Stephen Biggar

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. Every day, I will be joined by guests from across TD, many of whom you will only see here. We are going to take you through what's moving the market and answer your questions about investing. Coming up on today's show… We are going to discuss the big three drivers for the US financial sector with Stephen Biggar from Argus Research. On today's WebBroker education segment, Bryan Rogers shows how you can researcha specific sector using the platform. So here's how you can get in touch with us. Just email moneytalklive@td.com or you can fill in the viewer response box right under the video player here on WebBroker. And before he gets our guest of the day, let's get you an update on the markets. We will start here on Bay Street with the TSX Composite Index. It has been an interesting morning if you've been watching the markets, of course, the TMX did have some technical issues this morning which did mean a halt on the TSX Composite Index. We are told that they are trading again. I don't think that this quote has been updated since they started trading. We are still in positive territory on the TSX Composite Index, about 119 points to the upside right now, little more than half a percent, not quite as strong as you were before. Things sort of froze up on the screen due to problems at TMX. They say their past it now and the market is trading. Let's take a look at some individual names and get a fresh quote on those now the TMX has apparently resolved its technical issues, including First Quantum minerals, right now up almost 8% to 2591, seeing a bit into oil names as well in the price of crude, let's check out Athabasca Oil, it's up a little bit more than 2%, two bucks and $0.81 per share. South of the border, of course, Fed officials have been in their two day meeting. All will be known tomorrow afternoon at 2 PM Eastern time. Right now, you got a bit of downward pressure on the markets ahead of thatdecision tomorrow. 3857, got the S&P 500 down a little more than 1/3 of a percent. Let's check in on the tech heavy NASDAQ and how it's faring. Last week was the mega-cap tech earnings blitz, but the market still feels its lingering effects. It's down a little shy of 4%. Let's check out Amazon. It did disappoint last week in the quarter that passed and the current quarter. Can't seem to shake off some of those concerns, got Amazon at 9762, down 4.7%. And that's your market update. Well, the pace of rate hikes has been discussing the possibility of a recession on the horizon, and that has some investors wondering how financial stocks might hold up in an economic downturn. Our guest today says there are three items he's keeping an eye on when it comes to those financials. Joining us now will with more is Stephen Biggar, Dir. of financial institutions research at Argus Research. Welcome to the program. >> Hi, good to be here. >> This is an interesting one, obviously, with all of this fed action, fears about a recession. Let's check out financials. We have three things to look at. Let's take them one at a time. One is the loan book, the lending outlook. What are you saying here? >> On the lending side of the business has actually been pretty strong for banks here. We had that low during the pandemic, a lot of people shied away from borrowing, obviously. There was high unemployment and a lot of uncertainty, so borrowing wasn't done much at that time. Roughly a year or so later, we have people going back to banks for lending. Housing was very strong for a while, autos, pent-up demand for other housing related items, everything from vacations to you name it. So the Federal Reserve data we get once a week on lending activity and it's up 10% year-over-year through very recently. So that's been a good part of the story, that the consumer is feeling pretty good despite what some of the consumer sentiment surveys have said. There has been a lot of activity with the exception of a real down take more recently in housing, of course, of mortgage lending activity with rates going up as high as they are, that's been much lower. We do expect a bit of a slowdown here as rates go up. that's the intended impact that the Fed is trying to get across to slow things down. But the other good part of thelending business story has been that margin expansion based on the Fed rate hike. So we've had this universal upliftin the yield curve, short and long-term rates have moved up dramatically over the past year. And that is favourable for banks, and we are seeing that interest rate margin expansion in this most recent quarter. >> That's very interesting. Not only has the loan book held up, those interest margins, which are so keeps the banking business, have gotten a little richer as well considering those numbers we seen from the Fed. Let's talk about the Fed. All these rate hikes we've seen, we've seen them in Canada, they raise the fears of a recession. What do we need to think about on that part when we think about financials? >> Well, that is a big risk, we think, right now, and why some of these stocks and some of the major banks are trading atsome of these lower levels, has been that the Fed will have to go too far, basically, to rein in inflation. And what happens when you raise the cost of borrowing, obviously