of been pulled from service and the other half will be pulled soon. Regarding the overall impact to the aviation industry, 150 planes is not a lot at all. It's very manageable. But I think what this does is it highlights a pretty big gap in the safety and security of the supply chain.
Because vendors like AOG, third party parts suppliers, they are not actually, they operate in a grey area.
They are not actually regulated by any government or regulatory body so they can pretty much do whatever they want.
So it is a bit of a dangerous area. So far, this is not a criminal case just yet but I saw last week that the US Department of Justice is joining the investigation.
So this may turn into a criminal case. We will have to wait and see.
I'm taking will get the screen right now, stories saying that AOG has talked to the substantive issues at the core but they did say they are cooperating fully with the investigation. It's a very interesting story and we will see where it had from there.
Yeah. It doesn't make you feel good, does it?
No, no, no.
Look into another audience question. I have another viewer asking your view on the rails.
Is the so-called freight recession over? I guess there really was a freight recession.
Yeah, that's true.
The rails of been having a bit of a difficult time lately.
Volumes have fallen quite a bit this year and by quite a bit I mean in Q3 both CN and CP reported that there freight volumes fell about 4 to 5%.
So it's not a disaster but it does reflect the overall slowdown in the economy.
And now both rails are guiding to flat-ish earnings for 2023. Because there volumes have come down and their costs have gone up, even though they are charging more for their shipping services, those things have kind of offset each other and so there has not been a ton of growth in the bottom line this year.
As far as whether or not the freight recession has actually ended, I think it might be a little early to call a bottom.
I think one of the big factors for Canadian rails, CN and CP, is the Canadian grain harvest. And this year, at the beginning of the year, it looked like it was going to be a really, really good harvest. As the year progressed and there have been some weather events out West, the grain harvest looks like it's not going to be as good as what was expected so that's going to impact freight volumes.
We know volumes are fairly weak at the moment.
The outlook is improving but it's probably, in my view, it will probably take another one or two quarters to get to a full recovery. Both CN and CP give their outlook in January 4, 2024 and that's when they will tell us what they expect volumes to look like.
Maybe at that point we will have a better idea what kind of landing we will get for the economy. He talked about the importance of commodities and weeds. At the same time, part of the freight recession story was the fact that consumers in the face of higher borrowing costs are pulling back, which is what the central banks want us to do.
Yes.
And that's what affects intermodal volumes a lot is the consumer.
This will be an interesting one to watch as we get into 2024. Sticking with the rails, can you get your outlook for it CPKC? I think they need a new name.
Canadian Pacific Kansas City.
ER. Look, CP did have a bit of a tough third quarter. Revenues were down four or 5%. There volumes are down four or 5%.
The company cut there guidance for the full year. They cut their earnings guidance to flat so they don't expect any growth in earnings this year. Previously, they were expecting a little bit of growth, may be low to mid single digit earnings growth.
But I mean I would say that CP, I would say, still has one of the strongest management teams in the whole railway industry, and CP does have that extensive, robust network that runs through Mexico, US and Canada.
So my Outlook for CP is still positive. It might take a little bit of time for that to play out. I think one recent issue that has affected CP, affected the stock price in recent weeks is no Mexican government has announced that they want, basically, rail carriers in Mexico that typically only carry freight, they want them to start carrying passenger traffic as well.
And that includes CP. So I think it's going to affect two of CP's lines in Mexico.
And so the stock was down on that news.
The reason the stock was down is because there is uncertainty. Whenever an announcement like this comes out, we don't really know what the government is going to require from CP. We do know that the Mexican government wants those, that part of that passenger network to be electrified, which, it currently is not.
So it might lead to CP having to invest more into their network to bring it up to the standards that the Mexican government wants. And then anytime you bring in extra traffic onto a freight network, you don't know how it's going to affect the efficiency of how those trains are run in the fluidity of the network as well.
So there's a little bit of uncertainty there. So the stock is down a bit. I'm not particularly worried. The CEO of CP has pointed out himself but in the US, CP also shares rail with passenger traffic as well.
It sounds like my morning commute to.
Your train will be late 10 minutes. Why? A freight train. We share the same tracks.
In the US, I think Amtrak runs passenger traffic on some of CP's rail network as well.
And it seems to be doing fine. So hopefully, if the Mexican outcome is similar to what is, how CP is operating in the US, I don't think there should be a negative material impact to CP.
Interesting to elements there. As always, make sure you do your own research before making any investment decisions.
we are going to get back to questions for David Mau on industrial stocks and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
On today's education segment, we are going to take a look at T's Advanced Dashboard, a program designed for active traders available through TD Direct Investing. We are going to take you through how to set up a watchlist on the platform.
Joining us now with Maurice Jason Hnatyk, senior client education instructor with TD Direct Investing. Always great to see you.
Show us how to do this.
It's always a pleasure to be here, Greg.
The fact that the platform is streaming with real-time updates and its highly customizable are two key features of Advanced Dashboard. Both of those are going to be on full display when we take a look at watchlist so let's jump in and have a look at the platform. You can see on my screen I have got a watchlist that is streaming, optics and outtakes are updating in green and red. It's a bit of a Griswold Christmas going on in my screen right now. We are going to start by creating our own watchlist. It simple. In the upper right hand corner you can click at watchlist. You can add a name and you can continue to add watchlist. You are going to have a watchlist capacity as well as simple capacity is much further enhanced than it is in WebBroker so that's a plus there.
After you have created multiple lists, you will notice a drop down menu titled lists and in that list you can save all of your watchlist so they are easily accessible and ready. A scroll of your mouse wheel and you can choose what particular list is catching your eye today. All right, now let's go in and start editing our list to really bring out the functionality here.
If we want to add a symbol to an existing list, we are simply clicking the plus button at the bottom or there is a dialogue box at the top of the screen.
Let's say we want to add apples were watchlist, we simply type in the symbol, we hit the enter key and this symbol gets added to the bottom of our list. Now the customization certainly does not stop there. You got the opportunity to drag-and-drop your symbols to create a, to further enhance the customization and the beyond that, we also have the opportunity to drag and drop our columns as well. I'm going to take the volume column set towards the centre of my watchlist and drag that over. Maybe I'm going to move that right next to the asking price, so it's in a bit more of a prominent spot on my watchlist for easier access. In terms of sorting, if we want to sort by what is the highest volume stocks that are happening today in the market from the start of the open, we can go ahead and simply click on the column for volume and now I am sorting from ascending order and to change it to descending, I will simply click again on the volume column header and now we are sorted from highest to lowest volume. Beyond that, one final step of customization, what we can do is actually, Advanced Dashboard gives the opportunity to create custom column sets.
