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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are going to take a look at the dramatic shift we are seeing in the electric vehicle market. At TD Asset Management David Mau helps us break it down. MoneyTalk's Anthony Okolie is going to take a look at the latest Canadian retail sales report and what might be telling us about the future of borrowing costs. And in today's WebBroker education segment, Caitlin Cormier is going to take us through how to screen through different types of ETFs using the platform.
Here's how you get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
Bit of a down session on Bay and Wall Street's. We will start here at home with the TSX Composite Index. Pulling back about 160 points, three quarters of a percent. Among the most actively traded names out there right now are a few that had earnings handed in. At Metro, had $70.54, it is going against the broader market, so up about 8%.
Problem seems to be among the rails. We had CN and CP reporting.
Both down about four or 5% at this hour.
Canadian national down 4 1/2%. South of the border, the US 10 year bond yield inching higher again today. All of this conversation percolating about higher it for longer rates when it comes to the fight.
The S&P 500 is pulling back one third of a percent. The tech heavy NASDAQ had been managing to hold onto positive territory for the morning session.
Even the NASDAQ now falling modestly negative. Let's check in on Tesla. They came out with their quarterly earnings. He will tell you more about that later of the show. The quarter behind them, Elon Musk wasn't focus on that. It was not a great quarter. He talked about the potential going forward. Tesla right now is up almost 11%. And that's your market update.
The automotive industry has spent years investing heavily into their electric vehicle offerings, but in recent months, there has been a pretty dramatic shift taking place.
Joining us now discusses David Mau, VP, Dir. and portfolio manager with TD Asset Management.
Great to have you back on the show.
>> Thanks for having me.
>> For the longest time, the narrative was electric vehicles are the future.
Companies were investing heavily. The consumer sort of spoke up.
It's been an interesting shift. Walk us through it.
>> Yeah, I mean, EV sales as a whole are still growing.
If we look at the numbers and 2023, EV sales were up 47%. This is globally.
That's about 18% of all new car sales last year. It's pretty meaningful.
But what you are talking about is a slowdown and we are definitely seeing that. For this year, 2024, the sales growth is expected to slow from that 47% down to something in the low 30s.
We are seeing a pretty meaningful decline in new EV demand.
The numbers here in North America, the US and Canada, it's actually a lot lower than 47% that I just mentioned. That's because a lot of growth in EV sales is coming from places outside of North America like Europe and China.
I think the OEMs are going to be facing a bit of a challenging situation for the next let's call it couple years until consumers can get to a place where they can absorb these higher prices because EVs generally cost more. That's the main sticking point and that's one of the reasons that we are seeing the sales decline and the second issue with EV demand is that people are realizing that the charging infrastructure out there is just not robust enough for them to commit to buying an electric vehicle and having that is their car.
>> That's interesting. As we see the softness in the EV market, every time I see commentary from the CEOs of Ford or GM or the big automakers, if they are not complete EV play like Tesla, their mix, they start talking more about that mix, particularly hybrids.
>> That's a very good point.
A lot of attention over the last few years has been all electric vehicles but we are seeing a shift and more attention and interest being paid to hybrid vehicles.
The reason for that is hybrids actually address two of the main challenges that I just mentioned, hybrids are actually cheaper to make it, cheaper to sell, so it's cheaper for the consumer to buy, and hybrids, as the name implies, has an electric motor and a gas powered engine so there isn't really that same kind of range anxiety for hybrids because when the electric motor runs out, runs out of charge, the car will still keep running on the gas engine alone.
That addresses two very important points for hybrid buyers.
Especially on the price front, if you look at a typical hybrid vehicle like a Honda Insight or a Toyota previous, the starting prices for those cars are around 30, US$35,000 starting price whereas most electric vehicles, we are talking midrange electric vehicles, they have a starting price in the low to mid 40s, may be a high $40,000 US, that's actually quite a big difference. It is a stumbling block for new buyers to come into the market.
>> I understand there is something called the Toyota 1-6-90 rule. What is this? Walk me through it.
>> Yeah, that's very interesting.
The Toyota 1-6-90 rule is part of an internal memo that Toyota had circulated to its employees and its dealers and as you can imagine with any internal memo it was leaked immediately to the public.
What the 1-6-90 rule is is based on Toyota studies and research, they have come to the conclusion that the amount of raw materials, and I'm talking about things like the minerals that go into an electric vehicle, things that come out of the earth like cobalt, nickel, lithium, the amount of resources that are needed to build one electric vehicle can build six plug-in hybrid vehicles or 90 regular non-plug-in hybrid vehicles.
And they came to the conclusion that when you look at the lifetime carbon reduction of one electric vehicle versus 90 hybrid cars, those 90 hybrid cars actually reduce carbon emissions by 37 times more than one single EV. So the whole point of the memo is to inform their dealers and their employees that Toyota is going to focus on hybrids as opposed to investing a ton of time and money into electric vehicles because the payoff from hybrids is actually much better both financially and from an environmental point of view then electric vehicles.
>> That sounds like the kind of argument that if it got wider traction could really undermine I guess even the central thesis of the electric vehicle. Could this be a challenging couple years ahead for EVs?
>> It could be, but as you and I both know, there are always improvements going on in the manufacturing of electric vehicles, batteries are getting better all the time, prices are coming down and production is ramping up. At some point, we will reach a balance point where hopefully EVs and hybrids are somewhat comparable.
>> Let's talk about some of the challenges that we have seen in the EV space. If there is often consumer demand and consumers are looking hybrids, the pickup truck is still a very popular option in North America, the traditional pickup truck with an ice engine.
I want to talk about the delayed EV plans.
We are seeing delayed and pushed out plans.
>> Like you mentioned, Tesla is going to lay off 10% of their global workforce.
That's a pretty big number.
Closer to home here in Ontario, Ford, the Oakville board plan, was scheduled to start producing electric vehicles in 2025.
Ford has announced they are actually going to push that back to 2027 so that's going to be a two-year delay and the reason they gave is that, Ford gave is that they want to give the market some time to develop, so basically they are waiting for the man to come back. Hopefully, in two years time, the technology has improved so they will be able to do things more efficiently, more cheaply.
>> Right now I know another issue when it comes to EVs, I know where laying out a lot of roadblocks for them right now, the resale value. You talk about technology moving on very quickly, what does that mean for someone who buys in EV thinking they might sell it a couple of years down the road?
>> That's a very interesting point.
I have seen some studies show that resale values across all types of cars, internal combustion, hybrid, EVs, the typical depreciation rate over a five year period is about 40%, and that's across all categories of cars. When you specifically look at electric vehicles, the depreciation rate is actually higher.
It's about 50%.
So if you bought $100,000 EV, in five years, it's at most going to be worth $50,000. There are a couple of reasons for that.
One big thing is that as a new EV models come out, as manufacturers are to push up more and more EV models, one of the big changes is a lower price. Imagine if, Tesla has already done this a couple of times in the last year where they have cut prices. So if Tesla cuts the price of their Model Y by $10,000, all of these existing Model Y said there on the road are also going to be worth less.
So that's one big factor as companies continue to reduce prices.
Another thing is, and we mentioned this already, is technology is moving very, very quickly.