you raise the potential of default and in the attempt to slow the economy,you are going to disrupt the employment picture, there will be fewer jobs available, more layoffs. And I would say in the banking world, there's probably no better correlation between unemployment and the charge-offs or delinquencies for banks. So if you lose a job and it's difficult to find a replacement job, you will often get behind on your bills and on your payments. So banks look at that and depending on how long you've not paid, generally three months, they will set you aside is delinquent and eventually have to charge off that loan. So that means loss provisions move up and we did see that in the third quarter results, we saw banks getting a bit more cautious not because charge-offs had increased yet, because they hadn't, but they are being more cautious in the forward outlook and that's what cost provisions are designed to do, really. They are patting to your allowance almost in anticipation of some weakness coming up next year. And I think that's where we are at today. There is still concern that the Fed will go too far, too fast here. And by the middle of next year, they may even be in a period of having to reduce rates if they have gone too far. So really, it's the employment situation we are looking at closely here. To the extent that that does not unwind, that last look we had two months ago, we had about twice the number of job openings relative to the number of unemployed, so that gives you an awful large buffer for employment to go down a little bit. Of course, there's always a mismatch between skill sets and job openings and people that are able to take them. So that's, I think, really the major risk at this point is that the economy starts to unwind a little bit, credit costs for banks will move up and that is a big swing factor for banks when things are not going well and they have to add heavily in terms of loss provisions that will undermine earnings but he quickly. >> We got part three here. When it comes to the big money centre banks, some of the biggest names on Wall Street, we have already seenthat slow down in the capital markets business, the dealmaking. Not quite as robust as one might hope. What are we seeing in that space? Do we think we might be seeing going forward? >> Absolutely. It's been a dismal year, Greg, particularly in the equity underwriting but also fixed income underwriting and a bit of M&A activity. The only thing that's done well, really, has been trading volumes for banks, and that's because of the loss of volatility in the markets and that's across equities and fixed income currencies, commodities. There's just been such a massive volatility, so trading has held up well. There are two things going on. The comparisons are awful because 21 was such a good yearfor capital markets underwriting. We had record years, 20+ year highs for equity underwriting activity, lots of IPOs coming out, secondaries, rates were low so we still had good fixed rate income issuance. And that has basically completely unwound this year. Typically, when you have these downturns and downdrafts in the equity market, when you have a few IPOs that don't do well, then you have some hesitation when companies going public. There's just not enough liquidity. And of course, the Fed had flooded the market with liquidity and made a lot of money available,, some of which found its way into IPOs. So that has been unwinding for much of this year. And again, the equity market downdraft, we are in a bear market after 20% down, so you just don't have a lot of owners of private companies that are willing to go to the public markets no and convert their shares there. So that's going to take probably a couple of quarters to improve. I think we need to see some backing and filling of the equity markets and not just for a week like we've had or even a month. I think we need to see some sustained move upward. There have been some decent underwriting's that have come through lately, like mobile line and the Intel spinoff did well in its IPO debut. So there certainly some encouraging signs that there but I think we need to lay some groundwork here and improve on that front. M&A activity as well, typically, when financing costs go up, there is a number of lever transactions that move to the back burner in anticipation of just better financing rates. So M&A activity has not quite fall off a cliff like we've seen with IPOs, or it has been softer, and we've seen some strength in Europe and some specialty areas, you know, healthcare is still a bit of a bright spot, some of the energy transitionaries have been bright spots, but by and large, the big tech names have just not beenvery active and I think it's going to take a couple of quarters for that to show some signs of rebound. >> Fascinating stuff and a great start to the show. We are going to get your questions about the US financial stocks for Stephen Biggar in just a moment's time. Our minor course you get in touch with us at any time. Email moneytalklive@td.com or you can fill is that your response box right under the video player here on WebBroker. Right now, let's get you update on some of the top stories in the world of business and take a look at how the markets are trading. Shares of Uber are in the spotlight