We call them templates are on the platform. To access that, you will click on the hamburger menu, this three line button in the upper left-hand corner, you will choose manage templates. From here, you can see I have a large number of templates already created but to create your own, you go ahead and click on new and then you can give it a name.
We will get real creative and call it MT for MoneyTalk.
You are able to go ahead and add in all of the different columns that are important to you.
After you've gone to the customization, appear on the template button, we can hone in on the data points that are important to us.
So real custom, real-time, lots of great information available at your fingertips.
I know with the watchlist I have, most of them are populated with names I already have a position in. Some of them are names I might want to take a position in.
So you put your watchlist together, how quickly can you place a trade to the list?
Yeah, that's important, especially because this platform is designed for our most active traders.
We want to make this easy to use and it's really point, click, your orders already started. I will give you a quick demo on how that can be accomplished.
If we choose our top stock on the list, Tesla, if I want to enter a new position, I will click the asking button in your order ticket will pop up.
It's often running. Alternatively, if it's an existing position like in your case, I go ahead and click the bid button, the order tickets are colour-coded so this happens to be the sell button, and now we are often running. Go ahead and you can adjust your order type, adjuster limit price, whatever works for you in your particular situation. One final bit of order entry magic.
Everybody can notice the three dots next to the ticker. If you go ahead and choose those three buttons, you get into quick access into your advanced order size.
If you are looking to add in some stop orders or bracket orders, whatever works for you, Advanced Dashboard has some highly capable order types available at your fingertips make it easy to execute those traits.
Great stuff as always. Thanks for that.
It's my pleasure.
Thanks to Jason Hnatyk, senior client education instructor with 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.
Now before you get back to your questions about industrial stocks for David Mau, a reminder of how you can get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with David Mau, taking your questions about industrial stocks.
Let's get to them.
Of your want to get your view on the airlines right now. Is the post-pandemic travel boom over?
Yeah, I mean, look, the airlines clearly have pretty good third quarter.
The outlook is softening a bit because now that we've got the summer travel season behind us, we are heading into winter, things are slowing down a bit.
To answer the question about whether the post-pandemic travel boom is done, I would say I think for the most part we are pretty much there. Volumes have recovered pretty much back to where we were before COVID. I mean, if you look at the US, the most recent data shows that passenger throughput at US airports are about 5% higher than they were in 2019. Yeah.
In Europe, Europe is measuring passengers going through airports, they are at about 90, 95% of 2019 levels.
I would say the recovery, the post-pandemic travel recovery is pretty much Plato. I think we are almost there.
The numbers are a little bit lower in Asia.
But for North America and Europe, I think we are pretty much there.
Now, there are some differences in terms of segments. We know that business travel or corporate travel is still about 15 to 20% lower than where it was.
So that hasn't come back. We have been travelling, revenge travel, but those corporations are not shelling out?
They are not and there are a couple of reasons. One is people are doing a lot more meetings over the Internet, basically, doing Zoom meetings or Microsoft teams meetings or instead of flying across the country, you can jump on and have a one hour meeting.
And then the other thing is G business travel that is happening is, previously, somebody might take two trips a month.
They have cut that down to one trip a month but they try to fit more into that one trip so they are trying to fit two trips worth of work into one trip so that is also affecting the corporate business travel demand. But overall, if you look back to pre-COVID, the airline or the air travel industry used to grow at about 4 to 6% annually, which is a pretty good growth rate for a relatively mature industry.
So I think if the recovery is done and he will get back to that kind of four, five, 6% annual growth rate for air travel, I think the airlines are in good shape.
The other thing I want to mention is employment or unemployment is very closely correlated to air travel.
So if the economy is doing okay and people of jobs, they are going to continue to fly.
What worries me is if we get a meaningful spike in unemployment, I would be a lot more cautious on airlines because that's when you see demands her to drop off very quickly and very sharply.
Interesting stuff indeed. I was going to ask you about pricing power.
The latest inflation numbers, we are saying that perhaps are not paying as much for travel. How we lost our appetite? Our people be more selective now?
They are. And because of all the capacity that has been added over the last couple of years, when the boom, when the travel recovery was happening, a lot of airlines were adding a ton of capacity. It seems now that there's a bit of excess capacity and that's what's leading to lower airfare prices. Like you said, we saw that in the CPI numbers last week.
We will get some fresh CPI numbers for this country tomorrow.
TD Securities is noting that we might see some easing there. Question now about rising geopolitical risks around the world. Is this making it a good time to look at defensive stocks?
Defence stocks have generally outperformed. If you look at how the stocks have done I would say since the beginning of last year, beginning 2022, right before the Russian Ukraine conflict started, up until today, which obviously includes more recent Israel and Palestine war that's going on right now, defence stocks have outperformed the market. If we look for, at least in the US, it doesn't seem that there's going to be any meaningful reduction in defence spending or defence budgets.
In 2022, the US defence budget was $750 billion. That's about 3% of US GDP. And it doesn't seem like there's going to be any change to that 3% rate of GDP going forward. I saw some estimates of what defence spending would be in 10 years from now, so in about 2033, and if we keep this kind of 3% allocation of US GDP, the US government is going to spend close to $1.1 trillion on the defence budget 10 years from now. So it doesn't seem like there's any slowdown coming. And that's long term but if you look at the shorter term, we know that the US has been a supporter of Israel. They have been sending cash to Israel but they have also been sending equipment. So weapons, munitions, defence systems.
All different kinds of supplies they have been sending to Israel over the past two months. And where the supplies have been coming from is the existing inventory that the military carries.
So as they draw down on those inventories, the military is going to restock. They don't want to have nothing in reserve. So there will be orders for defence companies to supply weapons and ammunition and so on and so forth. So even the near term looks pretty good for the defence companies.
Okay. Interesting space indeed.
This one a bit of a different track. Seems to be growing interest in sustainable fuels. How big of a trend will this be and is it investable?
Yeah, so I think we are talking about aviation fuel. Sustainable aviation fuels.
This is definitely getting more and more attention recently. I think the industry is understanding that sustainable aviation fuels are gonna start to play a bigger part for them going forward.
