David Toung

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Hello I'm Greg Bonnell and welcome to MoneyTalk Live brought to you by TD Direct Investing. We we'll take you through the market and move with your questions about investing. Coming up on today's show. TD Asset Management's head of asset-allocation Michael Craig will talk to us about Credit Suisse and what it means for markets. And MoneyTalk's Anthony Okolie… Let's get you an update on the markets. Classic Haven bits today.

The US dollar with the trade up more than a full percent. You've got gold to the upside. You've also got bond yields pulling back pretty dramatically as money moves into bonds. This is having an effect among other asset classes including the price of oil which is down pretty dramatically right now, about 67 bucks more than 5% just pulling back on the session alone. Here's the effect it's having on the TSX Composite Index. Down more than a full 2%, 428 points. A lot of big energy names definitely taking points off the table.

You are seeing that move to gold globally. It is benefiting some of the miners. We will start with the green on the screen. You have Barrick Gold. Suncor at this hour with 39, 41. 8 1/2% pullback in this name along with the falling price of crude. It definitely weighing on the TSX comps at number. South of the border, let's take a look at the S&P 500 doubt about one and 1/2%. Of course Credit Suisse and what's happening with the shares there, the bank itself is sort of getting concerns about the global banking sector back into the spotlight. A lot of drama with only a week to go before the Fed makes its next rate decision.

A lot going on.

One and 1/2% of the downside to that broader REIT of the American market. Let's check the heck tech heavy NASDAQ. Fearing a bit better than the broader market.

Down 95 point a little shy of 4%.

Let's check on credits right now… But Buck 98, Credit Suisse down more than 21%. In Metro market update.

Keeping a careful eye on the global financial sector, joining us with perspective is Michael Craig Head of Asset Allocation at TD Asset Management.

Always great to have you with us.

>> Pleasure to be here.

>> Let's start with what's happened in the short period of time. What's going on with the financial sector and how you approach this?

>> A few crosscurrents in the last week. It was the US regionals, today it's Credit Suisse. Look, we are in a period of very tight financial conditions.

Historically this is not unsurprising.

The firm starting to falter and that's what we're seeing today.

As a result, markets are behaving according with bonds rallying in stocks selling off.

>> Let's talk about that rally. We've seen yields come back pretty dramatically in the past couple of days.

Money moving into that space. So, what do we expect for fixed income for the rest this year? What were you expecting Eddington into this year?

>> We have been, for some time now, buying fixed income.

To try and time it perfectly. So we just continue to add. And so that's worked out well.

The bond market, the short end of the bond market, is almost trading like a penny stock right now to be totally frank. Always a bit of a loaded term but historic moves are these in terms of how much the curve is moving. Even out to 1030, running out now. The bond market is telling you their stress and it really sets up for challenging policies for central banks.

With inflation… They are now having to deal with financial instability as well. That's kind of what's happening.

In terms of our positioning, the market is coming into where our thinking was.

Sometimes the best course of action is to do nothing.

Right now, I think were pretty happy with our position.

Able to manage as we go through whatever we are going through in terms of the slowdown/recession.

>> You did mention the fact that things have changed pretty quickly in the past couple of days.

Big shifts when it comes to flows and bonds and you have policymakers having to make sense of it all. The Fed is that I have to make some sort of proclamation on all this in a weeks time. What do they need?

They have a lot of their plate right now but what are they need to be thinking about?

>> Yeah it's very fluid and a lot can happen just like lots has happened before.

A lot can happen over the next week.

The way I would kind of cut it is that I would expect them to still hike in a quarter-point. I think the terminal rate is been down now and that might be it.

You know, the other two course of action, there's actually some banks calling for a cut if you can believe it.

Some calling for no action. I think that if they were to go in and do nothing, or even cut, that would send a message to market that they are panicking.

Actually almost counterproductive. But who am I to say?

We have another hike but it really is now, we are kind of at the end of the beginning to be frank.

The economic data is just okay. But with this shock in the banking sector, the natural fall in effect is that conditions are going tight and that's going to put stress on the industry and ultimately to a material slowdown. I think that's the bigger issue now. In terms of what kind of initial, financial stability for today but more so tightening financial conditions.