today, that after the ride hailing company grew its revenue 72% in the third quarter, compared to the same period last year. Uber says the renewed demand for travel coming out of the pandemic lockdowns drove demand for its services. And it's forecasting demand to hold up into the current quarter, which shares up 11% at this hour. Pharmaceutical giant Pfizer raising its full-year sales forecast. The company is boosting sales expectations for its COVID 19and it's maintaining its guidance for its COVID antiviral pill. Also demand in the United States for vaccines that target the omicron variant helped power an earnings beat in its most recent quarter. Another global oil major is reporting stronger-than-expected profits and higher energy costs. BP is reporting $8.2 billion in profit for the three months ending September 30, far exceeding analyst estimates. The oil majors also expanding a share buyback program to 2 1/2 billion dollars. Let's take a look at the S&P 500 right now, a day ahead of the US Federal Reserve coming inwith its right decision. At the end to that meeting today. There's caution in the markets. We thousand 856, down a very modest 15 points, a little more than 1/3 of a percent. We are back now with Stephen Biggar from Argus Research, we are taking your questions about US financial stocks so let's get to them. The first one coming in, Stephen, what are your thoughts on fintech firms like PayPal or Square? >> Sure, Greg. These are interesting stories to me. They have a pretty strong growth trajectory and sort of for different reasons. PayPal has been such an innovator and of course, this is an eBay spinoff originally, it was the payment mechanismfor eBay as a merchant. They kind of revolutionized payment capabilities where you can pay in store, you can pay an app, you can do person-to-person payments with then Mao and things like that, so that has helped their growth trajectory. Then, they started working more closely with merchants. They bought firms that could help in terms of marketing and couponing and things like that, so it's really things like that that have supercharge their growth or did for a while, including into the pandemic which gave a real boost to these type of firms as people were more homebound and shopped online much more. So I think we had that trend. Obviously, online is not new. It's been a 20 year trend. But I think it was more or less supercharged during the pandemic and pulled growth forward and that's why we saw a huge ramp-up in the earnings and stock price for PayPal. And then post-pandemic, when people began to return to physical stores, that growth kind of trailed off and maybe people thought it was going to continue at that rate indefinitely. I think we had this pullback and I think some of these companies still have terrific growth rates had. Similar with Square, Square is a bit of a unique case. It serves the micro merchants even more, so when the micro and small business activity trails off, that will be detrimental for them. So that is kind of risk for them. More recently, Jack Dorsey, the founder here went into crypto currencies in a very big way. And unfortunately, one there is a pricing dynamic fair and when you invest in these currencies and they move down, as they did sharply, a bit more than 50%, then you have to take write-offs for crypto currencies, so that was a negative to their story there for a little bit. And we've had some stabilization at least. But I think, in general, these companies are really well-equipped for the future, they have brand names, they serve the merchants well, they serve the consumer well, and they have that sort of namebrand recognition with both merchant and consumer. So I think the growth prospects here are generally intact, maybe not growing at the 70 to 80% levels such as Square was growing there pre-pandemic and PayPal even growing in the 30% range was not quite sustainable. But high teens growth rates and mid-20s I think our sustainable here and that's pretty good relative to the broader market. And you have share prices thatagain have come down. >> Interesting drivers and some risks on those names. Another question on the platform. What's your outlook for Visa and MasterCard? If there is a recession, how to handle that, the slowdown in spending? >> Yeah, Visa and MasterCard are also interesting names. Of course, the two of them together have something like 80% of the spend, you are either charging on a Visa card or a MasterCard, so they have very much a lockup, then you got American express and discover and some other smaller companies that kind of make up the difference. But Visa and MasterCard, I think there's a couple of major secular growth drivers, I would say, and there are some cyclical ones of course too here that are playing it into a fact and I would say the one that doesn'tget talked about a lot is inflation. Inflation is kind of a natural tailwind for these firms. If you see the same basket of goods in the US as inflation is measured, it cost 9% more this month than it did a year ago this month, so if you're charging a portion of that spend, that, again, and natural tailwind. What you spent 100 dollars on last year's no hundred and nine, let's say, and for merchants like Visa and MasterCard, the go-betweens, if you will, will make profit on that. But