The main issues around sustainable aviation fuel are two things. One thing is price. Sustainable aviation fuel is quite expensive compared to traditional jet fuel.
I think we have mentioned this in the past but it's 2 to 5 times more expensive.
Really?
Yeah.
So the price is going up. Another issue is availability. There are not a ton of companies that make sustainable aviation fuel.
I think sustainable fuel starts for one, less than 2% of the overall market for jet fuel. So cost is an issue. Availability is an issue.
So I think what's going to happen is you're going to see governments get more involved in this.
They should, I think, provide some more incentives for people to get involved in sustainable aviation fuel so it could be through incentives like direct subsidies, could be tax breaks, it could be regulatory requirements.
But I think that's the path forward for this segment. The governments will push it. The airlines might be a little bit resistant on price but we think that's going to be the future of flying.
As far as whether or not this is investable, there are not a ton of public companies out there that you can actually invest in that are involved in the space.
There's a handful of companies that are private that are involved and I think there might be to public companies, one is a Finland-based oil refiner so that's one way to get exposure to sustainable aviation fuel is through his company called nest day, which is in Finland. But sustainable aviation fuel is only part of it.
They do crude oil refining, other biodiesel's and things like that.
It may get your foot in the door but it's not a pure play.
The other company I can think of is a small US company called G Vo, I'm sure in pronouncing it incorrectly, but they are a very small company.
There market Is listed at $300 million and they are not profitable at all.
At this current point, it's a little bit difficult.
Interesting stuff. We'll get back your questions for David Mau on industrial 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.
Last week, we got a read on US inflation.
It was cooler than expected. Tomorrow morning before the markets open, we get the latest read on Canadian price pressures. Again, the market is thinking, maybe you're going to cool. Anthony Okolie has gone through TD Securities breakdown of what to expect.
In big inflation numbers. Of course in September, inflation took a step back, step in the right direction. We saw it slow to 3.8% on a year-over-year basis after a 4% jump in August. The core measure also eased despite higher gasoline prices in September. As the chart shows, both headline and core CPI have been on a downward trend since peaking back in June of last year before we did see a spike in the summer due to higher gas prices.
Two of the Bank of Canada's three underlying inflation matters, CPI trim and CPI median also edged lower in September to just under 4%.
Looking ahead to tomorrow's numbers, TD Securities expects October headline CPI to test the upper bound her upper end of their target range with a drop to 3.1% year-over-year.
This will be led by a decline primarily in energy prices. Headline index should also hold unchanged on a month-to-month basis despite a large grade on energy prices. A week rebound on core goods and ongoing strengthen shelter will keep weakness in energy prices while food prices should only see a modest increase with a seasonal director groceries.
When we look at core inflation, they expected to come up, to increase .3% month over month. On a year-over-year basis.
Just over 3%. Again, driven by large jump in sheltered components such as rent and mortgage costs.
Now TD Securities looks for further progress on the banks preferred measures of core inflation and they see both CPI trim and CPI median breaking lower in October with a three month annualized core inflation of breaking below their critical 3.5% mark.
That should give the Bank of Canada some added confidence at the rate hikes are still working to cool inflationary pressures.
That's still a long way away from the 2% target, but it should provide comfort to the Bank of Canada that the reason hikes are working their way through the economy.
Let's talk Bank of Canada. We do have inflation cooling on the conversation lately in the market has not been about our rate hikes over, it's been wherein are the cuts coming. What do they have to say about that?
TD Securities is looking for the Bank of Canada to deliver its first rate cut in July of next year. They believe that persistence and underlying inflation which drove the Bank of Canada to upgrade their inflation forecast will make it difficult for the Bank of Canada to start easing over the first half of 2024. Now TD Securities continues to look for a 5% terminal rate, that's where we are right now. They believe there is enough evidence for the Bank of Canada to hold the line and wait for inflation pressures to moderate. They also point to some risks for the Bank of Canada.
If they don't see progress on the inflation front in the first quarter, especially with the ongoing risks to inflation expectations becoming unmoored or unanchored, that increases the risk of further tightening next year. Now, TD Securities also raise their estimates for the banks neutral rate from 2 1/2% to 3% which they expect them to achieve in the fourth quarter of 2025.
Interesting stuff. We'll have the full details on the other side tomorrow.
Thanks, Anthony.
My pleasure.
MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
All right, we are back into Advanced Dashboard, taking a look at the heat map function. It gives you a view of the market movers on the TSX 50.
We are sorting by price and volume. First Quantum we were telling you earlier about the port blockade, it saying it might have to shut in operations by the end of the week if they can't get through the port.
So there has been an ongoing story, the problems they are having in Panama. It's at about 1 1/3% right now. It is off the lows of the session.
Shopify is rallying today in the tax base.
Even in materials, you got to get. Energy is interesting. You gag crude oil, American benchmark, a 3% today. It's been on a run in recent days but with all of the gains in recent days, 70 bucks per barrel, we are back to last week's levels for WBT I. A bit of green on the screen with the price of crude rallying but all it does is take you back to last Tuesday or Wednesday. So the water, let's check in on the S&P 100.
We have Boeing and Smalley today, some improving sentiment on the street around that name. You gobbling up about 4.6%.
This probably isn't playing into the share price but it's cool, the biggest play to land in Antarctica. Bristol Meyers was… BMI down 2.6%. There is a delayed approvals for one of the trucks that it has in development. You can get more information on TV Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with David Mau from TD Asset Management. Let's get to your questions. Someone would like your outlook for waste management companies.
Look at, waste companies tend to outperform the broader market over long time periods and for me, waste companies, I view ways companies the same way I view the Canadian rails.
They are a good stock to buy and hold for a long time because they offer steady returns, lower volatility in the market, and waste tends to outperform when the market is weak due to its defensive qualities and in times when the market is really strong, waste companies might leg the market a little bit but over time, I think the market does regard these ways companies for their strong revenue visibility and growth because they have long-term contracts, three, sometimes more than three year contract. There is good visibility into their topline. And they grow pretty consistently.
And there free cash flow conversion is very solid as well.
So I think ways companies are a good idea as part of a core portfolio holding.
What would be the biggest risk for a waste company? Would it be the execution of a name, a deep recession? We always produce waste but maybe a little bit less in bad times.
Yeah, there is always risk to everything.
