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[music] >> Hello, I'm Greg Bonnell welcome to MoneyTalk live, but you by TD investing.
Every tantrum I guess from across Canada we can only see here. I think you across the markets and answer your questions when investing. Coming up on today's show we're going to discuss what is ahead with Canadian marketing coordinating equity TNT dance mentioned management, Michael O'Brien. We'll talk at home sales in focus about trying to Vancouver and today's education segment, here in MN about how you can compare different stocks using WebBroker.
Get in touch with us in the MoneyTalk live@td.com. Forget our guest of the day, let us update you on the markets, starting with TSX comps index and Waziristan.
A bit of a lacklustre day then a bit mixed.
Up 11 points on.
. . And you look at the price of gold, down a little and the price of crude oil up a little, and thus the TSX today.
Athabasca oil is among these groups, not sure they're fearing right now, about 3% in some giveback on energy needs as people try to figure out exactly what voluntary cuts from these members means.
In looking at Kinross as well gold nearing a high recently some of the stocks running up and along that run in the precious metals is seven bucks and $0.86 today and pulling back a little more than a percent, and south of the border we have another indication that the economy there as far as a labour market is using job openings and at 8.7 million was so dramatic from the treasury, not from us for stocks today 4561, and the tech heavy NASDAQ some of the big tech names, here on the screen we have going on 34 points, but 1/4 of a percent.
An apple at hundred 93 bucks a share, up about a little bit over 2%. Unless you market update.
It is been a choppy ride for the TSX comps index according to our guest today and it is important not for Mr. to get too optimistic for what we see recently or overly pessimistic in some of the pullbacks we've seen.
And we have another big year ahead of us on the doorstep. doorstep. equity team at TD asset management. Great to have you back on the show, Michael!.
>> Great to be here!
>> And not being neither too optimistic or too pessimistic, it's been quite a year.
It is been a choppy range in which we be mindful of?
>> These are the same thoughts I have myself, and we go through these types of periods with these violent moves that can be pretty disorienting and we forget those first principles around valuation.
It is fascinating when you look, and obviously November it was a huge month.
But, like you say, September and October were pretty dark times and it just never ceases to amaze me these swings and sentiment.
It is not so much that fundamentals were detached from those moves, it was more that when sentiment gets on board things can get sort of amplified or taken to extremes and I think that is where we need to step back and say, wait, wait a second let's put this in perspective. And despite all these ups and downs, when you really step back these markets have been range bound for the last couple of years and you look at the TSX, we peeked in April 2022.
Almost 2 years now.
The SMTP diluted before that in January 2022 and so for the better part of two years you had this turning sideways market. I think when you look at it I think it makes sense because that coincided with the beginning of the rate hikes in both Canada and the US. It does make sense when you think of it in that context, this range bound trading is because we've all been trying to figure out how much work to central banks have to do and how our economy is going to respond in how we respond.
It is still not quite clear what the outcome is, but as we head into 2024, relatively closer to that conclusion. I think it is always helpful just to step back and try to put in the bigger picture perspective, for all this running we've been doing are all out of breath, think about where we'll be in two years.
It is important that that in perspective.
>> Is into next year, there are two ideas on my mind, just think of what the strategists are saying and reports, will probably be seeing rate cuts from the central banks including ours, mixing the spring from the Bank of Canada, and the dislike of the economy. When my sister think about the markets? And by the TSX?
>> Obviously a big part of the movie seen in recent weeks is investors hoping and believing and speculating that the rate cuts are going to come. But at the same time, they are wishing for those rate cuts without the thing that we typically trade for rate cut which is a big nasty downturn which could impact employment.
So some inconsistencies I would say in terms of how the market necessarily is looking at that, the bigger picture clearly the viewpoint is that rate hikes are behind us and it is a question of if and when rate cuts will arrive.
I would look at that and say in the Canadian context, I suspect that there will be rate cuts by the time we get to the middle of the year and reason I think that is because the economy needs those.
It is become a more clear that the key Canadian economy is slowing.
When you look for there are some obvious headwinds on the horizon that were going to have to work through and it does mean that is all doom and gloom but realistically, I think the outlook for 2024 has to be a pretty sober 1 More Were Expected in Canada to have sluggish growth and by extension you should expect a real blow to earnings year by the Canadian company is by and large.
This is going to be one of churning through a lot of headwinds.
>>let's talk about one sector in particular what were expecting to see.
When expecting from the banks?
And they have been warning us and we are looking for a tougher time next year.
>> You will have a balanced perspective on this because, on the one hand, the bank's numbers were a bit disappointing. It was a mixed bag is I guess you could describe it.
Clearly what we saw was continued increase in PCL's or loan losses, not to alarming levels, but the trend has been higher.
We are seeing more pressure in loan growth and loan growth is slowing.
We are also seeing pressure in capital levels, you know, people don't want to let their guards down.
All of those things are conspiring keep pressure on the earnings outlooks. As I said, I think three out of the six banks beat expectations. But the more important things are earnings estimates for the calendar 2024 are still coming down and there still being reduced and expectations are pretty modest for the year, but on the other hand though, if you look at the way that the banks been trading in the sentiment around them, and a lot of them are having dividend yields and their pressing a lot of negativity.
When you go in and say, is that well-founded and the results we just thought?
The areas of your typically seeing the most alarm around is, house credit unfolding and are they in a position where they have to raze capital And offset capital?
The picture by large is holding together more than the Bears would've thought.
Those downside scenarios don't seem to be in the cards it all right now and that to me is quite reassuring.
It was a great earnings season for the bank, and the outlook isn't great, but it wasn't terrible either.
Again, that turning sideways market is going to continue for a little while with the banks in particular people get a stronger view that the worst is behind them.
>> So, don't be too optimistic and will be too pessimistic!
But that set us up in this way, if in the next year the Bank of Canada is able to ease loss of restrictive policies and get that ideal soft landing, that mean better things in what we can expect for the TSX?
>> The short answer is yes. If we get a soft landing and inflation comes down to that excessive job losses, if economic growth bottoms at a reasonable level and begins to take higher, if interest rates are.
. . The central market, then yes we can be optimistic. So, is not impossible, but is probably not the most likely outcome.
There are probably one or two wheels that will fall off at some point and you have to put them back on.
And that's when I frame it up.