You look at surveys and they have been tightening for some time now.

This recent move in particular in the US, will be more tight and hence much more challenging for corporate stock.

>> When I think about Silicon Valley Bank, in the early innings, four or five days ago, Credit Suisse… These seem to be conditions quite specific to these institutions. As an investor, as they take a breath and take a look around at the state of the markets and where we are headed, what should investors half top of mind?

> A few things.

We've been very clear that as you going to these types of periods, you want to upgrade the quality of your investments. I would argue that firms that are struggling right now would not classify as "high-quality institutions" so that's one thing.

Depending on what type of investor you are, the stock is off Not the end of the world.

Look, it's going to be a challenging. But ultimately, with markets repricing, you are expecting returns in the future go higher as you have better entry points.

And for conservative investors, I would expect markets move a lot today… It turns, the returns at the end of the day will be probably become between zero and positive.

The offset of fixed income is more : selloff in equity.

There's been a lot of people who moved into cash.

You know, 5% rates with what they were earning.

That is not the craziest thing in the world to do but now as things start to reprice, financial assets are looking interesting again.

Some were to go. But our, you know, as I was stabbed chatting with staff, our next major shift will be looking into buying equity at some point. We are not close but that's ultimately were ahead is right now and I think that decision will be at some point later this year.

> That was Michael Craig Head of Asset Allocation at TD Asset Management.

Now let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading.

Shares of Canadian Pacific Railway are in the spotlight today that is regulations gave the green light to $27 billion of US takeover of Kansas City Southern. Giving the okay the US surface transportation Board says the deal is consistent with the public interest. The combination of the two rails creates a network that spans Canada, the United States and Mexico.

Canadian home sales activity picked up in February on a month over month basis. But transactions were still 40% below the same period last year. That according to the latest numbers from the Canadian Real Estate Association. When it comes to prices home price index slid some 1% for the month and it's down almost 16% of year-over-year. The price of American benchmark crude has fallen to its lowest in more than a year recent headlines out of the global financial sector has money moving into the perceived safe haven of the US dollar.

(…) A major way right now and that top line, down 480 points on the TSX almost 2 1/2%.

South of the border, the winnings are a bit different.

Still in negative territory but not much to the same tune as you have the S&P 500 right now, that broader REIT of the American market down 70 points.

About 1.8%.

The collapse of Silicon Valley banks and concerns of the health financial system have wide-ranging implications including for the healthcare sector.

Joining us now with more is David Tong, Senior Analyst at Argus Research Group great to have you.

A lot happening.

We will talk about healthcare. What's the readthrough with every thing happening in the financial sector?

>> That's an interesting question.

A couple of headlines that we discussed this week. We had Pfizer announcing its acquisition of C-Gen that will boast its oncology portfolio.

We think it's good for the industry to have this flow into M&A.

For Pfizer, using the tremendous cash flow they got from the vaccine sales to expand their portfolio and also provide revenue offset for their patent expirations later on in 2025 – 2030.

As far as the silicon SVP impact on the healthcare industry, we noticed that there were a number of startups in the space. They had deposit at SV, it's very very active in Silicon Valley.

Startups including tech companies and biotech companies. The government quick action to essentially, provide safety for all depositors has really calm to that.

At the same time, we are monitoring what effect will be on the financial health of the Baltech companies. They may be looked at as M&A target's by the industry.

>> We try to unravel the Silicon Valley story, part of the story is as I understand from reading some of the coverage, the reason why these startups were trying to access Silicon Valley Bank money is because when it comes to venture capital and trying to raise funds through VC funding, that's been a tougher space because of what we've seen in the past year. Even apart for Silicon Valley Bank, just trying to access that kind of funding and that kind of startup funding.

Is that getting tougher?

> It appears that there funding has perhaps not grown as much as it was over the past few years. I mean, in a pandemic, there was quite a strong inflow.

Strong inflows not just for developers of vaccines but developers of tests.

