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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Coming up on today's show, we are going to discuss what this week's US inflation report could mean for next week's Fed rate decision. TD Asset Management Scott Colbourne shares his thoughts. We are going to take a look at the risk posed by the potential decoupling of the US and Chinese economieswith findings, and in today's WebBroker education segment, Nugwa Haruna is going to tell us everything we need to know about RRSP withdrawals on the Whataburger platform. First look at you updated on the markets. We've got some interesting dynamics. We are holding very modestly in positive territory on Bay Street. Let's check in on the TSX Composite Index. Right now we are pretty much just flat but it's a tiny little green arrow on my screen.
Let's see what I can show you on the screen. Indeed, you're a very modest six points, just three ticks.
American benchmark crude above 90 bucks per barrel, but among the most actively traded names like TSX today are actually some mining place. We are seeing a bit into precious metals today, gold, playing out to the minors.
Barrick Gold is up to the tune ofmore than 2%, 22 bucks and $0.51 per share. Bit of a tech selloff on our handset of the border. This is a very dramatic but it 8441, you do have Shopify pulling back about 1 1/2%.
South of the border, it's a fairly positive week.
A bit of a giveback on our hands being led by a lot of the big tech names pulling down the S&P 500 to the tune of we will call that 40 points, almost a full percent.
If you take a look at the NASDAQ, the losses are a bit steeper.
Triple digit loss, right now you're done about 1 1/3%.
I could've picked any of the big tech names today including the chipmakers, we will take a look at Microsoft and see where some of the weaknesses in the market. It's not dramatic either. At 331 box per share, we've got Microsoft down about 2%. But it is weighing on the market. And that is your market update.
As investors, we keep a careful eye on the fight against inflation.
It was a big week on that front south of the border.
We had headline US CPI a little hotter than expected, prices a little harder than effective.
What's the culprit? Gasoline prices. We've got West Texas intermediate crude above 90 bucks per barrel. A lot going on here so we are going to delve into the implications of it all. A MoneyTalk's Anthony Okolie and Susan Prince join us. A pleasure to have both of you.
>> It's great to be here.
>> Where you want to start?
The fight against inflation has dominated for a year and 1/2 now.
How did you read it, Susan to mark> It's one of those things with the inflation numbers where, pick a number.
Pick a number you want to run with and that, to me, is what it feels like economists do. You can take the headline number and say that was a little bit more than we were expecting where you can delve into it, say well, ask gasoline, X food, ask whatever, we are more comfortable with it and that's what the economists do and that's why it makes it hard to say, okay, what's going to happen next week? Which number you going to choose? And I look at it but it it's an old metaphor but turning a steamship around.
That's where I think people like me and homeowners are looking and saying, how much more we going to see on interest rates?
Can they stop sooner and still turn the ship around?
Because you've got that Propulsion going ahead but we know anecdotally things are starting to slow down.
>> We know to obviously, Anthony, but the fact that if you want to, pick the part that you like.
If you want to ignore gasoline, everyone knows gasoline is the culprit, our own central bank earlier this month said that inflation will come down and a complete straight line, there will be bumps higher and will be at gasoline and oil prices.
>> Yes, and that points to Susan's point that we are seeing a trend in core inflation moving lower when you take out gasoline and food prices. We are seeing the trend move in the right direction. As you mentioned, it's not linear, but it's moving in the right direction.
When we talk about gas prices, that has been the key the driving headline inflation. There's also the base affect headwind that we are going to see until the end of the year as well.
But gasoline prices, I think there's been a focus on the kinds of pie.
We heard about the surprise oil cuts by OPEC+ earlier this year and that's kind of outweighing fears about global growth slowing.
We are also seeing a rise in US crude prices. That implies what's driving the price of oil higher.
I think the question is how we can repeat or is there more room to run?
But I think from a policy standpoint is that what this perhaps means is that interest rates may be higher for longer, particularly with the headwinds of gas prices potentially moving up higher.
>> We took a look at the price of oil, where it is right now, I've seen some people say the cure for this higher price, maybe it hits 100, but the cure will be the higher price.
If it's going to hit 100, is going to be inflationary.
The banks will stay restrictive and then we are going to slow the economy. Round and round on this wheel we keep running.
>> The thing that makes me uncomfortable about it is that we talk about supply and demand and restricted supply but it's a manipulated restriction.
OPEC can say, no, we are going to do more barrels, we can look at, do we find better ways to get oil out of the ground and with America and delivered? It's not that we are running out of supply, is that there are some very clear decisions that are being made to control the supply.
>> I picture someone with a really big a forearm with that sphere.
>> I'm going to take numbers pre-COVID because of all the factors that went into COVID, boosting oil up so high when I was there.
Around this time in 2019, oil was trading at around 60 bucks a barrel and then you saw all that volatility way down during the time of COVID and then up close to 100 bucks and now we are in that $90 range. You just want to see what role decision-makers are making in the price of this and is it going to help or hurt inflation, to your point.
>> I think the other question is, of course, China.
China is a big consumer of oil.
We have seen the recovery since COVID restrictions were lifted, that's been sort of bumpy.
What impact will that have? Can that income come back and we'll see strong demand for oil? I think there's a lot of factors at play when it comes to oil, as you mentioned. It is a very manipulative commodity and it's really hard to gauge where it's going to go from here.
> We have another story this week.
It's interesting because as we fret as investors about the direction of the economy and what could happen to the markets, central bank policy, we had an IPO this week, a tech IPO, and even though the markets are pulling back today, Arm holdings, this was pretty well received by the market. It seemed yesterday to lift the spirits of the markets.
>> What was it, hundred and 17 times P/E ratio?
The price to the earnings. Interesting company. It's got lots of buy-in.
it's controlled by a Japanese company. It is a British software company that makes most of its money on royalties and some of the royalties go back from developments 10 or 15 years ago. So they've got an interesting product with what looks like a good revenue generation. But, oh my goodness, it sort of like when there's been a shortage of ice cream and you've got everyone at the ice cream store and they are gonna lineup and they may not even like ice cream that much but they haven't had ice cream and so long, they are going to get in line for the ice cream.
>> Were showing the stock right there.
It's up another 2% today. The pop was yesterday when they started trading.
It's interesting though because we are talking about in the tech space, I don't think they are what someone would consider, Anthony, a pure AI play.
But they won't let the words AI get away from them.
I think they've talked about opportunity later on.
>> Yeah, I guess my big question about the IPO market coming back is how much is this tied to the AI frenzy?
A lot of the market, smarter people than I, have been talking about how the AI frenzy is similar to the.com frenzy.
Some more IPOs will come out.
If they are not tied to AI Intact, how successful will they be?
that's the question. We've got Instacart… >> Instarcart came to mind because I think you saw the success appetite yesterday and thought, oh… But a bit of a different kind of company, isn't it?
>> Yes, their value is a company now is much lower than it was during the pandemic.there's this pandemic hangover. My question is, if we do see some non-tech a IPOs coming out, what is the appetite going to be for that? And I think, when we look at the IPO frenzy, it's tied to the banking crisis because it when we saw this regional banking crisis, a lot of the banks were tightening creditand so a lot of these companies that want to come to market, they couldn't access credit because it was much tighter.
So a lot of them are going to raise money and equity markets, the retail investors, so we will have to wait and see if this is a turnaround in the IPO market. I'm somewhat sceptical, that the AIA frenzy is one factor driving it, but we will have to wait and see.
>> First word to Susan Prince, last word to Susan Prince.
>> The capital markets would certainly like to see IPOs come back.
It feels like in that world, it's good for everyone.
And it has been very quiet. But it's not always that great for the shareholder if you get caught up in that frenzy.