For the moment, I think ways companies, let's just call it half of their business is with small and medium-sized enterprises, so your stripmall or restaurant or whatever and the other half of the businesses with municipalities, so your city services that come pick up your garbage, your been that you leave at the curb every couple of weeks. So one risk is that if these local governments and municipalities start to in source more of that waste collection, which, I mean, we haven't really seen that trend happening, so I'm not too worried about that. But that is certainly something to keep an eye on. It is a risk.
The other big risk, and this applies to everything we've been talking about so far, is higher input costs.
The higher fuel costs, as you know, waste companies, the trucks need to run around the city all day picking up garbage to higher fuel costs will impact the bottom line and then a higher labour costs as well.
We know there has been wage inflation across many different sectors. Waste is no different.
So those are the things that I would look out for.
A pleasure having you here, was a fascinating conversation. Look forward to the next one.
Thanks for having me.
Our thanks to David Mau, VP, director and Portfolio manager TD Asset Management.
As always, make sure you do your own research before making any investment decisions. tomorrow, Robert Both, macro strategist at TD Securities will be our guest.
He'll be taking your questions about the economy and interest rates. You can get a head start. Just email moneytalklive@td.com.
That's all the time we have for the show today. Thanks for watching. We will see you tomorrow.
[music]
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 discussed the outlook for the auto sector amid a slowdown in demand in electric vehicles.
TD Asset Management's David Mau as our guest. MoneyTalk Anthony Okolie is giving us a preview of what to expect from tomorrow's Canadian inflation report.
And in today's education segment, Jason Hnatyk will shows how to set up a watchlist using Advanced Dashboard. Here's how you can get in touch with us. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before he gets our guest of the day, let's get you an update on the markets. We will start here at home with the TSX Composite Index.
We've got 62 points on the board, good for 1/3 of a percent to the upside. West Texas intermediate, American benchmark crude, up about 2 1/2%. There are some stories out there based on unconfirmed sources saying OPEC+ wants to see the price of crude a bit higher than it was last week and may be talking about more production cuts going forward. We will see. I think they go into a meeting this weekend. Amongst most actively traded names on the TSX at this hour include uranium play Denison Mines, up 2%, two bucks and $0.49 per share. First Quantum having problems in Panama where there is a lot of public opposition to their Cobre Panama mine and they are saying now that if a keyboard that they use is still blockaded by the end of the week, they might have to start shedding its production. You've got First Quantum down another 1% today but it's been a precipitous drop in the last couple of weeks based on the problems they are having with the project.
South of the border, want to get on their S&P 500. This is the Americans think living week. Still a couple of days away but some sense there than it might not be too eventful for the week. The S&P 500 up 20 points right now, a little less than half a percent.
Let's check in on the tech heavy NASDAQ, see how it's bearing against the broader market. A bit more strength here, 108 points on the board good for three quarters of a percent the upside.
Nvidia, they are reporting tomorrow.
This has been the big success story of the are based on artificial intelligence. We will see how that demand is holding up for the chipmaker. And that is your market update.
While many countries are pushing electrification as crucial to the fight against climate change, one of the big takeaways from earning season is that consumers may not be snapping up EVs.
Joining a staff discusses David Mau, VP, Dir. and partly a manager at TD Asset Management. Great to have you back.
Thanks for having me.
This has been an interesting turn of events in the past little while. There's been the electrification of everything, a lot of interest in height. Then we see consumers are not snapping them up. What is going on there?
We are seeing a slowdown in demand for electric vehicles. Probably started since about the beginning of the year. Don't get me wrong, the EV market is still growing, it's just not growing as fast as it used to grow. There are couple of reasons for that.
It looks like demand is falling off because the pool of electric vehicle buyers has may be reached and early saturation point, so pre-much most of the people who had intentions to buy electric vehicles have, in the past two years, have already bought them.
That pool of potential buyers is getting smaller over time.
And we are seeing electric vehicle sitting on dealer lots for a lot longer now.
Previously, and EV would reach a dealer and it might sit in inventory for 30, 40, maybe 50 days.
More recently, in the past couple of months, we are seeing electric vehicles at all lots were closer to 90 days. That's a big difference.
Admittedly, we are seeing a lot more supply, a lot more manufacturers have been rolling out models, production has ramped up.
So there's more supply, more inventory and less buyers. So we are seeing that slowdown in demand. As far as what goes to explain the slowdown, there are couple of things.
I talked about the pool of buyers getting smaller. The other thing is price is still a very important consideration. Price and affordability. It was electric vehicle still costing probably 20 to 30% more than a comparable internal combustion car, consumers, especially in this high interest rate environment, where affordability is actually a lot harder now, consumers are just looking for a cheaper option.
If you're financing the car, you are not financing it at 1 1/2 or 2%, it's much higher. I think Elon Musk has said that.
Not saying that there's anything wrong with that has low business but there is a slowing economy, higher interest rates and the buyer is hurting.
If you think back a couple of years ago, you could get a car loan at one, maybe two, 3%. Nowadays, auto loans are going for seven, 8%. It's having a pretty big impact.
When it comes to car loans, last year, early this year and that it sort of went to the wayside, this idea that you would perhaps start to see some problems with auto loans in the United States, particularly subprime. What's happening there?
That's a good point. We are starting to see a pretty significant take up in subprime auto defaults.
So right now, I think most recent numbers show that subprime auto defaults are above 6% of all subprime borrowers are defaulting on their loans. Thus the highest it's been I think for the last 30 to 40 years. That's even higher than the default rates that we saw during the financial crisis in 2008 2009.
So it is starting to be a little bit worrisome.
The thing is, for the subprime borrowers, they usually don't have the best credit to begin with. So when the economy starts to weaken even a little bit, these guys are the first ones to be affected.
And subprime borrowers are paying a lot for a car loan. They are paying somewhere between 15 to 20% per carload.
When things start to soften or weaken, these are where you start to see the first cracks.
What does that mean for the industry going forward, if you're starting to see those cracks right now with those borrowers? Is a very high rate, much higher than hopefully a lot of people are paying for their car loans. But what does it mean for the industry going forward in the next a while?
Is going to be challenging for the sector because subprime really only make up about 7 to 8% of the overall buyer pool for cars but that 78%, if that disappears, it's still pretty meaningful and can have a pretty big impact on sales going forward.
All right, so we are seeing a slowdown in demand for electric vehicles for various reasons. We are seeing some rising subprime defaults in the auto space. On top of all that for the autos, it's been pretty busy in the sector for the last little while, we had those strikes and now labour deals and pretty big pay raises and those labour deals.