Other healthcare tech companies. I would not say that it was going away. But certainly, there is more cautious ends on funding. But at the same time you've got the large companies like that : Pfizer, Bristol-Myers that that that GSK that need to refill their pipelines. So they are today continue the look and to look at biotech companies which are developing leading-edge therapies in immunology… So they will be looking to bolster their own pipelines. These bio farmer companies do not just invent all the new drugs internally. A lot of it is either acquired or in licensed.

>> It's incredible to think that everything that's happened in the past couple of days and all the headlines being dominated today with Credit Suisse, Silicon Valley Bank in recent days, you mentioned this Pfizer deal.

This is a multibillion-dollar transaction that normally would have dominated in normal times.

Take me a bit more through that deal and the significance of not only for Pfizer to take it on but as you said some of perhaps, the downstream effects that we will see for the industry.

>> Sure. For Pfizer, we know that COVID-19 vaccine was very, very successful.

So they have a big, big chunk of revenue cash flow. If you look out 2025, 2030, they have a bunch of patents with exclusivity. So they want to offset that.

What C-Gen pack does, is it provides new product and new revenue.

C-Gen has four drugs already in commercial stage. They expect to generate a little over $2 billion in revenue in 2023.

Pfizer says that it can, C-Gen alone can generate more than 10 billion by 2030. For a company the size of Pfizer with their Marketing … I view this as what the bio pharmacists, they look for new products.

They have blockbusters and at the same time they have patent expirations so they have to keep replacing that pipeline and as I mentioned earlier, they don't invent everything internally. They look for M&A in licensing to add to what they develop internally.

>> Overall sounds like even though these are volatile times, volatility, as we know is investors does create opportunity and so going forward in healthcare maybe this year and the coming years, is this the kind of volatility that we could see some action in this space that would be positive for investors?

>> Well, one of the things that we are focusing on this year is that, we are essentially post-pandemic.

Elected procedural volumes are coming back. People were doing more diagnostics for not COVID but things like scans and so you're going to see a return, we are already seeing a return of elective procedures.

And that is going to be impacting companies like makers of cardiovascular devices, orthopedic implants, these are devices that improve people's mobility as their joints get older. Or in the case of cardiovascular, placement valves or things that enable, devices that enable the heart to pump blood more efficiently. These things happen as we get older. But these devices are very effective.

So they were elective surgeries. People have deferred them. Now they are coming back.

So we are seeing the higher volumes of that.

And then in China, China is a fairly substantial market for medical devices.

And the first quarter will be down in the sense that COVID-19, when they ended the zero-tolerance policy, cases but not particularly… The cases will come down and the country is,, steering towards reopening.

There is a government stimulus.

I think that's all positive for procedural volumes and for sales of whether there devices or licensed labs getting back up to speed and acquiring instruments that they do or research and for their development of new drugs.

>> Fascinating stop and a great start to our discussion today with David Tong. Will be taking your questions for David on healthcare stocks just a moment's time. I remind her of course that you can get in touch with us any time by emailing MoneyTalk Live HT.com.

Now let's get to our educational segment of the day.

If you're looking to compare different type of exchange funds, WebBroker has tools that can help.

Bryan Rogers, senior education instructor with TD Direct Investing can help.

>> So I wanted to take a look at how to basically find ETF's or look for certain ETF categories and WebBroker.

Sometimes we find it can be a little bit daunting because there are so many out there and there's been so many that have been added on over the last few years as well. So if we do jump over to WebBroker, were going to go to the "research" screen and we will click on research and go to ETF's initially.

This is a way were you can filter right off the bat for certain types of ETF's. You can see at the very top, you have all the US stock, international and so on.

You can scroll down further and see there are a few checked off already that they will show in these graphs.

You will see things like "ultrashort bond" there is "technology". So there are a few you can see right off the bat.

But one of the things I wanted to show you is that we've recently been looking at to show clients in some of our classes, for example, if you want to look up a broad-based index ETF which a lot of us have heard of… SP light which is the spider the S&P 500 which represents the top 500 stocks according to the S&P 500 that tracks the broad market, if you click on that and you pull up the ETF itself, what I would say is as a quick trick that you could do is you can go down and scroll to the very first page on the summary page and you can see that it will have a category.

The category here says it's a large blend category.