The markets at a point where in the Canadian context, violations are demanding, they're not the problem, there is something cautious expectations, just most likely outcome elicit the data that we have today is that it probably will be a difficult year next year in terms of earnings growth. It will be difficult. Of time for the Canadian economy and the Canadian consumer and for those Canadian households and 24 and 2025 and 2026 and this will squeeze the cash flow that many have available to spend on entertainment, groceries, and cars.
All of those things suggest that we are probably into it.
Where growth will be a bit sluggish for a while.
But, if we get one of those pleasant surprises and the market never ceases to humble us, never ceases to surprise us, if we get one of those outcomes, then there is an upside because the markets are not at least in the Canadian context, the markets are not reflecting an exuberant outcome.
>> Always great to hear from you, that was Michael O'Brien.
If you have any questions feel free to email at money talk live@td.
com. Am taking a look at how the markets are trading. When shares of take two interactive on the spotlight today, then about 1.4%. So what's going on here?
A subsidiary.
. . Lisa trailer for Grand Theft Auto six a few days ahead of schedule after it was leaked online in the trailer also revealed a release date sometime in 2025.
And so that could have affected.
. . . And his predecessor Grand Theft Auto five was released in 20.
. . . And Nokia shares at a pressure today, the Finland based company loses a $14 billion contract with AT&T, and it is been awarded to their Swedish rival Erickson. So heading down here little more than 4%. Also checking in on CVS health which is releasing its sales forecast for the next year, with $66 billion and above the estimates of what they thought to deliver and raising their dividend by almost 10% early in the new year.
This is all coming as CVS holds its annual investor day right now CVS health Corp.
up almost 3%.
Now back to the S&P and T6 comps index, some modest green on the screen, will call the almost 32 points in excess of the border, lifting the NASDAQ and looking at the S&P 500 Index a little bit over the line.
And back with Michael O'Brien taking your questions on stocks, first question, getting your view on Tellico's stocks right now?
>>well, they're supposed to be a steady group, but that had some pretty exaggerated moves this year.
Going back a few months, there are few concerns out there. And one of them obviously is that this is one of the most sensitive sectors in the market.
Those big juicy dividend yields that we all look for obviously.
We can get five or 6% GS I rates, the dividend to look quite as attractive.
That was one headwind. And a second one which was more fundamentally based one, was with Rogers finishing his acquisition of Shaw and Québec or buying the wireless business freedom mobile, there's a lot of angst among the investors about what the competitive environment would be coming into the fall.
Both on wireline but also on wireless.
There's a lot of focus and a lot of concern about how with the new players will compete.
So, the stocks reflected that made a pretty rough summer and a pretty rough fall.
It can back very nicely in the last little while and a few reasons for that, obviously as interest rates have backed off, that is certainly alleviated a lot of that competition for that dividend yield.
Great song has been a big driver top-down and bottom-up the fundamental competitive environment, that certainly was no walk in the park and a lot of Canadian consumers probably got some decent deals in the back to school period.
It's not like it was in a competitive environment, but I don't think any of the actors were irrational.
None of the players got too carried away.
And if there's a bit of a sigh of relief that investors breathe.
And one other thing, obviously, all of the Tellico's Tellico and cable Kos, they're all caring a bit more debt right now then an investor would necessarily desire.
desire. spectrum of options, 4G and 5G have come out and they proven to be very, very expensive in the past. This time around, the latest wireless spectrum option which is wrapped up a few days ago came to Weibel expectations in terms of the prices paid for spectrum which was a real sigh of relief and that which is one more stress on the balance sheet the people didn't want to see.
I would say, the sentiment has turned nicely.
And that said, is still there to be a very competitive environment here for the next little while.
You just have to have about's perspective on this group as well.
>> And a follow-up question, when you cut your sons off from paying for their cell phones?
I'm just kidding, but is a question I think about.
Next real question now from the audience, how Google companies are doing better given the high price of gold?
>> Goal is been on a big run here the next couple months.
It's amazing we got to that September and October.
With higher interest rates and a strong US dollar, gold is one of those asset classes that was really being weighed on and being pressured.
And as Atul broke in November, first rates came down and then secondly the US dollar weakened and on top of that, we had unfortunately the conflict in the Middle East with Israel and Hamas, and all those things really turned gold's price action around.
And so it is sitting at a higher level and from that perspective there is a high correlation between gold equities and gold bullion, however gold stocks, it will just have to see her goldplate price, that to believe is going to stay there for a while and I think right now we're still not.
With a bully and moved very quickly investors are trying to figure out, and mother prices and the gold stocks as if it is going to be $2000 a year from now into your sound three years from now?
And I think the jury is out on that.
And also, intentions gold operations, one thing that place of bullying it says, and the people pick different names to be like, okay what companies will prosper?
>> This is a perfect point and it just goes to say that a caveat in going to the gold names, it is very difficult business.
The gold miners all have their idiosyncratic stories to go along about whether gold is working for you or not.
We see some great illustrations around whether it is geological risk or problems of individual minds or political risk which obviously is a never-ending part of the story when you're looking at mining investments.
And even those that are seen as the safest play, if you want exposure to coal companies, from a long-term perspective, there have been outstanding performers.
And you think you're playing it kind of safe because it's a streamer, however one of the biggest streams is Panama mining in Panama owned by Volkmann.
, We'll get into that just after one more question >> With.
. .Panama minus the current situation in the region?
>> What they develop this mine.
.
.
once this is built, once it spent all the money, the once this is built, once it spent all the money, the once this is built, once it spent all the money, the once this is built, once it spent all the money, the So the renegotiations around the terms and tax rates and guarantees and whatnot. I think the market had kind of thought that this is all been settled this spring that all the negotiations and they agreed to her packages of royalties and guaranteed income streams.
In all kind of unraveled in last a while and quite quickly.
And with a whole bunch of different demonstrations and demonstrators and oppositional figures, all piling on to this one very fluid situation right now and the government has revoked the mining license in the Supreme Court of Panama has ruled the contract unconstitutional in the line itself is actually being shut down now would it is obvious is been devastating for first quantum because it is so far as large as mine and by far as largest source of cash flow.
Think of the manna has a stream on Colbert Panama and that hundreds of streams, but this is easily the biggest and most important stream, 15 to 20% of their income.
Even though we thought we are playing it safe with Franco Nevada, it just shows that political risk is everywhere and always present with these mining businesses and it is something investors want to keep a close eye on.
As far as the first quantum situation, like I said it is very fluid right now it is not quite clear how this is going to play out.