So it sort of like, could we just take a breath and do some valuations that aren't at 170 times?
Thank you very much.
>> Thank you very much! Great way to start the show, great conversation. Look forward to the next one.
We are going to have you both back in those chairs very soon.
>> Thank you.
>> Susan Prince and Anthony Okolie.
Let's get you an update on the top stories in the business world today and a quick check in on how the markets are trading.
Canada's housing market continuing to slow down in the face of higher borrowing costs. The numbers from the Canadian real estate Association show that existing home sales fell about 4% from July into August.
TD Economics says the slow down does not come as a surprise given these higher mortgage rates and it does expect average prices to decline into the fourth quarter.
We got targeted strikes aimed at the big three Detroit automakers that began earlier this morning. This is of course after that midnight deadline to negotiate a new deal expired without an agreement. Wages and pensions in the face of soaring inflation have been a key sticking point in the talks.
Here in Canada, we do have our own auto negotiation continuing with Unifor. That contract is set to expire at 11:59 PM Eastern time this coming Monday.
Also want to check in on shares of software maker Adobe in the spotlight today. Right now we are down about 4%.
The company behind Photoshop and Acrobat actually beat earnings expectations and is forecasting strong profits for the current quarter. So what's going on?
The street appears to have some concerns about Adobe's pending deal to buy software design firm Figma for $20 billion and the overall economic environment. And we've got a bit of a text selloff on our hands as well.
A quick check in on the market, we will start here at home on the TSX Composite Index.
Even though tech is to the downside on Bay and Wall Street, we are up about 10 points right now but we do have benchmark crude above 90 bucks a barrel.
South of the border, less chicken on the S&P 500. It is being dragged lower by those big tech names.
Your down about 35 points, a little shy of a full percent.
Of course, as you were mentioning earlier, US inflation did push higher in August, that on the back of stronger gasoline prices.
This reading comes a week ahead of the US Federal Reserve meeting that will conclude next Wednesday. They will come out with the right decision. Earlier this week, I spoke with Scott Colbourne, managing Dir. and head of active fixed income at TD Asset Management and I asked him about that inflation print.
>> It was a mild, a little upside surprise there. But at the end of the day, as you know, the market reaction has been pretty benign.
I think from the point of view of next week's Fed meeting, they basically have telegraphed that they are on hold into next week's meeting. So it's not really much of a surprise to the market.
I would say the broad trends of inflation are consistently moving in the right direction.
When you look at three month annualized, core inflation is down about 2.4%.
Six months, little higher at 3.
7. I think when you think about central bankers and what they have said here in terms of policy, we've come a long way on inflation. We've gone a long way on monetary policy. The next or last mile, if you will, between where inflation is right now and hopefully by mid, end of next year, it's a longer road to travel but the direction is in place and so from a market surprise point of view, I don't think it was much in today's data, the small interpretations this way or that way but the broader trend is in place and it's consistent with what the policymakers are saying.
>> The central bankers never said it would be one line from eight or 9% inflation straight down. It would be a bumpy road.
The Bank of Canada warned of the same thing. What we now it doesn't take an economist or a big thinker to say, hey, I'm paying more when I fill up my car.
This seems to be what's pushing headline higher and could push it even higher in Canada and the United States and months to come.
> Yeah, you got some risks, butCentral banks can be patient here, right?
You're gonna let some of the noise and some of the choppiness, whether it's energy prices, play out. They are going to be on hold here and watch the labour developments both in Canada and the United States.
We've got potential strikes in the US coming up. So there is a lot for them to be patient on and let the data player here.
There is no need to accelerate the aggressive policy because we've had a lot of that. They frontloaded and it's been one of the rapid tightening cycles so let's let the legs pay out, the monetary policy legs play out here and see how things evolve over the next 3 to 6 months.
> Even if they are on pause or on holdand they stay there, they have warned us repeatedly that they are going to stay at an elevated level for a while. Is that, we can't read their mind, is that the long-term plan or simply what you need to tell the market to keep achieving this downward path for inflation?
>> There so much uncertainty right now. Everyone's in sort of this data dependent mode, right?
Broadly speaking, when you look at the fixed income markets, there are three broad drivers right now: growth, inflation and liquidity. The inflation story is on the right path and if you look at today's market reaction, the markets are really not reacting to inflation anymore. The narrative has been put into the market. The central bankers have told us to be patient, they will keep things here for a while until they see further improvement on inflation.
They are really focused on the growth, the labour, the wages and see how that develops and obviously we have seen a lot of surprise on that side this summer between mid July and August, there was a raise of 50 basis points.
Personally, I think that responded to a growth shock in the US and obviously there's a lot more supply in the market, both corporate and government.
So I think the central bankers are content to say, we are going to watch, particularly on the labour development, growth, employment, and how growth plays out over the next little while and we will keep things here on hold for as long as possible.
They do penciling, the Fed has penciled in a cut next year, right? So we will see how things evolve.
We got another summary of economic projections next week that will be released to see where they think things evolve.
They've also said they're going to have another hike in the market to release the option to hike into the end of the year.
So very data dependent.
Gov. Powell said, look, we are navigating by the stars under a cloudy sky, so I think that really speaks volumes to how we are navigating here, very data dependent. We think the trend is in place, it's a little stickier than expected.
>> When it comes to what they been trying to do all along, cool the economy, they warned us at the outset, there's going to be some pain here, and you said the labour market has been resilient, the consumer, slowing down a little bit but still spending, it seems now when you put that together, people say, is this going to be a soft landing?
No lending? Maybe you can do all this, get inflation under control and we will walk away without anything to bandage. Can that happen?
>> I'm always a bit of a sceptic.
I've been doing this for a while.
It's different this time but there haven't been many soft landings.
It's a really hard objective.
Think of what we've gone through.
We went through a pandemic shock and the monetary fiscal policy response has been off the charts and to think that monetary policy is going to land softly given the massive stimulus that we've had, I'm a little bit of a sceptic.
I don't believe that we are going to get there. I'm still in the mild recession camp, but prove me wrong.
It's a really tough thing to navigate so if monetary policy is on hold, I think you will see the lags play out in 2024.
I'm in mild case because I think both corporate and household went into it, the pandemic, in much better shape than they have been in the past, so it's more of a mild recession and the monetary policy will bite and fiscal policy will ultimately stop being a tailwind.
> Taking all of that with you about what it means for the fixed income market, obviously we are seeing yield we have not seen in a long time, but some people thought we would perhaps be cutting by now.
How do you see it all playing out?
>> I think ultimately that we will see one, two cuts next year at some point in the US.
I think that's my base case scenario.
At minimum, we were going to see is inflation continuing to move down.
Market sort of expected inflation to be 2.
5, 2.
6% headline inflation sort of June to September of next year.
If the Fed doesn't recalibrate interest rates, what you're going to have his real rates continue to move up and that is a tightening, continuing to tighten into a downward trajectory and inflation.
So I think that the Fed can recalibrate modestly, so still behaved with higher for longer and still be disciplined here but I think net net, it's a very attractive level to be adding some fixed income to your portfolio, absolute yields are very attractive historically.
So I think it's still positive.
>> That was Scott Colbourne, managing Dir.
and head of active fixed income at TD Asset Management.
Now let's get our educational segment of the day.
So you have a registered account like an RRSP and you want to make a withdrawal. How would you actually do that? Nugwa Haruna, senior client education instructorat TD Direct Investing is here to tell us what we need to know. New book, always great to see you.
Tell us what we need to know.
>> Yeah, so, when it comes to making withdrawals, especially for registered accounts, there are a number of things that investors want to be aware. Something like a tax-free savings account, it's easy to go into your account make withdrawal, but with an RRSP, there are other considerations you want to take into accountbefore you make a decision to withdraw money.