If you look at an electric vehicle from four or five years ago, that battery technology has improved tremendously since then. So you EVs today are probably going to have a better range, quicker charging and things like, other things like the onboard technologies, the operating system that runs the car, that runs the driver assistance features, the safety features, even the entertainment features have improved drastically so people are starting to realize that within a couple of years, maybe three or four years, that brand-new EV that you bought a few years ago is starting to become outdated and in some cases is becoming obsolete.
I think that's keeping some people on the sidelines.
Not only is the car becoming outdated very quickly and resale value, it's also not as good when compared to other types of cars so that is actually waiting on current demand as well. The shift in demand is also not helpful board demand today because people are going to wait. I mean, some people who care about resale value are going to say, why don't I wait another year or another two years before I buy an electric vehicle?
>> I want to ask you, we put all this together, what should investors be mindful of when they are looking at the space?
>> I think for investors who are looking at OEMs, you've got to understand where their competitive position is within the industry. Are they a market leader or are they someone trying to catch up to the market leaders?
Obviously, valuations are important.
Tesla is the only automotive company that has a valuation, at least a PE valuation that is significantly higher than everyone else.
Most of the traditional mainstream automakers trade in the mid single digits.
Tesla I actually don't know after today's move, but I think there PE is probably in the high 40s or 50s. That's definitely something to dig into.
>> Fascinating stuff and a great start to the program. You will take your questions about industrial stocks for David Mau in just moment's time. And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Speaking of Tesla, shares clearly in the spotlight today. Last time I checked, they were double digits to the upside. The electric vehicle maker, let's talk about the order they had.
We are about 9% right now. They reported 9% drop in revenue for the first quarter this year. That is the steepest year-over-year decline for Tesla income in more than a decade.
But that doesn't appear to be the focus for investors today on that earnings call.
Elon Musk says Tesla aims to start producing lower cost vehicles by early next year and he throughout the rowboat taxi, self driving taxi. A few things working in his favour.
Rogers Communications has its looking at selling data sensors as part of a larger plan to divest assets. That said, the Telco says majority of its $1 billion asset sale plan will focus on real estate.
The comments came as Rogers delivered a mixed quarterly report. Right now, the stock down about 3%.
And we got those major Canadian rails reporting today also. Let's start with CN.
Increase labour cost and reduce sales revenue for container shipments weighing on the bottom line for National Railways most recent quarter. That resulted in nearly a 10% drop in profit compared to the same period last year. CEO Tracy Robinson says the re-acceleration of the economy will benefit the railway going forward.
Meantime, it Canadian Pacific Kansas City reporting that its first quarter profit fell compared to the same period last year. They are also down about 5%.
A quick check on the markets, let's take a look at the TSX Composite Index.
We are in negative territory, I will tell you that much. I can show it to you at the moment but on my screen it's and 159 point sense of the border, the S&P 500 pulling back today. We are in the thick of earnings season in the United States. A bond yields are pushing higher amid the conversation of higher for longer rates, and right now the S&P 500 is down a little more than 1/3 of a percent.
We are back with David Mau, taking your questions about industrial stocks. Another one reporting today. What is your view on Boeing?
I think it's a case of a quarterly report not being as bad as expected.
>> Yeah. Boeing is facing quite a lot of difficulties right now and it's a very difficult environment for them at the moment. You are probably aware of the incident that happened in January.
>> The door plug incident.
>> The door plug incident that blew off in Alaska Airlines 737.
That wasn't the beginning of third trouble. They have been having safety and quality issues for a few years now.
The company has made some changes. We have already seen the CEO announced that he's going to leave at the end of this year.
There have been changes at the board level. I think it's going to take them sometime, probably a few years to earn back the trust of their airline customers and the flying public in general.
They've got a lot of work to do. They are actually under a criminal investigation right now by the Department of Justice that is related to that January incident.
I have a fairly cautious view on Boeing now. I think it will take some time for them to turn the ship around.
>> When I think of internationally the number of big players in the space, there are not many. Is this to the advantage of an Airbus and others or is it something that has the entire industry on a bit of notice?
>> It is definitely a positive for Airbus because, like I said, Boeing has lost the trust of some of their customers. Boeing has not been able to fulfil their delivery schedule so a lot of their airline customers are upset with them because airlines need to plan years in advance and they are counting on receiving these planes from Boeing and that has changed dramatically in the last couple of years.
Boeing has had to reduce their production schedule. They have not been delivering planes on time. So it is definitely a positive for Airbus. But from Airbus's point of view, their production schedule is filled up for the next 6 to 8 years.
I knew customer comes Airbus and says I want 30 A320s, you get to the back of the wide and you will get them for another seven or eight years.
>> Interesting stuff. And I segue into the next question from the audience. What is your outlook for the US airlines?
The American ones had their first quarter reports.
>> They are mentioning Boeing not a positive way.
That is related to the delivery delays that were mentioned.
As far as the US airlines go, it's really positive. We are seeing leisure travel demand quite strong and Delta Airlines was reported their first quarter couple weeks ago indicated that they are seeing a very strong recovery in business travel, and that's really, really great for them because business travel is the most profitable segment of air travel for these major carriers.
I think it's American Airlines that are reporting tomorrow. We will see if that recovery and business travel… >> If it's sector wide. That's what we've been waiting for, right? The whole idea of the revenge travel coming out of the pandemic and businesses stopped sending people all over the country because they could do it over and Internet call.
>> Does seem like business travel is coming back to the positive. That's not to say airlines don't still face challenges.
Operating costs of gone across the board.
Jet fuel is much more expensive now than it was a couple of years ago. Employee salaries are much higher so things like that do present some challenges.
Overall, it is positive to see that there is a robust demand for travel.
In leisure travel, they seem to be willing and able to absorb higher prices. Alyssa had set it up for a pretty good spring and summer travel session.
>> Another question here about the airlines, closer to home.
Will Air Canada be able to compete globally going forward or is it destined to be a predominantly domestic airline?
>> Air Canada is Canada's national carrier, it is always going to have a focus on the domestic market.
That is not going to change. But if you actually look at Air Canada in comparison to the rest of the world's major airlines, Air Canada is already kind of up there.
Last year, I think the number I saw, Air Canada carried close to 50 million, 47 million passengers in 2023. So that would put Air Canada kind of in the top 15 to 20 airlines globally in terms of passengers carried.
So that's not a bad place to be. In terms of revenue, Air Canada is in the top 10 or 12 of all airlines in the world in terms of revenue generation.
You have to take into account that is Canada's national carrier, Canada's population sizes smaller than the US. I don't think Air Canada would ever get to the scale that you see of major US airlines like Delta. But globally, Air Canada is already quite competitive.
>> Fascinating stuff.
As always, make sure you do your own research before making any investment decisions.
we will get back your questions for David Mau and 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.
There are plenty of different types of exchange traded funds out there and in today's education segment, Caitlin Cormier, Senior client education instructor with TD Direct Investing is going to take us through how to screen for them on the platform. Always great to see.
Let's talk about where we go. Maybe we are looking for Canadian dividend ETFs. How would we look for them?
>> Make sure I'm on muted there. There we go. That is a great place to start, Greg.