then there is also this issue of digitization and payment spending, so the migration from cash and checks towards cards and other electronic forms has been, I think, and will continue to be a very long runway of growth for these firms because you still have something like 80% of transactions worldwide that are done with cash and checks. So what have Visa and MasterCard done and how do they benefit from that? Of course, for the consumer, reasons you might want to spend with a card instead of cash would be convenience, instead of carrying cash, cash can get stolen and so can a credit card, but you have recourse when that happens and fraudulent transactions. Cash get stolen, good luck getting it back. Also, the reward spending, credit card companies are very active in trying to get you to spend more because that will help you on the reward side, so you build points, travel rewards, it might be cash back, other things like that that will enable you to benefit, basically, from that merchant fee that otherwise goes directly to the credit card company. So they are incentivizing you to charge more relative to cash and checks again. As well as online, of course, when you go to a physical store, you can pay by check, by cash or by card, but online, course, you really only have the ability to pay with a credit card or debit card, so that has been a big boost for these firms as more money, again, migrates to online spending and shipped a home relative to physical source. So just a host of good reasons to expect that growth will continue there at a good pace and Visa and MasterCard both reported earnings recently and, you know, you're seeing big, mid-to high teens growth, you are seeing a high rebound in cross-border transactions, this is when you use your card outside your home base. There are fees associated with that in cross-border transactions have really taken off, rebounded since the pandemic. We've got this issue of a strong dollar and it helps when Americans travel abroad, they get more bang for their buck, so that has created more travel opportunities a cross-border transaction fees for Visa and MasterCard. So just a whole host of reasons that are good reasons. The question about the recession is, of course, risk. Spending does tend to slow down during a recession and so it's something to keep an eye on. I don't think it goes to zero. I don't think it goes negative. But consumers do pull back their spendingand you'll see slower growth generally during recessions. >> Interesting stuff and a great breakdown of the Visa and MasterCard. At home, always make sure you do your own research before you make any investment decision. You will get back your questions for Stephen Biggar on financial stocks in just a moment's time. a reminder, course coming in contact with us anytime. IMO moneytalklive@td.com. Now, let's get to our educational segment of the day. If you're looking to do research on a specific sector in WebBroker, there are tools on the platform that can help. Bryan Rogers, Senior client education instructor with TD Direct InvestingHas more. >> All right, since today's segment is about financial stocks, I thought we would take a look at WebBroker. We can look at evaluating a certain sector or industries within that actual sector. So let's take a look and jump over to WebBroker and we can see and hear that if we go into the research tab and we click on sectors and industries, but the fourth one down, we can see that if we look here on this chart, we have a bubble chart that shows all of the different sectors available within a particular market. Right now, we are looking at the Canadian market. You can switch that, the flag at the upper right hand side, click the US flag and it will go to the US market you can see all of the sectors available there. You can look at these different bubbles based on different sizes represented by today's change or whatever criteria are in this drop-down. But what we want to do is today I want to focus on the Canadian market and we want to look at the financial industry. So we go down a little bit further and we click on financials specifically, before even do so, you can actually is sort within market, ratio, etc. Let's see what happens. When we click on financials, we can ask something very similar we can sort each industry within that sector, we can go by the average market, we can go by P/E ratio, earnings-per-share growth, etc. and we can also look at the performance tab, it's something that can be export even further, but we want to do today was look at financial services diversified, so a lot of companies within that a lot of Canadians would be familiar with. You're gonna see those Canadian banks, like the Bank of Montréal, CIBC, Bank of Nova Scotia, and now you can sort those by market And P/E ratio and market shares growth, you can look at performance as well, how well is it performed today, the month to date, year-to-date, total five year return. You can also look at the news for all these particular stocks. So these are any recent news items for the stocks within that industry, within the financial sector. But the thing I really love is any one of the sectors or industries you look at, you can now go to the right hand side and this might not look completely familiar if you haven't seen it in this