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Tag: invest

  • “I have the dream job”: Brian Scudamore on making meaning with your money – MoneySense

    “I have the dream job”: Brian Scudamore on making meaning with your money – MoneySense

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    Dragon’s Den cast: Wes Hall, Michele Romanow, Arlene Dickinson, Brian Scudamore and Manjit Minhas.

    Who is your money hero?

    One of my fellow “dragons,” Wes Hall, who I got to know a little bit this year, during filming. I’m so inspired with how he spends money. He’s very different from me in the sense that he’s got the fancy cars and the big mansion and so on. I drive my Ford pickup truck and I have a modest home. But I’m inspired by how he puts charity first. He takes care of other people before he takes care of himself. He grew up in Jamaica. He didn’t have a lot, but he says, “This is about helping others.” He’s made it, and I think that’s what money is all about.

    How do you like to spend your free time?

    I love traveling. I love eating. For example, this summer, I went to France with my family. It was just a combination of family, friends, great food, some wine, practicing my French. That ties in everything I love.

    My wife and three kids—we were in Paris as a base, we went down to Cap Ferret, which is just south of Bordeaux—a beautiful little peninsula, beach town. We hung out in Lille for a little bit to watch the Olympic basketball. We spent time in Bordeaux and went to some wineries. Paris is such a well-travelled place, so we had dinners with different friends and their families who were in town. I just I love that country.

    What’s your first memory about money?

    My dad, who’s a liver transplant surgeon, is not an entrepreneur or a business person. But he taught me early on to be purposeful with money. What am I doing with even the cheques I would get from aunts, uncles and grandparents for the holidays? He had me write thank-you notes, which no kid likes to do. I had to tell them how I was using the money they gave me.

    My dad really hammered into me to save that money for education. And I did, but it was really ironic, because here I am, a high school dropout, a university dropout. But I valued learning about money from my dad and just being wise with how I spend it and being purposeful.

    But one of my early memories was when I saved up my life savings as an eight-year-old and bought a brand-new bike. A couple of days later, I put a big basket on it so I could deliver newspapers more efficiently. I put that prized bike to work. I learned from my dad that money was about investment—a purposeful investment.

    There’s also a frugal side of me that thinks, “Do I really need that?” Fancy cars wouldn’t bring me joy. Would I rent a Ferrari for a day on the coast of Italy? Heck, yeah. Would I ever buy one? No. And he got me to think about the value of money and what you can do with it.

    If money were no object, what would you be doing right now?

    Nothing different. I have the dream job. I am so excited to be a “dragon” and to help inspire others, give some wisdom, shared learnings to the pitchers on Dragon’s Den. I love building and growing my companies. Not to make more money, but to grow opportunities and possibilities for other people, and for the freedom to travel and spend time with family and friends, which I love to do.

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    MoneySense Editors

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  • How to invest tax-free in a bitcoin ETF in Canada – MoneySense

    How to invest tax-free in a bitcoin ETF in Canada – MoneySense

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    Investment Investment account Purchase price Sale price Gain Capital gains tax After-tax gains
    Bitcoin Non-registered $23,500 $61,000 $37,500 $3,750 $33,750
    Bitcoin ETF TFSA $23,500 $61,000 $37,500 $0 $37,500

    As you can see, in this hypothetical situation, gains for the tax-free bitcoin ETF come out ahead by $3,750, which is about 11% more than the after-tax gain on bitcoin.

    Canadian crypto ETFs 

    The table below lists all the crypto spot ETFs based in Canada. You can buy bitcoin ETFs (ETFs that invest entirely in BTC), ethereum or ether ETFs (those that invest entirely in ETH) or multi-crypto ETFs (those that invest in BTC and ETH). As of now, BTC and ETH are the only cryptocurrencies available through ETFs. (Figures are current as of Aug. 30, 2024.)

    ETF Ticker symbol Management expense ratio (MER) Assets under management
    (in Canadian dollars)
    Bitcoin ETFs
    Purpose Bitcoin ETF BTCC / BTCC.B 1.5% $2.1 billion
    CI Galaxy Bitcoin ETF BTCX.B 0.77% $724.7 million
    Fidelity Advantage Bitcoin ETF FBTC 0.69% $491.6 million
    3iQ Coinshares Bitcoin ETF BTCQ 1.75% $283 million
    Evolve Bitcoin ETF EBIT 0.75% $165.5 million
    Ethereum (ether) ETFs
    Purpose Ether ETF ETHH / ETHH.B 1.47%–1.49% $318.7 million
    CI Galaxy Ethereum ETF ETHX.B 0.77% $385 million
    Evolve Ether ETF ETHR 0.75% $55.2 million
    3iQ Ether Staking ETF ETHQ 1.97% $65.8 million
    Fidelity Advantage Ether ETF FETH 0.95% $18.7 million
    Multiple cryptocurrency ETFs
    Evolve Cryptocurrencies ETF ETC 0.85% $35.4 million
    CI Galaxy Multi-Crypto ETF CMCX.B 1.03% $3.7 million

    U.S. crypto ETFs: Should you invest?

    U.S.-based bitcoin ETFs have created quite a buzz in 2024. The Securities and Exchange Commission (SEC) approved the first one in January, almost three years after Purpose Investments launched Canada’s first spot bitcoin ETF. 

    Numerous American ETF providers now offer bitcoin ETFs, including big investment brands like BlackRock’s iShares, Fidelity and Invesco. Canadian investors can buy these ETFs, too, through their discount brokerage account—just like they would any U.S. stock or ETF. And, yes, these ETFs can be held in registered accounts like the TFSA or RRSP.

    Which is better: Canadian or U.S. ETFs? 

    Truth be told, there’s not much difference between the two. For instance, bitcoin ETFs in both countries hold the same underlying asset: bitcoin. Investors could make a decision based on their preferred parameters. 