Right now, the best guess seems to be that the situation isn't likely to improve or to change dramatically until national elections are held in Panama in May of next year and so, I think that is the hope for turning point in this.
This is obviously been a huge political issue in this is a fact that the mine accounts for something like 5% of Panamanian GDP. And so this to shut down, this is a big action.
And I think, the hope from the company's perspective is that a new government is formed in May with a new point of view and hopefully the lightning rod type of the fact that we are seeing right now is being given some time to dissipate and cooler heads will prevail and you come to an arrangement. That's the help.
But the problem first quantum is that they do the fair deal of debt on their sheet and this is the biggest source of cash flow. The longer this mind and staves off this and can stay in production, the more concern there will be about their debt covenants.
So time isn't on their side.
>> Great points to make.
As always, do your own research before making investments and will be back with questions Michael Brian in a moment of time. It will answer questions anytime to him a MoneyTalk live@teevee.com. And now getting to her educational segment for the day.
If you are interested in comparing a possible investment to its peers, WebBroker has tools which can help.
Letting us now to discuss, we have here in MN, with TD investing. Great to see you again! Let's talk about investors identifying a company that they might be interested in and start comparing it to its peer group in the industry.
>> Great to be on, Greg! With these comparisons, it really falls in the relative valuation with our investors looking for similar companies within the industry to see how they stack up and be able to benchmark.
Let's look WebBroker right now magnetic pull up and Nvidia which seems to be making the newsletter on these days is much with the AI theme.
Let's bring up the stock profile and were going to head up to the fundamentals page.
That's the tabular to click on and then right hand of fundamentals, we want to head over to the peer comparison and that's what I'm going to drop and this is a great spot to, first of all, to see the actual hard value numbers on the fundamental side of things and you see for Nvidia in the first column, it's broken down by his relative valuation profitability and this is where we will keep our focus on and where investors are going one set with their analysis.
Many of the industry benchmark and this is always good because we want to see as company, how Nvidia is really doing compared to the overall industry itself and then you would have some of the peers and this is a great spot, if you're not too familiar with the industry and the competitors in the same business basis, this is a good space to get acquainted with what some of these numbers are. You see things like earnings which is based on a trailing 12 month value there that investors might be interested in looking at and we have our relative valuation and remember this is really the future growth expectations of the company and so, the higher the PE, there is more projected growth or hopes not company.
You also have you growth profit margin numbers and an interesting one you might want to look at is the net profit margin on the company to see how the industry is.
And we can see really what the value differentiators are here and said she was in Nvidia here, is that for every dollar that Nvidia makes her connecting $0.
42 in profit which is significantly higher than most of its competitors as well as his industry average.
>> All right, when the fundamentals we can see and compare that way for investors.
And if investors need more information and compare price or overall trends, where we looking?
>> Yes, we can do a shift here and looks matches fundamentals and you might want to look a bit on the trend things as well to see how stock is performing. So if we had here to charts, we can do with in the chart section over here is you can rent comparables because you have already preloaded a couple of them in here is a run comparisons we can come in here and click on the comparisons tab.
We can enter either benchmark ETF or there is one on the American market here which covers the whole semiconductor space, Esso acts, and you can turn as many of these as you want and you can really look at different time frames as well, looking at a three year work run right now looking at the stock in a comparison of the peers as well as the NASDAQ and the Esso X in the ETF that slayer and you can see that the overall performance and be able to see where the bigger trends are lying.
This is only to the mix of fundamentals and technicals when you're doing some of those comparisons, Greg.
>> Great, thanks for that.
A senior instructor at TD learning.
And feel free to head to WebBroker for more instructional videos and upcoming webinars.
Before you can answer questions about Canadian stocks Michael O'Brien, reminded how you can get in touch with us.
Do you have a question about investing, or what is driving the markets? Send it to us here at MONEYTALK LIVE. You can send your questions two ways: You can send us an email anytime at MONEYTALK LIVE AT TD-DOT-COM. Or you can use the question box at the bottom of the screen right here on Web Broker. Just type it out and click submit.
Back with Michael O'Brien in taking your questions about Canadian stocks, can only get your guests opinion of Air Canada?
>> Air Canada is an interesting one, and obviously the immediate pandemic era where everything was shut down and no planes were flying and nobody was travelling, that was virtually the worst possible outcome for an airline.
You really can imagine a situation worse than that.
Obviously the stock price reflected that.
And then we went through this period of the reopening and the revenge travel phase! And that is when Air Canada and every other company that transported people around either by plane, train, automobile or boat, the data back like a demand.
In Air Canada stock prices reflected all of this.
It is bounced around in these ranges and that is that investors are still trying to figure out, okay, what is the new normal going to be for airlines?
And obviously revenge travel can't last forever.
Are we at the end of that right now?
There are still a lot of people wanting to get on a plane, me included, and clearly that phase of excess demand is leveling out.
And I think right now investors are really trying to figure out, once all that passes, where will be land? Pardon the pun.
I think for Air Canada, obviously the been putting up some great cash flow numbers last couple quarters and it paid off a DC-9 of debt which is great, but at the end of the day, travels one of the most discretionary items in a budget whether a consumer or talking the business travel.
A lot of the next 6 to 12 months hinges on where you think the economy goes from here.
Obviously, if we get the soft landing the people are hoping for, if we can have a hard landing or recessionary type of environment, it is hard to think that people will forget a couple thousand dollars to fly each year.
That subject make a call on really with Air Canada.
>> Another question, what gets opinion on Brookfield renewable?
>>Brookfield renewable, you think that's on trend with some of the big secular themes that should play it over the next decade and in this case particularly clean energy and electrification.
You know, they were run a wonderful suite of assets around their Hydro which is kind of the crown jewel in their building out a lot of solar and wind power.
From a 10 year perspective, that is a very interesting story and leveraging off the Brookfield family, they have proven ability to store steels around the planet which is an advantage of these companies.
In another advantage of this, one, there is an enormous amount of capital chasing this renewable energy theme.
So a lot of chasing this usually drives down returns and makes it a very competitive environment.
And the other thing which we witnessed in the summer and fall when the telcos and the utilities were all getting hammered with higher interest rates, the renewable energy names also proved to be very sensitive to the higher bond yields.
And that is partly because of the long duration of nature of these businesses, but also because a lot of debt in our capital structure so those are kind of the two sides of that one, but on a more newsy note, they have been pursuing a very large acquisition in Australia, Brookfield renewable and some of their partners.