The good news is that we have an excellent tool to help find that specific type of ETFs. It's funny that you mention those once in particular. Let's go ahead and hop into a broker and find where we can see those specifically Canadian dividend ETFs.
Under research, we are going under tools and clicking on screeners.
Once we are here, instead of navigating over to ETFs, we are going to stay under stocks and we are going to look at seems.
You'll notice that there are a lot of different themes here for stocks. You can see these are for individual companies.
But we do have a couple of different screens that are for ETFs.
This one here for example is trading centrals curated list of different companies that have certain assets under management as well as they are having dividends and those sorts of things as well. If we go ahead and click on this theme, which is a grouping of securities under one particular category, we can see that there is actually 23 matches or ETFs that will match that specific theme. So as we go through, we can see there is a price performance listed here as kind of a data point as well as a unit price for the ETF.
We can add additional information if you would like. If we wanted to have, for example, the dividend yield, what we are actually receiving as far as a dividend on that particular company, we can view it there. We also have any other information, there are a couple of things that pop up here, including earnings per share growth and those sorts of things.
Just one sec here, let me click on my dividend yield. There we go.
So we can actually go through and look at these different companies. We can click on for example the top 10. If I click, it will actually you tell me exactly why this particular ETF is listed within the top 10.
It has very good price performance five day as will as stock price compared to the other companies that are listed in this ranking. Kind of a quick way to find information. You can also go ahead and click here and click on for example overview and go to the information paid for this particular ETF if you think you might want to do more research on it.
>> How about finding other types of ETFs on the platform?
>> Yeah, so exactly as I just mentioned, we have the ETF tab as well within the screeners have so if you are not looking for the specific types of Canadian dividend growers, instead, we can come in to research, go into screeners and then just choose the ETFs tab. This will take us to specific criteria that is meant for ETFs as opposed to other types of investments. We can choose some specific criteria here. For example, we are going to click create custom screen as opposed to going to these featured or saved screens.
I'm going to start just by clicking fund category. Let's choose fund type.
And then we can scroll down and go ahead and choose if there's a specific type of fund that we are looking for so let's just choose for example international equity for today. I'm going to come up here and choose my management expense ratio. That would just be the fees or expenses paid in order to hold something like an exchange traded fund.
I'm going to click to add that. Here and what to go ahead and choose it maybe I am looking for lower cost. It I don't need the lowest but below average is what I'm looking for as far as cost. I'm going to remove the mutual funds because I just want to see ETFs today.
If you'll notice, you will see that I have 146 matches, still a lot. Maybe I would like to filter down a little further.
There are a lot of other pieces of criteria. You can click through and see what information you can filter on. Risk rating, performance.
Maybe I'm looking for distribution so I will select above average or highest distribution.
Now I have filtered it way down to just 17 results.
I'm going to click view matches and here I have those results.
I can see here what my criteria was, international equity management expense ratio below average, distribution yield above average as well.
As I scroll through here, I can see the different names that show up for ETFs, I can see the criteria that matches what I put in and I can also click through these other pages and see additional information about these ETFs, find a way to filter them down a little further, find a few that I might want to add to a little bit more detail and if I do, I simply go ahead and click this little box beside whatever ETFs I want to compare it further side-by-side then just click the compare button and of course we come over to this tool where we can do the side-by-side comparison of those particular ETFs.
As always, we can add them to a watchlist if we want so that we are able to come back and review them further in the future and keep an eye on them, see how they are performing and see if we want to add them to our portfolio or not.
>> Great stuff as always. Thanks for that.
>> Thanks, Greg.
>> Our thanks to Caitlin Cormier, Senior client education instructor with TD Direct Investing.
For more educational resources, you can check out the education centre on a broker or use this QR code which will navigate to TD Direct Investing's Instagram page where you can find more informative videos. We will display the code again at the end of the show if you don't have your phone handy.
Don't worry, we will bring the code back at the end of the show and you will get another crack at it.
Before you get back to your questions about industrial stocks for David Mau, a reminder of how you 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 another when here. What is your view of the Canadian railroads for this year and longer term?
Not having a great day today price action lies.
>> Today's market reaction notwithstanding, I generally have a positive view on the Canadian rails.
Over long periods of time, these guys, see NNTP, have them perform the market quite significantly. These are well-run companies.
Well-run companies operating in a fairly oligopolistic market.
These networks that they have cannot easily be replicated or replaced.
I don't think that's going to change anytime soon.
As I said, today's four or 5% drop notwithstanding, the Canadian rails are really, really good places for long-term investors and I think they have a place in people's portfolios as a core holding.
>> When it came to Canadian National Railway, I know the CEO made comments saying, as we see the economy pickup, and there are expectations that the Canadian economy will pick up, the US is doing well, it will be good for the rails.
You have to have a view on where the economy is headed if you're starting to think about the rails.
>> I think people view rails as somewhat representative of the economy, not just Canada but globally, because as Canada, we do export a lot of raw materials that are transported by rail. But like I said, over the long term and over many different cycles, the Canadian rails have outperformed and I don't think that will change.
>> Interesting on the rails there to keep an eye on.
Completely different kind of business.
Thoughts on the waste management sector?
>> I like the waste management sector, I like the waste industry.
If we look at the big players like waste management or Republic services, these guys over a period of 10 or 15 years, their share price return is more than double that of the market and there's a good reason for that.
Waste is generally considered less cyclical than many other industrial sectors, and that's because good times were bad, people need to have the garbage picked up.
Residential customers usually pay for their waste pickup through their utility bill or property taxes depending on where you are, so that's not really going to change. For commercial customers like small businesses, restaurants, shops and things like that, even when times are tough, looking to cut your expense on waste is not the first thing you do when the going gets rough.
You still need to have your waist picked up every two weeks or every week, regardless of how the business is going because it's just a part of the business and the cost of waste collection, pickup and disposal is such a very small part of the businesses operating budget, they don't really look there is something that's going to save them money in a meaningful way.
Waste is generally, in my view, less cyclical.
It does offer a bit better downside protection.
You might not have the same kind of torque to the upside as a tech company or some kind of AI company when things are going really well, but waste, I think, similar to rails, it should have a place in people's portfolios.
>> When I think about the way story over the last several years, it's been about buying smaller operations, consolidating the space.
Is there still room for that sort of consolidation, the mom and pop ways companies in the bigger ones, or his that played out?
>> There is definitely still room.
I will speak about the US here. Major waste companies take up 50 or 60% of the market, that leaves 40 or 50% of the market still run by small family-run companies, 6 to 8 trucks, and they collect waste in their town or small city. As bigger guys come in and roll the smaller players up, they generally end up running these operations a bit more efficiently because they have the scale, they have more experience and a bigger network.
That's good for everyone, the customers, the company, the investors.
>> Let's get to another question from the audience, but one of the headlines today.
A viewer wants to know how realistic it is that Tesla will deliver a new low price model by next year? This is what Elon Musk was saying. Don't worry, we know it's highly competitive, we have something for you.
>> From what I saw, he said possibly by the end of 2024 but more likely spring early 2025.
How likely is that?
Me personally, I don't believe it.
He has made promises like this many, many, many times and in most cases, he has failed to deliver. At least, he has failed to deliver the specific timeline that he referenced.