    For example, you may pick the bitcoin ETF with the lowest management expense ratio (MER) or the highest assets under management (AUM), or you could look for the oldest fund—regardless of where it’s based. 

    If you go with a Canadian ETF, you could have more choices to make: Do you want a Canadian ETF that hedges its currency risk or one that doesn’t? Do you want to hold the ETF in U.S. dollars? The table below lays out the options for one example, the Purpose Bitcoin ETF. (Figures are current as of Sept. 13, 2024.)

    ETF (ticker symbol) Currency Currency hedge One-year return
    BTCC Canadian dollar Yes 117.94%
    BTCC.B Canadian dollar No 121.15%
    BTCC.U U.S. dollar No 120.88%

    In the right-hand column, you’ll notice there’s a difference in the ETFs’ one-year historical return, even though they all hold bitcoin as their underlying asset. This difference is because of the appreciation or depreciation of the currency in which the ETF holds its bitcoin. In this case, the non-hedged ETF delivered higher returns because it benefited from the appreciation of the U.S. dollar against the Canadian dollar. But there’s no way to have known this one year ago. Like all financial markets, the currency market is largely unpredictable.

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    Aditya Nain

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  • Sobeys/FreshCo parent company, Empire reports earnings – MoneySense

    Sobeys/FreshCo parent company, Empire reports earnings – MoneySense

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    Growing grocery delivery business and other opportunities

    The company also said it’s hitting pause on a new fulfilment centre to help save costs in its grocery delivery business Voilà, among other changes. 

    “While the market penetration of Voilà continues to be strong, the size and growth of the Canadian grocery e-commerce market is smaller than anticipated, resulting in higher net earnings dilution than originally estimated,” Empire said in its press release. The company says it’s focusing on driving volume and performance at its three existing centres. 

    Empire also prematurely ended its mutual exclusivity agreement with technology provider Ocado, as part of changes it’s made to lower costs and increase flexibility. The changes “are expected to have a significant, positive impact on Voilà’s profitability in fiscal 2025 and 2026,” Empire said.
    The company says its profit amounted to $0.86 per diluted share for the 13-week period ended Aug. 3.

    The result was down from a profit of $1.03 per diluted share in the same quarter last year when its bottom line was boosted by the sale of 56 gas stations in Western Canada.

    Analyst take on Empire’s quarter

    RBC analyst Irene Nattel said Empire’s operating results came in “a tick above forecast as consumer value-seeking behaviour stabilizes.” She said in a note that the company continues to execute on its strategy to maximize revenue in its full-service stores, despite the broader momentum in discount stores, though she added Empire is also growing its discount presence. Nattel has previously said Empire is overly exposed to the full-service part of the grocery sector compared with its competitors, giving it a relative disadvantage amid heightened price sensitivity. 

    Empire earnings highlights

    Here’s a breakdown of the results this week.

    • Empire Company (EMP/TSX): Earnings per share of $0.63 (versus $0.62 predicted). Revenue of $7.41 billion (meeting the prediction).

    Sales for what was the company’s first quarter totalled $8.14 billion, up from $8.08 billion a year earlier. Same-store sales for the quarter were up 0.5%, while same-store sales, excluding fuel, increased 1%.

    Medline said a year and a half after completing the rollout of loyalty program Scene+ across Canada, the program has more than 15 million members, with those members spending on average 55% more than non-members. “Scene+ has significantly boosted our incremental sales and margin compared to our prior loyalty program,” he said. 

    On an adjusted basis, Empire says it earned $0.90 per share in its latest quarter, up from an adjusted profit of $0.78 per diluted share in the same quarter last year. Shares in Empire closed up 5.6% on the Toronto Stock Exchange at $40.62. 

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    The Canadian Press

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  • New to Canada and no pension: How to save for your retirement – MoneySense

    New to Canada and no pension: How to save for your retirement – MoneySense

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    The difficulties facing newcomers to Canada with respect to retirement planning are particularly acute. Given how Canada’s immigration points system works, economic immigrants are usually in their late 20s or early 30s—and they face unique challenges:

    1. Depleted savings: If you’re a 30-year-old newcomer, chances are you’ve used a large portion—if not all—of your savings to set up your new life in Canada. So, you’re behind in the retirement savings game. If retirement savings were a 100-metre race, lifelong Canadians have a 20- to 30-metre head start over newcomers.
    2. Lower income: If you’re a newcomer to Canada, you’ve probably had to restart your career a few rungs lower on the corporate ladder because of your lack of Canadian work experience. This means you’re not earning as much as others your age who have similar experience. Consequently, your ability to save for retirement is lower.
    3. Lack of knowledge: You need to understand Canada’s financial and tax systems to maximize its retirement planning opportunities, and gathering this knowledge takes time.
    4. Reduced contributions: Joining the Canadian workforce later in life than their Canadian-born peers, immigrants have fewer years to contribute to the Canada Pension Plan (CPP) and build up registered retirement savings plan (RRSP) and tax-free savings account (TFSA) contribution room. For this reason, they rely on less tax-efficient unregistered savings and investment vehicles to sustain their retirements to a greater degree than their neighbours.

    But there’s good news. As Toronto-based financial advisor Jason Pereira points out, “Canada’s retirement system does not discriminate against newcomers. The rules are the same for everybody.” So, with the right knowledge and expertise, you can work towards building a strong retirement plan. 

    How to start retirement planning as an immigrant

    To plan for retirement, you need to know:

    • How much money will you need each month in retirement? The simplest method to estimate your income requirement in retirement is to consider it to be 70% to 80% of your current income. For example, if you earn $75,000 a year today, 70% of that is $52,500—that’s $4,375 per month—in today’s dollars. Alternatively, you could estimate the amount you’d need in retirement using this tool.
    • How much you’ll receive from government pension and aid payments: You need to estimate approximately how much you’ll get from the Canada Pension Plan (CPP) and other government programs: Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). The tool at this link will help you do so. Ayana Forward, an Ottawa-based financial planner, notes that “some home countries for newcomers have social-security agreements with Canada, which can help newcomers reach the eligibility requirements for OAS.”
    • How much you’ll receive from your employer-sponsored retirement plan: Workplaces without a defined benefit pension plan sometimes offer a registered investment account (usually a group RRSP), with contributions made by you and your employer or only your employer. If you have a group RRSP from your employer, what will its estimated future value be at the time of your retirement? You could use a compound interest calculator to find out.
    • How to make up for a shortfall: The CPP, OAS, GIS and your group RRSP likely won’t be enough to fund your retirement. You’ll need to make up for the shortfall through your personal investments or additional sources of income.