One of those things would be the potential tax implications because as you are aware, the RRSP is a registered retirement savings plan and if you take money out of that account, you are potentially losing that contribution room plus there may be tax applications.I will show you how to make those withdrawals and WebBroker.
under transfers and withdrawals, you're going to click on withdrawals from RRSPs or RESP is. The RESP is of the registered education savings plan.
you do have an opportunity to make withdrawals through WebBroker as well.
But today we are going to focus on the RRSP. When it comes to making withdrawals from RRSPs, some investors may decide to use these accounts to take advantage of the Home Buyers' Plan or the lifelong learning plan.
The homebuyers plan let's investors take out up to $35,000 from the RRSP which they can pay back in a 15 year period and they don't lose their contribution room. There is also the lifelong learning plan that lets investors take out up to $20,000 for full-time education for themselves or a spouse and this needs to be paid back within a four year time frame.
None of these impact the investor's contribution room in the long run but if you decide to use the withdrawal system within WebBroker, be aware that that contribution room, you will be losing it.
If you want to take advantage of the homebuyers plan or lifelong learning plan, you want to click on the link here that says forms, you want to fill out a form specifically dedicated to that.
Once you've decided you want to take money out of the account, you will need to transfer those funds from your RRSP to a TD checking or savings account. It has to be an account with TD Bank. I also want to mention that you want to make sure that whatever you are looking to what transfer is already in cash and trades have settled. So you go and yourself at least two business days for any trades to settle. If you want to do a full withdrawal, so you want to completely empty your RRSP account, once you do that, the account will be closed on your behalf and that comes with the fee of $100 plus sales tax. And on the other hand, if you want to do a partial withdrawal, you are able to do that and there is a fee of $25 plus sales tax. The next thing you want to think about is are you doing a gross or net withdrawal? The difference between the gross or than it would be if you do a gross withdrawal, that would be the amount that you are looking to take out of the account in and out of that amount, those fees would be deducted, any taxes would be deducted, he will end up seeing less than the original amount you put in the system. On the other hand, if you say on net withdrawal, what will end up happening is you will get the exact number you want but some additional fees will be taken out of your RRSP. So for this example, we are going to do a gross withdrawal of their. We are looking to take it that thousand dollars from the account.
Another consideration is the withholding taxes. It's automatically 10% of this withdrawal, they would be withholding tax. You can decide to increase that amount to no potentially have that additional tax burden at the end of the year or you can decide to just deal with the 10% and deal with whatever tax obligations happen when you file your taxes. And finally you get to confirm what that withdrawal looks like.
Finally, you will get to see the amount you asked to be taken out of your account, you will see whatever fees you are being charged and whatever taxes are being taken out, so because we did a gross withdrawal, even though we put $1000 as the amount we want to take out, we ended up receiving about $874 and the opposite would be the case of the net withdrawal, the amount we request withdraws the amount we will see but then some additional fees will be taken out of the RRSP. So after you have done those withdrawals, once again, investors want to be aware that whatever amount you take out of your account will end up beingadded to your income for the year or so you may be dealing with some additional tax burden there, so something to be aware of when you decide to make this decision.
>> Alright, a lot of important information there, Nugwa. Thanks as always.
>> Thanks for having me, great.
>> Nugwa Haruna, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Increasing tensions between the United States and China are stoking concerned that the world's two largest economies might decouple.
Well, earlier this week, we talked to our guest who said it poses a major risk to the market, that was Haining Zha, VP and Dir.
of TD Asset Management and he laid out the key themes investors are focusing on.
>> I know for many people that focus on develop market, inflation is the number one enemy and it's on the headlines every day.
But from medium to longer term, the decoupling between China and the US is actually a bigger threat.
so to put it into perspective, if you think about the last decade, it's basically the biggest two countries generally, they get along really well, and that created two forms of dividend.
Number one is economic dividend.
Because for US corporations, they find a cheaper source of labour, they find a cheaper source of product and they find a fast market. And for Chinese, they were able to attract more capital, build their manufacturing base and they were able to find the end market for their product as well.
So that is generally a win-win situation. The second form of dividend is the peace dividend.
So although there are always some kind of conflict here and there in the world, generally, they don't threaten the major economic interests for extended periods of time.
So if we look at the past fantastic return, these two forms of dividend, they are actually the major sources.
So it would be complacent to think we can kind of repeat history and repeat that fantastic return.
>> It seems to be a lot of the tensions are on the technology front, talking about the United States being worried about having technology go to China in terms of artificial intelligence and chips. In the real world, we have seen some headlines recently where it's right down to, can I take an iPhone to work in China? In some cases, no.
>> That's exactly the case in point. Many people don't feel the tangible impact of geopolitical tension but Apple is one great example.
Right before they rolled out their new phone, the Chinese government guided the government employee not to use iPhone for security reasons, and not actually also coincided with Huawei rolling out their new phone as well. That caused a hit to the Apple share price, about seven, 8%.
>> We are talking about intellectual property in the end and bothcountries having their intellectual property in each other's markets. How far could that go?
>> it can go for a long time and right now we are not seeing thegeopolitical tension in the technology area really alleviate anytime soon.
> If we do end up in the situation or the situation doesn't get better, you talked about the impact, there was dividends to be paid for the world's two largest powers, two largest economies playing nice together.
They are not going to play nice going forward, what does it mean for investors? Which of the be looking for?
>> They have to be prepared to accept a much lower return and they have to be really nimble and to watch for Black swans.
This will be an arrow for many, many Black swans down the road.
>> Okay. The hard thing about the Black Swan is that you don't really see it until it is on your doorstep.
Interesting dynamics there. We do now in terms of China's economy that it's been faltering.
They dropped to the COVID restrictions, they thought it would be good for the economy. It hasn't played out that way.
I think they made moves even today to shore up the economy.
Is what they are doing enough?
>> Right.
Generally speaking, there are different areas. For example, the monetary policy, the fiscal policy, the policy around real estate, but so far, none of the policy have been enough to give investors the confidence boost they need which is why the economy is lacklustre. We can talk about each different area. For example in the monetary policy area, for example, the central government cut reserve reverse repo rate twice together total about 20 to 25 basis points and also the… Usually how the monetary policy works is once you cut the key rate, it will naturally spread to the loan prime rate which is directly linked to the mortgage rate in the corporate lending rate. But when they cut the LPR, they only cut on the one year Tanner, not the five-year tenor. The reason why is they want to protect the banking profit.
So on the monetary policy from so far, it has been below investor expectation, and in the future, they might need to do more.
>> What about the fiscal policy side? If you are trying to stoke an economy, traditionally the monetary policy plays a role but fiscal stimulus, getting money into people's hands, hoping that they put it back into the economy.
>> On the fiscal front, we heard even less news because there have been some whispers that the Chinese government might do a special Treasury issuance of about 1 trillion RNB to support spending. That didn't happen.
people are expecting the government to have money to households to support consumption. That didn't really happen. The only progress happening on the fiscal front is the local government financing vehicle, now they will try to consolidate that debt into provincial debt and the reason why they want to do that is for those local funding government vehicles, the interest financing is about 1% higher than the provincial so by doing that, they can save the 1% interest rate cost but for many of those provinces, there is also very high leading into an entity where the existing debt load is, is really not confidence boosting.
>> Given the fact that they have taken these moves and it hasn't been confidence boosting, is there a sense that they will do more on the fiscal or the monetary side or where are we at this point? China has to know that the economy is a bit in trouble.
>> Right. I think all investors are in a wait-and-see mode.
I think typically the government wants to maintain some kind of stability and even policy stability, so it will be very unusual for them to all of a sudden exceed market expectations. Usually, is the economic situation getting worse and worse and that presses them to do something and then they will respond.