How does that all work towards impacting autos?
You are probably talking about the United Auto Workers strike that is happening for the past few months. They were on strike for about six weeks and it seems like they have come to an agreement now.
I think the unions probably did a pretty good job for the employees.
I think most of the agreements for her for about a 25% increase in wages and when you add in all the other benefits improvements at the unions negotiated, their total comp is going to be going up by about 40% over the next 4 to 5 years for these unionized workers. So it is a pretty good deal for the workers.
But this adds to an increasingly difficult situation for the automakers, right, because like we already mentioned, higher interest rates are slowing demand, and now you have these labour costs that are going up.
What it all really comes down to is this is going to put pressure on margins, so profitability is going to go down.
Usually, what happens in these cases is that the automakers, when they are faced with these rising costs, they are going to try to pass those costs onto the consumer.
The consumer that's already showing slowing demand for EVs.
That's going to mean higher prices for consumers. We are not seeing that just for the Big Three in the US. There are other automakers in the US, some of the Asian brands like Honda, Toyota, Hyundai, even Tesla, all of those brands are not unionized. Their plants are not unionized.
So but because of this recent deal, a lot of those automakers have also increased wages for their employees because, A, they know that they need to stay competitive on the pay front to attract and retain employees and, be, they don't want unions to come into their plants. So if their employees are happy with their pay, it's less likely that the unions will be able to convince the employees to join the union.
If we take this altogether, what does it mean for the investment thesis for the auto space in the next little while? Will there be a bit of a choppy ride, I guess?
I think he, for the near term, it's going to be a little bit rough. We have these rising costs, slowing demand.
demand. are spending a ton of money on building out their EV capability, investing in plants, trying to ramp up production near to midterm before automakers.
We started talking about autos but we will talk about industrials. A reminder that you can get in touch with us at 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.
Microsoft making a high profile hired to lead his new AI team. Sam Altman has landed the job just days after being ousted from the CEO role at OpenAI.
Microsoft has invested billions into OpenAI which has been navigating a tumultuous couple of days since the board ousted Altman on Friday. That just the surface of the tail. It's a pretty interesting one. We continue to wash developments on that.
Microsoft now up 1.7%. First Quantum minerals reducing output from its mine in Panama amid a blockade at a local port.
There is strong opposition of the country to the companies Cobre Panama and copper mine and part of the pushback is the blockade. First Quantum says it might be forced to halt production later in the week of supplies can't get through that port.
Right now, First Quantum down 1% on the news. Got McDonald's increasing its stake in its business in China.
The fast food giant will take a 48% ownership in the business as it buys Carlyle's stake. McDonald's sold control of its China unit in 2017 for $2.1 billion.
A quick check on the market, we will start here at home on Bay Street with the TSX Composite Index. We have the price of crude firming up today to the scene of about 2 1/2%, almost 70 bucks per barrel for WBT. At your 52 points in the green for the TSX, about 1/4 of a percent.
South of the border, which will be perhaps a more muted week with Thanksgiving coming up for the Americans but we will get Nvidia earnings tomorrow and fed business on Wednesday. A few things to keep your eye on.
There up about half a percent.
We are back with David Mau, take your questions about industrial stocks. Let's get to them.
This is an interesting one. I had to find out what the reading was talking about here.
I was reading about the AOG Technics saga, what sort of impact is in having? Maybe for some people in the audience you haven't heard about what's going on here, what is going on?
This is a very interesting story.
So what AOG is, AOG Technics is a small company based in the UK, and they are a vendor, supplier/broker of airline parts, of airplane parts, sorry, and their customers are airlines.
And what they do is they will source parts directly from supplier to manufacture the parts were from other third parties, so say an airline is scrapping a plane and they will tear the plane down whatever parts that they can sell, they will sell into the secondary market. So AOG, that's where AOG plays, they buy and sell parts in the aftermarket. What has happened is recently, or I guess over the summer, there was a part that AOG had sold, and engine part that AOG had sold to a, I think it was a Portuguese airline and as the airline mechanics were putting in this part into the engine, they noticed that the part looked like it was kind of used, it didn't seem to be in brand-new condition. So they went, they looked at the part and said, well, it's probably still okay but let's go check the paperwork.
They went to check the paperwork, the safety certificate, and the safety certificate looks kind of suspicious to you. So this led to a wider investigation and what came out of it was that AOG has been forging safety certificates for these engine parts.
The engine? I mean, I was on a plane just two weekends ago the engine is pretty critical.
It is pretty critical. What's happened is airlines around the world have bought parts from AOG as part of their regular maintenance or repair and overhaul program so it's been found out that there is at least currently the number could grow over time but at least currently there has been about 150 planes that have installed parts from AOG where the safety certificate is either proven to be fake to or is suspected to be fake.
So that's a pretty big deal, right, because engine parts are pretty critical.
It is, you know, the safety of the airplane relies very heavily on the right parts being in the right place at the right time.
And you can imagine, if AOG is selling used parts and representing them as new, that could be a pretty big problem because for parts, you might, and I will make up a number here, you might have a part that showed last 50,000 flight hours, but, if it was new, but if AOG is selling a part that already has 20,000 flight hours…
You don't get the expected life.
And also the airline doesn't know that there is already a 20,000 flight hours on this part. They expected to be new.
There are 150 planes out there that have been done with these parts. Half of been pulled from service and the other half will be pulled soon. Regarding the overall impact to the aviation industry, 150 planes is not a lot at all. It's very manageable. But I think what this does is it highlights a pretty big gap in the safety and security of the supply chain.
Because vendors like AOG, third party parts suppliers, they are not actually, they operate in a grey area.
They are not actually regulated by any government or regulatory body so they can pretty much do whatever they want.
So it is a bit of a dangerous area. So far, this is not a criminal case just yet but I saw last week that the US Department of Justice is joining the investigation.
So this may turn into a criminal case. We will have to wait and see.
I'm taking will get the screen right now, stories saying that AOG has talked to the substantive issues at the core but they did say they are cooperating fully with the investigation. It's a very interesting story and we will see where it had from there.
Yeah. It doesn't make you feel good, does it?
No, no, no.
Look into another audience question. I have another viewer asking your view on the rails.
Is the so-called freight recession over? I guess there really was a freight recession.
Yeah, that's true.
The rails of been having a bit of a difficult time lately.
Volumes have fallen quite a bit this year and by quite a bit I mean in Q3 both CN and CP reported that there freight volumes fell about 4 to 5%.