    Sample retirement cash flow for a 35-year-old (retirement age 65)

    This table illustrates the types of income you could have in retirement. The amounts used in the table are hypothetical estimates. (To estimate your retirement income, try the various tools linked to above.)

    Amount (today’s value) Amount (inflation adjusted)
    A Amount needed $52,500 $127,400
    B Government pension and aid payouts
    (CPP, OAS, GIS)    		 $22,000 $53,400
    C Employer-sponsored pension plan
    (group RRSP)    		 $8,000 $19,400
    D B + C $30,000 $72,800
    E Shortfall (A – D) $22,500 $54,600
    F Needed value of investments in the year of retirement (E divided by 4%, based on the 4% rule) $562,500 $1,365,000
    G Needed flat/constant monthly investment amount from now to retirement $969

    In the example above, the person faces an annual shortfall of $22,500. In other words, this person needs to generate an additional $22,500 per year to meet their retirement income needs, after accounting for the typical government pension or aid payouts and their employer-sponsored retirement plan. To do this, they’d need to invest about $969 per month, assuming an 8% annual rate of return from now to retirement 30 years later. How could they fill this gap and meet their shortfall? Enter self-directed investments, real estate and small-business income.

    Build your own retirement portfolio

    An obvious and tax-efficient way to cover your retirement income shortfall is to build your own investment portfolio from which to draw income in your retirement years. These investments can be held in registered or non-registered accounts. Registered accounts, such as the TFSA and RRSP, offer useful tax advantages—such as a tax deduction and/or tax-free or tax-sheltered gains, depending on the account—but the amount you can contribute to these accounts is limited. Non-registered accounts have no contribution limits but offer no tax advantages. 

    Newcomers often have lower TFSA and RRSP contribution room compared to their peers because they’ve lived and worked in Canada for a shorter period. “TFSA contribution room starts accruing the year of becoming a resident of Canada,” Forward explains. “RRSP contribution room is based on earned income in the previous year.”

    Your TFSA and RRSP contribution room information is available on your Notice of Assessment from the Canada Revenue Agency, which you’ll receive after you file your tax return. To check your TFSA limit, you can also use a TFSA contribution room calculator.

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    Aditya Nain

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  • Making sense of the markets this week: September 15, 2024 – MoneySense

    Making sense of the markets this week: September 15, 2024 – MoneySense

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    Trump’s down, Oracle’s up

    Tuesday’s earnings call was the best day that Oracle shareholders have seen in a while. 

    Oracle earnings highlights

    All figures in U.S. currency in this section.

    • Oracle (ORCL/NYSE): Earnings per share came in at $1.39 (versus $1.32 predicted), and revenues of $13.31 billion (versus $13.23 billion predicted). 

    Share prices rose more than 13% after the tech giant showed profits that were up nearly 20% from last year. Revenues across the company’s cloud services division continue to increase. And CEO Safra Catz said, “I will say that demand is still outstripping supply. But I can live with that.”

    Founder Larry Ellison (who recently passed Mark Zuckerberg to become the second richest person in the world) excitedly predicted that Oracle would one day operate more than 2,000 data centres, which is up from the 162 today. The current project that he highlighted is a massive data centre that will use three modular nuclear reactors to produce the needed gigawatts of electricity.

    In other U.S. stock market news, Trump Media and Technology Group (DJT/NASDAQ) investors face a big decision this week. The stock plummeted from highs of $66 per share on March 27, to $16.56 after the debate on Wednesday. Don’t say we didn’t warn you. 

    That’s not the worst news for DJT investors though. Next week, a potentially crippling event occurs: the entity that owns 57% of the shares can sell the stock for the first time. If it were to sell all its shares (in order to get as much money as possible out of a business venture that loses millions of dollars every month), the share price would tank. 

    What is the “entity”? It’s actually a question of who not what: Donald Trump. 

    Even at reduced share price levels, Trump’s slice of Truth Social is worth about $1.9 billion. It’s not like he needs money for pressing issues or anything like that…

    Dell and Palantir kick American Airlines and Etsy out of the S&P 500

    In other big events to look forward to, September 23 will see major U.S. market indices experience a reweighting. Given that trillions of dollars are now passively invested into indice-based index funds, whether your company is a member of a specific index or not can make a big difference in its share price. That said, these indice moves are largely anticipated by the market, so a lot of the value movement has already been priced in.

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    Kyle Prevost

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  • How to plan for retirement when you have no pension – MoneySense

    How to plan for retirement when you have no pension – MoneySense

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    Retirement

    OAS payment dates in 2024, and more to know about Old Age Security

    Here’s how Canada’s Old Age Security pension program works, who’s eligible for OAS, when you can start receiving OAS,…

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    Michael McCullough

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  • How to manage as a single parent with no pension – MoneySense

    How to manage as a single parent with no pension – MoneySense

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    “If someone’s not lucky enough to have a company pension, it’s that much more crucial for them to be building up savings on their own,” says Millie Gormely, a Certified Financial Planner at IG Wealth Management in Thunder Bay, Ont. “But that’s really hard to do when you’re supporting yourself and your kids, because you’re having to stretch that income that much further.”