So right now, what we are seeing is they are in reactive mode rather than an proactive mode.
>> That was Haining Zha of TD Asset Management.
Now, for an update on the markets.
We are having a look at TD's advanced Accor, platform designed for active traders available through TD Direct Investing. This is the heat map function, gives you a view of the market movers. We will start with the TSX 60, we are screening by price and we are screening by volume.
Obviously, we see the big move higher in the price of crude this week but it seemed like material stocks are the ones really standing out today.
See some green on the screen there.
energy is a bit of a mixed picture.
Right now we've got some weakness in tech on both sides of the border. Shopify on our side of the border is endowed by all that much, I think they moved also the lows of the session. I want to check in on the S&P 100 because we had some key readings of inflation and south of the border, all of that ahead of a Federal Reserve rate decisionnext Wednesday.
So we take a look, it's a real mixed picture today on the S&P 100. I am noticing about some weakness in the chipmakers. Of course, they've had a fairly decent run as of late as well. You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
While we think about passing on our assets and money before we pass on, we typically think about the role children and other family members will play.
What happens if you prefer or need to pass these things onto) instead? Earlier Kim Parlee spoke with Mindy Bennett, tax and estate planner at TD Wealth, and she asked her, are there key considerations to keep in mind when making friends a part of your estate plan?
>> Yes, and the first thing you want to be thinking about is, with the exception of being required to provide legally for certain people who are financially dependent upon you, the common law restrictions that provinces have, you typically have the freedom tochoose whoever you want as a beneficiary which includes friends as well as family but there are certain jurisdictions like Québec they have concepts like force heirship which requires you to provide a certain portion of your estate to certain close family which limits your ability to provide for friends.
so you want to look at the jurisdiction that you reside in. You also want to look at your family dynamics. If your family and loved ones were expecting andassume they would receive a certain inheritance and they are not, know that this may cause that family relative to legally challenge your will and if your will is is determined to be invalid, the intestacy laws, which govern if you don't have a will or a legally valid Will, only your close family and close relatives are going to inherit.
>> There are things to consider. Is there timing that might be better? Is it better to give to friends perhaps when you were still alive rather than including them in the willrather than afterwards after you pass?
>> Italy going to depend on the circumstances. It may make sense to giveassets of friends while your life and in others when you are not.
One of the benefits of gifting when your life is you can witness the advantage of your friends being able to utilize that gift to and they can enjoy the gift immediately. However, there are also going to be disadvantages depending on the type of asset that you are gifting. There may be an immediate tax application to both you and your friend as well is you want to ensure that when you are gifting assets, you are still ensuring that you have enough money for your own financial needs.
Whenever you're dealing with the possibility of your will being legally challenge, you want to be sure that you have a well drafted legally sound will, preferably it drafted by an estate planning lawyer.
>> Got it.
Make sure that it is legally sound.
What about if, we talked about this before, you're looking to designate beneficiaries of a TFSA or an RRSP, can you designate a friend as a beneficiary to?
>> Yes, you can, and with most financial institutions, they have a designation form that you can sign.
You obviously want to be reviewing that form and updating that form whenever there is any changes that you want to make. One thing I do want to highlight is while it's not legally required that you inform the person that you are naming is your beneficiary, again, communication with your loved ones so that there is no surprises especially in an emotionally challenging time.
>> Yes.
What about an executor? Could you maybe ask a close friend to come in and be your executor because maybe they know you well and they understand things?
I know it's much more complicated than people think, we will start that, but what kind of conversation should you be having with them to get them ready for that role?
>>the first thing I want to highlight when it comes the executor is that it's a job and when you appoint somebody, it can be considered an honour because clearly you trusted them enough to appoint them, but you still have to recognize that it's a job so one of the first things I tell clients is while it's not legally required, you may want to ask your friend, are they willing to act as your executor? Because if you know in advance that your friend is not willing to act as your executor, that gives you an opportunity to ask someone else. You want to find out, are they willing?
You want to talk to them about, again, the role and response ability. They have the expertise? And lastly you really want to bring up the topic of compensation.
I tell clients that without adequate compensation, is arguable, if someone is going to act as your executor or possibly as your attorney, you want to ensure that adequate compensation is provided.
>> I know stories of friends, they have said, I thought this would be a great idea, and then hated it, really hated it. It is a job.
there are other options, like a corporate executor. As a corporate executor is a professional company whose job it is to act, and they are professionals, acting as the administrator of your estate. Sober friends or clientsI don't have anyone they can appoint or you don't want to place the burden on your family or friends, a corporate executor is a really good option.
I tend to find that with many clients, one of the challenges that we face is the concern is are they going to be able to act when you need them to? People get sick, people pass away and so when you are appointing an individual, this is really a concern.
This is not a concern when you appoint a corporate executor.
> They are legally bound to do what they are going to do.
>> Even if the person is actually working on the estate, the one that has that job, is no longer on that job, the corporation is going to seamlessly replace that person with another professional who can continue to act on your estate and the corporation doesn't get sick and the corporation doesn't die.
>> That's a very good point.
What do you need to include into your estate plan to make it clear what you want your wishes to be? I've got a list here of documentation. I will just let people know I was looking. You had a letter of instructions and wishes which was in addition to the will. Take us through what you think is the right package.
>> There are three key and cornerstone documents to your estate plan.
There's your will and two powers of attorney, someone to make your financial decisions and someone to make a medical care decisions and then in addition to those cornerstone documents there are other documents that are beneficial especially when you are considering a friend in any of these fiduciary roles. What you're trying to get ahead is you are trying to communicate your wishes. Obviously it is best to communicate verbally about your wishes by providing them in documentation can also be helpful.
A letter of wishes or a letter of instructions, it's documentation about what your wishes are in addition to your will. There are certain things that are not appropriate to go in a will and are more appropriate to go in a letter wishes.
>> Like what?
What kinds of things?
>> When it comes your personal effects, you may change her mind frequently, if you put it in your will,… >> Who gets a painting, who gets the chair.
>> And a document outside of your will, you can update your document as frequently as you want. It's not going to be legally binding but it will provide a lot of persuasion on the executive to follow your wishes and often executors will follow your wish. In addition to a letter of instructions or wishes, you want to look into a living will or medical or health care directive which is where you are providing an expression of what your wishes are. I had to find that a lot of clients don't understand the difference between a power of attorney document and the living will and healthcare. To briefly explain, in a power of attorney document, you are actually appointing a person, your attorney in some provinces, to make your medical care decisions. In a living will or medical care directive, you are expressing what your medical wishes are, so having both of those documents can be really helpful and then lastly another document you want to look at in terms ofthe consents or authorizations needed for tissue and organ donations, communicating your wishes about what that isn't depending on the jurisdiction that you live in, what documentations you need. Some jurisdictions are often and some are opt out when it comes to organ donation.
>> The ultimate act of generosity. I only got about 30 seconds here,it's the team that I think brings this to life. You talk about it could be somebody like yourself, accountants, your advisor who understands some of the financial wishes as well and in some cases a family mediator can be involved.
>> So if you have a family business, there is certain individuals, family enterprise advisors, who can provide guidance in navigating often time complex relationships that you have in family business.
We certainly recommend talking to the family mediators.
>> That was Mindi Banach, tax and estate planner at TD Wealth speaking with our Kim Parlee.
You want to stay tuned for Monday show, we will be speaking with Mike MacBain, CEO and CIO at East Coast Fund Management. He wants to take your questions on fixed income and interest rates. You can get a head start with your questions. Just email moneytalklive@td.com. On behalf of me and everyone here at the show, thanks for watching all this week, and we will see you next week.