So it's not a disaster but it does reflect the overall slowdown in the economy.
And now both rails are guiding to flat-ish earnings for 2023. Because there volumes have come down and their costs have gone up, even though they are charging more for their shipping services, those things have kind of offset each other and so there has not been a ton of growth in the bottom line this year.
As far as whether or not the freight recession has actually ended, I think it might be a little early to call a bottom.
I think one of the big factors for Canadian rails, CN and CP, is the Canadian grain harvest. And this year, at the beginning of the year, it looked like it was going to be a really, really good harvest. As the year progressed and there have been some weather events out West, the grain harvest looks like it's not going to be as good as what was expected so that's going to impact freight volumes.
We know volumes are fairly weak at the moment.
The outlook is improving but it's probably, in my view, it will probably take another one or two quarters to get to a full recovery. Both CN and CP give their outlook in January 4, 2024 and that's when they will tell us what they expect volumes to look like.
Maybe at that point we will have a better idea what kind of landing we will get for the economy. He talked about the importance of commodities and weeds. At the same time, part of the freight recession story was the fact that consumers in the face of higher borrowing costs are pulling back, which is what the central banks want us to do.
Yes.
And that's what affects intermodal volumes a lot is the consumer.
This will be an interesting one to watch as we get into 2024. Sticking with the rails, can you get your outlook for it CPKC? I think they need a new name.
Canadian Pacific Kansas City.
ER. Look, CP did have a bit of a tough third quarter. Revenues were down four or 5%. There volumes are down four or 5%.
The company cut there guidance for the full year. They cut their earnings guidance to flat so they don't expect any growth in earnings this year. Previously, they were expecting a little bit of growth, may be low to mid single digit earnings growth.
But I mean I would say that CP, I would say, still has one of the strongest management teams in the whole railway industry, and CP does have that extensive, robust network that runs through Mexico, US and Canada.
So my Outlook for CP is still positive. It might take a little bit of time for that to play out. I think one recent issue that has affected CP, affected the stock price in recent weeks is no Mexican government has announced that they want, basically, rail carriers in Mexico that typically only carry freight, they want them to start carrying passenger traffic as well.
And that includes CP. So I think it's going to affect two of CP's lines in Mexico.
And so the stock was down on that news.
The reason the stock was down is because there is uncertainty. Whenever an announcement like this comes out, we don't really know what the government is going to require from CP. We do know that the Mexican government wants those, that part of that passenger network to be electrified, which, it currently is not.
So it might lead to CP having to invest more into their network to bring it up to the standards that the Mexican government wants. And then anytime you bring in extra traffic onto a freight network, you don't know how it's going to affect the efficiency of how those trains are run in the fluidity of the network as well.
So there's a little bit of uncertainty there. So the stock is down a bit. I'm not particularly worried. The CEO of CP has pointed out himself but in the US, CP also shares rail with passenger traffic as well.
It sounds like my morning commute to.
Your train will be late 10 minutes. Why? A freight train. We share the same tracks.
In the US, I think Amtrak runs passenger traffic on some of CP's rail network as well.
And it seems to be doing fine. So hopefully, if the Mexican outcome is similar to what is, how CP is operating in the US, I don't think there should be a negative material impact to CP.
Interesting to elements there. As always, make sure you do your own research before making any investment decisions.
we are going to get back to questions for David Mau on industrial stocks and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
On today's education segment, we are going to take a look at T's Advanced Dashboard, a program designed for active traders available through TD Direct Investing. We are going to take you through how to set up a watchlist on the platform.
Joining us now with Maurice Jason Hnatyk, senior client education instructor with TD Direct Investing. Always great to see you.
Show us how to do this.
It's always a pleasure to be here, Greg.
The fact that the platform is streaming with real-time updates and its highly customizable are two key features of Advanced Dashboard. Both of those are going to be on full display when we take a look at watchlist so let's jump in and have a look at the platform. You can see on my screen I have got a watchlist that is streaming, optics and outtakes are updating in green and red. It's a bit of a Griswold Christmas going on in my screen right now. We are going to start by creating our own watchlist. It simple. In the upper right hand corner you can click at watchlist. You can add a name and you can continue to add watchlist. You are going to have a watchlist capacity as well as simple capacity is much further enhanced than it is in WebBroker so that's a plus there.
After you have created multiple lists, you will notice a drop down menu titled lists and in that list you can save all of your watchlist so they are easily accessible and ready. A scroll of your mouse wheel and you can choose what particular list is catching your eye today. All right, now let's go in and start editing our list to really bring out the functionality here.
If we want to add a symbol to an existing list, we are simply clicking the plus button at the bottom or there is a dialogue box at the top of the screen.
Let's say we want to add apples were watchlist, we simply type in the symbol, we hit the enter key and this symbol gets added to the bottom of our list. Now the customization certainly does not stop there. You got the opportunity to drag-and-drop your symbols to create a, to further enhance the customization and the beyond that, we also have the opportunity to drag and drop our columns as well. I'm going to take the volume column set towards the centre of my watchlist and drag that over. Maybe I'm going to move that right next to the asking price, so it's in a bit more of a prominent spot on my watchlist for easier access. In terms of sorting, if we want to sort by what is the highest volume stocks that are happening today in the market from the start of the open, we can go ahead and simply click on the column for volume and now I am sorting from ascending order and to change it to descending, I will simply click again on the volume column header and now we are sorted from highest to lowest volume. Beyond that, one final step of customization, what we can do is actually, Advanced Dashboard gives the opportunity to create custom column sets.
We call them templates are on the platform. To access that, you will click on the hamburger menu, this three line button in the upper left-hand corner, you will choose manage templates. From here, you can see I have a large number of templates already created but to create your own, you go ahead and click on new and then you can give it a name.
We will get real creative and call it MT for MoneyTalk.
You are able to go ahead and add in all of the different columns that are important to you.
After you've gone to the customization, appear on the template button, we can hone in on the data points that are important to us.
So real custom, real-time, lots of great information available at your fingertips.
I know with the watchlist I have, most of them are populated with names I already have a position in. Some of them are names I might want to take a position in.
So you put your watchlist together, how quickly can you place a trade to the list?
Yeah, that's important, especially because this platform is designed for our most active traders.
We want to make this easy to use and it's really point, click, your orders already started. I will give you a quick demo on how that can be accomplished.