    As of 2022, there were about 1.84 million single-parent families in Canada, and they face unique financial challenges. For starters, the primary caregiver may be covering more than their share of the responsibility and cost of raising their kids, footing bills for everything from food to clothing and childcare. And, thanks to inflation, we all know the cost of living has gone way up in recent years. Plus, a single parent may also be shouldering the burden of saving for their kids’ education (read about RESP planning), taking on medical expenses and more. And then there’s the fact that single parents tend to have less income to work with in the first place. According to Statistics Canada, lone-parent families with two kids report an average household income that’s only about a third of what dual-earner families of four bring in. (Not half, a third.) 

    All this financial strain can be a serious hurdle to retirement planning, but it doesn’t mean it’s impossible to save for your future. 

    Pinpoint your goals

    The first step is to identify your long-term goals (consulting a financial planner can help with this part). You’ll want to figure out your desired income in retirement and how much saving you’ll need to do to reach your goal. The next step is to take a hard look at your spending habits and your budget to find funds you can set aside for your retirement. 

    You may wish to review past bank and credit card statements to get a clear picture of what you’re spending on essentials (which can include rent, groceries, transportation and daycare). You’ll also want to get a clear picture of your debts like credit card balances, personal lines of credit and mortgage instalments to help you identify your fixed costs. All of this will help you figure out a budget you can live with—and what you have left over for retirement savings.

    If what’s left isn’t much, don’t despair. Even a small monthly savings will help you in the long run, says Gormely. “Contributing something rather than nothing on a regular basis is going to put you so much further ahead than if you just throw up your hands,” she says.

    Assess potential sources of retirement income

    You may have more options than you realize. A registered retirement savings plan (RRSP) is a long-term investing account that is registered with the Canadian federal government and helps you save for retirement on a tax-deferred basis. It allows for plenty of room to help your money grow. For example, your RRSP contribution limit for 2024 is equal to 18% of your 2023 earned income (or $31,560, whichever is lower). You also can tap into unused contribution room from past years.

    A tax-free savings account (TFSA) is another option. Like an RRSP, a TFSA can hold any combination of eligible investment vehicles, including stocks, bonds, cash and more, and the growth will be tax-sheltered. “In general, for someone at a lower income level, they might be better off maxing out their TFSA first, and then looking at their RRSP as a source of retirement income,” says Gormely.

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    Karen Robock

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  • Which savings should retirees draw down first? – MoneySense

    Which savings should retirees draw down first? – MoneySense

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    Working as a financial planner, I am often asked, “What is the most tax-efficient way to draw down on investments?” From the outset, I question if a decumulation plan based on tax efficiency is the best use of someone’s money. I wonder whether it is even possible to design “the best” long-term, tax-efficient withdrawal strategy.  

    I have modelled many different combinations of withdrawal strategies, such as RRSP first, non-registered first, blending the two, depleting registered retirement income funds (RRIFs) by age 90, dividends from a holding company, integrating tax-free savings accounts (TFSAs), and so on. In most cases, there is no significant difference to the estate over a 25- or 30-year retirement period, with the odd exception.

    You may have read articles suggesting the right withdrawal strategy can have a major impact on your retirement. The challenge when reading these articles is you don’t know the underlying assumptions. For example, if the planner is using a 5% annual return, is it all interest income and fully taxable? What is the mix of interest, dividends, foreign dividends, capital gains and turnover rate that makes up the 5% return? There is no standard all planners use, which leads to confusion and can make things seem more complicated than they need to be.

    Think spending, not decumulation

    Here is my approach to designing a decumulation plan. First, think about my opening. You have about 20 years of active living left to get the most out of your money. What do you want to do? Twenty years from now, do you want to look back on your life and say, “I sure was tax-efficient,” or would you rather say, “I had a great time, I did this and that and I helped…” I write this because it is not uncommon for me to see people be too restrictive on their spending in the name of tax efficiency, or not wanting or having the confidence to draw down their investments when they could.

    Stop thinking decumulation; that puts the focus on the money. Instead, think spending. How do you want to spend your money? I know you can’t predict over 20 years, so focus on this year. How can you make this a fantastic year while living within your means? Do you even know the limit to your means? 

    Now prepare an expense sheet so you can see where you are spending your money and where you want to spend it. This is where a financial planner with sophisticated software can help. Have your expenses modelled and projected over time. Will your income and assets support your ideal lifestyle or even allow you to enhance your lifestyle?

    Now do the math

    Once you have a spending plan supported by your income and assets, do the projections showing different withdrawal strategies. You need the spending plan first, because the amount and timing of your spending dictates the withdrawal plan. Plus, detailing your spending gives you a better view behind the curtain to see the impact of spending amounts and frequency on tax and capital changes of different withdrawals. What does spending on things like vehicles, special vacations and renovations mean?

    I suspect that as you work through this exercise, ideally with a planner capable of using sophisticated software, you will see that the withdrawal order doesn’t matter too much and can be easily influenced by various assumptions. If that is your result, you are in a good position. It allows you to manage your affairs so you are tax-efficient each year. 

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    Allan Norman, MSc, CFP, CIM

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  • Making sense of the markets this week: September 8, 2024 – MoneySense

    Making sense of the markets this week: September 8, 2024 – MoneySense

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    Macklem says we could see a soft landing

    For the third straight month, the Bank of Canada (BoC) decided to cut interest rates. The quarter-point cut takes the Bank’s key interest rate down to 4.25%.

    The news that’s perhaps bigger than the widely anticipated rate cut was how aggressive BoC governor Tiff Macklem sounded in his prepared remarks. Macklem stated, “If we need to take a bigger step, we’re prepared to take a bigger step.” That sentence will be focused on by financial markets looking to price in larger potential cuts in the months to come. As of Thursday, financial markets were predicting a 93% probability that October would see another 0.25% rate cut. Several economists believe interest rates would fall to around 3% by next summer.

    While describing a potential soft landing to the bumpy pandemic-fuelled inflation flight we’ve been on, Macklem stated, “The runway’s in sight, but we have not landed it yet.” It appears that the real debate is no longer if the BoC should cut interest rates, but instead, how quickly it should cut them, and whether a 0.50% cut may be in the cards sooner rather than later.