ETF. You may not know that before when you were looking for similar ETF's because this one can be very expensive at $390 a share. If you want to have something with a similar approach on looking at that large ETF, that large blend is what they are talking about here, you can go to the category click on the category itself. It's giving you a big list of all the different ETF's that may have had that same approach.

So you can start by volume if you want to find what's got a bit of a higher volume on the left-hand side here.

You can add all of these with these buttons. A graphic that will come up to do some comparisons,… And you can also see average daily volume. You can sort by the top ETF's for average daily volume in this particular category.

You can sort by MVR which is the management expense ratio, distribution yield and so on. So you can, what I would say is a good research approach is you can go to Google, for example, and search for a particular ETF.

One of the top dividend beefed ETF's. We will actually be doing webinars shortly into passive income ETF's.

If you find her here of a particular ETF put it in the symbol box and find that category.

So here's an example of what I just looked at recently.

There's a company called banking ETF coming from the Bank of Montréal. If I scroll down I can see in the financial services equity ETF category.

Now I can click on that link and search some more. You can also go to the learning centre and I mentioned have a webinar coming up shortly.

This is Adrian, passive income investor who will talk about passive income exit investing using exchange traded funds that are sometimes covered and leveraged to get a little bit of a better return.

You can search an individual one and see some others that are available. And lastly, you can use the screen.

If you take that category, you can go on WebBroker and click on the research screen as we talked about that several times before.

Click on a fund category, and ETF category and screener tool and you can find all kinds of additional information.

>> Our thanks to Bryan Rogers, Senior Client Education Instructor TD Direct Investing.

Make sure to check out the learning centre on WebBroker for more educational videos, live interactive master classes and upcoming webinars.

Now before we get back to questions about healthcare stocks with David Tong, a quick reminder of how you can get in touch with us.

Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live.

We are back with David Tong from Argus research taking your questions about healthcare stocks so let's get to them.

Let's take a look for healthcare stocks in a recessionary environment?

If we end up with an economic contraction what you think?

>> Well that is an interesting question.

One of the drivers, let's just talk about and continue the conversation about medical devices. These are devices that improve the quality of people's lives.

They improve mobility, as I mentioned. Heart function… They are not tied to the economic cycle.

If you've got heart failure, or if your valves are leaking, you can only defer or that so long and a lot of these procedures are covered by instructor insurance or Medicare so people will go ahead and undergo those procedures.

So you could say in that sense that healthcare is…… You know, I would not say recession proof but it doesn't run in the same cycle as recessions and economic. But just to say, people's decisions have, even though they are covered by insurance or Medicare, you know, the economic may also affect their own decision-making. But as I said, when your knees are in pain or you have trouble walking upstairs because your hips are in pain, and you want to continue ability, you will try to get that replacement joint.

Those replacement joints.

…^Funding for some of those startup companies that are doing new and exciting things.

One day might get swallowed by a larger organization in a recessionary environment I imagine the funding would be a challenge.

>> That's an interesting question and I can't, you know, I haven't done the analysis exactly. Funding flows and recessions. You know, it's, what I can say is that, you know, these companies that I was talking about that were developing medicines, they are pivoting.

And they are looking at their resources and looking at what they have in their inventory.

I'll give you an example.

Of this pivot. There are, when you're making is logical, they are using these large vats. It's a mixture of chemicals and agents and… These facts can be the same.

These can be used for therapy drugs but that decision is being made right now.

In that sense, maybe I would say positive funding but are reset and funding.

But there are still, you know, tremendous needs to be addressed. One of the reasons that Pfizer is acquiring c-GEN is that it has a particular technology the target's cancers. As you may know, typically oncology medicines, they will work for a while. Langston lives of survival but at some point, there is resistance to the drug and you have to look for another therapy.

That's why, C-Gen has these drugs that provide a new way of targeting cancer.

>> Interesting stuff.

Another question from the audience.

What is your guest's view on McKesson?

>> That's one of the largest distributors of pharmaceuticals and of medical surgical equipment in North America. About six and 7% of the revenue are in Canada.

