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[theme 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 discuss whether this recent rally we have seen in copper has more room to run with TD Asset Management's Hussein Allidina.
MoneyTalk's Anthony Okolie is going to have a look at the health of the Canadian housing market, particularly the building industry.
And in today's WebBroker education segment, Megan Henricks will show us how to set up alerts on the platform. So 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. We will start here at home with the TSX Composite Index.
Up a modest 32 points, a little more than 1/10 of a percent. Among some of the most actively traded names out there today are based off of earnings. We will show you Lightspeed Commerce first, we'll tell you more about the earnings later on the show.
Right now the stock is up to the tune of almost 15%. Canada Goose also heading in a quarterly report, was being it taken well by the market in the morning trade, it's up 17%. South of the border, we have US markets hitting new all-time highs. The S&P 500 up 12 points right now, 1/4 of a percent.
The NASDAQ building on its recent gains as well to the tune of about 1/5 of a percent. Right on the nose, one face of a percent. We've also got the Dow, I can show you at the moment, but at 40,000 for the first time in its history. Walmart also handing in an earnings report being received it favourably it by the street, it's up a little shy of 6%. And that's your market update.
The price of copper has jumped about 25% since the start of this year, but are the market fundamentals supporting this big move? Joining us now to discuss is Hussein Allidina, managing director and had commodities at TD Asset Management.
Right to have you back on the show.
>> Happy to be here.
>> I looked at the chart this morning and did the math, this is a substantial move in 2024 for Dr. Copper. What's going on?
>> The red metal has been supported I think by three main factors. Last year, we had a big mine in Panama that was taken out of commission or not brought into commission which I think force everyone to update their supply demand balances in a recognition or realization that balances are maybe not as loose as prices were discounting. I think this year we have seen Chinese economic activity on the ground improving from low levels but no longer getting worse and on the margin getting better which is quite supportive for copper demand, and I think the third piece is the realization, recognition that the AI trade and the amount of power that's going to be needed to support those data centres as material, we can debate what the power source is for generation but you are going to need copper to move that power.
You ask, is the price reflecting fundamentals today? We think the copper prices have actually moved too far too quick.
If we talk about copper on a multiyear view, copper prices do have to move and right now I think it's too much given today's fundamentals. When I look at a multi-year review, quite constructive. Not to bore the viewers, we talked about this before, we have not been investing in the supply side for the better part of the last 10 years. You and I can go and try to find a copper mine. We are not getting over to the market for 10 years. So copper prices will have to move higher than the 10,000 we are trading at right now but I think that probably we see a bit of a pullback of five, 7% over the course of the next couple of weeks.
>> I was going to ask you of the fundamentals longer term might support price but in the here and now, if we got ahead of ourselves, we see a pullback?
>> Commodities broadly speaking are coincident indicators. They should reflect supply and demand today.
There is a low correlation between commodities and equities. Could we have a scenario where the constructive miss on a multiyear view keeps copper prices higher?
Of course, we shall this happen in the energy market in 2005, 2006 were anticipations of the future deficits lead to higher prices today.
That actually softens the fundamental balance today. If the copper prices higher than in theory it should be, you'll see less demand today and potentially more supply on the margin. Do I think, in my position, we are set up for a pullback?
Yes. Do I think copper is one of the better performing commodities on a multiyear view? Absolutely.
>> Let's talk about some of those factors you're breaking down, particularly what was happening in Panama. As the industry tries to work through that, you said it's very hard to find a new copper mine.
As we get further into the future and all those factors you talked about, AI, we will get to EVs in a second, are we going to have the copper?
>> Based on the supply we have today, the supply that we can identify that is going to be produced over the next five, 10 years, if I look at that relative to demand projections, no, we are now going to have enough copper and that means that the price of copper has to move materially higher to do two things, to bring about increased production. It we have to deal with the legs associated with bringing copper to market. Prices will have to average higher to discourage demand on the margin. Will it discourage EV demand, will it discourage AI demand? That could be debated.
Probably more of a substitution out of copper into aluminum, it may be in power generation or in transmission of that generation, it may be air conditioning units in China, etc.
Based on supply and demand today, there is not enough copper to meet the demand projections that we are seeing.
Now, as prices move higher, we will find more minds. Those mines will not come on lion between 2025 and 2027, they take 8 to 10 years to bring onto the market.
During that timeframe, you're going to have to discourage demand. The only way to do that is by price.
>> The EV story, I want to dig a bit deeper because we've seen this moving copper, a substantial one this year, against the backdrop of EVs which were part of that story but EV demand has been going in the other direction.
How does that play into what we've been seeing?
>> I want to be very clear, EV demand growth has been moving in the other direction. The absolute number of EVs, i.e. the absolute number of pounds of copper I need for every EV that is sold is still materially higher than what you CNN ice vehicle.
Demand is tempered for 24 and maybe 25 but we are using incrementally more copper. We could argue that I'm using less than I thought I was going to use 6 to 12 months ago, that's true.
That is a bearish factor for copper. But today, everyone is focused on the number of research reports I get from the south side on power generation, AI. I get multiple report today, so everyone is focused on that sliver of the market.
Today, it's a relatively small proponent of demand. It will get materially larger.
It's not there yet. That's why I think the market has maybe moved a little too fast.
>> A higher price for copper in the future would incentivize people to start mining for copper. It sounds like it's going to be a bumpy road, though.
>> It's not easy. In the last cycle when we were trying to find copper reserve, right, copper, unlike oil, we do not have shale copper, we do not have an OPEC that is keeping copper production off-line in anticipation of better price. You are producing everything that you can today.
The reason that the First Quantum Panama situation was such a surprise to the market is that was supposed to be copper that came to the market to help with the supply demand balance. If I rewind 12 months when folks still thought Cobre Panama was coming online, most folks had 24 supply demand, relatively equal. Naïve losses production, some production issues in other regions as well, that has taken a sort of balanced market with tight inventories to a deficit market. A deficit market with tight inventories is a recipe for higher prices.
>> It's hard to know what's going to happen in the Panama situation. It's a topical story in terms of Will there be a changing of sentiment, can they get things going again on the right side of the officials there, could that be a wildcard in the months ahead? It doesn't look like there's going to be a quick resolution, at least there hasn't been for a while.
>> I ultimately think that production will come to the market. The economics for the producer are probably not going to be as good as they thought they were going to be when they first started investing and this is something that we have kind of forgotten over the past 10 or 15 years because commodity prices have been depressed but in environments where commodity prices are higher, you see more resource nationalism, you see more strikes. The labour that's working at these mines, everyone got an iPhone today, they know what the copper prices. When copper is north of four, 450, they are going to be more inclined to ask for more.
That is going to be an issue that we have not had to think about over the course of the last five, 10, 12 years. As commodity prices move higher, anticipate that the countries were that production is situated will want to keep more of it.
>> Fascinating stuff there on copper. We are going to get your questions about copper, commodities in general for Hussein Allidina in just a 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.
We showed you some stocks moving today on earnings, let's tell you about the earnings. Let's start with Walmart. Says it's attracting more high-income shoppers as households look for bargains amid the high cost of living.