    With unemployment rates increasing, it follows that the inflation rate of labour-intensive services should continue to fall. Lower variable-rate mortgage interest payments will automatically have a deflationary impact on shelter costs across Canada as well.

    You can read our article about the best low-risk investments in Canada at Milliondollarjourney.com if lowered interest rates have you thinking about adjusting your portfolio.

    Will Couche-Tard go global?

    Last week we wrote about the Alimentation Couche-Tard (ATD/TSX) proposed buyout of 7-Eleven parent company Seven & i Holdings Co. If the buyout goes through, ATD would go from being Canada’s 14th-largest company to being in the running for third-largest company. That’s a big if: on Friday morning, just hours before we went to press, Seven & i said it is rejecting ATD’s $38.5-billion cash bid on the grounds it was not in the best interests of shareholders and was likely to face major anti-trust challenges in the U.S. (All figures in this section are in U.S. dollars.)

    It’s interesting to note that 7-Eleven has been much better at running convenience stores in Japan (where it has a 38% profit margin) versus outside of Japan (where it has a 4% margin). That’s partly due to the fact that locations outside of Japan sell a large amount of low-margin gasoline. Couche-Tard, however, has been able to unlock margins in the 8% range in similar gasoline-dominated locations, indicating substantial room for growth. With 7-Eleven’s overall returns falling far behind its Japanese benchmark index over the last eight years, there is clearly a business case to be made to current shareholders.

    The political dimensions to the acquisition are much harder to quantify than the business case. While Japan did change its laws to become more foreign-acquisition-friendly in 2023, it still classifies companies as “core,” “non-core” and “protected,” under the Foreign Exchange and Foreign Trade Act. Logically, it seems that a convenience-store company would fit the textbook definition of “non-core.” However, Seven & i Holdings has asked the government to change the classification of its corporation to “core” or “protected.” That would effectively kill any wholesale acquisition opportunities.

    There is also an American legal aspect to the deal. The Federal Trade Commission (FTC) would have to rule on whether ATD’s resulting U.S. market share of 13% would be too dominant. Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management, speculated that the most likely outcome might be a sale of 7-Eleven’s overseas assets to ATD, with the company holding on to its Japan-based assets.

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    Kyle Prevost

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  • Is VFV a good buy? What about other U.S. ETFs with even lower fees? – MoneySense

    Is VFV a good buy? What about other U.S. ETFs with even lower fees? – MoneySense

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    Sure, investing in these ETFs means you’ll forfeit 15% of your dividends to withholding tax. Yet, for many, it’s a worthwhile trade-off to gain access the most significant U.S. equity index—a benchmark that, according to the Standard & Poor’s Indices Versus Active (SPIVA) report, has outperformed 88% of all U.S. large-cap funds over the past 15 years.

    But hold on, these aren’t your only choices. And here’s something you might not know: they aren’t even the cheapest around. Just like opting for no-name brands at the store can offer the same quality for a lower price, other ETF managers have been quietly rolling out competing U.S. equity index ETFs that come with even lower fees. Here’s what you need to know to make an informed choice.

    Exploring cheaper alternatives to the well-known S&P 500 ETFs—like VFV, ZSP and XUS—leads us to a pair of lesser known but highly competitive options: the TD U.S. Equity Index ETF (TPU) and the Desjardins American Equity Index ETF (DMEU). Launched in March 2016 and April 2024, respectively, these ETFs track the Solactive US Large Cap CAD Index (CA NTR) and the Solactive GBS United States 500 CAD Index. The “CA NTR” stands for “net total return,” which means the index accounts for after-withholding tax returns, providing a more accurate measure of what Canadian investors might take home.

    Essentially, these indices offer U.S. equity exposure without the licensing costs associated with the brand-name S&P 500 index, which is a significant advantage for keeping expenses low. You can think of Solactive as the RC Cola of the indexing industry, and S&P Global as Coca-Cola, and MSCI as Pepsi. 

    For TPU, the management fee is set at 0.06%, with a total MER of 0.07%. DMEU charges a management fee of just 0.05%. Since it hasn’t been trading for a full year yet, its MER is still to be determined but is expected to be competitively low.

    In terms of portfolio composition, there’s scant difference between the these ETFs: VFV, TPU and DMEU. Glance at the top 10 holdings, and you’ll see the weightings of these ETFs reveals very similar exposure, with only minor deviations. Similarly, when comparing sector allocations between TPU and VFV, they align closely, reflecting a consistent approach to capturing the broad U.S. equity market. However, look a bit deeper into the technical aspects, the indices that these ETFs track—the Solactive indices for TPU and DMEU versus the S&P 500 for VFV—exhibit some notable differences. 

    The S&P 500 is not as straightforward as it might seem, though. It doesn’t just track the 500 largest U.S. stocks. Instead, what is included is at the discretion of a committee, subject to eligibility criteria including market capitalization, liquidity, public float and positive earnings. This makes it more stringent and somewhat more active than you might have thought.

    In contrast, the Solactive indices used by TPU and DMEU are more passive. They simply track the largest 500 U.S. stocks by market cap, with minimal additional screening criteria. This straightforward approach lends a more passive characteristic to these indices compared to the S&P 500.

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    Tony Dong

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  • Making sense of the markets this week: September 1, 2024 – MoneySense

    Making sense of the markets this week: September 1, 2024 – MoneySense

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    Couche-Tard takes aim at Slurpee King

    Because I grew up in near Winnipeg, the Slurpee Capital of the World, I thought I knew everything the 7-Eleven universe had to offer. Then, I visited Japan and Thailand last year. I realized that I hadn’t seen anything yet. (All figures in U.S. dollars in this section.)