If we choose our top stock on the list, Tesla, if I want to enter a new position, I will click the asking button in your order ticket will pop up.
It's often running. Alternatively, if it's an existing position like in your case, I go ahead and click the bid button, the order tickets are colour-coded so this happens to be the sell button, and now we are often running. Go ahead and you can adjust your order type, adjuster limit price, whatever works for you in your particular situation. One final bit of order entry magic.
Everybody can notice the three dots next to the ticker. If you go ahead and choose those three buttons, you get into quick access into your advanced order size.
If you are looking to add in some stop orders or bracket orders, whatever works for you, Advanced Dashboard has some highly capable order types available at your fingertips make it easy to execute those traits.
Great stuff as always. Thanks for that.
It's my pleasure.
Thanks to Jason Hnatyk, senior client education instructor with 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.
Now before you get back to your questions about industrial stocks for David Mau, a reminder of how you can get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with David Mau, taking your questions about industrial stocks.
Let's get to them.
Of your want to get your view on the airlines right now. Is the post-pandemic travel boom over?
Yeah, I mean, look, the airlines clearly have pretty good third quarter.
The outlook is softening a bit because now that we've got the summer travel season behind us, we are heading into winter, things are slowing down a bit.
To answer the question about whether the post-pandemic travel boom is done, I would say I think for the most part we are pretty much there. Volumes have recovered pretty much back to where we were before COVID. I mean, if you look at the US, the most recent data shows that passenger throughput at US airports are about 5% higher than they were in 2019. Yeah.
In Europe, Europe is measuring passengers going through airports, they are at about 90, 95% of 2019 levels.
I would say the recovery, the post-pandemic travel recovery is pretty much Plato. I think we are almost there.
The numbers are a little bit lower in Asia.
But for North America and Europe, I think we are pretty much there.
Now, there are some differences in terms of segments. We know that business travel or corporate travel is still about 15 to 20% lower than where it was.
So that hasn't come back. We have been travelling, revenge travel, but those corporations are not shelling out?
They are not and there are a couple of reasons. One is people are doing a lot more meetings over the Internet, basically, doing Zoom meetings or Microsoft teams meetings or instead of flying across the country, you can jump on and have a one hour meeting.
And then the other thing is G business travel that is happening is, previously, somebody might take two trips a month.
They have cut that down to one trip a month but they try to fit more into that one trip so they are trying to fit two trips worth of work into one trip so that is also affecting the corporate business travel demand. But overall, if you look back to pre-COVID, the airline or the air travel industry used to grow at about 4 to 6% annually, which is a pretty good growth rate for a relatively mature industry.
So I think if the recovery is done and he will get back to that kind of four, five, 6% annual growth rate for air travel, I think the airlines are in good shape.
The other thing I want to mention is employment or unemployment is very closely correlated to air travel.
So if the economy is doing okay and people of jobs, they are going to continue to fly.
What worries me is if we get a meaningful spike in unemployment, I would be a lot more cautious on airlines because that's when you see demands her to drop off very quickly and very sharply.
Interesting stuff indeed. I was going to ask you about pricing power.
The latest inflation numbers, we are saying that perhaps are not paying as much for travel. How we lost our appetite? Our people be more selective now?
They are. And because of all the capacity that has been added over the last couple of years, when the boom, when the travel recovery was happening, a lot of airlines were adding a ton of capacity. It seems now that there's a bit of excess capacity and that's what's leading to lower airfare prices. Like you said, we saw that in the CPI numbers last week.
We will get some fresh CPI numbers for this country tomorrow.
TD Securities is noting that we might see some easing there. Question now about rising geopolitical risks around the world. Is this making it a good time to look at defensive stocks?
Defence stocks have generally outperformed. If you look at how the stocks have done I would say since the beginning of last year, beginning 2022, right before the Russian Ukraine conflict started, up until today, which obviously includes more recent Israel and Palestine war that's going on right now, defence stocks have outperformed the market. If we look for, at least in the US, it doesn't seem that there's going to be any meaningful reduction in defence spending or defence budgets.
In 2022, the US defence budget was $750 billion. That's about 3% of US GDP. And it doesn't seem like there's going to be any change to that 3% rate of GDP going forward. I saw some estimates of what defence spending would be in 10 years from now, so in about 2033, and if we keep this kind of 3% allocation of US GDP, the US government is going to spend close to $1.1 trillion on the defence budget 10 years from now. So it doesn't seem like there's any slowdown coming. And that's long term but if you look at the shorter term, we know that the US has been a supporter of Israel. They have been sending cash to Israel but they have also been sending equipment. So weapons, munitions, defence systems.
All different kinds of supplies they have been sending to Israel over the past two months. And where the supplies have been coming from is the existing inventory that the military carries.
So as they draw down on those inventories, the military is going to restock. They don't want to have nothing in reserve. So there will be orders for defence companies to supply weapons and ammunition and so on and so forth. So even the near term looks pretty good for the defence companies.
Okay. Interesting space indeed.
This one a bit of a different track. Seems to be growing interest in sustainable fuels. How big of a trend will this be and is it investable?
Yeah, so I think we are talking about aviation fuel. Sustainable aviation fuels.
This is definitely getting more and more attention recently. I think the industry is understanding that sustainable aviation fuels are gonna start to play a bigger part for them going forward.
The main issues around sustainable aviation fuel are two things. One thing is price. Sustainable aviation fuel is quite expensive compared to traditional jet fuel.
I think we have mentioned this in the past but it's 2 to 5 times more expensive.
Really?
Yeah.
So the price is going up. Another issue is availability. There are not a ton of companies that make sustainable aviation fuel.
I think sustainable fuel starts for one, less than 2% of the overall market for jet fuel. So cost is an issue. Availability is an issue.
So I think what's going to happen is you're going to see governments get more involved in this.
They should, I think, provide some more incentives for people to get involved in sustainable aviation fuel so it could be through incentives like direct subsidies, could be tax breaks, it could be regulatory requirements.
But I think that's the path forward for this segment. The governments will push it. The airlines might be a little bit resistant on price but we think that's going to be the future of flying.
As far as whether or not this is investable, there are not a ton of public companies out there that you can actually invest in that are involved in the space.
There's a handful of companies that are private that are involved and I think there might be to public companies, one is a Finland-based oil refiner so that's one way to get exposure to sustainable aviation fuel is through his company called nest day, which is in Finland. But sustainable aviation fuel is only part of it.