The retail giant beat expectations on both the top and bottom lines were the most recent quarter. If the US e-commerce business, days shine a spotlight on that, and grew 22%. Walmart says the high cost of dining it is attracting more shoppers, including higher income households, to its grocery business. I want to check in on cheers of Canada Goose, making gains today. The high-end parka maker is benefiting from a rebound of sales in Asia, key market for its goods. The Asia-Pacific region is home to more than 40% of Canada Goose stores and recovering demand coming out of COVID had been slow for the area. We are seeing a pickup this year.
At $18.15, Europe 17%.
And Lightspeed Commerce, though shares on the move today as well. The point-of-sale software company is reporting A 25% jump in revenue for its most recent quarter.
Lightspeed also announced that founder Dax Dasilva will assume the CEO title after returning to that top job on an interim basis earlier this year. Put it all together, Lightspeed is just shy of $20 per share.
Let's check on the markets. Starting with the TSX Composite Index, up six ticks.
South of the border is getting a lot of attention.
Indices they are making new all-time highs. Dow at 40,000 for the first time ever, S&P 500 at 5315, up about 1/10 of a percent today.
We are back with Hussein Allidina, taking your questions about commodities. At first question. What is your outlook for gold?
>> Is that a near-term call or long-term?
>> Near-term, long-term, what are the dynamics?
>> Let me start with the long term first.
If you look at what has driven gold over the last 6 to 12 months, it is not the typical factors. The typical factors will look at the US dollar, the acid is priced in dollars, it will look at real rates, typically with a stronger dollar and higher real rates, you would anticipate weakness in gold prices. Gold prices have done the exact opposite and I think the driver behind that sort of gold strength has been robust due to central bank buying. If you look at EM central banks and their total reserves, the EEM central banks, broadly speaking, are probably sitting at 78% of total reserves that compared to DM central bank that are sitting at north of 40.
You are seeing EM banks diversifying their reserves, they are moving away from the dollar and euros into gold and I think that trend continues because the EM number is seven or 8% and the DM number is 40%.
That has been the biggest driver of gold and I think from a portfolio construction perspective, we talk about portfolio construction in our portfolios, central banks are thinking the same thing and there is this motivation to diversify. I think that trend continues over the course of the medium-term. I think we continue to see increases in gold flows or allocation to gold from the broader community, central banks and holders of capital broadly. In the near term, it's a hard call. Gold has gone up tremendously. When I look tactically, it feels like a real rates are closer to a high. It feels like the dollar is closer to a high. If that is correct, gold should continue to see support as those respective metrics come down but I recognize that we have had a pretty phenomenal move over the course of the last couple of months so I would not be surprised to see consolidation. I like it, I own it in my PAN I think that it serves a role in a portfolio that other assets cannot serve. If I have a very sort of inflationary or deflationary tales of distribution, gold is one of the few assets that performs in those.
>> When you talk about emerging-market central bank buying, these seem to be the kind of buyers that do not quickly turn around and put the gold back on the market.
>> That gold I don't think is coming back in any hurry, to be clear.
If we look at the last couple of years, what has prompted the sort of buying on the part of the central banks is frankly the confiscation of US reserves by the US government. They did it in Afghanistan when the Taliban took over and they did it in Russia when Putin invaded Ukraine. I think these EM central banks are questioning whether it is as safe to hold the dollar as they once thought and I think that is probably the sort of move away into other assets including gold.
>> Fascinating stuff there on gold. Next question, knew you were going to get it sooner rather than later. It's about oil.
Is oil range bound?
>> I have been of the view and we have talked before, I think oil is near-term range bound, 7290 is likely where we trade. We go below 70 if you have a material contraction in growth and the tea leaves are not showing that right now.
Growth is slowing but it seems to be slowing at relatively sort of robust levels. I don't think we go above 90 because there is a lot of spare capacity and I think that the global economy probably cannot handle oil above $90 per barrel.
The tax that would put on the consumer would challenge demand even further. I do think that we are probably trading at the lower end of the range relative to where I think we are going to head over the course of the summer and in the summer we are going to see refinery demand for crude increase by 2 to 3 million barrels per day. I think in the third quarter we are going to see crude product inventories dropped to the tune of 1.5 to 2 million barrels per day from a very low level.
So I think that continues to support the price. I think that continues to support the structure so it continues to support the backwardation of the market but I'm not of the camp that we are going to see a big change unless I see supply-side disruption which is not something that I am looking for.
>> There is another meeting coming in June for OPEC+. What to expect from Nike Mark!
It is debating because there has been some news about Iraq and potentially UAE complaining about their production levels and some dialogue about are they going to continue with their production restraint?
I think overall when I look at OPEC as a whole, I don't think that they are going to return production to the market.
You worked so hard over the course of the last couple of years to lower inventories, to keep prices relatively supportive.
What'd OPEC like an oil price higher?
Possibly, but if they bring production back to the market, it's only going to send prices materially lower. They are trying to maximize total revenues. I think they are also trying to keep a backward dated curve where there prices increase OPEC's market share. I'm not in the camper I believe that OPEC is returning production to market anytime soon. They will return production to market when the market needs it.
I do not think on an incremental basis that we need it right now.
>> Another audience question.
Will transmountain give a boost to Canada's energy sector?
>> I think it's amazing that the pipeline is finally online.
It's concerning that it was expensive to build relative to original expectations.
But what it does is it improves the realization that the Canadian producer reserves for their crude. That should help bottom-line Canadian producers.
I think it's important to highlight that when transmountain was first discussed, they were talking about for five dollars per barrel to move it along a 1200 water pipeline.
Today that price is higher. It's materially better than sending it on rail and/or on truck for the Canadian producer.
So yes, I think it's good on the margin for Canadian producers.
>> When we think about what it took to get this built and the cost that it took to get this built and we had to go through all the hurdles, is this the last big Canadian pipeline project?
>> I hope it's not. Canada has tremendous resource.
I was in Saskatchewan a fortnight ago.
When you think about commodity production, you think about Alberta, maybe you think about Newfoundland because of the oil and gas they have there. Saskatchewan has a ton of potential. We have to build infrastructure broadly. You asked about pipelines but I'm going to talk about infrastructure broadly.
This country has so much resource. The world is going to need that resource. And frankly, I would rather face Canada as a supplier of resource and some of the other options that we have. But in order to get that commodity to market, I need infrastructure. I think it underscores the challenges associated with building infrastructure broadly. We could argue that there might be some unique challenges in Canada over the last couple of years or last couple of terms but ultimately it takes time to build infrastructure. I can't do it overnight.
And I think the world is going to I think see the impact of that over the course of the next couple of years if not longer.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
we will get back your questions for Hussein Allidina on commodities in just a moment's time. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day. If you are looking to stay up-to-date on what's happening in the markets, what broker has tools which can help. Joining us now to discuss his Megan Henricks, Senior client education instructor with TD Direct Investing.
Welcome to the show.
Let's talk about how an investor can use what broker alerts to stay informed about events that shape the market.
>> Yes, of course. For a lot of investors, it can be difficult to figure out how can I get this information because there's so much information out there. And what broker, I'm going to show you how we can do this. Using our main menu, if we were to go under research, under markets, we can go to overview.
So from here, of course, we can do our research manually ourselves. But as we know, there's just so much information that it's pretty time-consuming and a lot of us might not have the time to do this efficiently.