Canada is a very good market for reimbursement coverage they have had steady growth in Canada and good profitability in Canada. You know, McKesson distributes a whole panoply of prescription drugs including oncology.

It's not a bet on one particular therapy whether one particular therapy will work or get approved by the FDA but you know, it represents the whole vast industry.

That is growing.

They also have a technology business that enables and helps pharmacists with prescriptions and all they have attached and that technology business is growing. It is so it's a company that has been around since 1806 or something like that.

You know, it's quite an interesting play within the healthcare industry.

>> It definitely sounds like it has some positives in its favour. What are some things they could get in the way in the medium term?

>> There is ongoing opioid litigation. A lot has been settled but there are still cases out there by states or localities.

Not all the parties have settled. So there is a litigation risk on that.

Also divesting European operations.

With the exception of Norway… This is a process of redeploying its capital so the risk is, are they are there going to be any disruptions to their business as it restructures?

So far that I can see, things have gone well.

The operating markets have gone up and redeploying capital to faster growing assets.

>> Fascinating stuff we will get back to your questions with David Tong in just a moment's time.

Always do your own research before making any investment decisions and a reminder you can get in touch with us anytime.

Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live.

>> With the current volatility in the banking sector, markets also paying close attention to the US economic data.

Of course we are a week away now from the Federal Reserve having to make a decision. Our Anthony Okolie is gonna break down the retail sales in inflation and of course we saw what could be telling us about the health of the economy. What can you tell us about the big decision?

>> Yes Greg.

US retail sales today and it eased in February after pretty so strong start to the year.

Retail sales fell 0.

4% which was in line with expectations and down versus the upward revised 3.2% back in January.

The decline in spending in February, sorry, in February indicates that the Fed reg rate hikes are working its way slowly through the economy.

Consumers spent less the things like restaurants, auto dealerships, department stores in February.

Taking out volatile sales, sales actually fell in February. A pullback in consumer spending is worrying for the broader economy if it persists. Keep in mind that US household consumptions represents about 70% of total output. Meanwhile, we saw a shift in spending by households.

Shifting to essentials like groceries and personal care stores.

Throughout the winter of course we've seen this trend as retailers reported mixed results with shoppers spending on necessities and food and less on discretionary items like electronics and more.

Meanwhile, we also got a report on the US Labor Department for wholesale prices.

They actually unexpectedly fell 0.

1% in February versus expectations of the 0.3% increase. On a 12 month basis. The index rose 4.

6% but that's well below the 4.

5% percent of us back in January. Now, most of the drop in the wholesale prices driven by a 36% plunge in chicken egg prices over the past year.

So the drop of some good news on inflation for the Fed as it waives its next move next week.

>> If I was a central banker and I'm awfully glad I'm not one, I would probably be pretty glad if that's all I had to way with the financial sector.

Turbulence right now. We are a week away.

What is the thinking here as to what the Fed might be thinking?

>> TD Economics as well it looks like consumers have stopped spending in February, they believe the strong momentum puts their estimates in real consumer spending on track to 3% on an annualized basis in the first quarter. So they feel the Fed would not be able to ignore the acceleration and demand.

They expect the Fed will hike interest rates by 25 basis points next week.

Instead of what's being talked about in the markets, they believe financial stability in the wake of the US banking sector outweighs pricing stability.

>> Interesting stuff in interesting times.

70.

>> Thanks Greg.

>> MoneyTalk Live's Anthony Okolie.

Now we see a sizable pullback here with West Texas intermediate with $66.35 a barrel, that's a pullback of 7% in the session.

Definitely being felt among some of the biggest energy names in this country. The headline here 407 point deficit down more than a 2 1/3%.

Could have chosen any makers in this country to illustrate the point.

Canadian Natural Ressources with 60 bucks and change, down a little more than 7%. Of course Nadine Pacific Railway, finally getting the okay, the green light on the Kansas City Southern acquisition.

Right now those shares are up a little more than 5% on that news. Of course the tie between those two railroads spans Canada, the United States and Mexico.

It is in some time coming. Let's take a look at the S&P 500 right now.

Of course Credit Suisse has the banks back in the spotlight today.

Silicon Valley Bank last week. A lot has happened just in the past for five days.