The Target company that they are seeking to acquire, they just have the shareholder vote and it was rejected.
So, this is going to be a pretty sizable deal for Brookfield renewable shareholders decided that it was in a sweetness deal yet, what about the end of it and whether we are waiting for the next deal, clearly, X acquisitions are an important part of the Brookfield renewable story.
>> Great, thanks, Jeff seems to be a regular viewer of the show, because we have another one from him. You need to prepare or plan or just for the US election next year?
>> When I think about the US election, I think it will definitely impact the way that we as investors and particularly Canadian investors want to think about our portfolio.
I think it's a little early at this stage to actually be acting on that.
You can think about different scenarios, you know, if you want to play that game of scenario analysis and if there's a trump White House or abiding White House or somebody else, but in terms of where we are actually at in the actual race in such a long time between now and next November and I think what is much clearer picture of the actual candidates will be by the time we get to the end of February or March of next year will him gone to the first set of primaries.
Is Donald Trump going to walk away with the Republican nomination or you going to see a different face when it is a Rhonda Santos or Mickey Healy? Before I sharpen my pencil too much, I want to know who the players are.
Let's get to those early primaries and see where we are in March and the setup will be a little clear by that point.
>> Will be back for your questions for Michael O'Brien and moments time.
Before making any investments, do your own research and if you have a question about investing or striving markets, I guess were eager to hear what's on your mind, and you can always send us your questions.
You can set the scene at any time at MoneyTalk live@teevee.com or you can use a question box right below the screen here on WebBroker.
Just writing your question and hit send!
We will see if one of our guests can get you the answer right here on MoneyTalk live.
And we are course on the evening of the Bank of Canada rate analysis and theory more evidence of the toll the higher borrowing costs are affecting the economy, talk about the housing market and were getting some numbers out of Toronto and some numbers at a Vancouver.
We've been going them all over the TSX leave Anthony here to talk with us about this.
>> The report highlighted some of the worst entrance in Ontario's housing market and this highlighted on tier sales which fell to its lowest level since the worst of the financial crisis of 2008 and 2009.
Today we got some housing data as to the big cities in Canada, will start with Toronto were home sales ticked 1.7% higher in November and the stems after five months of decline in the still puts it 30% before it's 10 year average according to the Toronto regional real estate Board.
And despite a flood of new listings on the market, whole prices down 6% with the whole prices in Toronto more than one and half percent month over month and this marks another to cotton for home prices.
Meanwhile, as we talked about yesterday, month over month is been about 7% year-over-year and is higher now and of course was a buyers rushing back into the market and the latest data does suggest that home sales in Ontario are already running at Lowe's reached well into.
. . The 90 cycle, anti-economics is a home prices have likely making some further downsides in the coming months and partially 10% from the third quarter of this year to the first half of 20 24.
Is looking at the 10% decline, still leaving at 15% higher than the pre-pandemic lot levels.
We believe that homeowners will continue to fit face continued pressure into 2025 and 2026 and likely to be facing significant payment shock.
In Vancouver last month, home sales there rose almost 1/2% year-over-year in November that marked the slowdown versus October and November sales, again, like Toronto still 30% above the seasonal average.
In the new listings coming almost 10% in the year we are average.
And how precise his home prices did increase year-over-year but went down slightly from October October.
This comes after the Bank of Canada rate decision.
The latest housing data does suggest that the Bank of Canada most aggressive height hike rate campaign is slowing this growth in Canada.
>> And the big question that they have and many folks have two, what do you see some cuts from the Bank of Canada?
While look, we think that the Bank of Canada is done with rate hikes.
It's easy to early for the Bank of Canada to hint at this in tomorrow's meeting, the bank will likely need to see some further declines in inflation and especially the core managers and move more firmly below before they move toward a rate hike.
But we are forecasting the Bank of Canada to cut rates starting in about April 2024 which is pretty much aligned with market expectations.
>> A big day tomorrow!
Thank you so much, Anthony.
In looking at the markets.
When looking at the heat map function on TD investing, and as you can see, a bit of a mixed day and looking at the energy space, we have seen queue up slightly and some downward pressure on Synovus and the tech stocks, looking south of the border and here rebounding down 1% and south of the border, struck on the S&P 100, technology was the big drag yesterday and her sinks and the big names including Microsoft and Apple showing a bit of strength today. Apple up 2% and Microsoft, not quite as firm, bookable up a little more than 1%.
And you get more information about TD advanced dashboard by visiting TD.com/advanced dashboard.
In fact now with Michael O'Brien and a few questions here before we say goodbye to you. When you see the Canadian dollar headed?
>> The Canadian dollar, oh, will I would say the easiest way to frame up where we see the Canadian dollar headed is to think through the likely interest rate path but the Fed and the Bank of Canada respectively are going to follow.
And right now, it looks to me like the Bank of Canada is going to be in a position to cut earlier and more aggressively, sometimes I think the Canadian economy is going to show more weakness.
If that were to transpire and the US rates stay higher bit longer, I would expect that with lead to a stronger US dollar or almost equal.
If the surprises us and pulls off a soft landing in the Fed is little more aggressive in cutting rates than I think, that we tend to support the Canadian dollar.
>> Is central bank policy now driving the bus or are there other factors?
>> I think for your now, that's a determining factor. For years and years, there is a correlation between oil prices and the Canadian dollar.
The one thing that is changed in the last 10 or 15 years though is that domestic production of oil in the US is gone up so much and when you think about why would oil drive the Canadian dollar stronger, it's because Canada's exporting oil in the US is important oil.
Now, the amount of oil that the US imports is far lower than it used to be, so the significance of the oil price, it is still there and he still favours the Canadian dollar and recently that perception that will affect the Canadian dollar, but the fundamental flow-through is a lot less than it was say 10 or 20 years ago.
>> Always a pre-appreciate the insights and the comments, and always great to have you on, hopefully we'll see you again in the new year!
Thank you so much. And that was Michael O'Brien TD asset management. It was mature to do your own research before you do any investment you make any investment decisions. And stay tuned for tomorrow's show we have Andrew Calvin and Canadian corporate strategy at TD securities.
We'll talk about the Bank of Canada rate decision will take your questions about the economy.
And get a head start with this question by emailing MoneyTalk live@td.com.