So what we can do to make this easier is on the right, you see under this symbol, we have a set alerts.
From here, we will have a choice to select between market analysis and news and research. It's pretty simple. All we need to do is select the one that interests us.
For instance, let's say we were looking at market gainers and losers. We can select this, select our index that we are interested in, let's pretend that it's the TSX compensate, and then we choose the frequencies. Do we want to get this information at midday, after the close, before markets open? So you select these based on what you are interested in. Say that I trade during the market hours so I will do midday. And then from there, it's how I'm going to be notified. So we have a choice that you can select up to two email addresses so that way when this information comes in, it will send you an email and all you need to do is click on save and you will be getting that notification.
>> Great. What if you actually have some stocks in your holdings or maybe once you been watching and put onto a watchlist, is there a way to set alerts for those individual ones?
>> Yes. For a lot of investors, they do you want to be able to get notifications based on that specific company, so let me show you that on web broker where we are going to use the main menu. We are going to stay in the research section, but this time we are going to go under tools and then we are going to go to alerts.
This is actually our alerts homepage. So from here, we would simply enter the name of the company, so you enter, we can put in the symbol. Let's say it's BCE. From the drop-down, we would select it.
I'm just going to refresh because it's acting a little slow. So here we go.
Let's try this again. It BCE and then from the drop-down we can select which market we may be wanting. I'm going to select the Canadian market.
From here, there are a lot of different tabs for price and volume, ratings changes, events. So you can discover this on your own time but let's say I wanted to get a notification if the price were to drop because maybe I want to buy it but only if it drops to example $43 but I want to be notified first. So again, make sure you check it off. You put in your criteria of what price you want. Just like before, we have our two different email addresses that we could select but what's more is that we have that mobile app push notification. If you have the TD app and you have enabled push notifications, you can get this directly on your phone when it meets the criteria.
Just like before, it's very simple. Once you put everything in, all you would need to do after that is click on save and it's that easy.
>> All right. Great stuff. Thanks, Megan.
>> Thank you.
>> Megan Henricks, Senior client education instructor with TD Direct Investing. For more educational resources, check at the learning centre on web broker or use this QR code. It will navigate to TD Direct Investing's Instagram page and there you will find more informative videos.
Now before you get back to your questions about commodities for Hussein Allidina, a reminder of how you can get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Hussein Allidina, taking your questions about commodities.
Before we get to this one, a little complement came in for you. A viewer said, nice guess.
>> Nice hair.
>> Particularly honed in on the hair.
Keep sending in your questions. Can you guys please comment on its outlook for natural gas pricing?
>> Natural gas prices have moved materially higher. There was a rally on whether in production in the US going lower. This AI story that I talked about sort of supporting copper which I don't think is justified today is also supporting natural gas because if I have to build more power generation, I've got a couple of choices. I've got nuclear, that is going to take a very long time to come to fruition, gas may be more expensive but I can bring it to market and build a quicker but I'm not going to be building at the summer. Gas prices have probably moved too far, too quick. When I look at the medium term and I look at where gas prices are trading in calendar 25, 26, 27, we are almost trading at four dollars so I think that's arguably well price given the ability of US producers to respond.
I would not be long gas right now. If we get below two, it might be an opportunity to add. I think over a multiyear period, natural gas probably moves higher like the four curve is pricing around four dollars.
I'm going to get not only increase power generation demand, I'm also going to get increased LNG exports out of the US which will help tighten the domestic balance.
But producers can and will respond as prices move higher.
>> What about the Canadian producer? Are we well positioned as a country to say if a I need more energy and natural gas demand, is Canada prepared for that?
>> Canada benefits from it. Where I think Canada is missing out is that a lot of resources are not being developed. Part of that is government, part of it is infrastructure and I think both of those things need to be addressed. I firmly believe that we are going to need this to meet the world's incremental demand.
>> Let's take another question now about something you just touched on, energy demand.
If you want to know what your outlook is for uranium and uranium stocks?
He's nonequity guide but we can talk about the commodity.
>> I will clarify that the fund that my team and I managed, we do not have uranium exposure in there because we are focused on derivatives alone and there is no futures market for uranium.
We do spend some time on power and electricity generation and I do not see how, again, I'm going to sound like a broken record, we cannot have economic growth because economic growth requires energy, you can debate the form of energy, you need power. The way the world is moving as it relates to energy transition, as it is relating to AI, is going to require more power. So then I go back to, where my going to get that power? I'm not burning coal, oil is expensive, wind and solar are great when it's windy or is sunny but because I can't store power, I need some baseload generation.
Today, baseload generation will come from natural gas, Hydro if I have Hydro, where I have that I'm using it, is either natural gas or nuclear and I think nuclear is materially cheaper, there is the ability to build the staff with government approval. It takes some time. But ultimately uranium has been under invested like most commodities over the course of the last decade or longer so I do like uranium because I think demand for uranium is going to increase as the world's nuclear generation increases.
>> Let's take you back to Canada because we have uranium, we have the resource.
Are we utilizing it?
>> I think you're trying to get me in trouble. I hope we are. It requires a government that recognizes that the resource is needed and that we have it. I think they recognize that we have it but they have not been as friendly in the development.
It's not a comment on the federal government.
You have regulatory constraints broadly speaking that limit the production of commodities, uranium included. Will he benefit? I think yes. Are we benefiting as much as we can today? No. And that needs to change.
>> Of course part of the change in the last couple of years has been the government's recognizing the need for energy and getting back to feeling a little bit more comfortable with nuclear.
>> Yes, nuclear has had a bad rap due to a few incidences but on the whole it's extremely economic and safe relative to the other forms. I think you have to be pragmatic and realistic.
If we want to continue to see economic growth, I'm going to repeat myself, if I want to see economic growth, I need energy.
We can look at the different forms of energy and we can wish that it's all going to be totally renewable, totally clean, but the technology and ability is not there. I want economic growth, I need to make sacrifices elsewhere and I'm talking about environmental sacrifices, to be clear, but I cannot have both. Now I look at my options given these constraints, nuclear wins, natural gas wins, in my books.
>> Interest except. We'll get back to your question for Hussein Allidina in just a moment's time. As always, make sure you do your own research before making any investment decisions.
and a reminder that you get in touch with us at any time. Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Let's talk about homebuilding. We have seen some government measures to try to support the building of new housing in this country. We have also seen rapidly rising rents that should support the construction of purpose-built rental starts at however, starts have been at healthy levels been trending lower.
Anthony Okolie is running is now in taking a look at all of this through a TD Economics report, seeing some of these measures we are hearing about from the federal government in the provinces are constructive.
>> Looking at some of the data we are seeing with respect to housing starts, they got off to a bit of a slow start to kick off the year. See MHC said that in April Canadian housing starts were down 1% month over month. When you look at the moving average of starts, down more than 2% month over month at the six month moving average. Geographically, starts were down and 5/10 provinces and actually new housing construction not seasonally adjusted dropped in Toronto, Vancouver and Montréal for both multiunit and semi detached homes. That's the data. The slow start in housing starts comes as the Federal Reserve, federal and provincial budgets contain housing measures to increase supply. In addition, we have seen the government introduced some demand-side measures such as the decision to extend amortization from 25 to 30 years for first-time homebuyers. Despite these efforts, TD Economics believes that they will likely only add marginally to housing supply and it won't meaningfully change their resale forecast and they point to several reasons. One, the federal government's housing targets vastly exceeds historical completions.