way, but if you've heard of before, you are looking at income-based socks, you are looking for income investing, you're interested in dividends, you can see that has a high dividend section, and now you can seethat. If you are looking more for the growth's lands within that industry, you click on earnings-per-share growth and these are the banks or the companies within that diversified financial sector that would be more with a growth slant. And then if you think of value, this is what this price discount to book value is related to. You can read this description here and it can tell you what it means if you're not sure, but really looking at those stocks that might have a value element to them. And I can see which ones half that price discount values it's a little bit lower than their tangible assets, the stock is trading a little bit below what they are even worth as a book value, so that'll give you some value opportunities. So whatever you prefer, you can now look at, have the information available, explore that sector and then make your decision from there. >> Our thanks to Bryan Rogers, Senior client education instructor at TD Direct Investing. Make sure to check out the learning centre in WebBroker even more educational videos, live interactive master classes and some upcoming webinars. Now, before he get back to your questions about financial stocks, reminder of how you get in touch with us. Do you have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind so send us your questions. there are two ways you can get in touch with us. You can get send us an email anytime at moneytalklive@td.com or you can use the box right below the screen here in WebBroker. Just writing your question and hit send. You will see if one of our guest can get you your answer right here on MoneyTalk Live. Okay, we're back now is Stephen Biggar from Argus Research, taking your questions about financials. Let's get to them. Another question coming. What is your take on the big private equity firms? >> Yeah, so it's an interesting spaceand has been for quite a while. So in this area, I cover Blackstone, Apollo global and KKR. These ferns, really the hallmark of them is they have a lot of flexibility in terms of how they make money. They've got a lot of leeway in terms of timing and when they take sales, when they buy things. Typically, in downturns like today in terms of asset values,they will take a cautious approach, of course, but they tend to start to bulk up on their investments and they start to look for discounts and things that they can hold for a number of years, one year, five years, let's say, and extract a lot of value, so they can take them private, they can take them public, they can invest partially or wholly, and we are seeing a little bit of that today know as companies are starting to look for opportunities. And when things are right in that cycle, like they were last year, you see a lot of monetization's, as they call it in the industry, so they are exiting some of these investments that they had made in prior years, and that results industry beatable income, distributable earnings in each quarter, they are well diversified in equities. Apollo has a much larger fixed income portfolio. They translate that into great fee income. So they own these firms that generate fees and then they distribute them out to shareholders. So generally, pretty good dividend rates here, dividend yields. Some have, because of that variability in the stream, they have come up with having a static dividend and then they make a special dividend along the way, but they want that kind of solid and secure yield and good yield that will entice folks. A lot of pensions have, many years before they were public used environment equity is kind of a booster to their equity and income exposures. So really, a long list of capabilities of these firms and how they make money, how they monetize some of their investments, the types of firms that they buy. It is safe to say that they tend to be very good at it, they make hundreds of investments and often all of them work out with very few exceptions. It's because they have the capability to wait a while, they can invest in a firm, they can make changes, demand they make changes, make changes with financing kind of things and give companies more of an opportunity, they can leverage some of their strengths and other areas that they own, they can bring in consultants, management teams of their own to improve operations and so, on the downside, you have won the monetization's fall off, that can be a big earnings hit. These companies have a much more variable distributable earnings, the equivalent of BPSin the industry, EE, distributable earnings, so that is variable and it is something you have to watch out for. There is a cycle to the big earnings payouts relative to more steady-state. But virtually all of them are converting more of their earnings into this fee-based income, which is a lot more stable and that's provided some, a little more confidence in that earnings stream to be a little bit more or a little bit less variable. So these tend to be interesting names I would say that they own in addition to a well-rounded portfolio and kind of not an exception to. >> Interesting break down there on the private equity space. It got another