    In much of Thailand and Japan (among other places in Asia), the convenience store is a daily touchstone stop. In Tokyo, there are more than 3,000 7-Eleven stores, a large part of the country’s 56,000-plus convenience store locations. While 7-Eleven was a big part of my childhood, it pales in comparison to the role it plays within many Asian communities. 

    So, it quickly caught my attention when Canadian corporate darling Alimentation Couche-Tard (ATD/TSX) announced it was making a friendly takeover bid for Tokyo-based Seven & I Holdings Co (SVNDY/NIKKEI). The possible deal is historic for many reasons.

    1. The acquisition of Seven & I Holdings Co is the largest-ever Japanese target of a foreign buyer. 
    2. It’s the first test of new 2023 takeover rules by Japan’s Ministry of Economy, Trade and Industry (METI), designed to make foreign acquisitions more welcoming and Japanese companies more internationally competitive. 
    3. It would likely top Enbridge’s $28 billion acquisition of Spectra Energy Corp back in 2016, to become Canada’s largest-ever corporate takeover.
    4. It would combine Couche-Tarde’s convenience store empire of 16,700 stores in 31 countries, with 7-Eleven’s 85,800 stores in 19 countries.
    5. By combining ATD’s and 7-Eleven’s U.S. market share, Couche-Tard would control more than 12% of the U.S. convenience store market, with the closest competitor being Casey’s General Stores at only 1.7%.
    6. It’s a massive bite to take for ATD, currently valued at about $56 billion, since 7-Eleven is currently worth about $38 billion.
    7. The potential acquisition is so large that many analysts believe ATD would have to raise $18 billion in new equity to complete the deal. That would be the biggest stock offering in Canada by a wide margin. It would also be in addition to the $2 billion in cash on hand ATD has, and its ability to borrow about $20 billion. There’s speculation that Canadian pension plans would be a key source of capital in order to get a deal done.

    Neither company disclosed the precise terms of the deal, but Couche-Tard described the offer as “friendly, non-binding.” That’s a key differentiator from a “hostile takeover.” (A hostile takeover is when a company tries to purchase more than half of another company’s shares on the free market against the wishes of the targeted company’s management, thus taking over operational control.)

    This move is not totally out of the blue for ATD, as the company has taken big acquisitional swings before. The Quebec-based operator has a long history of successfully integrating new acquisitions. Its attempt three years ago to purchase French grocery chain Carrefour for $25 billion was scuttled at the last minute by the French Finance Minister citing food security issues. Similar protectionist governmental instincts could prevent this massive deal from getting done. 

    That said, Couche-Tard has been circling (Circle K-ing?) 7-Eleven for over two years now. Perhaps it believes it has what it takes to navigate the new Japanese corporate legal waters and get the deal done.

    While there will likely be some nervous customers of 7-Eleven (nobody wants to see change at their favourite corner store), Seven & I Holdings’ shareholders must be happy. Shares were up 22% upon announcement of the proposed acquisition.

    1900 vs. 2023 stock markets

    It’s always worth keeping the long run in mind when thinking about trends and market forces. When we consider just what an incredible run the U.S. stock market has achieved over the last few years, it’s important to remember that it’s unlikely to continue that outperformance forevermore.

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    Kyle Prevost

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  • Canadian banks earnings reports – MoneySense

    Canadian banks earnings reports – MoneySense

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    While results outside the credit provisions looked better than expected, it wasn’t enough to outweigh concerns about the bank’s loan book, said Scotiabank analyst Meny Grauman in a note. “After a big credit-focused miss in Q2, the market was laser focused on credit heading into Q3 reporting, and it is unfortunate that this is where the issues are once again,” he said. “The bottom line is that fears that BMO is in fact the outlier of this credit cycle will continue to weigh on the shares.”

    Rising provisions drag on Scotiabank results, but bank sees levelling of stress

    The Bank of Nova Scotia saw third-quarter profits fall compared with a year ago as it boosted its provisions for bad loans, even as the bank says it’s seeing some levelling out of the financial stress on Canadian consumers. The bank reported Tuesday it had $1.05 billion set aside for bad loans in the quarter, up from $819 million a year earlier, but increasing only slightly from the $1.01 billion last quarter. The amount of impaired loans, the kind the bank doesn’t reasonably expect full repayment on, actually fell for Canadian banking in the third quarter compared with the second, to $338 million from $399 million.

    “I continue to be impressed by how resilient the Canadian consumer has been through this period, the trade-offs that they continue to make,” said Phil Thomas, chief risk officer at Scotiabank. The trend is clearly coming through on variable-rate mortgages, he said, which have also started to benefit from the Bank of Canada starting to cut rates. Scotia is also seeing a levelling-off in its auto loans, an area it’s been signalling as stressed for about a year, said Thomas.
    “I was really encouraged this quarter to see we’re finally stable as it relates to net write offs in that portfolio,” he said. “One quarter is not a trend, but I’m encouraged by what I’m seeing this quarter. And even as I look into next quarter, I see stability in these portfolios moving forward.”

    Scotiabank has a much smaller credit card portfolio than some other Canadian banks, but its unsecured credit line trend seems to no longer be getting worse, Thomas said. “I am super encouraged by the fact that this quarter, the levels of delinquency or any stress seem to be levelling off.”

    While stabilizing, higher loan loss provisions did weigh on profits that amounted to $1.91 billion or $1.41 per diluted share for the quarter ended July 31 compared with a profit of $2.19 billion or $1.70 per diluted share a year ago. On an adjusted basis, Scotiabank says it earned $1.63 per diluted share, down from an adjusted profit of $1.72 per diluted share in the same quarter last year. Analysts on average had expected Scotiabank to earn an adjusted profit of $1.62 per share for the quarter, according to to LSEG Data & Analytics. Revenue totalled $8.36 billion, up from $8.07 billion in the same quarter last year.