Hitting the target for new homes implies over 550,000 new housing units completed per year, that's more than double historical maximums as the chart shows.
Secondly, the industry is already operating at an elevated pace while homebuilding is facing worker shortages amid a rapidly aging workforce for tradespeople and recent newcomers to Canada are entering construction at a lesser rate than other industries according to the Bank of Canada analysis.
Finally, TD Economics points to productivity in Canada's construction industry which has led to all other industries since the early 2000's. As this next chart shows, over the past 10 years, labour productivity in Canada in the construction industry, sorry, in Canada, average 1% growth where is construction productivity decline slightly on average.
The federal government's housing plan is highly ambitious and should deliver some boost to housing supply, particularly in the purpose-built rental starts. However, TD Economics is that capacity constraints in the construction sector will limit the government's ability to reach its lofty targets for new homes.
>> So that's a situation we are in right now, the trend we have been seeing unfold.
What about the rest of the year?
>> They continue to see weakness through the rest of the year. They think that starts will continue to decline through the remainder of 2024 and the decline will reflect a more recent increase in presale activity in? It's like you're in Toronto as well as elevated construction costs and high interest rates.
>> Interesting stuff. Thanks.
>> 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 us a view of the market movers. We're going to take a look at the TSX 60 on price and volume. What is taking up space on the screen in terms of volume? The life coast.
You got Sun Life up a little bit more than 1%. Manulife up a little bit more than 1%.
The size of real estate indicates that they are doing fairly impressive volume compared to other parts.
Energy stocks either slightly lower or slightly higher paid Shopify down about half a percent today. South of the border, we got the Dow breaking 40,000 for the first time in its history. It's a little bit below that right now, just coming out the highs of the session.
Still got the S&P 500 and the green so we are going to take a look at the 100.
We have an earnings story with Walmart today and the street seems to like it.
WMT up a little more than 6%. I think Cisco handed in a quarterly report and they are slightly down. Chipmaker AMD is up 4.5%.
We are back with Hussein Allidina from TD Asset Management talking commodity. Let's take another question from the audience.
This one just came in. Rate cuts are supposed to be good for commodities, but won't hire commodity prices cause more inflation and keep rates higher? Are we chasing our own tail?
>> Rate cuts should be constructed for commodities in so much as they support demand but the question, the viewer is correct in their question that as demand increases and commodity prices increase, that puts pressure on inflation.
One of the reasons why institutional and retail asset holders own commodities in their portfolios to hedge against that inflation because it is oftentimes a source of that inflation.
Now just one sort of caveat, if rates are coming off because growth is already very weak, then the lower rate will support growth and maybe relieve some pressure on inflation because inflation has come off because growth is low.
There is a scenario where rates don't come off because inflation is elevated and growth is declining. That is not good for equities or fixed income but commodities tend to do okay in that environment because of the asset allocation part.
>> You mentioned earlier that OPEC is aware that the global economy can only sustain oil prices at a certain level if they want to continue to see that growth.
As you mentioned, there is no one controlling the price of copper but you do have a cartel saying we want to make sure we are getting what we think our oil is worth but at the same time we don't want to choke off economic growth.
>> Like copper at 10,000, copper 20,000 would probably not be great for those folks that are consuming copper as a big cost of their production but you and I are probably not impacted by copper 20,000 the way we would be impacted… It's relatively small. This is interesting because it allows copper over time to move materially higher because it's such a small component of the overall cost of the things that we are consuming.
Even in the Tesla vehicle that has far more copper than the conventional combustible engine vehicle, it's a relatively small component of the overall cost of production meaning that copper can move materially higher before I see demand destruction. Oil prices go up 15%, we will all notice.
>> Yes, at the gas pump.
>> Energy as an input into everything else. It's not just the direct inflation from the oil but it's also the indirect impact that higher energy prices will have on the CPI basket.
Back to OPEC, I don't think OPEC allows willingly oil prices to move materially higher north of 90, north of 100. They start releasing some of that oil back into the market but let's be clear, OPEC spare capacity is not unlimited. The market is somewhere in the 4 to 6 million barrel per day range.
>> Fascinating stuff. Thanks that question.
Definitely want to get us thinking.
Another question here. Small wants to know how things are looking in the grains a sector.
>> Grains, if I look at the commodity basket, I've argued, commodity folks will argue that commodities are relatively delayed in their supply response. The price moves up, the price of copper goes from 10,000 a ton to 20,000 per ton, we are not going to see any meaningful amounts of copper come to markets tomorrow.
You will see people stealing copper from scrap yards but you are not going to see meaningful change in copper supply. When I think about grains on the other hand, we've had elevated grain prices broadly speaking since Putin's invasion of Ukraine and the farmer has on the margin try to respond to that higher price. They are using more fertilizer, more husbandry, more acreage. The balance as a result is software. There is always weather risk and right now I think grain prices have found some support over the course of the last two weeks on weather-related risk in the south of Brazil there has been a lot of rain which has raised questions about soybean crop there which has already been harvested and there has been some whether in the Midwest of the US which has delayed the farmer on the margin.
If things go as we see, sort of as hopefully they should, the grain balance should be relatively comfortable, allowing grain prices to retreat from higher levels.
>> While we are on the topic of grain, you made a trip to Saskatchewan. I knew about it because I saw it on social media, you are on a podium delivering a speech. Tell us about the situation there.
>> Saskatchewan is a beautiful providence and it has so much resource. There is a tremendous amount of, ignorantly, when I thought of Saskatchewan, I thought of it, and this was not recently, but historically, I thought of it as grains, wheat, pulses, etc. It definitely has tremendous grain, wheat, pulse, etc. but a tremendous amount of oil and natural gas potential, fertilizer, urea, uranium.
There is so much resource in a province that I think is 1.3, 1.4 million people.
As the world's need and demand for these commodities continues to grow, critical minerals, I think Saskatchewan, another speaker at this conference I was at noted that 19 or 21 of the 35 critical minerals on the critical minerals list are available in Saskatchewan. We have to develop this province. There is tremendous potential and Saskatchewan in Canada can play a role in facilitating the world's economic growth and we do it in a relatively clean and efficient manner. We talk about ESG. Sure, there is issues with oil sands production relative to some other forms of production. But Canada rates number one or number two on social and governance. We have to look at the holistic picture and I think Canada wins when we do that.
>> Always fascinating conversation when you're here. I look forward to the next time.
>> Thanks for having me.
>> Our thanks to Hussein Allidina, managing Dir. and head of commodities at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
we will be back tomorrow with an update on the markets and some of our best interviews of the week. On programming no, of course, we will be off on Monday for the Victoria Day long weekend. I hope you are off as well. We were turn on Tuesday with Robert Both, Senior macro strategist at TD Securities he will give us his take on Canadian inflation. We are getting a report on Tuesday. There will be plenty to talk about. He wants to take your questions about the economy and interest rates.
You can get this questions in ahead of time as always.
Just email MoneyTalkLive@TD.com.
That's all the time we have the show today. Thanks for watching. We will see you tomorrow.