You know, he does eventually get to his goal, but it usually takes a lot longer than what he tells people at the beginning.
So yeah, I would read the probability of having a $25,000 EV available-for-sale in spring 2025 is very low.
>> Interesting stuff.
>> He could prove me wrong though.
>> She's going to want to try to prove everyone wrong.
It's a pretty tall order.
>> Yeah, definitely.
>> Interesting stuff. We are going to get back to your questions for David Mau on industrial stocks in just a moment time.
As always, make sure you do your own research before making any investment decisions.
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.
A lot going on today. We also got a new read on the health of the Canadian consumer retail sales for the month of February.
Lower for the second month in the row. We know we are all dealing with the high cost of living, as he put it all together, what could it mean for the Bank of Canada, the bigger picture? Our Anthony Okolie has been digging into a report on that topic.
>> February retail sales here in Canada edged lower by .1% month over month. That compares to stats Canada's advanced estimate of 8.1% increase. When we adjusted for inflation, retail sales are down .3% after two months of gains.
Preliminary estimates for March showed that sales were likely unchanged in March.
Now, looking at some of the big movers, motor vehicle sales, which accounts for more than 1/4 of total sales, that's the biggest chunk, rose by half a percent month over month, raising some of January's losses. According to industry estimates, March is trending positive for auto sales as the new vehicle market has remained robust. We continue to see improved vehicle availability. That has made a real impact on the market, helping to ease pent-up demand and rates on auto loans and the slowing economy. However, total sales were pulled down by a broad-based drop across several subsectors. We saw a decline in five out of the nine subsectors. Gas stations, fuel vendor sales were down despite higher prices at the pump. When we look at core retail sales, which provides more of an accurate reflection of consumers spending trends, sales remained unchanged for January.
While certain sectors such as general merchandise, retailers reported high receipts, others experienced declines, the biggest losses were in electronics and appliance stores, clothing and clothing accessories among other things, reflecting a change in the consumer preferences or economic conditions. Now, the drop in February retail sales were more widespread versus January's figures and that sort of reflects the weaker than expected performance in core measures, excluding auto and gas station sales and really underscores the challenges that consumers are facing with the higher cost of living and the higher interest rates or borrowing costs. Despite the overall softness, car sales emerged as a bright spot after January's decline and TD's internal credit and debit spending data indicates an expansion in both goods and services spending in March, keeping TD economics real consumption tracking at a range of about 2.8% to 3% for the first quarter of 2024. The solid spending momentum has been supported by still meaningful excess deposits, robust population growth and the wealth effect. However, with the job market slowing, TD economics expects that income growth will moderate which will in turn lead to a slower pace of consumer spending going forward.
>> So the consumer appetite starts to get tamped back by the higher cost of borrowing, this is what the BOC has been trying to do, and bringing down inflation as a result. You put all that together, what are they thinking about the chances of a rate cut?
>> The prospect of a rate cut remain dependent on the trajectory of inflation.
Marches inflation data marked three straight months of good news on core inflation with inflation still at the top of the Bank of Canada's range. TD economics expects the bank will want to see more confirmation that inflation is moving towards 2% target before it cuts rates. The Bank of Canada To its overnight rate unchanged at 5% this month for the sixth time in a row but they did say that a rate cut in June was a possibility.
Markets you the chance of a June rate cut as a coin toss where a 25 Basis Point Cut in July is fully priced in.
As it stands, TD economics is leaning for a rate cut in July.
However, if the numbers continue to soften by more than expected, talking about inflation, TD economics as the risks are tilted towards an earlier move.
>> For this economy, that's the big question of the year. Thanks for breaking that down.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat map function, gives a nice picture of the market movers. What is going on? TSX 60, let's take a look right now. We had the rails reporting today so you can see CN Rail and CP both underwater to the tune of roughly about 5%. Also had Rogers reporting.
Rogers peeling back about 3% as well and not a lot of green on the screen. The financials taking points off the table 2, triple digit loss for the TSX Composite Index. Let's go south of the border.
Bond yields are on the rise again. The crush of earnings coming out. Tesla making big gains today and holding onto them, up about 9%.
That was enough earlier to get the NASDAQ above water but it has now fallen into negative territory. Nvidia down 2.5%.
We are back now with David Mau from TD Asset Management talking industrial.
This question just came in.
Do you see Chinese EVs flooding the market?
>> So at this point, honestly, I think not and I will tell you why. The reason is Chinese EVs are certainly cheap and they are being produced at a very, very fast rate.
So there is a ton of cheap EVs out there in China.
Now, they are not all tea. Some companies, some of the cars are quite good and very competitive to a Tesla or other high-end manufacturers but the reason I say that I don't see cheap Chinese electric vehicles flooding say the North American or European market is that I don't think the governments will allow it.
If you think about the US, obviously they have a vested interest in developing their own American companies that build electric vehicles, same for Europe.
Even if there is a ton of availability and try to wants to ship those EVs to these Western countries, I don't think the governments will just let them come in.
What I think they will do is they will impose some pretty high tariffs. The car itself might actually only cost under $15,000 but they may slap a 100% tariff on that and the selling price to the consumer is still 30 or $40,000 because they do have to protect their own domestic EV industry and development.
The one way around that, the one scenario where you could see more Chinese electric vehicles come to North America and Europe, is if these companies start to use local content. So they are using parts from that are made in America or parts that are made in Europe.
And they are also building and assembling the car in the country that is going to be sold in, so we are seeing some of that, a little bit of that. BYD has been doing that in the US. But I think that's the only way you're going to see imported Chinese electric vehicles going to markets, if they source and build locally because that's going to be a benefit for the country where the suppliers are getting more business and its providing jobs the local economy.
>> Before let you go, we just got a question about of you were asking if Boeing is at a buy at these levels. Here on the platform, we cannot give a buy or sell recommendations but maybe refresh us quickly.
You have concerns about Boeing having a long path to get back the trust of its customers.
>> How would I put this? The stock has fallen a lot. It's one of the worst performers in the Dow Jones and S&P this year.
There is a very real possibility that there's going to be some sort of short-term bounce. We saw a little bit of that today when the results come out. But I will remind people that Boeing has not has a profitable quarter since 2021 and I was just one quarter.
Their financial situation is actually deteriorating, their balance sheet is getting a little bit worse.
They've had negative cash flow for the last little while.
So would I be looking to jump in at these levels?
Like I said earlier, I'm cautious on the name.
I would probably wait at least a few more quarters to see how things develop and whether or not the FAA is going to allow Boeing to ramp up production again.
There still a lot of overhang in the stock, I think.
>> A lot of important things to keep in mind there if you're looking ugly. Great to have you back on the program.
Look forward to the next time.
>> Thanks.
>> Our thanks to David Mau, VP, Dir. and portfolio manager at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
if we didn't have time to get your questions today, we will try to get it into future shows. As promised, we said we would show you that QR code again in case you didn't have your phone handy earlier.
It will take you to you TD Direct Investing this Instagram account will you or find more informative videos. You want to stay tuned for tomorrow show.
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Just email MoneyTalkLive@TD.com.