They do crude oil refining, other biodiesel's and things like that.
It may get your foot in the door but it's not a pure play.
The other company I can think of is a small US company called G Vo, I'm sure in pronouncing it incorrectly, but they are a very small company.
There market Is listed at $300 million and they are not profitable at all.
At this current point, it's a little bit difficult.
Interesting stuff. We'll get back your questions for David Mau on industrial 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.
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Last week, we got a read on US inflation.
It was cooler than expected. Tomorrow morning before the markets open, we get the latest read on Canadian price pressures. Again, the market is thinking, maybe you're going to cool. Anthony Okolie has gone through TD Securities breakdown of what to expect.
In big inflation numbers. Of course in September, inflation took a step back, step in the right direction. We saw it slow to 3.8% on a year-over-year basis after a 4% jump in August. The core measure also eased despite higher gasoline prices in September. As the chart shows, both headline and core CPI have been on a downward trend since peaking back in June of last year before we did see a spike in the summer due to higher gas prices.
Two of the Bank of Canada's three underlying inflation matters, CPI trim and CPI median also edged lower in September to just under 4%.
Looking ahead to tomorrow's numbers, TD Securities expects October headline CPI to test the upper bound her upper end of their target range with a drop to 3.1% year-over-year.
This will be led by a decline primarily in energy prices. Headline index should also hold unchanged on a month-to-month basis despite a large grade on energy prices. A week rebound on core goods and ongoing strengthen shelter will keep weakness in energy prices while food prices should only see a modest increase with a seasonal director groceries.
When we look at core inflation, they expected to come up, to increase .3% month over month. On a year-over-year basis.
Just over 3%. Again, driven by large jump in sheltered components such as rent and mortgage costs.
Now TD Securities looks for further progress on the banks preferred measures of core inflation and they see both CPI trim and CPI median breaking lower in October with a three month annualized core inflation of breaking below their critical 3.5% mark.
That should give the Bank of Canada some added confidence at the rate hikes are still working to cool inflationary pressures.
That's still a long way away from the 2% target, but it should provide comfort to the Bank of Canada that the reason hikes are working their way through the economy.
Let's talk Bank of Canada. We do have inflation cooling on the conversation lately in the market has not been about our rate hikes over, it's been wherein are the cuts coming. What do they have to say about that?
TD Securities is looking for the Bank of Canada to deliver its first rate cut in July of next year. They believe that persistence and underlying inflation which drove the Bank of Canada to upgrade their inflation forecast will make it difficult for the Bank of Canada to start easing over the first half of 2024. Now TD Securities continues to look for a 5% terminal rate, that's where we are right now. They believe there is enough evidence for the Bank of Canada to hold the line and wait for inflation pressures to moderate. They also point to some risks for the Bank of Canada.
If they don't see progress on the inflation front in the first quarter, especially with the ongoing risks to inflation expectations becoming unmoored or unanchored, that increases the risk of further tightening next year. Now, TD Securities also raise their estimates for the banks neutral rate from 2 1/2% to 3% which they expect them to achieve in the fourth quarter of 2025.
Interesting stuff. We'll have the full details on the other side tomorrow.
Thanks, Anthony.
My pleasure.
MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
All right, we are back into Advanced Dashboard, taking a look at the heat map function. It gives you a view of the market movers on the TSX 50.
We are sorting by price and volume. First Quantum we were telling you earlier about the port blockade, it saying it might have to shut in operations by the end of the week if they can't get through the port.
So there has been an ongoing story, the problems they are having in Panama. It's at about 1 1/3% right now. It is off the lows of the session.
Shopify is rallying today in the tax base.
Even in materials, you got to get. Energy is interesting. You gag crude oil, American benchmark, a 3% today. It's been on a run in recent days but with all of the gains in recent days, 70 bucks per barrel, we are back to last week's levels for WBT I. A bit of green on the screen with the price of crude rallying but all it does is take you back to last Tuesday or Wednesday. So the water, let's check in on the S&P 100.
We have Boeing and Smalley today, some improving sentiment on the street around that name. You gobbling up about 4.6%.
This probably isn't playing into the share price but it's cool, the biggest play to land in Antarctica. Bristol Meyers was… BMI down 2.6%. There is a delayed approvals for one of the trucks that it has in development. You can get more information on TV Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with David Mau from TD Asset Management. Let's get to your questions. Someone would like your outlook for waste management companies.
Look at, waste companies tend to outperform the broader market over long time periods and for me, waste companies, I view ways companies the same way I view the Canadian rails.
They are a good stock to buy and hold for a long time because they offer steady returns, lower volatility in the market, and waste tends to outperform when the market is weak due to its defensive qualities and in times when the market is really strong, waste companies might leg the market a little bit but over time, I think the market does regard these ways companies for their strong revenue visibility and growth because they have long-term contracts, three, sometimes more than three year contract. There is good visibility into their topline. And they grow pretty consistently.
And there free cash flow conversion is very solid as well.
So I think ways companies are a good idea as part of a core portfolio holding.
What would be the biggest risk for a waste company? Would it be the execution of a name, a deep recession? We always produce waste but maybe a little bit less in bad times.
Yeah, there is always risk to everything.
For the moment, I think ways companies, let's just call it half of their business is with small and medium-sized enterprises, so your stripmall or restaurant or whatever and the other half of the businesses with municipalities, so your city services that come pick up your garbage, your been that you leave at the curb every couple of weeks. So one risk is that if these local governments and municipalities start to in source more of that waste collection, which, I mean, we haven't really seen that trend happening, so I'm not too worried about that. But that is certainly something to keep an eye on. It is a risk.
The other big risk, and this applies to everything we've been talking about so far, is higher input costs.
The higher fuel costs, as you know, waste companies, the trucks need to run around the city all day picking up garbage to higher fuel costs will impact the bottom line and then a higher labour costs as well.
We know there has been wage inflation across many different sectors. Waste is no different.
So those are the things that I would look out for.
A pleasure having you here, was a fascinating conversation. Look forward to the next one.
Thanks for having me.
Our thanks to David Mau, VP, director and Portfolio manager TD Asset Management.
As always, make sure you do your own research before making any investment decisions. tomorrow, Robert Both, macro strategist at TD Securities will be our guest.
He'll be taking your questions about the economy and interest rates. You can get a head start. Just email moneytalklive@td.com.
That's all the time we have for the show today. Thanks for watching. We will see you tomorrow.
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