[theme 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 discuss whether this recent rally we have seen in copper has more room to run with TD Asset Management's Hussein Allidina.
MoneyTalk's Anthony Okolie is going to have a look at the health of the Canadian housing market, particularly the building industry.
And in today's WebBroker education segment, Megan Henricks will show us how to set up alerts on the platform. So 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. We will start here at home with the TSX Composite Index.
Up a modest 32 points, a little more than 1/10 of a percent. Among some of the most actively traded names out there today are based off of earnings. We will show you Lightspeed Commerce first, we'll tell you more about the earnings later on the show.
Right now the stock is up to the tune of almost 15%. Canada Goose also heading in a quarterly report, was being it taken well by the market in the morning trade, it's up 17%. South of the border, we have US markets hitting new all-time highs. The S&P 500 up 12 points right now, 1/4 of a percent.
The NASDAQ building on its recent gains as well to the tune of about 1/5 of a percent. Right on the nose, one face of a percent. We've also got the Dow, I can show you at the moment, but at 40,000 for the first time in its history. Walmart also handing in an earnings report being received it favourably it by the street, it's up a little shy of 6%. And that's your market update.
The price of copper has jumped about 25% since the start of this year, but are the market fundamentals supporting this big move? Joining us now to discuss is Hussein Allidina, managing director and had commodities at TD Asset Management.
Right to have you back on the show.
>> Happy to be here.
>> I looked at the chart this morning and did the math, this is a substantial move in 2024 for Dr. Copper. What's going on?
>> The red metal has been supported I think by three main factors. Last year, we had a big mine in Panama that was taken out of commission or not brought into commission which I think force everyone to update their supply demand balances in a recognition or realization that balances are maybe not as loose as prices were discounting. I think this year we have seen Chinese economic activity on the ground improving from low levels but no longer getting worse and on the margin getting better which is quite supportive for copper demand, and I think the third piece is the realization, recognition that the AI trade and the amount of power that's going to be needed to support those data centres as material, we can debate what the power source is for generation but you are going to need copper to move that power.
You ask, is the price reflecting fundamentals today? We think the copper prices have actually moved too far too quick.
If we talk about copper on a multiyear view, copper prices do have to move and right now I think it's too much given today's fundamentals. When I look at a multi-year review, quite constructive. Not to bore the viewers, we talked about this before, we have not been investing in the supply side for the better part of the last 10 years. You and I can go and try to find a copper mine. We are not getting over to the market for 10 years. So copper prices will have to move higher than the 10,000 we are trading at right now but I think that probably we see a bit of a pullback of five, 7% over the course of the next couple of weeks.
>> I was going to ask you of the fundamentals longer term might support price but in the here and now, if we got ahead of ourselves, we see a pullback?
>> Commodities broadly speaking are coincident indicators. They should reflect supply and demand today.
There is a low correlation between commodities and equities. Could we have a scenario where the constructive miss on a multiyear view keeps copper prices higher?
Of course, we shall this happen in the energy market in 2005, 2006 were anticipations of the future deficits lead to higher prices today.
That actually softens the fundamental balance today. If the copper prices higher than in theory it should be, you'll see less demand today and potentially more supply on the margin. Do I think, in my position, we are set up for a pullback?
Yes. Do I think copper is one of the better performing commodities on a multiyear view? Absolutely.
>> Let's talk about some of those factors you're breaking down, particularly what was happening in Panama. As the industry tries to work through that, you said it's very hard to find a new copper mine.
As we get further into the future and all those factors you talked about, AI, we will get to EVs in a second, are we going to have the copper?
>> Based on the supply we have today, the supply that we can identify that is going to be produced over the next five, 10 years, if I look at that relative to demand projections, no, we are now going to have enough copper and that means that the price of copper has to move materially higher to do two things, to bring about increased production. It we have to deal with the legs associated with bringing copper to market. Prices will have to average higher to discourage demand on the margin. Will it discourage EV demand, will it discourage AI demand? That could be debated.
Probably more of a substitution out of copper into aluminum, it may be in power generation or in transmission of that generation, it may be air conditioning units in China, etc.
Based on supply and demand today, there is not enough copper to meet the demand projections that we are seeing.
Now, as prices move higher, we will find more minds. Those mines will not come on lion between 2025 and 2027, they take 8 to 10 years to bring onto the market.
During that timeframe, you're going to have to discourage demand. The only way to do that is by price.
>> The EV story, I want to dig a bit deeper because we've seen this moving copper, a substantial one this year, against the backdrop of EVs which were part of that story but EV demand has been going in the other direction.
How does that play into what we've been seeing?
>> I want to be very clear, EV demand growth has been moving in the other direction. The absolute number of EVs, i.e. the absolute number of pounds of copper I need for every EV that is sold is still materially higher than what you CNN ice vehicle.
Demand is tempered for 24 and maybe 25 but we are using incrementally more copper. We could argue that I'm using less than I thought I was going to use 6 to 12 months ago, that's true.
That is a bearish factor for copper. But today, everyone is focused on the number of research reports I get from the south side on power generation, AI. I get multiple report today, so everyone is focused on that sliver of the market.
Today, it's a relatively small proponent of demand. It will get materially larger.
It's not there yet. That's why I think the market has maybe moved a little too fast.
>> A higher price for copper in the future would incentivize people to start mining for copper. It sounds like it's going to be a bumpy road, though.
>> It's not easy. In the last cycle when we were trying to find copper reserve, right, copper, unlike oil, we do not have shale copper, we do not have an OPEC that is keeping copper production off-line in anticipation of better price. You are producing everything that you can today.
The reason that the First Quantum Panama situation was such a surprise to the market is that was supposed to be copper that came to the market to help with the supply demand balance. If I rewind 12 months when folks still thought Cobre Panama was coming online, most folks had 24 supply demand, relatively equal. Naïve losses production, some production issues in other regions as well, that has taken a sort of balanced market with tight inventories to a deficit market. A deficit market with tight inventories is a recipe for higher prices.
>> It's hard to know what's going to happen in the Panama situation. It's a topical story in terms of Will there be a changing of sentiment, can they get things going again on the right side of the officials there, could that be a wildcard in the months ahead? It doesn't look like there's going to be a quick resolution, at least there hasn't been for a while.
>> I ultimately think that production will come to the market. The economics for the producer are probably not going to be as good as they thought they were going to be when they first started investing and this is something that we have kind of forgotten over the past 10 or 15 years because commodity prices have been depressed but in environments where commodity prices are higher, you see more resource nationalism, you see more strikes. The labour that's working at these mines, everyone got an iPhone today, they know what the copper prices. When copper is north of four, 450, they are going to be more inclined to ask for more.
That is going to be an issue that we have not had to think about over the course of the last five, 10, 12 years. As commodity prices move higher, anticipate that the countries were that production is situated will want to keep more of it.
>> Fascinating stuff there on copper. We are going to get your questions about copper, commodities in general for Hussein Allidina in just a 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.
We showed you some stocks moving today on earnings, let's tell you about the earnings. Let's start with Walmart. Says it's attracting more high-income shoppers as households look for bargains amid the high cost of living.