That's all the time for the show today, thanks for watching and we will see you tomorrow!
[music]
Every tantrum I guess from across Canada we can only see here. I think you across the markets and answer your questions when investing. Coming up on today's show we're going to discuss what is ahead with Canadian marketing coordinating equity TNT dance mentioned management, Michael O'Brien. We'll talk at home sales in focus about trying to Vancouver and today's education segment, here in MN about how you can compare different stocks using WebBroker.
Get in touch with us in the MoneyTalk live@td.com. Forget our guest of the day, let us update you on the markets, starting with TSX comps index and Waziristan.
A bit of a lacklustre day then a bit mixed.
Up 11 points on.
. . And you look at the price of gold, down a little and the price of crude oil up a little, and thus the TSX today.
Athabasca oil is among these groups, not sure they're fearing right now, about 3% in some giveback on energy needs as people try to figure out exactly what voluntary cuts from these members means.
In looking at Kinross as well gold nearing a high recently some of the stocks running up and along that run in the precious metals is seven bucks and $0.86 today and pulling back a little more than a percent, and south of the border we have another indication that the economy there as far as a labour market is using job openings and at 8.7 million was so dramatic from the treasury, not from us for stocks today 4561, and the tech heavy NASDAQ some of the big tech names, here on the screen we have going on 34 points, but 1/4 of a percent.
An apple at hundred 93 bucks a share, up about a little bit over 2%. Unless you market update.
It is been a choppy ride for the TSX comps index according to our guest today and it is important not for Mr. to get too optimistic for what we see recently or overly pessimistic in some of the pullbacks we've seen.
And we have another big year ahead of us on the doorstep. doorstep. equity team at TD asset management. Great to have you back on the show, Michael!.
>> Great to be here!
>> And not being neither too optimistic or too pessimistic, it's been quite a year.
It is been a choppy range in which we be mindful of?
>> These are the same thoughts I have myself, and we go through these types of periods with these violent moves that can be pretty disorienting and we forget those first principles around valuation.
It is fascinating when you look, and obviously November it was a huge month.
But, like you say, September and October were pretty dark times and it just never ceases to amaze me these swings and sentiment.
It is not so much that fundamentals were detached from those moves, it was more that when sentiment gets on board things can get sort of amplified or taken to extremes and I think that is where we need to step back and say, wait, wait a second let's put this in perspective. And despite all these ups and downs, when you really step back these markets have been range bound for the last couple of years and you look at the TSX, we peeked in April 2022.
Almost 2 years now.
The SMTP diluted before that in January 2022 and so for the better part of two years you had this turning sideways market. I think when you look at it I think it makes sense because that coincided with the beginning of the rate hikes in both Canada and the US. It does make sense when you think of it in that context, this range bound trading is because we've all been trying to figure out how much work to central banks have to do and how our economy is going to respond in how we respond.
It is still not quite clear what the outcome is, but as we head into 2024, relatively closer to that conclusion. I think it is always helpful just to step back and try to put in the bigger picture perspective, for all this running we've been doing are all out of breath, think about where we'll be in two years.
It is important that that in perspective.
>> Is into next year, there are two ideas on my mind, just think of what the strategists are saying and reports, will probably be seeing rate cuts from the central banks including ours, mixing the spring from the Bank of Canada, and the dislike of the economy. When my sister think about the markets? And by the TSX?
>> Obviously a big part of the movie seen in recent weeks is investors hoping and believing and speculating that the rate cuts are going to come. But at the same time, they are wishing for those rate cuts without the thing that we typically trade for rate cut which is a big nasty downturn which could impact employment.
So some inconsistencies I would say in terms of how the market necessarily is looking at that, the bigger picture clearly the viewpoint is that rate hikes are behind us and it is a question of if and when rate cuts will arrive.
I would look at that and say in the Canadian context, I suspect that there will be rate cuts by the time we get to the middle of the year and reason I think that is because the economy needs those.
It is become a more clear that the key Canadian economy is slowing.
When you look for there are some obvious headwinds on the horizon that were going to have to work through and it does mean that is all doom and gloom but realistically, I think the outlook for 2024 has to be a pretty sober 1 More Were Expected in Canada to have sluggish growth and by extension you should expect a real blow to earnings year by the Canadian company is by and large.
This is going to be one of churning through a lot of headwinds.
>>let's talk about one sector in particular what were expecting to see.
When expecting from the banks?
And they have been warning us and we are looking for a tougher time next year.
>> You will have a balanced perspective on this because, on the one hand, the bank's numbers were a bit disappointing. It was a mixed bag is I guess you could describe it.
Clearly what we saw was continued increase in PCL's or loan losses, not to alarming levels, but the trend has been higher.
We are seeing more pressure in loan growth and loan growth is slowing.
We are also seeing pressure in capital levels, you know, people don't want to let their guards down.
All of those things are conspiring keep pressure on the earnings outlooks. As I said, I think three out of the six banks beat expectations. But the more important things are earnings estimates for the calendar 2024 are still coming down and there still being reduced and expectations are pretty modest for the year, but on the other hand though, if you look at the way that the banks been trading in the sentiment around them, and a lot of them are having dividend yields and their pressing a lot of negativity.
When you go in and say, is that well-founded and the results we just thought?
The areas of your typically seeing the most alarm around is, house credit unfolding and are they in a position where they have to raze capital And offset capital?
The picture by large is holding together more than the Bears would've thought.
Those downside scenarios don't seem to be in the cards it all right now and that to me is quite reassuring.
It was a great earnings season for the bank, and the outlook isn't great, but it wasn't terrible either.
Again, that turning sideways market is going to continue for a little while with the banks in particular people get a stronger view that the worst is behind them.
>> So, don't be too optimistic and will be too pessimistic!
But that set us up in this way, if in the next year the Bank of Canada is able to ease loss of restrictive policies and get that ideal soft landing, that mean better things in what we can expect for the TSX?
>> The short answer is yes. If we get a soft landing and inflation comes down to that excessive job losses, if economic growth bottoms at a reasonable level and begins to take higher, if interest rates are.
. . The central market, then yes we can be optimistic. So, is not impossible, but is probably not the most likely outcome.
There are probably one or two wheels that will fall off at some point and you have to put them back on.
And that's when I frame it up.