question here coming off the platform. This one about the regional banks. The US regional banks look interesting. what's the general outlook and some names in the space that may be worth looking at, do some research on? >> Sure, well, regional banks have the benefit right now of being in the sweet spot of the lending business boom that we mentioned at the start of the show, so they have that lending is doing wellmargin expansion to the point of big charge-offs, and then they also tend to have big operations and capital markets, some of them have smaller operations but certainly not a big driver or a swing factor in earnings. Some of them have insurance operations and they can add some volatility but they can also add to the investment case as well. Some names I would highlight like BNC financial, U.S. Bancorp, surest financial. You think about these banks and what's driving their earnings right now and it's lending, as I said, but you can also look for other catalysts, and each of these has their own kind of catalyst. PNC financial, for example,mostly in the South states in the US, that has added some great assets, deposits, they can get some revenue and expense energies out of the branches there. In the case of US Bancorp, they got all their approvals for that acquisition, this is a West Coast banking franchise. So again, another catalyst. Truist, a few years back, was a merger between BB&T and SunTrust. It was renamed Truist financial. Still getting some revenue and expense energies out of that merger. And at the same time, you got some branch consolidation, they have some mobile apps there, get those expense energies, and then they have some search operations, to you hit the revenue energies. These banks, at the same time, because they are well off their highs in terms of share price, you have valuations that are in the high single digit to low double-digit ease, they have yields generally around 4% are slightly higher, so these could be good opportunities if you, again, as part of a well-balanced portfolio and the risks aside there, obviously it remains the economy and if charge-offs increase because of return from all these job availabilities and job layoffs, that can be a swing factor for regional bank earnings. so that is something we are keeping a close eye on. >> Fascinating stuff there. We are going to get back to your questions for Stephen Biggar on financial stocks in just a moment's time. As always, make sure you do your own research before you make any investment decisions. now, of course, head of tomorrow's cure decision from the US Federal Reserve, TD Economics has a new report out looking at some of the Fed's favourite indicators and what they are telling us about the economy. Our aunt equally has been digging in and joins us for more. >> First, we will start with the good newsthat US GDP is growing. The economy expanded in the third quarter, that after two consecutive declines in the first half. Now, when you look underneath the surface, there is some underlying weakness there. Consumer spending, this is the growth of the US engine, and it was down quarter over quarter, dragged down by higher interest rates and higher inflation in the United States. The weakest area of the GDP data was, of course, the US housing market, residential investing, it was down 26%. Just to put that in context, outside of the pandemic, this was the sharpest pullback since 2010. When you look at some other indicators, pending home sales, for example, this is a leading indicator of the US existing home sales, and it fell for the fourth consecutive month. Again, housing is one of the most interest sensitive sectors and has been impacted by the aggressive rate hikes by the Fed. Finally, when it comes to inflation, this is a big one, there are really two main price indices in the US, one of course is the consumer price index, put out by the Bureau of Labor and statistics. The other is the personal consumption expenditure or PCE index and this is put out by the Bureau of economic analysis. When you look at the numbers, US core CPI inflation, it ruled at 6.6% in September. The court PCE index, the preferred index by the Fed because it truly reflects household costs, it was up at just over 5% year-over-year in September. The difference between the two indices have increased, as this chart shows. And looking back, it shows that the difference was accelerating, the largest ever in the second quarter, about 3%. The PCE is favoured by the Fed. This divergence was mainly due to shelter costs which is a much bigger component in CPI than it is in the PCE index. And of course, this is due to the fact that when leases get renewed at the current rates, gets rolled into past leases and so it can take up to 12 months for the changes in rent to show up, the prices to show up in the CPI index. This is not as big a deal with the PCE index because shelter cost, of course, make up a much smaller component of PCE. But the challenge here, course, is that the CPI report gets released ahead of the Fed's preferred gauge of inflation, PCE, and it grabs most of the market's attention. That adds to the Fed's communication problem. TD Securities warns that the magnitude of the differences between actually resents the possibility of the Fed could overshoot on policy rates as it focuses