The retail giant beat expectations on both the top and bottom lines were the most recent quarter. If the US e-commerce business, days shine a spotlight on that, and grew 22%. Walmart says the high cost of dining it is attracting more shoppers, including higher income households, to its grocery business. I want to check in on cheers of Canada Goose, making gains today. The high-end parka maker is benefiting from a rebound of sales in Asia, key market for its goods. The Asia-Pacific region is home to more than 40% of Canada Goose stores and recovering demand coming out of COVID had been slow for the area. We are seeing a pickup this year.
At $18.15, Europe 17%.
And Lightspeed Commerce, though shares on the move today as well. The point-of-sale software company is reporting A 25% jump in revenue for its most recent quarter.
Lightspeed also announced that founder Dax Dasilva will assume the CEO title after returning to that top job on an interim basis earlier this year. Put it all together, Lightspeed is just shy of $20 per share.
Let's check on the markets. Starting with the TSX Composite Index, up six ticks.
South of the border is getting a lot of attention.
Indices they are making new all-time highs. Dow at 40,000 for the first time ever, S&P 500 at 5315, up about 1/10 of a percent today.
We are back with Hussein Allidina, taking your questions about commodities. At first question. What is your outlook for gold?
>> Is that a near-term call or long-term?
>> Near-term, long-term, what are the dynamics?
>> Let me start with the long term first.
If you look at what has driven gold over the last 6 to 12 months, it is not the typical factors. The typical factors will look at the US dollar, the acid is priced in dollars, it will look at real rates, typically with a stronger dollar and higher real rates, you would anticipate weakness in gold prices. Gold prices have done the exact opposite and I think the driver behind that sort of gold strength has been robust due to central bank buying. If you look at EM central banks and their total reserves, the EEM central banks, broadly speaking, are probably sitting at 78% of total reserves that compared to DM central bank that are sitting at north of 40.
You are seeing EM banks diversifying their reserves, they are moving away from the dollar and euros into gold and I think that trend continues because the EM number is seven or 8% and the DM number is 40%.
That has been the biggest driver of gold and I think from a portfolio construction perspective, we talk about portfolio construction in our portfolios, central banks are thinking the same thing and there is this motivation to diversify. I think that trend continues over the course of the medium-term. I think we continue to see increases in gold flows or allocation to gold from the broader community, central banks and holders of capital broadly. In the near term, it's a hard call. Gold has gone up tremendously. When I look tactically, it feels like a real rates are closer to a high. It feels like the dollar is closer to a high. If that is correct, gold should continue to see support as those respective metrics come down but I recognize that we have had a pretty phenomenal move over the course of the last couple of months so I would not be surprised to see consolidation. I like it, I own it in my PAN I think that it serves a role in a portfolio that other assets cannot serve. If I have a very sort of inflationary or deflationary tales of distribution, gold is one of the few assets that performs in those.
>> When you talk about emerging-market central bank buying, these seem to be the kind of buyers that do not quickly turn around and put the gold back on the market.
>> That gold I don't think is coming back in any hurry, to be clear.
If we look at the last couple of years, what has prompted the sort of buying on the part of the central banks is frankly the confiscation of US reserves by the US government. They did it in Afghanistan when the Taliban took over and they did it in Russia when Putin invaded Ukraine. I think these EM central banks are questioning whether it is as safe to hold the dollar as they once thought and I think that is probably the sort of move away into other assets including gold.
>> Fascinating stuff there on gold. Next question, knew you were going to get it sooner rather than later. It's about oil.
Is oil range bound?
>> I have been of the view and we have talked before, I think oil is near-term range bound, 7290 is likely where we trade. We go below 70 if you have a material contraction in growth and the tea leaves are not showing that right now.
Growth is slowing but it seems to be slowing at relatively sort of robust levels. I don't think we go above 90 because there is a lot of spare capacity and I think that the global economy probably cannot handle oil above $90 per barrel.
The tax that would put on the consumer would challenge demand even further. I do think that we are probably trading at the lower end of the range relative to where I think we are going to head over the course of the summer and in the summer we are going to see refinery demand for crude increase by 2 to 3 million barrels per day. I think in the third quarter we are going to see crude product inventories dropped to the tune of 1.5 to 2 million barrels per day from a very low level.
So I think that continues to support the price. I think that continues to support the structure so it continues to support the backwardation of the market but I'm not of the camp that we are going to see a big change unless I see supply-side disruption which is not something that I am looking for.
>> There is another meeting coming in June for OPEC+. What to expect from Nike Mark!
It is debating because there has been some news about Iraq and potentially UAE complaining about their production levels and some dialogue about are they going to continue with their production restraint?
I think overall when I look at OPEC as a whole, I don't think that they are going to return production to the market.
You worked so hard over the course of the last couple of years to lower inventories, to keep prices relatively supportive.
What'd OPEC like an oil price higher?
Possibly, but if they bring production back to the market, it's only going to send prices materially lower. They are trying to maximize total revenues. I think they are also trying to keep a backward dated curve where there prices increase OPEC's market share. I'm not in the camper I believe that OPEC is returning production to market anytime soon. They will return production to market when the market needs it.
I do not think on an incremental basis that we need it right now.
>> Another audience question.
Will transmountain give a boost to Canada's energy sector?
>> I think it's amazing that the pipeline is finally online.
It's concerning that it was expensive to build relative to original expectations.
But what it does is it improves the realization that the Canadian producer reserves for their crude. That should help bottom-line Canadian producers.
I think it's important to highlight that when transmountain was first discussed, they were talking about for five dollars per barrel to move it along a 1200 water pipeline.
Today that price is higher. It's materially better than sending it on rail and/or on truck for the Canadian producer.
So yes, I think it's good on the margin for Canadian producers.
>> When we think about what it took to get this built and the cost that it took to get this built and we had to go through all the hurdles, is this the last big Canadian pipeline project?
>> I hope it's not. Canada has tremendous resource.
I was in Saskatchewan a fortnight ago.
When you think about commodity production, you think about Alberta, maybe you think about Newfoundland because of the oil and gas they have there. Saskatchewan has a ton of potential. We have to build infrastructure broadly. You asked about pipelines but I'm going to talk about infrastructure broadly.
This country has so much resource. The world is going to need that resource. And frankly, I would rather face Canada as a supplier of resource and some of the other options that we have. But in order to get that commodity to market, I need infrastructure. I think it underscores the challenges associated with building infrastructure broadly. We could argue that there might be some unique challenges in Canada over the last couple of years or last couple of terms but ultimately it takes time to build infrastructure. I can't do it overnight.
And I think the world is going to I think see the impact of that over the course of the next couple of years if not longer.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
we will get back your questions for Hussein Allidina on commodities in just a moment's time. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day. If you are looking to stay up-to-date on what's happening in the markets, what broker has tools which can help. Joining us now to discuss his Megan Henricks, Senior client education instructor with TD Direct Investing.
Welcome to the show.
Let's talk about how an investor can use what broker alerts to stay informed about events that shape the market.
>> Yes, of course. For a lot of investors, it can be difficult to figure out how can I get this information because there's so much information out there. And what broker, I'm going to show you how we can do this. Using our main menu, if we were to go under research, under markets, we can go to overview.
So from here, of course, we can do our research manually ourselves. But as we know, there's just so much information that it's pretty time-consuming and a lot of us might not have the time to do this efficiently.