The markets at a point where in the Canadian context, violations are demanding, they're not the problem, there is something cautious expectations, just most likely outcome elicit the data that we have today is that it probably will be a difficult year next year in terms of earnings growth. It will be difficult. Of time for the Canadian economy and the Canadian consumer and for those Canadian households and 24 and 2025 and 2026 and this will squeeze the cash flow that many have available to spend on entertainment, groceries, and cars.
All of those things suggest that we are probably into it.
Where growth will be a bit sluggish for a while.
But, if we get one of those pleasant surprises and the market never ceases to humble us, never ceases to surprise us, if we get one of those outcomes, then there is an upside because the markets are not at least in the Canadian context, the markets are not reflecting an exuberant outcome.
>> Always great to hear from you, that was Michael O'Brien.
If you have any questions feel free to email at money talk live@td.
com. Am taking a look at how the markets are trading. When shares of take two interactive on the spotlight today, then about 1.4%. So what's going on here?
A subsidiary.
. . Lisa trailer for Grand Theft Auto six a few days ahead of schedule after it was leaked online in the trailer also revealed a release date sometime in 2025.
And so that could have affected.
. . . And his predecessor Grand Theft Auto five was released in 20.
. . . And Nokia shares at a pressure today, the Finland based company loses a $14 billion contract with AT&T, and it is been awarded to their Swedish rival Erickson. So heading down here little more than 4%. Also checking in on CVS health which is releasing its sales forecast for the next year, with $66 billion and above the estimates of what they thought to deliver and raising their dividend by almost 10% early in the new year.
This is all coming as CVS holds its annual investor day right now CVS health Corp.
up almost 3%.
Now back to the S&P and T6 comps index, some modest green on the screen, will call the almost 32 points in excess of the border, lifting the NASDAQ and looking at the S&P 500 Index a little bit over the line.
And back with Michael O'Brien taking your questions on stocks, first question, getting your view on Tellico's stocks right now?
>>well, they're supposed to be a steady group, but that had some pretty exaggerated moves this year.
Going back a few months, there are few concerns out there. And one of them obviously is that this is one of the most sensitive sectors in the market.
Those big juicy dividend yields that we all look for obviously.
We can get five or 6% GS I rates, the dividend to look quite as attractive.
That was one headwind. And a second one which was more fundamentally based one, was with Rogers finishing his acquisition of Shaw and Québec or buying the wireless business freedom mobile, there's a lot of angst among the investors about what the competitive environment would be coming into the fall.
Both on wireline but also on wireless.
There's a lot of focus and a lot of concern about how with the new players will compete.
So, the stocks reflected that made a pretty rough summer and a pretty rough fall.
It can back very nicely in the last little while and a few reasons for that, obviously as interest rates have backed off, that is certainly alleviated a lot of that competition for that dividend yield.
Great song has been a big driver top-down and bottom-up the fundamental competitive environment, that certainly was no walk in the park and a lot of Canadian consumers probably got some decent deals in the back to school period.
It's not like it was in a competitive environment, but I don't think any of the actors were irrational.
None of the players got too carried away.
And if there's a bit of a sigh of relief that investors breathe.
And one other thing, obviously, all of the Tellico's Tellico and cable Kos, they're all caring a bit more debt right now then an investor would necessarily desire.
desire. spectrum of options, 4G and 5G have come out and they proven to be very, very expensive in the past. This time around, the latest wireless spectrum option which is wrapped up a few days ago came to Weibel expectations in terms of the prices paid for spectrum which was a real sigh of relief and that which is one more stress on the balance sheet the people didn't want to see.
I would say, the sentiment has turned nicely.
And that said, is still there to be a very competitive environment here for the next little while.
You just have to have about's perspective on this group as well.
>> And a follow-up question, when you cut your sons off from paying for their cell phones?
I'm just kidding, but is a question I think about.
Next real question now from the audience, how Google companies are doing better given the high price of gold?
>> Goal is been on a big run here the next couple months.
It's amazing we got to that September and October.
With higher interest rates and a strong US dollar, gold is one of those asset classes that was really being weighed on and being pressured.
And as Atul broke in November, first rates came down and then secondly the US dollar weakened and on top of that, we had unfortunately the conflict in the Middle East with Israel and Hamas, and all those things really turned gold's price action around.
And so it is sitting at a higher level and from that perspective there is a high correlation between gold equities and gold bullion, however gold stocks, it will just have to see her goldplate price, that to believe is going to stay there for a while and I think right now we're still not.
With a bully and moved very quickly investors are trying to figure out, and mother prices and the gold stocks as if it is going to be $2000 a year from now into your sound three years from now?
And I think the jury is out on that.
And also, intentions gold operations, one thing that place of bullying it says, and the people pick different names to be like, okay what companies will prosper?
>> This is a perfect point and it just goes to say that a caveat in going to the gold names, it is very difficult business.
The gold miners all have their idiosyncratic stories to go along about whether gold is working for you or not.
We see some great illustrations around whether it is geological risk or problems of individual minds or political risk which obviously is a never-ending part of the story when you're looking at mining investments.
And even those that are seen as the safest play, if you want exposure to coal companies, from a long-term perspective, there have been outstanding performers.
And you think you're playing it kind of safe because it's a streamer, however one of the biggest streams is Panama mining in Panama owned by Volkmann.
, We'll get into that just after one more question >> With.
. .Panama minus the current situation in the region?
>> What they develop this mine.
.
.
once this is built, once it spent all the money, the once this is built, once it spent all the money, the once this is built, once it spent all the money, the once this is built, once it spent all the money, the So the renegotiations around the terms and tax rates and guarantees and whatnot. I think the market had kind of thought that this is all been settled this spring that all the negotiations and they agreed to her packages of royalties and guaranteed income streams.
In all kind of unraveled in last a while and quite quickly.
And with a whole bunch of different demonstrations and demonstrators and oppositional figures, all piling on to this one very fluid situation right now and the government has revoked the mining license in the Supreme Court of Panama has ruled the contract unconstitutional in the line itself is actually being shut down now would it is obvious is been devastating for first quantum because it is so far as large as mine and by far as largest source of cash flow.
Think of the manna has a stream on Colbert Panama and that hundreds of streams, but this is easily the biggest and most important stream, 15 to 20% of their income.
Even though we thought we are playing it safe with Franco Nevada, it just shows that political risk is everywhere and always present with these mining businesses and it is something investors want to keep a close eye on.
As far as the first quantum situation, like I said it is very fluid right now it is not quite clear how this is going to play out.