more on backward -looking data. TD Economics warns that if central banks do not pivot the markets focus to become more forward-looking, intro cycles could risk pushing the economy to a harder landing. >> So we know what the Fed is going to be looking at. They are in that meeting right now. Maybe they are sitting around the table, just like we are, discussing these issues. What does TD Economics think we are going to hear from them tomorrow afternoon? >> We heard from TD Economics earlier this week. They expect another jumbo size rate hike, another 75 basis points from the Fed on Wednesday. They also expect the F1C to soon pivot its communications to focus the market on forward-looking data. They also think that the Fed needs to dial back on the pace of rate hikes going forward. Greg? >> Interesting stuff. We are going to know a lot more in about 26 hours or so. Thanks. >> My pleasure. >> The countdown is on. Money talks and equally. Let's get back to our guest now in the program, Stephen Biggar from Argus Research. We are talking financial stocks. We have time to fit one more in. Stephen, before we let go, let's talk about BlackRock. We were talking about private equity earlier. What about some of the asset managers? >> Some of the asset managers like BlackRock have had a very hard time clearly with the downdraft and the prices here. As we hear about almost daily, the 6040 split is not working out this year with equities being down, fixed income being down not quite as much but just having a terrible year. So those asset values have moved down and they have caused some earnings damage to the BlackRock's and invest cos. at the same time, I think there are few kind of hallmarks that have propelled historically the earnings at BlackRock and will in the future and that is when you have such a broad product suite such as BlackRock and you operate globally, the money tends to stay in house. What I mean by that is that if you are an investor and say oh, now is a good time to get out of equities and into fixed income or I like this currency play or this commodity play or I want to go US versus Europe or Asia or vice versa, BlackRock has a fund for you, they have an ETF generally. Some asset management product that will allow you to stay with BlackRock. So often, you will see that the money will shift around a lot, but their inflows stay pretty strong and you may not know any given quarter where they are going, into fixed income or out of fixed, or into equities or commodities, currencies around the globe, but they tend to gravitate into some fund there at BlackRock. So it's either, you know, the old phrase in asset management I think works pretty well, go big or go home, should work for invest Cos. as well. They made a number of acquisitions, Oppenheimer, some acquisitions, they are very large in the NASDAQ UQQs, one of the biggest products, so that ability to retain those assets through a market cycle, I think, is pretty important. the long-term has been a bit unfavourable for the key rates, they tend to come down year-over-year, so it puts a lot of pressure on these companies to become more efficient to make up the difference. And fee rates, one reasons going down is this a long-term trend from going from active products to passive products. So active tends to have much higher fee rates associated with it and Index products or passive products tend to have lower fee rates. so that trend has put some downward pressure on the fee rates. But over time, and you will see some fluctuations, these do have some correlation to broad markets. You see broad markets move up, very good for the asset managers. When it goes down, it will den to earnings annual tendency downdrafts in stock prices. But again, I think there is a trend towards the larger companies here, I'm talking about kind of the top six or seven that are able to handle the downdraft in fee rates and get more efficient that have, again, these widely diversified product suites that allow for retention of the assets. And there are some risks in terms of the political side. I think they are relatively minor. BlackRock, of course, has been chided by a number of states, for example, in terms of managing the money because they are heavy on the ESG criteria. There is a view that they will not invest in energy firms and that has caused some problems with states like Texas that have wanted to pull some funds from BlackRock. As a $9 trillion asset manager, you're talking in any given case a few hundred million, so it is an impact, a big impact, but it's something to be aware of. You wouldn't always think automatically of politics at play with asset managers, but there is an element of that. >> Some great insights there, not only on BlackRock but on other topics that came in from the audience. Thanks for joining us today. >> Thank you. Good to be here. > Talk soon. Stephen Biggar, Dir. of financial institutions research at Argus Research. We thank him for joining us today. Stay tuned for tomorrow show. Ben Gossack, portly manager at TD Asset Management will be our guest taking your questions about income investing. A reminder that you can get a head start with those questions. Email moneytalklive@td.com. That's all the time we have for the show today. Thanks for watching. We will see you tomorrow. [music]