So what we can do to make this easier is on the right, you see under this symbol, we have a set alerts.
From here, we will have a choice to select between market analysis and news and research. It's pretty simple. All we need to do is select the one that interests us.
For instance, let's say we were looking at market gainers and losers. We can select this, select our index that we are interested in, let's pretend that it's the TSX compensate, and then we choose the frequencies. Do we want to get this information at midday, after the close, before markets open? So you select these based on what you are interested in. Say that I trade during the market hours so I will do midday. And then from there, it's how I'm going to be notified. So we have a choice that you can select up to two email addresses so that way when this information comes in, it will send you an email and all you need to do is click on save and you will be getting that notification.
>> Great. What if you actually have some stocks in your holdings or maybe once you been watching and put onto a watchlist, is there a way to set alerts for those individual ones?
>> Yes. For a lot of investors, they do you want to be able to get notifications based on that specific company, so let me show you that on web broker where we are going to use the main menu. We are going to stay in the research section, but this time we are going to go under tools and then we are going to go to alerts.
This is actually our alerts homepage. So from here, we would simply enter the name of the company, so you enter, we can put in the symbol. Let's say it's BCE. From the drop-down, we would select it.
I'm just going to refresh because it's acting a little slow. So here we go.
Let's try this again. It BCE and then from the drop-down we can select which market we may be wanting. I'm going to select the Canadian market.
From here, there are a lot of different tabs for price and volume, ratings changes, events. So you can discover this on your own time but let's say I wanted to get a notification if the price were to drop because maybe I want to buy it but only if it drops to example $43 but I want to be notified first. So again, make sure you check it off. You put in your criteria of what price you want. Just like before, we have our two different email addresses that we could select but what's more is that we have that mobile app push notification. If you have the TD app and you have enabled push notifications, you can get this directly on your phone when it meets the criteria.
Just like before, it's very simple. Once you put everything in, all you would need to do after that is click on save and it's that easy.
>> All right. Great stuff. Thanks, Megan.
>> Thank you.
>> Megan Henricks, Senior client education instructor with TD Direct Investing. For more educational resources, check at the learning centre on web broker or use this QR code. It will navigate to TD Direct Investing's Instagram page and there you will find more informative videos.
Now before you get back to your questions about commodities for Hussein Allidina, a reminder of how you can get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Hussein Allidina, taking your questions about commodities.
Before we get to this one, a little complement came in for you. A viewer said, nice guess.
>> Nice hair.
>> Particularly honed in on the hair.
Keep sending in your questions. Can you guys please comment on its outlook for natural gas pricing?
>> Natural gas prices have moved materially higher. There was a rally on whether in production in the US going lower. This AI story that I talked about sort of supporting copper which I don't think is justified today is also supporting natural gas because if I have to build more power generation, I've got a couple of choices. I've got nuclear, that is going to take a very long time to come to fruition, gas may be more expensive but I can bring it to market and build a quicker but I'm not going to be building at the summer. Gas prices have probably moved too far, too quick. When I look at the medium term and I look at where gas prices are trading in calendar 25, 26, 27, we are almost trading at four dollars so I think that's arguably well price given the ability of US producers to respond.
I would not be long gas right now. If we get below two, it might be an opportunity to add. I think over a multiyear period, natural gas probably moves higher like the four curve is pricing around four dollars.
I'm going to get not only increase power generation demand, I'm also going to get increased LNG exports out of the US which will help tighten the domestic balance.
But producers can and will respond as prices move higher.
>> What about the Canadian producer? Are we well positioned as a country to say if a I need more energy and natural gas demand, is Canada prepared for that?
>> Canada benefits from it. Where I think Canada is missing out is that a lot of resources are not being developed. Part of that is government, part of it is infrastructure and I think both of those things need to be addressed. I firmly believe that we are going to need this to meet the world's incremental demand.
>> Let's take another question now about something you just touched on, energy demand.
If you want to know what your outlook is for uranium and uranium stocks?
He's nonequity guide but we can talk about the commodity.
>> I will clarify that the fund that my team and I managed, we do not have uranium exposure in there because we are focused on derivatives alone and there is no futures market for uranium.
We do spend some time on power and electricity generation and I do not see how, again, I'm going to sound like a broken record, we cannot have economic growth because economic growth requires energy, you can debate the form of energy, you need power. The way the world is moving as it relates to energy transition, as it is relating to AI, is going to require more power. So then I go back to, where my going to get that power? I'm not burning coal, oil is expensive, wind and solar are great when it's windy or is sunny but because I can't store power, I need some baseload generation.
Today, baseload generation will come from natural gas, Hydro if I have Hydro, where I have that I'm using it, is either natural gas or nuclear and I think nuclear is materially cheaper, there is the ability to build the staff with government approval. It takes some time. But ultimately uranium has been under invested like most commodities over the course of the last decade or longer so I do like uranium because I think demand for uranium is going to increase as the world's nuclear generation increases.
>> Let's take you back to Canada because we have uranium, we have the resource.
Are we utilizing it?
>> I think you're trying to get me in trouble. I hope we are. It requires a government that recognizes that the resource is needed and that we have it. I think they recognize that we have it but they have not been as friendly in the development.
It's not a comment on the federal government.
You have regulatory constraints broadly speaking that limit the production of commodities, uranium included. Will he benefit? I think yes. Are we benefiting as much as we can today? No. And that needs to change.
>> Of course part of the change in the last couple of years has been the government's recognizing the need for energy and getting back to feeling a little bit more comfortable with nuclear.
>> Yes, nuclear has had a bad rap due to a few incidences but on the whole it's extremely economic and safe relative to the other forms. I think you have to be pragmatic and realistic.
If we want to continue to see economic growth, I'm going to repeat myself, if I want to see economic growth, I need energy.
We can look at the different forms of energy and we can wish that it's all going to be totally renewable, totally clean, but the technology and ability is not there. I want economic growth, I need to make sacrifices elsewhere and I'm talking about environmental sacrifices, to be clear, but I cannot have both. Now I look at my options given these constraints, nuclear wins, natural gas wins, in my books.
>> Interest except. We'll get back to your question for Hussein Allidina in just a moment's time. As always, make sure you do your own research before making any investment decisions.
and a reminder that you get in touch with us at any time. Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Let's talk about homebuilding. We have seen some government measures to try to support the building of new housing in this country. We have also seen rapidly rising rents that should support the construction of purpose-built rental starts at however, starts have been at healthy levels been trending lower.
Anthony Okolie is running is now in taking a look at all of this through a TD Economics report, seeing some of these measures we are hearing about from the federal government in the provinces are constructive.
>> Looking at some of the data we are seeing with respect to housing starts, they got off to a bit of a slow start to kick off the year. See MHC said that in April Canadian housing starts were down 1% month over month. When you look at the moving average of starts, down more than 2% month over month at the six month moving average. Geographically, starts were down and 5/10 provinces and actually new housing construction not seasonally adjusted dropped in Toronto, Vancouver and Montréal for both multiunit and semi detached homes. That's the data. The slow start in housing starts comes as the Federal Reserve, federal and provincial budgets contain housing measures to increase supply. In addition, we have seen the government introduced some demand-side measures such as the decision to extend amortization from 25 to 30 years for first-time homebuyers. Despite these efforts, TD Economics believes that they will likely only add marginally to housing supply and it won't meaningfully change their resale forecast and they point to several reasons. One, the federal government's housing targets vastly exceeds historical completions.