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[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are going to take a look at the dramatic shift we are seeing in the electric vehicle market. At TD Asset Management David Mau helps us break it down. MoneyTalk's Anthony Okolie is going to take a look at the latest Canadian retail sales report and what might be telling us about the future of borrowing costs. And in today's WebBroker education segment, Caitlin Cormier is going to take us through how to screen through different types of ETFs using the platform.
Here's how you get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
Bit of a down session on Bay and Wall Street's. We will start here at home with the TSX Composite Index. Pulling back about 160 points, three quarters of a percent. Among the most actively traded names out there right now are a few that had earnings handed in. At Metro, had $70.54, it is going against the broader market, so up about 8%.
Problem seems to be among the rails. We had CN and CP reporting.
Both down about four or 5% at this hour.
Canadian national down 4 1/2%. South of the border, the US 10 year bond yield inching higher again today. All of this conversation percolating about higher it for longer rates when it comes to the fight.
The S&P 500 is pulling back one third of a percent. The tech heavy NASDAQ had been managing to hold onto positive territory for the morning session.
Even the NASDAQ now falling modestly negative. Let's check in on Tesla. They came out with their quarterly earnings. He will tell you more about that later of the show. The quarter behind them, Elon Musk wasn't focus on that. It was not a great quarter. He talked about the potential going forward. Tesla right now is up almost 11%. And that's your market update.
The automotive industry has spent years investing heavily into their electric vehicle offerings, but in recent months, there has been a pretty dramatic shift taking place.
Joining us now discusses David Mau, VP, Dir. and portfolio manager with TD Asset Management.
Great to have you back on the show.
>> Thanks for having me.
>> For the longest time, the narrative was electric vehicles are the future.
Companies were investing heavily. The consumer sort of spoke up.
It's been an interesting shift. Walk us through it.
>> Yeah, I mean, EV sales as a whole are still growing.
If we look at the numbers and 2023, EV sales were up 47%. This is globally.
That's about 18% of all new car sales last year. It's pretty meaningful.
But what you are talking about is a slowdown and we are definitely seeing that. For this year, 2024, the sales growth is expected to slow from that 47% down to something in the low 30s.
We are seeing a pretty meaningful decline in new EV demand.
The numbers here in North America, the US and Canada, it's actually a lot lower than 47% that I just mentioned. That's because a lot of growth in EV sales is coming from places outside of North America like Europe and China.
I think the OEMs are going to be facing a bit of a challenging situation for the next let's call it couple years until consumers can get to a place where they can absorb these higher prices because EVs generally cost more. That's the main sticking point and that's one of the reasons that we are seeing the sales decline and the second issue with EV demand is that people are realizing that the charging infrastructure out there is just not robust enough for them to commit to buying an electric vehicle and having that is their car.
>> That's interesting. As we see the softness in the EV market, every time I see commentary from the CEOs of Ford or GM or the big automakers, if they are not complete EV play like Tesla, their mix, they start talking more about that mix, particularly hybrids.
>> That's a very good point.
A lot of attention over the last few years has been all electric vehicles but we are seeing a shift and more attention and interest being paid to hybrid vehicles.
The reason for that is hybrids actually address two of the main challenges that I just mentioned, hybrids are actually cheaper to make it, cheaper to sell, so it's cheaper for the consumer to buy, and hybrids, as the name implies, has an electric motor and a gas powered engine so there isn't really that same kind of range anxiety for hybrids because when the electric motor runs out, runs out of charge, the car will still keep running on the gas engine alone.
That addresses two very important points for hybrid buyers.
Especially on the price front, if you look at a typical hybrid vehicle like a Honda Insight or a Toyota previous, the starting prices for those cars are around 30, US$35,000 starting price whereas most electric vehicles, we are talking midrange electric vehicles, they have a starting price in the low to mid 40s, may be a high $40,000 US, that's actually quite a big difference. It is a stumbling block for new buyers to come into the market.
>> I understand there is something called the Toyota 1-6-90 rule. What is this? Walk me through it.
>> Yeah, that's very interesting.
The Toyota 1-6-90 rule is part of an internal memo that Toyota had circulated to its employees and its dealers and as you can imagine with any internal memo it was leaked immediately to the public.
What the 1-6-90 rule is is based on Toyota studies and research, they have come to the conclusion that the amount of raw materials, and I'm talking about things like the minerals that go into an electric vehicle, things that come out of the earth like cobalt, nickel, lithium, the amount of resources that are needed to build one electric vehicle can build six plug-in hybrid vehicles or 90 regular non-plug-in hybrid vehicles.
And they came to the conclusion that when you look at the lifetime carbon reduction of one electric vehicle versus 90 hybrid cars, those 90 hybrid cars actually reduce carbon emissions by 37 times more than one single EV. So the whole point of the memo is to inform their dealers and their employees that Toyota is going to focus on hybrids as opposed to investing a ton of time and money into electric vehicles because the payoff from hybrids is actually much better both financially and from an environmental point of view then electric vehicles.
>> That sounds like the kind of argument that if it got wider traction could really undermine I guess even the central thesis of the electric vehicle. Could this be a challenging couple years ahead for EVs?
>> It could be, but as you and I both know, there are always improvements going on in the manufacturing of electric vehicles, batteries are getting better all the time, prices are coming down and production is ramping up. At some point, we will reach a balance point where hopefully EVs and hybrids are somewhat comparable.
>> Let's talk about some of the challenges that we have seen in the EV space. If there is often consumer demand and consumers are looking hybrids, the pickup truck is still a very popular option in North America, the traditional pickup truck with an ice engine.
I want to talk about the delayed EV plans.
We are seeing delayed and pushed out plans.
>> Like you mentioned, Tesla is going to lay off 10% of their global workforce.
That's a pretty big number.
Closer to home here in Ontario, Ford, the Oakville board plan, was scheduled to start producing electric vehicles in 2025.
Ford has announced they are actually going to push that back to 2027 so that's going to be a two-year delay and the reason they gave is that, Ford gave is that they want to give the market some time to develop, so basically they are waiting for the man to come back. Hopefully, in two years time, the technology has improved so they will be able to do things more efficiently, more cheaply.
>> Right now I know another issue when it comes to EVs, I know where laying out a lot of roadblocks for them right now, the resale value. You talk about technology moving on very quickly, what does that mean for someone who buys in EV thinking they might sell it a couple of years down the road?
>> That's a very interesting point.
I have seen some studies show that resale values across all types of cars, internal combustion, hybrid, EVs, the typical depreciation rate over a five year period is about 40%, and that's across all categories of cars. When you specifically look at electric vehicles, the depreciation rate is actually higher.
It's about 50%.
So if you bought $100,000 EV, in five years, it's at most going to be worth $50,000. There are a couple of reasons for that.
One big thing is that as a new EV models come out, as manufacturers are to push up more and more EV models, one of the big changes is a lower price. Imagine if, Tesla has already done this a couple of times in the last year where they have cut prices. So if Tesla cuts the price of their Model Y by $10,000, all of these existing Model Y said there on the road are also going to be worth less.
So that's one big factor as companies continue to reduce prices.
Another thing is, and we mentioned this already, is technology is moving very, very quickly.