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Coming up on today's show, we are going to discuss what this week's US inflation report could mean for next week's Fed rate decision. TD Asset Management Scott Colbourne shares his thoughts. We are going to take a look at the risk posed by the potential decoupling of the US and Chinese economieswith findings, and in today's WebBroker education segment, Nugwa Haruna is going to tell us everything we need to know about RRSP withdrawals on the Whataburger platform. First look at you updated on the markets. We've got some interesting dynamics. We are holding very modestly in positive territory on Bay Street. Let's check in on the TSX Composite Index. Right now we are pretty much just flat but it's a tiny little green arrow on my screen.
Let's see what I can show you on the screen. Indeed, you're a very modest six points, just three ticks.
American benchmark crude above 90 bucks per barrel, but among the most actively traded names like TSX today are actually some mining place. We are seeing a bit into precious metals today, gold, playing out to the minors.
Barrick Gold is up to the tune ofmore than 2%, 22 bucks and $0.51 per share. Bit of a tech selloff on our handset of the border. This is a very dramatic but it 8441, you do have Shopify pulling back about 1 1/2%.
South of the border, it's a fairly positive week.
A bit of a giveback on our hands being led by a lot of the big tech names pulling down the S&P 500 to the tune of we will call that 40 points, almost a full percent.
If you take a look at the NASDAQ, the losses are a bit steeper.
Triple digit loss, right now you're done about 1 1/3%.
I could've picked any of the big tech names today including the chipmakers, we will take a look at Microsoft and see where some of the weaknesses in the market. It's not dramatic either. At 331 box per share, we've got Microsoft down about 2%. But it is weighing on the market. And that is your market update.
As investors, we keep a careful eye on the fight against inflation.
It was a big week on that front south of the border.
We had headline US CPI a little hotter than expected, prices a little harder than effective.
What's the culprit? Gasoline prices. We've got West Texas intermediate crude above 90 bucks per barrel. A lot going on here so we are going to delve into the implications of it all. A MoneyTalk's Anthony Okolie and Susan Prince join us. A pleasure to have both of you.
>> It's great to be here.
>> Where you want to start?
The fight against inflation has dominated for a year and 1/2 now.
How did you read it, Susan to mark> It's one of those things with the inflation numbers where, pick a number.
Pick a number you want to run with and that, to me, is what it feels like economists do. You can take the headline number and say that was a little bit more than we were expecting where you can delve into it, say well, ask gasoline, X food, ask whatever, we are more comfortable with it and that's what the economists do and that's why it makes it hard to say, okay, what's going to happen next week? Which number you going to choose? And I look at it but it it's an old metaphor but turning a steamship around.
That's where I think people like me and homeowners are looking and saying, how much more we going to see on interest rates?
Can they stop sooner and still turn the ship around?
Because you've got that Propulsion going ahead but we know anecdotally things are starting to slow down.
>> We know to obviously, Anthony, but the fact that if you want to, pick the part that you like.
If you want to ignore gasoline, everyone knows gasoline is the culprit, our own central bank earlier this month said that inflation will come down and a complete straight line, there will be bumps higher and will be at gasoline and oil prices.
>> Yes, and that points to Susan's point that we are seeing a trend in core inflation moving lower when you take out gasoline and food prices. We are seeing the trend move in the right direction. As you mentioned, it's not linear, but it's moving in the right direction.
When we talk about gas prices, that has been the key the driving headline inflation. There's also the base affect headwind that we are going to see until the end of the year as well.
But gasoline prices, I think there's been a focus on the kinds of pie.
We heard about the surprise oil cuts by OPEC+ earlier this year and that's kind of outweighing fears about global growth slowing.
We are also seeing a rise in US crude prices. That implies what's driving the price of oil higher.
I think the question is how we can repeat or is there more room to run?
But I think from a policy standpoint is that what this perhaps means is that interest rates may be higher for longer, particularly with the headwinds of gas prices potentially moving up higher.
>> We took a look at the price of oil, where it is right now, I've seen some people say the cure for this higher price, maybe it hits 100, but the cure will be the higher price.
If it's going to hit 100, is going to be inflationary.
The banks will stay restrictive and then we are going to slow the economy. Round and round on this wheel we keep running.
>> The thing that makes me uncomfortable about it is that we talk about supply and demand and restricted supply but it's a manipulated restriction.
OPEC can say, no, we are going to do more barrels, we can look at, do we find better ways to get oil out of the ground and with America and delivered? It's not that we are running out of supply, is that there are some very clear decisions that are being made to control the supply.
>> I picture someone with a really big a forearm with that sphere.
>> I'm going to take numbers pre-COVID because of all the factors that went into COVID, boosting oil up so high when I was there.
Around this time in 2019, oil was trading at around 60 bucks a barrel and then you saw all that volatility way down during the time of COVID and then up close to 100 bucks and now we are in that $90 range. You just want to see what role decision-makers are making in the price of this and is it going to help or hurt inflation, to your point.
>> I think the other question is, of course, China.
China is a big consumer of oil.
We have seen the recovery since COVID restrictions were lifted, that's been sort of bumpy.
What impact will that have? Can that income come back and we'll see strong demand for oil? I think there's a lot of factors at play when it comes to oil, as you mentioned. It is a very manipulative commodity and it's really hard to gauge where it's going to go from here.
> We have another story this week.
It's interesting because as we fret as investors about the direction of the economy and what could happen to the markets, central bank policy, we had an IPO this week, a tech IPO, and even though the markets are pulling back today, Arm holdings, this was pretty well received by the market. It seemed yesterday to lift the spirits of the markets.
>> What was it, hundred and 17 times P/E ratio?
The price to the earnings. Interesting company. It's got lots of buy-in.
it's controlled by a Japanese company. It is a British software company that makes most of its money on royalties and some of the royalties go back from developments 10 or 15 years ago. So they've got an interesting product with what looks like a good revenue generation. But, oh my goodness, it sort of like when there's been a shortage of ice cream and you've got everyone at the ice cream store and they are gonna lineup and they may not even like ice cream that much but they haven't had ice cream and so long, they are going to get in line for the ice cream.
>> Were showing the stock right there.
It's up another 2% today. The pop was yesterday when they started trading.
It's interesting though because we are talking about in the tech space, I don't think they are what someone would consider, Anthony, a pure AI play.
But they won't let the words AI get away from them.
I think they've talked about opportunity later on.
>> Yeah, I guess my big question about the IPO market coming back is how much is this tied to the AI frenzy?
A lot of the market, smarter people than I, have been talking about how the AI frenzy is similar to the.com frenzy.
Some more IPOs will come out.
If they are not tied to AI Intact, how successful will they be?
that's the question. We've got Instacart… >> Instarcart came to mind because I think you saw the success appetite yesterday and thought, oh… But a bit of a different kind of company, isn't it?
>> Yes, their value is a company now is much lower than it was during the pandemic.there's this pandemic hangover. My question is, if we do see some non-tech a IPOs coming out, what is the appetite going to be for that? And I think, when we look at the IPO frenzy, it's tied to the banking crisis because it when we saw this regional banking crisis, a lot of the banks were tightening creditand so a lot of these companies that want to come to market, they couldn't access credit because it was much tighter.
So a lot of them are going to raise money and equity markets, the retail investors, so we will have to wait and see if this is a turnaround in the IPO market. I'm somewhat sceptical, that the AIA frenzy is one factor driving it, but we will have to wait and see.
>> First word to Susan Prince, last word to Susan Prince.
>> The capital markets would certainly like to see IPOs come back.
It feels like in that world, it's good for everyone.
And it has been very quiet. But it's not always that great for the shareholder if you get caught up in that frenzy.