Right now you're down 66 points in a broader REIT of the American market. 1.

7%, still in negative territory but not as much is the broader market. Right now down 128 points a little more than a full percent.

Let's check on the US regional banks… Getting hit on the Silicon Valley Bank.

It's interesting that Schwab hit as well as making some ground higher. Obviously some moves recovering in the recent sessions with 5766,… We are back now with David Tong from Argus research talking about healthcare stocks. Let's get back to it.

Is intuitive surgical a goodbye at this price? We can't give buyer and seller recommendations on the shovel we can definitely talk about intuitive surgical and what it does and the environment.

>> Sure. Intuitive surgical has the surgical platform for soft tissue procedures.

That's like gallbladder removal, geriatric surgery.

Their gynecological procedures.

So it's actually you know a lot of what used to be done, laparoscopically to be done in the intuitive platform. It's… They have been coming out with upgrades to technology. Upgrades to software. Upgrades to the instruments. So the, people, patients… You know… Want robotic surgery because it's been shown that robotic surgery has been around since… Shorter recovery periods. Less pain, for doctors there, you know, there is a little bit of less fatigue so, you know, overseas, robotic procedures are less penetrated than in the US so in countries like Japan, China… Europe are actually growing faster in the placement of intuitiveness.

Robots, they are called da Vinci's and in terms of the actual volume of procedures being done, what intuitive is doing is, they are getting more and more approvals for specific procedures within soft tissue, there is any number of whether it's 50 or 70 procedures. The more procedures that can be done on the platform, that's more and more volumes when you have more volume, you're going to be pulling in more of consumable services and instruments.

The software. It is so it's a very, very interesting platform.

There is competition, in a few years, they are going to be watching their robotic platform for soft tissue.

It's not there yet. But it is approved in Europe and they are doing a lot of what they are learning in Europe using a lot of what they are learning in Europe to get launched in the US.

>> Interesting stuff there.

Another question that is company specific.

Can we have David's take on Thermo Fisher?

> Yes much earlier, we talked about the biotech industry and what they do to develop and manufacture drugs. I talk about this description of the… The fats.

Thermal provide the equipment.

A lot of the tools that it's biotech companies need to develop and manufacture their therapies.

Thermal has, over the years, required technology and capacity.

They help these biotech developers with research and development.

They help them with manufacturing and in some cases they provide manufacturing capacity. It is been a very inquisitive company.

They are quite good at integrating their acquisitions and adding, using the acquisitions to continue to grow their revenue, grow their capabilities and also improve their margins. Some of the acquisitions command with lower margins and they were able to essentially make these acquisitions more efficient.

And in some cases, adding an asset for acquisition helps the, you know, it creates a larger portfolio of solutions that Thermo can sell to their customers.

>> Interesting name there.

To squeeze one more innocent clock counts down on us, can we get your opinion on UnitedHealth?

>> Sure. UnitedHealth is one of the largest health insurers in the country in the US. So they provide commercial insurance if you're an employee in a larger medium-size organization. You want to get your insurance through UnitedHealth. They have Medicare advantage for seniors.

They have Medicaid state-sponsored insurance.

They also have a segment called optum which provide services and technologies to hospitals and doctors.

It's also what's called a pharmacy benefit manager which is essentially, the engine that dispenses the drugs.

Takes the prescription, goes through the reimbursement and gets the medicines delivered to the specific pharmacy so that we can buy it.

It's quite a growth engine.

You can look at the stock chart over the past 15 years of how it's grown.

And you know, it's essentially a play on the aging population. More people are going to be in Medicare advantage and that's been a growth driver for them.

> Fascinating stuff. David really great to having on the program.

I look forward to the next time.

>> Thank you Greg.

Good to talk to you.

>> Excellent as always. That was David Tong senior and the. Stay tuned tomorrow, Nicole Ewing will be our guest taking your questions about personal finance.

A reminder that you can get it head start on emailing us questions by sending your questions to MoneyTalkLive@td.com.

We are now in tax season.

That's all we will be talking about. That's all the time we have for today.

Thanks for watching and we will see you tomorrow.

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