If you look at an electric vehicle from four or five years ago, that battery technology has improved tremendously since then. So you EVs today are probably going to have a better range, quicker charging and things like, other things like the onboard technologies, the operating system that runs the car, that runs the driver assistance features, the safety features, even the entertainment features have improved drastically so people are starting to realize that within a couple of years, maybe three or four years, that brand-new EV that you bought a few years ago is starting to become outdated and in some cases is becoming obsolete.
I think that's keeping some people on the sidelines.
Not only is the car becoming outdated very quickly and resale value, it's also not as good when compared to other types of cars so that is actually waiting on current demand as well. The shift in demand is also not helpful board demand today because people are going to wait. I mean, some people who care about resale value are going to say, why don't I wait another year or another two years before I buy an electric vehicle?
>> I want to ask you, we put all this together, what should investors be mindful of when they are looking at the space?
>> I think for investors who are looking at OEMs, you've got to understand where their competitive position is within the industry. Are they a market leader or are they someone trying to catch up to the market leaders?
Obviously, valuations are important.
Tesla is the only automotive company that has a valuation, at least a PE valuation that is significantly higher than everyone else.
Most of the traditional mainstream automakers trade in the mid single digits.
Tesla I actually don't know after today's move, but I think there PE is probably in the high 40s or 50s. That's definitely something to dig into.
>> Fascinating stuff and a great start to the program. You will take your questions about industrial stocks for David Mau in just moment's time. And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Speaking of Tesla, shares clearly in the spotlight today. Last time I checked, they were double digits to the upside. The electric vehicle maker, let's talk about the order they had.
We are about 9% right now. They reported 9% drop in revenue for the first quarter this year. That is the steepest year-over-year decline for Tesla income in more than a decade.
But that doesn't appear to be the focus for investors today on that earnings call.
Elon Musk says Tesla aims to start producing lower cost vehicles by early next year and he throughout the rowboat taxi, self driving taxi. A few things working in his favour.
Rogers Communications has its looking at selling data sensors as part of a larger plan to divest assets. That said, the Telco says majority of its $1 billion asset sale plan will focus on real estate.
The comments came as Rogers delivered a mixed quarterly report. Right now, the stock down about 3%.
And we got those major Canadian rails reporting today also. Let's start with CN.
Increase labour cost and reduce sales revenue for container shipments weighing on the bottom line for National Railways most recent quarter. That resulted in nearly a 10% drop in profit compared to the same period last year. CEO Tracy Robinson says the re-acceleration of the economy will benefit the railway going forward.
Meantime, it Canadian Pacific Kansas City reporting that its first quarter profit fell compared to the same period last year. They are also down about 5%.
A quick check on the markets, let's take a look at the TSX Composite Index.
We are in negative territory, I will tell you that much. I can show it to you at the moment but on my screen it's and 159 point sense of the border, the S&P 500 pulling back today. We are in the thick of earnings season in the United States. A bond yields are pushing higher amid the conversation of higher for longer rates, and right now the S&P 500 is down a little more than 1/3 of a percent.
We are back with David Mau, taking your questions about industrial stocks. Another one reporting today. What is your view on Boeing?
I think it's a case of a quarterly report not being as bad as expected.
>> Yeah. Boeing is facing quite a lot of difficulties right now and it's a very difficult environment for them at the moment. You are probably aware of the incident that happened in January.
>> The door plug incident.
>> The door plug incident that blew off in Alaska Airlines 737.
That wasn't the beginning of third trouble. They have been having safety and quality issues for a few years now.
The company has made some changes. We have already seen the CEO announced that he's going to leave at the end of this year.
There have been changes at the board level. I think it's going to take them sometime, probably a few years to earn back the trust of their airline customers and the flying public in general.
They've got a lot of work to do. They are actually under a criminal investigation right now by the Department of Justice that is related to that January incident.
I have a fairly cautious view on Boeing now. I think it will take some time for them to turn the ship around.
>> When I think of internationally the number of big players in the space, there are not many. Is this to the advantage of an Airbus and others or is it something that has the entire industry on a bit of notice?
>> It is definitely a positive for Airbus because, like I said, Boeing has lost the trust of some of their customers. Boeing has not been able to fulfil their delivery schedule so a lot of their airline customers are upset with them because airlines need to plan years in advance and they are counting on receiving these planes from Boeing and that has changed dramatically in the last couple of years.
Boeing has had to reduce their production schedule. They have not been delivering planes on time. So it is definitely a positive for Airbus. But from Airbus's point of view, their production schedule is filled up for the next 6 to 8 years.
I knew customer comes Airbus and says I want 30 A320s, you get to the back of the wide and you will get them for another seven or eight years.
>> Interesting stuff. And I segue into the next question from the audience. What is your outlook for the US airlines?
The American ones had their first quarter reports.
>> They are mentioning Boeing not a positive way.
That is related to the delivery delays that were mentioned.
As far as the US airlines go, it's really positive. We are seeing leisure travel demand quite strong and Delta Airlines was reported their first quarter couple weeks ago indicated that they are seeing a very strong recovery in business travel, and that's really, really great for them because business travel is the most profitable segment of air travel for these major carriers.
I think it's American Airlines that are reporting tomorrow. We will see if that recovery and business travel… >> If it's sector wide. That's what we've been waiting for, right? The whole idea of the revenge travel coming out of the pandemic and businesses stopped sending people all over the country because they could do it over and Internet call.
>> Does seem like business travel is coming back to the positive. That's not to say airlines don't still face challenges.
Operating costs of gone across the board.
Jet fuel is much more expensive now than it was a couple of years ago. Employee salaries are much higher so things like that do present some challenges.
Overall, it is positive to see that there is a robust demand for travel.
In leisure travel, they seem to be willing and able to absorb higher prices. Alyssa had set it up for a pretty good spring and summer travel session.
>> Another question here about the airlines, closer to home.
Will Air Canada be able to compete globally going forward or is it destined to be a predominantly domestic airline?
>> Air Canada is Canada's national carrier, it is always going to have a focus on the domestic market.
That is not going to change. But if you actually look at Air Canada in comparison to the rest of the world's major airlines, Air Canada is already kind of up there.
Last year, I think the number I saw, Air Canada carried close to 50 million, 47 million passengers in 2023. So that would put Air Canada kind of in the top 15 to 20 airlines globally in terms of passengers carried.
So that's not a bad place to be. In terms of revenue, Air Canada is in the top 10 or 12 of all airlines in the world in terms of revenue generation.
You have to take into account that is Canada's national carrier, Canada's population sizes smaller than the US. I don't think Air Canada would ever get to the scale that you see of major US airlines like Delta. But globally, Air Canada is already quite competitive.
>> Fascinating stuff.
As always, make sure you do your own research before making any investment decisions.
we will get back your questions for David Mau and 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.
There are plenty of different types of exchange traded funds out there and in today's education segment, Caitlin Cormier, Senior client education instructor with TD Direct Investing is going to take us through how to screen for them on the platform. Always great to see.
Let's talk about where we go. Maybe we are looking for Canadian dividend ETFs. How would we look for them?
>> Make sure I'm on muted there. There we go. That is a great place to start, Greg.
The good news is that we have an excellent tool to help find that specific type of ETFs. It's funny that you mention those once in particular. Let's go ahead and hop into a broker and find where we can see those specifically Canadian dividend ETFs.