    Earlier in August, Scotiabank announced it would pay about USD$2.8 billion for a 14.9% stake in the U.S. bank KeyCorp in two stages. Some analysts have worried about the bank possibly devoting lots of cash to buy even more of the bank, but chief executive Scott Thomson said Tuesday that the deal was about getting increased exposure to the U.S. at a good price. “Our investment in KeyCorp represents a low cost low-risk approach to deploying capital in the U.S. banking market at a time when valuations are favourable and as the regulatory and competitive environment evolves.”

    TD Bank Group reports profits down 22% on anti-money laundering hit.

    TD Bank Group’s second-quarter profit fell 22% from last year as it booked costs related to a high-profile failure of its U.S. anti-money laundering program. The bank had warned of the $615-million initial charge it was taking in connection with its talks with U.S. regulators, allowing analysts to adjust projections that the bank then handily beat. “It was a strong quarter for TD with all of our businesses outperforming expectations,” said chief executive Bharat Masrani on an earnings call Thursday, after reiterating the bank’s mea culpa on its anti-money laundering controls. )

    Read the full article about TD’s earning report: Why is TD’s profit down?

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    The Canadian Press

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  • Markets response to U.S. Federal Reserve – MoneySense

    Markets response to U.S. Federal Reserve – MoneySense

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    The S&P 500 rose 1.1% after Fed Chair Jerome Powell said in a highly anticipated speech that the time has come to lower its main interest rate from a two-decade high. The index pulled within 0.6% of its all-time high set last month and has clawed back virtually all of its losses from a brief but scary summertime swoon.

    The Dow Jones Industrial Average rose 462 points, or 1.1%, to close above the 41,000 level for the first time since it set its own record in July, while the Nasdaq composite jumped 1.5%.

    U.S. Fed Chair Jerome Powell’s speech on August 23

    Powell’s speech marked a sharp turnaround for the Fed after it began hiking rates two years ago as inflation spiralled to its worst levels in generations. The Fed’s goal was to make it so expensive for U.S. households and companies to borrow that it slowed the economy and stifled inflation.

    While careful to say the task is not complete, Powell used the past tense to describe many of the conditions that sent inflation soaring after the pandemic, including a job market that “is no longer overheated.” That means the Fed can pay more attention to the other of its twin jobs: to protect an economy that is slowing but has so far defied many predictions for a recession.

    “The time has come for policy to adjust,” Powell said. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” But that second part of his statement held back some of the details that Wall Street wanted so much to hear.

    Bank of Canada recent cuts

    “Canadians are experiencing rate cut déjà vu today, as the Bank of Canada (BoC) slashed its trend-setting overnight lending rate by a quarter of a per cent. It’s the second rate cut in as many months from the central bank. It implemented its first on June 5, bringing an end to a prolonged, 11-month rate hold and officially putting Canada on track for lower borrowing costs.”

    Read the full article: Making sense of the Bank of Canada interest rate decision on July 24, 2024

    Impact on Treasury yields

    Treasury yields had already pulled back sharply in the bond market since April on expectations the U.S. Federal Reserve’s next move would be to cut its main interest rate for the first time since the COVID crash in 2020. The only questions were by how much the U.S. Fed would cut and how quickly it would move.

    A danger is that traders have built their expectations too high, something they’ve frequently done in the past. Traders see a high likelihood the U.S. Fed will cut its main interest rate by at least one percentage point by the end of the year, according to data from CME Group. That would require the U.S. Fed to go beyond the traditional move of a quarter of a percentage point at least once in its three meetings remaining for the year.

    If their predictions are wrong, which has also been a frequent occurrence, that could mean Treasury yields have already pulled back too much since their decline began in the spring. That in turn could pressure all kinds of investments.

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    The Associated Press

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  • Making sense of the markets this week: August 25, 2024 – MoneySense

    Making sense of the markets this week: August 25, 2024 – MoneySense

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    On Tuesday, Statistics Canada stated that the Consumer Price Index (CPI) measured inflation of 2.5% for July. That’s down from 2.7% in June, and is the lowest inflation rate recorded since 2021.

    Deceleration in headline inflation led by shelter component , 12-month % change

    CPI basket items June 2024 July 2024
    All-items Consumer Price Index 2.7% 2.5%
    Food 2.8% 2.7%
    Shelter 6.2% 5.7%
    Household operations, furnishings and equipment -0.9% -0.1%
    Clothing and footwear -3.1% -2.7%
    Transportation 2% 2%
    Health and personal care 3.0% 2.9%
    Recreation, education and reading 0.6% -0.2%
    Alcoholic beverages, tobacco products and recreational cannabis 3.1% 2.7%
    Source: Statistics Canada

    In fact, if you take shelter out of the equation, we’re getting close to zero inflation. And that’s significant for two reasons:

    1. The shelter-inflation rate (primarily a measurement of rent and mortgage expenses) did come down substantially between June and July.
    2. As the Bank of Canada (BoC) cuts interest rates, the inflation component of the CPI will inevitably go down as Canadians will have access to mortgages with lower rates.

    Notably, passenger vehicle prices were down 1.4% in July. Clothing and footwear was also down by 2.7%. Food and gas were up by 2.7% and 1.9% respectively. British Columbia and New Brunswick had the highest inflation rate growth, while Manitoba and Saksatchewan had the lowest.

    It’s pretty clear there’s no longer an overall inflation crisis in Canada. It’s now simply a home affordability issue at this point. Economists were widely predicting that this continuing trend of a downward inflation rate would clear the way for continued interest-rate cuts in the coming months. Money markets are now predicting a 0.25% cut minimum on September 4, with a 4% probability that the cut will be 0.50%. Looking further down the road, those same markets are predicting there is a 76% chance we will see a 2% decrease by October of 2025. 

    I hope you locked in those guaranteed investment certificates (GICs) or bonds when you could still snag those high rates Check out MoneySense’s list of the best GIC rates in Canada, and my article on low-risk investments over at MillionDollarJourney.com.

    A bullseye for Target

    Target Corporation posted a big earnings beat on Wednesday and shareholders saw its shares increase in value by 11.20%. The Minneapolis-based discount retailer is the seventh-largest in the U.S.