Right now, the best guess seems to be that the situation isn't likely to improve or to change dramatically until national elections are held in Panama in May of next year and so, I think that is the hope for turning point in this.
This is obviously been a huge political issue in this is a fact that the mine accounts for something like 5% of Panamanian GDP. And so this to shut down, this is a big action.
And I think, the hope from the company's perspective is that a new government is formed in May with a new point of view and hopefully the lightning rod type of the fact that we are seeing right now is being given some time to dissipate and cooler heads will prevail and you come to an arrangement. That's the help.
But the problem first quantum is that they do the fair deal of debt on their sheet and this is the biggest source of cash flow. The longer this mind and staves off this and can stay in production, the more concern there will be about their debt covenants.
So time isn't on their side.
>> Great points to make.
As always, do your own research before making investments and will be back with questions Michael Brian in a moment of time. It will answer questions anytime to him a MoneyTalk live@teevee.com. And now getting to her educational segment for the day.
If you are interested in comparing a possible investment to its peers, WebBroker has tools which can help.
Letting us now to discuss, we have here in MN, with TD investing. Great to see you again! Let's talk about investors identifying a company that they might be interested in and start comparing it to its peer group in the industry.
>> Great to be on, Greg! With these comparisons, it really falls in the relative valuation with our investors looking for similar companies within the industry to see how they stack up and be able to benchmark.
Let's look WebBroker right now magnetic pull up and Nvidia which seems to be making the newsletter on these days is much with the AI theme.
Let's bring up the stock profile and were going to head up to the fundamentals page.
That's the tabular to click on and then right hand of fundamentals, we want to head over to the peer comparison and that's what I'm going to drop and this is a great spot to, first of all, to see the actual hard value numbers on the fundamental side of things and you see for Nvidia in the first column, it's broken down by his relative valuation profitability and this is where we will keep our focus on and where investors are going one set with their analysis.
Many of the industry benchmark and this is always good because we want to see as company, how Nvidia is really doing compared to the overall industry itself and then you would have some of the peers and this is a great spot, if you're not too familiar with the industry and the competitors in the same business basis, this is a good space to get acquainted with what some of these numbers are. You see things like earnings which is based on a trailing 12 month value there that investors might be interested in looking at and we have our relative valuation and remember this is really the future growth expectations of the company and so, the higher the PE, there is more projected growth or hopes not company.
You also have you growth profit margin numbers and an interesting one you might want to look at is the net profit margin on the company to see how the industry is.
And we can see really what the value differentiators are here and said she was in Nvidia here, is that for every dollar that Nvidia makes her connecting $0.
42 in profit which is significantly higher than most of its competitors as well as his industry average.
>> All right, when the fundamentals we can see and compare that way for investors.
And if investors need more information and compare price or overall trends, where we looking?
>> Yes, we can do a shift here and looks matches fundamentals and you might want to look a bit on the trend things as well to see how stock is performing. So if we had here to charts, we can do with in the chart section over here is you can rent comparables because you have already preloaded a couple of them in here is a run comparisons we can come in here and click on the comparisons tab.
We can enter either benchmark ETF or there is one on the American market here which covers the whole semiconductor space, Esso acts, and you can turn as many of these as you want and you can really look at different time frames as well, looking at a three year work run right now looking at the stock in a comparison of the peers as well as the NASDAQ and the Esso X in the ETF that slayer and you can see that the overall performance and be able to see where the bigger trends are lying.
This is only to the mix of fundamentals and technicals when you're doing some of those comparisons, Greg.
>> Great, thanks for that.
A senior instructor at TD learning.
And feel free to head to WebBroker for more instructional videos and upcoming webinars.
Before you can answer questions about Canadian stocks Michael O'Brien, reminded how you can get in touch with us.
Do you have a question about investing, or what is driving the markets? Send it to us here at MONEYTALK LIVE. You can send your questions two ways: You can send us an email anytime at MONEYTALK LIVE AT TD-DOT-COM. Or you can use the question box at the bottom of the screen right here on Web Broker. Just type it out and click submit.
Back with Michael O'Brien in taking your questions about Canadian stocks, can only get your guests opinion of Air Canada?
>> Air Canada is an interesting one, and obviously the immediate pandemic era where everything was shut down and no planes were flying and nobody was travelling, that was virtually the worst possible outcome for an airline.
You really can imagine a situation worse than that.
Obviously the stock price reflected that.
And then we went through this period of the reopening and the revenge travel phase! And that is when Air Canada and every other company that transported people around either by plane, train, automobile or boat, the data back like a demand.
In Air Canada stock prices reflected all of this.
It is bounced around in these ranges and that is that investors are still trying to figure out, okay, what is the new normal going to be for airlines?
And obviously revenge travel can't last forever.
Are we at the end of that right now?
There are still a lot of people wanting to get on a plane, me included, and clearly that phase of excess demand is leveling out.
And I think right now investors are really trying to figure out, once all that passes, where will be land? Pardon the pun.
I think for Air Canada, obviously the been putting up some great cash flow numbers last couple quarters and it paid off a DC-9 of debt which is great, but at the end of the day, travels one of the most discretionary items in a budget whether a consumer or talking the business travel.
A lot of the next 6 to 12 months hinges on where you think the economy goes from here.
Obviously, if we get the soft landing the people are hoping for, if we can have a hard landing or recessionary type of environment, it is hard to think that people will forget a couple thousand dollars to fly each year.
That subject make a call on really with Air Canada.
>> Another question, what gets opinion on Brookfield renewable?
>>Brookfield renewable, you think that's on trend with some of the big secular themes that should play it over the next decade and in this case particularly clean energy and electrification.
You know, they were run a wonderful suite of assets around their Hydro which is kind of the crown jewel in their building out a lot of solar and wind power.
From a 10 year perspective, that is a very interesting story and leveraging off the Brookfield family, they have proven ability to store steels around the planet which is an advantage of these companies.
In another advantage of this, one, there is an enormous amount of capital chasing this renewable energy theme.
So a lot of chasing this usually drives down returns and makes it a very competitive environment.
And the other thing which we witnessed in the summer and fall when the telcos and the utilities were all getting hammered with higher interest rates, the renewable energy names also proved to be very sensitive to the higher bond yields.
And that is partly because of the long duration of nature of these businesses, but also because a lot of debt in our capital structure so those are kind of the two sides of that one, but on a more newsy note, they have been pursuing a very large acquisition in Australia, Brookfield renewable and some of their partners.