Under research, we are going under tools and clicking on screeners.
Once we are here, instead of navigating over to ETFs, we are going to stay under stocks and we are going to look at seems.
You'll notice that there are a lot of different themes here for stocks. You can see these are for individual companies.
But we do have a couple of different screens that are for ETFs.
This one here for example is trading centrals curated list of different companies that have certain assets under management as well as they are having dividends and those sorts of things as well. If we go ahead and click on this theme, which is a grouping of securities under one particular category, we can see that there is actually 23 matches or ETFs that will match that specific theme. So as we go through, we can see there is a price performance listed here as kind of a data point as well as a unit price for the ETF.
We can add additional information if you would like. If we wanted to have, for example, the dividend yield, what we are actually receiving as far as a dividend on that particular company, we can view it there. We also have any other information, there are a couple of things that pop up here, including earnings per share growth and those sorts of things.
Just one sec here, let me click on my dividend yield. There we go.
So we can actually go through and look at these different companies. We can click on for example the top 10. If I click, it will actually you tell me exactly why this particular ETF is listed within the top 10.
It has very good price performance five day as will as stock price compared to the other companies that are listed in this ranking. Kind of a quick way to find information. You can also go ahead and click here and click on for example overview and go to the information paid for this particular ETF if you think you might want to do more research on it.
>> How about finding other types of ETFs on the platform?
>> Yeah, so exactly as I just mentioned, we have the ETF tab as well within the screeners have so if you are not looking for the specific types of Canadian dividend growers, instead, we can come in to research, go into screeners and then just choose the ETFs tab. This will take us to specific criteria that is meant for ETFs as opposed to other types of investments. We can choose some specific criteria here. For example, we are going to click create custom screen as opposed to going to these featured or saved screens.
I'm going to start just by clicking fund category. Let's choose fund type.
And then we can scroll down and go ahead and choose if there's a specific type of fund that we are looking for so let's just choose for example international equity for today. I'm going to come up here and choose my management expense ratio. That would just be the fees or expenses paid in order to hold something like an exchange traded fund.
I'm going to click to add that. Here and what to go ahead and choose it maybe I am looking for lower cost. It I don't need the lowest but below average is what I'm looking for as far as cost. I'm going to remove the mutual funds because I just want to see ETFs today.
If you'll notice, you will see that I have 146 matches, still a lot. Maybe I would like to filter down a little further.
There are a lot of other pieces of criteria. You can click through and see what information you can filter on. Risk rating, performance.
Maybe I'm looking for distribution so I will select above average or highest distribution.
Now I have filtered it way down to just 17 results.
I'm going to click view matches and here I have those results.
I can see here what my criteria was, international equity management expense ratio below average, distribution yield above average as well.
As I scroll through here, I can see the different names that show up for ETFs, I can see the criteria that matches what I put in and I can also click through these other pages and see additional information about these ETFs, find a way to filter them down a little further, find a few that I might want to add to a little bit more detail and if I do, I simply go ahead and click this little box beside whatever ETFs I want to compare it further side-by-side then just click the compare button and of course we come over to this tool where we can do the side-by-side comparison of those particular ETFs.
As always, we can add them to a watchlist if we want so that we are able to come back and review them further in the future and keep an eye on them, see how they are performing and see if we want to add them to our portfolio or not.
>> Great stuff as always. Thanks for that.
>> Thanks, Greg.
>> Our thanks to Caitlin Cormier, Senior client education instructor with TD Direct Investing.
For more educational resources, you can check out the education centre on a broker or use this QR code which will navigate to TD Direct Investing's Instagram page where you can find more informative videos. We will display the code again at the end of the show if you don't have your phone handy.
Don't worry, we will bring the code back at the end of the show and you will get another crack at it.
Before you get back to your questions about industrial stocks for David Mau, a reminder of how you 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 another when here. What is your view of the Canadian railroads for this year and longer term?
Not having a great day today price action lies.
>> Today's market reaction notwithstanding, I generally have a positive view on the Canadian rails.
Over long periods of time, these guys, see NNTP, have them perform the market quite significantly. These are well-run companies.
Well-run companies operating in a fairly oligopolistic market.
These networks that they have cannot easily be replicated or replaced.
I don't think that's going to change anytime soon.
As I said, today's four or 5% drop notwithstanding, the Canadian rails are really, really good places for long-term investors and I think they have a place in people's portfolios as a core holding.
>> When it came to Canadian National Railway, I know the CEO made comments saying, as we see the economy pickup, and there are expectations that the Canadian economy will pick up, the US is doing well, it will be good for the rails.
You have to have a view on where the economy is headed if you're starting to think about the rails.
>> I think people view rails as somewhat representative of the economy, not just Canada but globally, because as Canada, we do export a lot of raw materials that are transported by rail. But like I said, over the long term and over many different cycles, the Canadian rails have outperformed and I don't think that will change.
>> Interesting on the rails there to keep an eye on.
Completely different kind of business.
Thoughts on the waste management sector?
>> I like the waste management sector, I like the waste industry.
If we look at the big players like waste management or Republic services, these guys over a period of 10 or 15 years, their share price return is more than double that of the market and there's a good reason for that.
Waste is generally considered less cyclical than many other industrial sectors, and that's because good times were bad, people need to have the garbage picked up.
Residential customers usually pay for their waste pickup through their utility bill or property taxes depending on where you are, so that's not really going to change. For commercial customers like small businesses, restaurants, shops and things like that, even when times are tough, looking to cut your expense on waste is not the first thing you do when the going gets rough.
You still need to have your waist picked up every two weeks or every week, regardless of how the business is going because it's just a part of the business and the cost of waste collection, pickup and disposal is such a very small part of the businesses operating budget, they don't really look there is something that's going to save them money in a meaningful way.
Waste is generally, in my view, less cyclical.
It does offer a bit better downside protection.
You might not have the same kind of torque to the upside as a tech company or some kind of AI company when things are going really well, but waste, I think, similar to rails, it should have a place in people's portfolios.
>> When I think about the way story over the last several years, it's been about buying smaller operations, consolidating the space.
Is there still room for that sort of consolidation, the mom and pop ways companies in the bigger ones, or his that played out?
>> There is definitely still room.
I will speak about the US here. Major waste companies take up 50 or 60% of the market, that leaves 40 or 50% of the market still run by small family-run companies, 6 to 8 trucks, and they collect waste in their town or small city. As bigger guys come in and roll the smaller players up, they generally end up running these operations a bit more efficiently because they have the scale, they have more experience and a bigger network.
That's good for everyone, the customers, the company, the investors.
>> Let's get to another question from the audience, but one of the headlines today.
A viewer wants to know how realistic it is that Tesla will deliver a new low price model by next year? This is what Elon Musk was saying. Don't worry, we know it's highly competitive, we have something for you.
>> From what I saw, he said possibly by the end of 2024 but more likely spring early 2025.
How likely is that?
Me personally, I don't believe it.
He has made promises like this many, many, many times and in most cases, he has failed to deliver. At least, he has failed to deliver the specific timeline that he referenced.
You know, he does eventually get to his goal, but it usually takes a lot longer than what he tells people at the beginning.