So it sort of like, could we just take a breath and do some valuations that aren't at 170 times?
Thank you very much.
>> Thank you very much! Great way to start the show, great conversation. Look forward to the next one.
We are going to have you both back in those chairs very soon.
>> Thank you.
>> Susan Prince and Anthony Okolie.
Let's get you an update on the top stories in the business world today and a quick check in on how the markets are trading.
Canada's housing market continuing to slow down in the face of higher borrowing costs. The numbers from the Canadian real estate Association show that existing home sales fell about 4% from July into August.
TD Economics says the slow down does not come as a surprise given these higher mortgage rates and it does expect average prices to decline into the fourth quarter.
We got targeted strikes aimed at the big three Detroit automakers that began earlier this morning. This is of course after that midnight deadline to negotiate a new deal expired without an agreement. Wages and pensions in the face of soaring inflation have been a key sticking point in the talks.
Here in Canada, we do have our own auto negotiation continuing with Unifor. That contract is set to expire at 11:59 PM Eastern time this coming Monday.
Also want to check in on shares of software maker Adobe in the spotlight today. Right now we are down about 4%.
The company behind Photoshop and Acrobat actually beat earnings expectations and is forecasting strong profits for the current quarter. So what's going on?
The street appears to have some concerns about Adobe's pending deal to buy software design firm Figma for $20 billion and the overall economic environment. And we've got a bit of a text selloff on our hands as well.
A quick check in on the market, we will start here at home on the TSX Composite Index.
Even though tech is to the downside on Bay and Wall Street, we are up about 10 points right now but we do have benchmark crude above 90 bucks a barrel.
South of the border, less chicken on the S&P 500. It is being dragged lower by those big tech names.
Your down about 35 points, a little shy of a full percent.
Of course, as you were mentioning earlier, US inflation did push higher in August, that on the back of stronger gasoline prices.
This reading comes a week ahead of the US Federal Reserve meeting that will conclude next Wednesday. They will come out with the right decision. Earlier this week, I spoke with Scott Colbourne, managing Dir. and head of active fixed income at TD Asset Management and I asked him about that inflation print.
>> It was a mild, a little upside surprise there. But at the end of the day, as you know, the market reaction has been pretty benign.
I think from the point of view of next week's Fed meeting, they basically have telegraphed that they are on hold into next week's meeting. So it's not really much of a surprise to the market.
I would say the broad trends of inflation are consistently moving in the right direction.
When you look at three month annualized, core inflation is down about 2.4%.
Six months, little higher at 3.
7. I think when you think about central bankers and what they have said here in terms of policy, we've come a long way on inflation. We've gone a long way on monetary policy. The next or last mile, if you will, between where inflation is right now and hopefully by mid, end of next year, it's a longer road to travel but the direction is in place and so from a market surprise point of view, I don't think it was much in today's data, the small interpretations this way or that way but the broader trend is in place and it's consistent with what the policymakers are saying.
>> The central bankers never said it would be one line from eight or 9% inflation straight down. It would be a bumpy road.
The Bank of Canada warned of the same thing. What we now it doesn't take an economist or a big thinker to say, hey, I'm paying more when I fill up my car.
This seems to be what's pushing headline higher and could push it even higher in Canada and the United States and months to come.
> Yeah, you got some risks, butCentral banks can be patient here, right?
You're gonna let some of the noise and some of the choppiness, whether it's energy prices, play out. They are going to be on hold here and watch the labour developments both in Canada and the United States.
We've got potential strikes in the US coming up. So there is a lot for them to be patient on and let the data player here.
There is no need to accelerate the aggressive policy because we've had a lot of that. They frontloaded and it's been one of the rapid tightening cycles so let's let the legs pay out, the monetary policy legs play out here and see how things evolve over the next 3 to 6 months.
> Even if they are on pause or on holdand they stay there, they have warned us repeatedly that they are going to stay at an elevated level for a while. Is that, we can't read their mind, is that the long-term plan or simply what you need to tell the market to keep achieving this downward path for inflation?
>> There so much uncertainty right now. Everyone's in sort of this data dependent mode, right?
Broadly speaking, when you look at the fixed income markets, there are three broad drivers right now: growth, inflation and liquidity. The inflation story is on the right path and if you look at today's market reaction, the markets are really not reacting to inflation anymore. The narrative has been put into the market. The central bankers have told us to be patient, they will keep things here for a while until they see further improvement on inflation.
They are really focused on the growth, the labour, the wages and see how that develops and obviously we have seen a lot of surprise on that side this summer between mid July and August, there was a raise of 50 basis points.
Personally, I think that responded to a growth shock in the US and obviously there's a lot more supply in the market, both corporate and government.
So I think the central bankers are content to say, we are going to watch, particularly on the labour development, growth, employment, and how growth plays out over the next little while and we will keep things here on hold for as long as possible.
They do penciling, the Fed has penciled in a cut next year, right? So we will see how things evolve.
We got another summary of economic projections next week that will be released to see where they think things evolve.
They've also said they're going to have another hike in the market to release the option to hike into the end of the year.
So very data dependent.
Gov. Powell said, look, we are navigating by the stars under a cloudy sky, so I think that really speaks volumes to how we are navigating here, very data dependent. We think the trend is in place, it's a little stickier than expected.
>> When it comes to what they been trying to do all along, cool the economy, they warned us at the outset, there's going to be some pain here, and you said the labour market has been resilient, the consumer, slowing down a little bit but still spending, it seems now when you put that together, people say, is this going to be a soft landing?
No lending? Maybe you can do all this, get inflation under control and we will walk away without anything to bandage. Can that happen?
>> I'm always a bit of a sceptic.
I've been doing this for a while.
It's different this time but there haven't been many soft landings.
It's a really hard objective.
Think of what we've gone through.
We went through a pandemic shock and the monetary fiscal policy response has been off the charts and to think that monetary policy is going to land softly given the massive stimulus that we've had, I'm a little bit of a sceptic.
I don't believe that we are going to get there. I'm still in the mild recession camp, but prove me wrong.
It's a really tough thing to navigate so if monetary policy is on hold, I think you will see the lags play out in 2024.
I'm in mild case because I think both corporate and household went into it, the pandemic, in much better shape than they have been in the past, so it's more of a mild recession and the monetary policy will bite and fiscal policy will ultimately stop being a tailwind.
> Taking all of that with you about what it means for the fixed income market, obviously we are seeing yield we have not seen in a long time, but some people thought we would perhaps be cutting by now.
How do you see it all playing out?
>> I think ultimately that we will see one, two cuts next year at some point in the US.
I think that's my base case scenario.
At minimum, we were going to see is inflation continuing to move down.
Market sort of expected inflation to be 2.
5, 2.
6% headline inflation sort of June to September of next year.
If the Fed doesn't recalibrate interest rates, what you're going to have his real rates continue to move up and that is a tightening, continuing to tighten into a downward trajectory and inflation.
So I think that the Fed can recalibrate modestly, so still behaved with higher for longer and still be disciplined here but I think net net, it's a very attractive level to be adding some fixed income to your portfolio, absolute yields are very attractive historically.
So I think it's still positive.
>> That was Scott Colbourne, managing Dir.
and head of active fixed income at TD Asset Management.
Now let's get our educational segment of the day.
So you have a registered account like an RRSP and you want to make a withdrawal. How would you actually do that? Nugwa Haruna, senior client education instructorat TD Direct Investing is here to tell us what we need to know. New book, always great to see you.
Tell us what we need to know.
>> Yeah, so, when it comes to making withdrawals, especially for registered accounts, there are a number of things that investors want to be aware. Something like a tax-free savings account, it's easy to go into your account make withdrawal, but with an RRSP, there are other considerations you want to take into accountbefore you make a decision to withdraw money.