The Target company that they are seeking to acquire, they just have the shareholder vote and it was rejected.
So, this is going to be a pretty sizable deal for Brookfield renewable shareholders decided that it was in a sweetness deal yet, what about the end of it and whether we are waiting for the next deal, clearly, X acquisitions are an important part of the Brookfield renewable story.
>> Great, thanks, Jeff seems to be a regular viewer of the show, because we have another one from him. You need to prepare or plan or just for the US election next year?
>> When I think about the US election, I think it will definitely impact the way that we as investors and particularly Canadian investors want to think about our portfolio.
I think it's a little early at this stage to actually be acting on that.
You can think about different scenarios, you know, if you want to play that game of scenario analysis and if there's a trump White House or abiding White House or somebody else, but in terms of where we are actually at in the actual race in such a long time between now and next November and I think what is much clearer picture of the actual candidates will be by the time we get to the end of February or March of next year will him gone to the first set of primaries.
Is Donald Trump going to walk away with the Republican nomination or you going to see a different face when it is a Rhonda Santos or Mickey Healy? Before I sharpen my pencil too much, I want to know who the players are.
Let's get to those early primaries and see where we are in March and the setup will be a little clear by that point.
>> Will be back for your questions for Michael O'Brien and moments time.
Before making any investments, do your own research and if you have a question about investing or striving markets, I guess were eager to hear what's on your mind, and you can always send us your questions.
You can set the scene at any time at MoneyTalk live@teevee.com or you can use a question box right below the screen here on WebBroker.
Just writing your question and hit send!
We will see if one of our guests can get you the answer right here on MoneyTalk live.
And we are course on the evening of the Bank of Canada rate analysis and theory more evidence of the toll the higher borrowing costs are affecting the economy, talk about the housing market and were getting some numbers out of Toronto and some numbers at a Vancouver.
We've been going them all over the TSX leave Anthony here to talk with us about this.
>> The report highlighted some of the worst entrance in Ontario's housing market and this highlighted on tier sales which fell to its lowest level since the worst of the financial crisis of 2008 and 2009.
Today we got some housing data as to the big cities in Canada, will start with Toronto were home sales ticked 1.7% higher in November and the stems after five months of decline in the still puts it 30% before it's 10 year average according to the Toronto regional real estate Board.
And despite a flood of new listings on the market, whole prices down 6% with the whole prices in Toronto more than one and half percent month over month and this marks another to cotton for home prices.
Meanwhile, as we talked about yesterday, month over month is been about 7% year-over-year and is higher now and of course was a buyers rushing back into the market and the latest data does suggest that home sales in Ontario are already running at Lowe's reached well into.
. . The 90 cycle, anti-economics is a home prices have likely making some further downsides in the coming months and partially 10% from the third quarter of this year to the first half of 20 24.
Is looking at the 10% decline, still leaving at 15% higher than the pre-pandemic lot levels.
We believe that homeowners will continue to fit face continued pressure into 2025 and 2026 and likely to be facing significant payment shock.
In Vancouver last month, home sales there rose almost 1/2% year-over-year in November that marked the slowdown versus October and November sales, again, like Toronto still 30% above the seasonal average.
In the new listings coming almost 10% in the year we are average.
And how precise his home prices did increase year-over-year but went down slightly from October October.
This comes after the Bank of Canada rate decision.
The latest housing data does suggest that the Bank of Canada most aggressive height hike rate campaign is slowing this growth in Canada.
>> And the big question that they have and many folks have two, what do you see some cuts from the Bank of Canada?
While look, we think that the Bank of Canada is done with rate hikes.
It's easy to early for the Bank of Canada to hint at this in tomorrow's meeting, the bank will likely need to see some further declines in inflation and especially the core managers and move more firmly below before they move toward a rate hike.
But we are forecasting the Bank of Canada to cut rates starting in about April 2024 which is pretty much aligned with market expectations.
>> A big day tomorrow!
Thank you so much, Anthony.
In looking at the markets.
When looking at the heat map function on TD investing, and as you can see, a bit of a mixed day and looking at the energy space, we have seen queue up slightly and some downward pressure on Synovus and the tech stocks, looking south of the border and here rebounding down 1% and south of the border, struck on the S&P 100, technology was the big drag yesterday and her sinks and the big names including Microsoft and Apple showing a bit of strength today. Apple up 2% and Microsoft, not quite as firm, bookable up a little more than 1%.
And you get more information about TD advanced dashboard by visiting TD.com/advanced dashboard.
In fact now with Michael O'Brien and a few questions here before we say goodbye to you. When you see the Canadian dollar headed?
>> The Canadian dollar, oh, will I would say the easiest way to frame up where we see the Canadian dollar headed is to think through the likely interest rate path but the Fed and the Bank of Canada respectively are going to follow.
And right now, it looks to me like the Bank of Canada is going to be in a position to cut earlier and more aggressively, sometimes I think the Canadian economy is going to show more weakness.
If that were to transpire and the US rates stay higher bit longer, I would expect that with lead to a stronger US dollar or almost equal.
If the surprises us and pulls off a soft landing in the Fed is little more aggressive in cutting rates than I think, that we tend to support the Canadian dollar.
>> Is central bank policy now driving the bus or are there other factors?
>> I think for your now, that's a determining factor. For years and years, there is a correlation between oil prices and the Canadian dollar.
The one thing that is changed in the last 10 or 15 years though is that domestic production of oil in the US is gone up so much and when you think about why would oil drive the Canadian dollar stronger, it's because Canada's exporting oil in the US is important oil.
Now, the amount of oil that the US imports is far lower than it used to be, so the significance of the oil price, it is still there and he still favours the Canadian dollar and recently that perception that will affect the Canadian dollar, but the fundamental flow-through is a lot less than it was say 10 or 20 years ago.
>> Always a pre-appreciate the insights and the comments, and always great to have you on, hopefully we'll see you again in the new year!
Thank you so much. And that was Michael O'Brien TD asset management. It was mature to do your own research before you do any investment you make any investment decisions. And stay tuned for tomorrow's show we have Andrew Calvin and Canadian corporate strategy at TD securities.
We'll talk about the Bank of Canada rate decision will take your questions about the economy.
And get a head start with this question by emailing MoneyTalk live@td.com.
That's all the time for the show today, thanks for watching and we will see you tomorrow!
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