Hitting the target for new homes implies over 550,000 new housing units completed per year, that's more than double historical maximums as the chart shows.
Secondly, the industry is already operating at an elevated pace while homebuilding is facing worker shortages amid a rapidly aging workforce for tradespeople and recent newcomers to Canada are entering construction at a lesser rate than other industries according to the Bank of Canada analysis.
Finally, TD Economics points to productivity in Canada's construction industry which has led to all other industries since the early 2000's. As this next chart shows, over the past 10 years, labour productivity in Canada in the construction industry, sorry, in Canada, average 1% growth where is construction productivity decline slightly on average.
The federal government's housing plan is highly ambitious and should deliver some boost to housing supply, particularly in the purpose-built rental starts. However, TD Economics is that capacity constraints in the construction sector will limit the government's ability to reach its lofty targets for new homes.
>> So that's a situation we are in right now, the trend we have been seeing unfold.
What about the rest of the year?
>> They continue to see weakness through the rest of the year. They think that starts will continue to decline through the remainder of 2024 and the decline will reflect a more recent increase in presale activity in? It's like you're in Toronto as well as elevated construction costs and high interest rates.
>> Interesting stuff. Thanks.
>> 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 us a view of the market movers. We're going to take a look at the TSX 60 on price and volume. What is taking up space on the screen in terms of volume? The life coast.
You got Sun Life up a little bit more than 1%. Manulife up a little bit more than 1%.
The size of real estate indicates that they are doing fairly impressive volume compared to other parts.
Energy stocks either slightly lower or slightly higher paid Shopify down about half a percent today. South of the border, we got the Dow breaking 40,000 for the first time in its history. It's a little bit below that right now, just coming out the highs of the session.
Still got the S&P 500 and the green so we are going to take a look at the 100.
We have an earnings story with Walmart today and the street seems to like it.
WMT up a little more than 6%. I think Cisco handed in a quarterly report and they are slightly down. Chipmaker AMD is up 4.5%.
We are back with Hussein Allidina from TD Asset Management talking commodity. Let's take another question from the audience.
This one just came in. Rate cuts are supposed to be good for commodities, but won't hire commodity prices cause more inflation and keep rates higher? Are we chasing our own tail?
>> Rate cuts should be constructed for commodities in so much as they support demand but the question, the viewer is correct in their question that as demand increases and commodity prices increase, that puts pressure on inflation.
One of the reasons why institutional and retail asset holders own commodities in their portfolios to hedge against that inflation because it is oftentimes a source of that inflation.
Now just one sort of caveat, if rates are coming off because growth is already very weak, then the lower rate will support growth and maybe relieve some pressure on inflation because inflation has come off because growth is low.
There is a scenario where rates don't come off because inflation is elevated and growth is declining. That is not good for equities or fixed income but commodities tend to do okay in that environment because of the asset allocation part.
>> You mentioned earlier that OPEC is aware that the global economy can only sustain oil prices at a certain level if they want to continue to see that growth.
As you mentioned, there is no one controlling the price of copper but you do have a cartel saying we want to make sure we are getting what we think our oil is worth but at the same time we don't want to choke off economic growth.
>> Like copper at 10,000, copper 20,000 would probably not be great for those folks that are consuming copper as a big cost of their production but you and I are probably not impacted by copper 20,000 the way we would be impacted… It's relatively small. This is interesting because it allows copper over time to move materially higher because it's such a small component of the overall cost of the things that we are consuming.
Even in the Tesla vehicle that has far more copper than the conventional combustible engine vehicle, it's a relatively small component of the overall cost of production meaning that copper can move materially higher before I see demand destruction. Oil prices go up 15%, we will all notice.
>> Yes, at the gas pump.
>> Energy as an input into everything else. It's not just the direct inflation from the oil but it's also the indirect impact that higher energy prices will have on the CPI basket.
Back to OPEC, I don't think OPEC allows willingly oil prices to move materially higher north of 90, north of 100. They start releasing some of that oil back into the market but let's be clear, OPEC spare capacity is not unlimited. The market is somewhere in the 4 to 6 million barrel per day range.
>> Fascinating stuff. Thanks that question.
Definitely want to get us thinking.
Another question here. Small wants to know how things are looking in the grains a sector.
>> Grains, if I look at the commodity basket, I've argued, commodity folks will argue that commodities are relatively delayed in their supply response. The price moves up, the price of copper goes from 10,000 a ton to 20,000 per ton, we are not going to see any meaningful amounts of copper come to markets tomorrow.
You will see people stealing copper from scrap yards but you are not going to see meaningful change in copper supply. When I think about grains on the other hand, we've had elevated grain prices broadly speaking since Putin's invasion of Ukraine and the farmer has on the margin try to respond to that higher price. They are using more fertilizer, more husbandry, more acreage. The balance as a result is software. There is always weather risk and right now I think grain prices have found some support over the course of the last two weeks on weather-related risk in the south of Brazil there has been a lot of rain which has raised questions about soybean crop there which has already been harvested and there has been some whether in the Midwest of the US which has delayed the farmer on the margin.
If things go as we see, sort of as hopefully they should, the grain balance should be relatively comfortable, allowing grain prices to retreat from higher levels.
>> While we are on the topic of grain, you made a trip to Saskatchewan. I knew about it because I saw it on social media, you are on a podium delivering a speech. Tell us about the situation there.
>> Saskatchewan is a beautiful providence and it has so much resource. There is a tremendous amount of, ignorantly, when I thought of Saskatchewan, I thought of it, and this was not recently, but historically, I thought of it as grains, wheat, pulses, etc. It definitely has tremendous grain, wheat, pulse, etc. but a tremendous amount of oil and natural gas potential, fertilizer, urea, uranium.
There is so much resource in a province that I think is 1.3, 1.4 million people.
As the world's need and demand for these commodities continues to grow, critical minerals, I think Saskatchewan, another speaker at this conference I was at noted that 19 or 21 of the 35 critical minerals on the critical minerals list are available in Saskatchewan. We have to develop this province. There is tremendous potential and Saskatchewan in Canada can play a role in facilitating the world's economic growth and we do it in a relatively clean and efficient manner. We talk about ESG. Sure, there is issues with oil sands production relative to some other forms of production. But Canada rates number one or number two on social and governance. We have to look at the holistic picture and I think Canada wins when we do that.
>> Always fascinating conversation when you're here. I look forward to the next time.
>> Thanks for having me.
>> Our thanks to Hussein Allidina, managing Dir. and head of commodities at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
we will be back tomorrow with an update on the markets and some of our best interviews of the week. On programming no, of course, we will be off on Monday for the Victoria Day long weekend. I hope you are off as well. We were turn on Tuesday with Robert Both, Senior macro strategist at TD Securities he will give us his take on Canadian inflation. We are getting a report on Tuesday. There will be plenty to talk about. He wants to take your questions about the economy and interest rates.
You can get this questions in ahead of time as always.
Just email MoneyTalkLive@TD.com.
That's all the time we have the show today. Thanks for watching. We will see you tomorrow.
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