One of those things would be the potential tax implications because as you are aware, the RRSP is a registered retirement savings plan and if you take money out of that account, you are potentially losing that contribution room plus there may be tax applications.I will show you how to make those withdrawals and WebBroker.
under transfers and withdrawals, you're going to click on withdrawals from RRSPs or RESP is. The RESP is of the registered education savings plan.
you do have an opportunity to make withdrawals through WebBroker as well.
But today we are going to focus on the RRSP. When it comes to making withdrawals from RRSPs, some investors may decide to use these accounts to take advantage of the Home Buyers' Plan or the lifelong learning plan.
The homebuyers plan let's investors take out up to $35,000 from the RRSP which they can pay back in a 15 year period and they don't lose their contribution room. There is also the lifelong learning plan that lets investors take out up to $20,000 for full-time education for themselves or a spouse and this needs to be paid back within a four year time frame.
None of these impact the investor's contribution room in the long run but if you decide to use the withdrawal system within WebBroker, be aware that that contribution room, you will be losing it.
If you want to take advantage of the homebuyers plan or lifelong learning plan, you want to click on the link here that says forms, you want to fill out a form specifically dedicated to that.
Once you've decided you want to take money out of the account, you will need to transfer those funds from your RRSP to a TD checking or savings account. It has to be an account with TD Bank. I also want to mention that you want to make sure that whatever you are looking to what transfer is already in cash and trades have settled. So you go and yourself at least two business days for any trades to settle. If you want to do a full withdrawal, so you want to completely empty your RRSP account, once you do that, the account will be closed on your behalf and that comes with the fee of $100 plus sales tax. And on the other hand, if you want to do a partial withdrawal, you are able to do that and there is a fee of $25 plus sales tax. The next thing you want to think about is are you doing a gross or net withdrawal? The difference between the gross or than it would be if you do a gross withdrawal, that would be the amount that you are looking to take out of the account in and out of that amount, those fees would be deducted, any taxes would be deducted, he will end up seeing less than the original amount you put in the system. On the other hand, if you say on net withdrawal, what will end up happening is you will get the exact number you want but some additional fees will be taken out of your RRSP. So for this example, we are going to do a gross withdrawal of their. We are looking to take it that thousand dollars from the account.
Another consideration is the withholding taxes. It's automatically 10% of this withdrawal, they would be withholding tax. You can decide to increase that amount to no potentially have that additional tax burden at the end of the year or you can decide to just deal with the 10% and deal with whatever tax obligations happen when you file your taxes. And finally you get to confirm what that withdrawal looks like.
Finally, you will get to see the amount you asked to be taken out of your account, you will see whatever fees you are being charged and whatever taxes are being taken out, so because we did a gross withdrawal, even though we put $1000 as the amount we want to take out, we ended up receiving about $874 and the opposite would be the case of the net withdrawal, the amount we request withdraws the amount we will see but then some additional fees will be taken out of the RRSP. So after you have done those withdrawals, once again, investors want to be aware that whatever amount you take out of your account will end up beingadded to your income for the year or so you may be dealing with some additional tax burden there, so something to be aware of when you decide to make this decision.
>> Alright, a lot of important information there, Nugwa. Thanks as always.
>> Thanks for having me, great.
>> Nugwa Haruna, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Increasing tensions between the United States and China are stoking concerned that the world's two largest economies might decouple.
Well, earlier this week, we talked to our guest who said it poses a major risk to the market, that was Haining Zha, VP and Dir.
of TD Asset Management and he laid out the key themes investors are focusing on.
>> I know for many people that focus on develop market, inflation is the number one enemy and it's on the headlines every day.
But from medium to longer term, the decoupling between China and the US is actually a bigger threat.
so to put it into perspective, if you think about the last decade, it's basically the biggest two countries generally, they get along really well, and that created two forms of dividend.
Number one is economic dividend.
Because for US corporations, they find a cheaper source of labour, they find a cheaper source of product and they find a fast market. And for Chinese, they were able to attract more capital, build their manufacturing base and they were able to find the end market for their product as well.
So that is generally a win-win situation. The second form of dividend is the peace dividend.
So although there are always some kind of conflict here and there in the world, generally, they don't threaten the major economic interests for extended periods of time.
So if we look at the past fantastic return, these two forms of dividend, they are actually the major sources.
So it would be complacent to think we can kind of repeat history and repeat that fantastic return.
>> It seems to be a lot of the tensions are on the technology front, talking about the United States being worried about having technology go to China in terms of artificial intelligence and chips. In the real world, we have seen some headlines recently where it's right down to, can I take an iPhone to work in China? In some cases, no.
>> That's exactly the case in point. Many people don't feel the tangible impact of geopolitical tension but Apple is one great example.
Right before they rolled out their new phone, the Chinese government guided the government employee not to use iPhone for security reasons, and not actually also coincided with Huawei rolling out their new phone as well. That caused a hit to the Apple share price, about seven, 8%.
>> We are talking about intellectual property in the end and bothcountries having their intellectual property in each other's markets. How far could that go?
>> it can go for a long time and right now we are not seeing thegeopolitical tension in the technology area really alleviate anytime soon.
> If we do end up in the situation or the situation doesn't get better, you talked about the impact, there was dividends to be paid for the world's two largest powers, two largest economies playing nice together.
They are not going to play nice going forward, what does it mean for investors? Which of the be looking for?
>> They have to be prepared to accept a much lower return and they have to be really nimble and to watch for Black swans.
This will be an arrow for many, many Black swans down the road.
>> Okay. The hard thing about the Black Swan is that you don't really see it until it is on your doorstep.
Interesting dynamics there. We do now in terms of China's economy that it's been faltering.
They dropped to the COVID restrictions, they thought it would be good for the economy. It hasn't played out that way.
I think they made moves even today to shore up the economy.
Is what they are doing enough?
>> Right.
Generally speaking, there are different areas. For example, the monetary policy, the fiscal policy, the policy around real estate, but so far, none of the policy have been enough to give investors the confidence boost they need which is why the economy is lacklustre. We can talk about each different area. For example in the monetary policy area, for example, the central government cut reserve reverse repo rate twice together total about 20 to 25 basis points and also the… Usually how the monetary policy works is once you cut the key rate, it will naturally spread to the loan prime rate which is directly linked to the mortgage rate in the corporate lending rate. But when they cut the LPR, they only cut on the one year Tanner, not the five-year tenor. The reason why is they want to protect the banking profit.
So on the monetary policy from so far, it has been below investor expectation, and in the future, they might need to do more.
>> What about the fiscal policy side? If you are trying to stoke an economy, traditionally the monetary policy plays a role but fiscal stimulus, getting money into people's hands, hoping that they put it back into the economy.
>> On the fiscal front, we heard even less news because there have been some whispers that the Chinese government might do a special Treasury issuance of about 1 trillion RNB to support spending. That didn't happen.
people are expecting the government to have money to households to support consumption. That didn't really happen. The only progress happening on the fiscal front is the local government financing vehicle, now they will try to consolidate that debt into provincial debt and the reason why they want to do that is for those local funding government vehicles, the interest financing is about 1% higher than the provincial so by doing that, they can save the 1% interest rate cost but for many of those provinces, there is also very high leading into an entity where the existing debt load is, is really not confidence boosting.
>> Given the fact that they have taken these moves and it hasn't been confidence boosting, is there a sense that they will do more on the fiscal or the monetary side or where are we at this point? China has to know that the economy is a bit in trouble.
>> Right. I think all investors are in a wait-and-see mode.
I think typically the government wants to maintain some kind of stability and even policy stability, so it will be very unusual for them to all of a sudden exceed market expectations. Usually, is the economic situation getting worse and worse and that presses them to do something and then they will respond.