So yeah, I would read the probability of having a $25,000 EV available-for-sale in spring 2025 is very low.
>> Interesting stuff.
>> He could prove me wrong though.
>> She's going to want to try to prove everyone wrong.
It's a pretty tall order.
>> Yeah, definitely.
>> Interesting stuff. We are going to get back to your questions for David Mau on industrial stocks in just a moment time.
As always, make sure you do your own research before making any investment decisions.
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.
A lot going on today. We also got a new read on the health of the Canadian consumer retail sales for the month of February.
Lower for the second month in the row. We know we are all dealing with the high cost of living, as he put it all together, what could it mean for the Bank of Canada, the bigger picture? Our Anthony Okolie has been digging into a report on that topic.
>> February retail sales here in Canada edged lower by .1% month over month. That compares to stats Canada's advanced estimate of 8.1% increase. When we adjusted for inflation, retail sales are down .3% after two months of gains.
Preliminary estimates for March showed that sales were likely unchanged in March.
Now, looking at some of the big movers, motor vehicle sales, which accounts for more than 1/4 of total sales, that's the biggest chunk, rose by half a percent month over month, raising some of January's losses. According to industry estimates, March is trending positive for auto sales as the new vehicle market has remained robust. We continue to see improved vehicle availability. That has made a real impact on the market, helping to ease pent-up demand and rates on auto loans and the slowing economy. However, total sales were pulled down by a broad-based drop across several subsectors. We saw a decline in five out of the nine subsectors. Gas stations, fuel vendor sales were down despite higher prices at the pump. When we look at core retail sales, which provides more of an accurate reflection of consumers spending trends, sales remained unchanged for January.
While certain sectors such as general merchandise, retailers reported high receipts, others experienced declines, the biggest losses were in electronics and appliance stores, clothing and clothing accessories among other things, reflecting a change in the consumer preferences or economic conditions. Now, the drop in February retail sales were more widespread versus January's figures and that sort of reflects the weaker than expected performance in core measures, excluding auto and gas station sales and really underscores the challenges that consumers are facing with the higher cost of living and the higher interest rates or borrowing costs. Despite the overall softness, car sales emerged as a bright spot after January's decline and TD's internal credit and debit spending data indicates an expansion in both goods and services spending in March, keeping TD economics real consumption tracking at a range of about 2.8% to 3% for the first quarter of 2024. The solid spending momentum has been supported by still meaningful excess deposits, robust population growth and the wealth effect. However, with the job market slowing, TD economics expects that income growth will moderate which will in turn lead to a slower pace of consumer spending going forward.
>> So the consumer appetite starts to get tamped back by the higher cost of borrowing, this is what the BOC has been trying to do, and bringing down inflation as a result. You put all that together, what are they thinking about the chances of a rate cut?
>> The prospect of a rate cut remain dependent on the trajectory of inflation.
Marches inflation data marked three straight months of good news on core inflation with inflation still at the top of the Bank of Canada's range. TD economics expects the bank will want to see more confirmation that inflation is moving towards 2% target before it cuts rates. The Bank of Canada To its overnight rate unchanged at 5% this month for the sixth time in a row but they did say that a rate cut in June was a possibility.
Markets you the chance of a June rate cut as a coin toss where a 25 Basis Point Cut in July is fully priced in.
As it stands, TD economics is leaning for a rate cut in July.
However, if the numbers continue to soften by more than expected, talking about inflation, TD economics as the risks are tilted towards an earlier move.
>> For this economy, that's the big question of the year. Thanks for breaking that down.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat map function, gives a nice picture of the market movers. What is going on? TSX 60, let's take a look right now. We had the rails reporting today so you can see CN Rail and CP both underwater to the tune of roughly about 5%. Also had Rogers reporting.
Rogers peeling back about 3% as well and not a lot of green on the screen. The financials taking points off the table 2, triple digit loss for the TSX Composite Index. Let's go south of the border.
Bond yields are on the rise again. The crush of earnings coming out. Tesla making big gains today and holding onto them, up about 9%.
That was enough earlier to get the NASDAQ above water but it has now fallen into negative territory. Nvidia down 2.5%.
We are back now with David Mau from TD Asset Management talking industrial.
This question just came in.
Do you see Chinese EVs flooding the market?
>> So at this point, honestly, I think not and I will tell you why. The reason is Chinese EVs are certainly cheap and they are being produced at a very, very fast rate.
So there is a ton of cheap EVs out there in China.
Now, they are not all tea. Some companies, some of the cars are quite good and very competitive to a Tesla or other high-end manufacturers but the reason I say that I don't see cheap Chinese electric vehicles flooding say the North American or European market is that I don't think the governments will allow it.
If you think about the US, obviously they have a vested interest in developing their own American companies that build electric vehicles, same for Europe.
Even if there is a ton of availability and try to wants to ship those EVs to these Western countries, I don't think the governments will just let them come in.
What I think they will do is they will impose some pretty high tariffs. The car itself might actually only cost under $15,000 but they may slap a 100% tariff on that and the selling price to the consumer is still 30 or $40,000 because they do have to protect their own domestic EV industry and development.
The one way around that, the one scenario where you could see more Chinese electric vehicles come to North America and Europe, is if these companies start to use local content. So they are using parts from that are made in America or parts that are made in Europe.
And they are also building and assembling the car in the country that is going to be sold in, so we are seeing some of that, a little bit of that. BYD has been doing that in the US. But I think that's the only way you're going to see imported Chinese electric vehicles going to markets, if they source and build locally because that's going to be a benefit for the country where the suppliers are getting more business and its providing jobs the local economy.
>> Before let you go, we just got a question about of you were asking if Boeing is at a buy at these levels. Here on the platform, we cannot give a buy or sell recommendations but maybe refresh us quickly.
You have concerns about Boeing having a long path to get back the trust of its customers.
>> How would I put this? The stock has fallen a lot. It's one of the worst performers in the Dow Jones and S&P this year.
There is a very real possibility that there's going to be some sort of short-term bounce. We saw a little bit of that today when the results come out. But I will remind people that Boeing has not has a profitable quarter since 2021 and I was just one quarter.
Their financial situation is actually deteriorating, their balance sheet is getting a little bit worse.
They've had negative cash flow for the last little while.
So would I be looking to jump in at these levels?
Like I said earlier, I'm cautious on the name.
I would probably wait at least a few more quarters to see how things develop and whether or not the FAA is going to allow Boeing to ramp up production again.
There still a lot of overhang in the stock, I think.
>> A lot of important things to keep in mind there if you're looking ugly. Great to have you back on the program.
Look forward to the next time.
>> Thanks.
>> Our thanks to David Mau, VP, Dir. and portfolio manager at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
if we didn't have time to get your questions today, we will try to get it into future shows. As promised, we said we would show you that QR code again in case you didn't have your phone handy earlier.
It will take you to you TD Direct Investing this Instagram account will you or find more informative videos. You want to stay tuned for tomorrow show.
Michael O'Brien, managing Dir. and head of the core Canadian equity team with TD Asset Management will be taking your questions about Canadian stocks.
You can get a head start with your questions.
Just email MoneyTalkLive@TD.com.
Let's all the time we have the show today.
Thanks for watching. We will see you tomorrow.
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