So right now, what we are seeing is they are in reactive mode rather than an proactive mode.
>> That was Haining Zha of TD Asset Management.
Now, for an update on the markets.
We are having a look at TD's advanced Accor, platform designed for active traders available through TD Direct Investing. This is the heat map function, gives you a view of the market movers. We will start with the TSX 60, we are screening by price and we are screening by volume.
Obviously, we see the big move higher in the price of crude this week but it seemed like material stocks are the ones really standing out today.
See some green on the screen there.
energy is a bit of a mixed picture.
Right now we've got some weakness in tech on both sides of the border. Shopify on our side of the border is endowed by all that much, I think they moved also the lows of the session. I want to check in on the S&P 100 because we had some key readings of inflation and south of the border, all of that ahead of a Federal Reserve rate decisionnext Wednesday.
So we take a look, it's a real mixed picture today on the S&P 100. I am noticing about some weakness in the chipmakers. Of course, they've had a fairly decent run as of late as well. You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
While we think about passing on our assets and money before we pass on, we typically think about the role children and other family members will play.
What happens if you prefer or need to pass these things onto) instead? Earlier Kim Parlee spoke with Mindy Bennett, tax and estate planner at TD Wealth, and she asked her, are there key considerations to keep in mind when making friends a part of your estate plan?
>> Yes, and the first thing you want to be thinking about is, with the exception of being required to provide legally for certain people who are financially dependent upon you, the common law restrictions that provinces have, you typically have the freedom tochoose whoever you want as a beneficiary which includes friends as well as family but there are certain jurisdictions like Québec they have concepts like force heirship which requires you to provide a certain portion of your estate to certain close family which limits your ability to provide for friends.
so you want to look at the jurisdiction that you reside in. You also want to look at your family dynamics. If your family and loved ones were expecting andassume they would receive a certain inheritance and they are not, know that this may cause that family relative to legally challenge your will and if your will is is determined to be invalid, the intestacy laws, which govern if you don't have a will or a legally valid Will, only your close family and close relatives are going to inherit.
>> There are things to consider. Is there timing that might be better? Is it better to give to friends perhaps when you were still alive rather than including them in the willrather than afterwards after you pass?
>> Italy going to depend on the circumstances. It may make sense to giveassets of friends while your life and in others when you are not.
One of the benefits of gifting when your life is you can witness the advantage of your friends being able to utilize that gift to and they can enjoy the gift immediately. However, there are also going to be disadvantages depending on the type of asset that you are gifting. There may be an immediate tax application to both you and your friend as well is you want to ensure that when you are gifting assets, you are still ensuring that you have enough money for your own financial needs.
Whenever you're dealing with the possibility of your will being legally challenge, you want to be sure that you have a well drafted legally sound will, preferably it drafted by an estate planning lawyer.
>> Got it.
Make sure that it is legally sound.
What about if, we talked about this before, you're looking to designate beneficiaries of a TFSA or an RRSP, can you designate a friend as a beneficiary to?
>> Yes, you can, and with most financial institutions, they have a designation form that you can sign.
You obviously want to be reviewing that form and updating that form whenever there is any changes that you want to make. One thing I do want to highlight is while it's not legally required that you inform the person that you are naming is your beneficiary, again, communication with your loved ones so that there is no surprises especially in an emotionally challenging time.
>> Yes.
What about an executor? Could you maybe ask a close friend to come in and be your executor because maybe they know you well and they understand things?
I know it's much more complicated than people think, we will start that, but what kind of conversation should you be having with them to get them ready for that role?
>>the first thing I want to highlight when it comes the executor is that it's a job and when you appoint somebody, it can be considered an honour because clearly you trusted them enough to appoint them, but you still have to recognize that it's a job so one of the first things I tell clients is while it's not legally required, you may want to ask your friend, are they willing to act as your executor? Because if you know in advance that your friend is not willing to act as your executor, that gives you an opportunity to ask someone else. You want to find out, are they willing?
You want to talk to them about, again, the role and response ability. They have the expertise? And lastly you really want to bring up the topic of compensation.
I tell clients that without adequate compensation, is arguable, if someone is going to act as your executor or possibly as your attorney, you want to ensure that adequate compensation is provided.
>> I know stories of friends, they have said, I thought this would be a great idea, and then hated it, really hated it. It is a job.
there are other options, like a corporate executor. As a corporate executor is a professional company whose job it is to act, and they are professionals, acting as the administrator of your estate. Sober friends or clientsI don't have anyone they can appoint or you don't want to place the burden on your family or friends, a corporate executor is a really good option.
I tend to find that with many clients, one of the challenges that we face is the concern is are they going to be able to act when you need them to? People get sick, people pass away and so when you are appointing an individual, this is really a concern.
This is not a concern when you appoint a corporate executor.
> They are legally bound to do what they are going to do.
>> Even if the person is actually working on the estate, the one that has that job, is no longer on that job, the corporation is going to seamlessly replace that person with another professional who can continue to act on your estate and the corporation doesn't get sick and the corporation doesn't die.
>> That's a very good point.
What do you need to include into your estate plan to make it clear what you want your wishes to be? I've got a list here of documentation. I will just let people know I was looking. You had a letter of instructions and wishes which was in addition to the will. Take us through what you think is the right package.
>> There are three key and cornerstone documents to your estate plan.
There's your will and two powers of attorney, someone to make your financial decisions and someone to make a medical care decisions and then in addition to those cornerstone documents there are other documents that are beneficial especially when you are considering a friend in any of these fiduciary roles. What you're trying to get ahead is you are trying to communicate your wishes. Obviously it is best to communicate verbally about your wishes by providing them in documentation can also be helpful.
A letter of wishes or a letter of instructions, it's documentation about what your wishes are in addition to your will. There are certain things that are not appropriate to go in a will and are more appropriate to go in a letter wishes.
>> Like what?
What kinds of things?
>> When it comes your personal effects, you may change her mind frequently, if you put it in your will,… >> Who gets a painting, who gets the chair.
>> And a document outside of your will, you can update your document as frequently as you want. It's not going to be legally binding but it will provide a lot of persuasion on the executive to follow your wishes and often executors will follow your wish. In addition to a letter of instructions or wishes, you want to look into a living will or medical or health care directive which is where you are providing an expression of what your wishes are. I had to find that a lot of clients don't understand the difference between a power of attorney document and the living will and healthcare. To briefly explain, in a power of attorney document, you are actually appointing a person, your attorney in some provinces, to make your medical care decisions. In a living will or medical care directive, you are expressing what your medical wishes are, so having both of those documents can be really helpful and then lastly another document you want to look at in terms ofthe consents or authorizations needed for tissue and organ donations, communicating your wishes about what that isn't depending on the jurisdiction that you live in, what documentations you need. Some jurisdictions are often and some are opt out when it comes to organ donation.
>> The ultimate act of generosity. I only got about 30 seconds here,it's the team that I think brings this to life. You talk about it could be somebody like yourself, accountants, your advisor who understands some of the financial wishes as well and in some cases a family mediator can be involved.
>> So if you have a family business, there is certain individuals, family enterprise advisors, who can provide guidance in navigating often time complex relationships that you have in family business.
We certainly recommend talking to the family mediators.
>> That was Mindi Banach, tax and estate planner at TD Wealth speaking with our Kim Parlee.
You want to stay tuned for Monday show, we will be speaking with Mike MacBain, CEO and CIO at East Coast Fund Management. He wants to take your questions on fixed income and interest rates. You can get a head start with your questions. Just email moneytalklive@td.com. On behalf of me and everyone here at the show, thanks for watching all this week, and we will see you next week.
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