    Retail earnings highlights

    All numbers are in U.S. dollars.

    • Target (TGT/NYSE): Earnings per share of $2.57 (versus $2.18 predicted). Revenue of $25.45 billion (versus $25.21 billion estimate).
    • Lowe’s Companies (LOW/NYSE): Earnings per share of $4.10 (versus $3.97 predicted), and revenues of $23.59 billion (versus $23.91 billion predicted).

    Same-store sales for Target grew 3% last quarter, after five straight quarters of declining sales. More purchases of discretionary items like clothing were responsible for the positive reversal to the declining sales trend.

    Target’s COO Michael Fiddelke had a very cautious tone, though. “While we’ve been pleased with our performance so far this year, our view of the consumer remains largely the same. The range of possibilities and the macroeconomic backdrop in consumer data and in our business remains unusually high.” And Target CEO Brian Cornell cited price reductions and a value-seeking consumer as reasons for increased foot traffic in the quarter.

    It was very much a mediocre earnings report for Lowes, though, as it beat earnings expectations decisively but cut its full-year forecast. Shares were down by about 1% on Tuesday after the earnings announcement. 

    Lowe’s CEO Marvin Ellison said consumers were waiting for cuts in interest rates before taking on large home improvement projects. Because 90% of Lowes’ customers are homeowners (as opposed to contractors), they are particularly sensitive to movements in interest rates, he shared. Same-store sales were down 5.1% year over year.

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    Kyle Prevost

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  • Making sense of the markets this week: August 18, 2024 – MoneySense

    Making sense of the markets this week: August 18, 2024 – MoneySense

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    The U.S. is set to cut rates—finally

    After much speculation about when the U.S. will finally begin cutting its interest rates, the CME FedWatch tool reports a 100% chance that the U.S. Federal Reserve will cut its rates in September. Market watchers are pretty confident, with a 36% chance that the U.S. Fed will go right to a 0.50% cut instead of nudging the rate down. And looking ahead, the futures market predicts a 100% chance of 0.75% in rate cuts by December this year, with a 32% chance of a 1.25% rate decrease. The forecasts became stronger this week as the annualized inflation rate in the U.S. slowed to 2.9%, its lowest rate since March 2021. There are a lot of percentages here, but the gist is people are expecting big interest rate cuts.

    Those probabilities should take some of the currency pressure off of the Bank of Canada (BoC) when it makes its next interest rate decision on September 4. If the BoC were to continue to cut rates at a faster pace than the U.S. Fed, the Canadian dollar would substantially depreciate and import-led inflation would likely become an issue.

    Source: CNBC

    Here are some top-line takeaways from the U.S. Labor Department July CPI report:

    • Core CPI (excluding food and energy) rose at an annualized inflation rate of 3.2%.
    • Shelter costs rose 0.4% in one month and were responsible for 90% of the headline inflation increase.
    • Food prices were up 0.2% from June to July.
    • Energy prices were flat from June to July.
    • Medical care services and apparel actually deflated by 0.3% and -0.4% respectively.

    When combined with the meagre July jobs report, it’s pretty clear the U.S. consumer-led inflation pressures are receding. As the U.S. cuts interest rates and mortgage costs come down, it’s quite likely that shelter costs (the last leg of strong inflation) could come down as well.

    Walmart: “Not projecting a recession”

    Despite slowing U.S. consumer spending, mega retailers Home Depot and Walmart continue to book solid profits.

    U.S. retail earnings highlights

    Here are the results from this week. All numbers below are reported in USD.

    • Walmart (WMT/NYSE): Earnings per share of $0.67 (versus $0.65 predicted). Revenue of $169.34 billion (versus $168.63 billion predicted).
    • Home Depot (HD/NYSE): Earnings per share of $4.60 (versus $4.49 predicted). Revenue of $43.18 billion (versus $43.06 billion predicted).

    While Home Depot posted a strong earnings beat on Wednesday, forward guidance was lukewarm, resulting in a gain of 1.60% on the day. Walmart, on the other hand, knocked the ball out of the park and raised its forward guidance and booked a gain of 6.58% on Thursday.

    Walmart Chief Financial Officer John David Rainey told CNBC, “In this environment, it’s responsible or prudent to be a little bit guarded with the outlook, but we’re not projecting a recession.” He went on to add, “We see, among our members and customers, that they remain choiceful, discerning, value-seeking, focusing on things like essentials rather than discretionary items, but importantly, we don’t see any additional fraying of consumer health.”

    Same-store sales for Walmart U.S. were up 4.2% year over year, and e-commerce sales were up 22%. The mega retailer highlighted its launch of the Bettergoods grocery brand as a way to monetize the trend toward cheaper food-at-home options, and away from fast food. 

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    Kyle Prevost

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  • Yes, a cottage is an investment property—here’s how to minimize capital gains tax – MoneySense

    Yes, a cottage is an investment property—here’s how to minimize capital gains tax – MoneySense

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    Should you keep renting a cottage or buy one?

    You don’t need me to explain the personal perks of having a vacation home or a cottage. But to many people, a cottage is also an investment. There are costs and hopefully returns, especially if you decide to rent it out. If you hope to buy, find out what you need to pay beyond the listing price and how you might finance the purchase.

    Read: Is a vacation home a good investment?

    Is there a capital gains tax exemption for a cottage?

    Sorry to be the bearer of bad news, but there isn’t. There was once a lifetime capital gains exemption of $100,000, but that no longer exists. It only applied in Canada from 1984 to 1994. There are other ways to minimize taxes on the sale of a cottage, though. What about selling to a family member: Can you avoid taxes that way? It depends on a few factors, such as the relationship, if the second property can be claimed as a principal residence, and more.

    Read: Can I sell my cottage tax-free?

    Read: Selling a cottage to a family member: What that means for capital gains

    Do you pay tax when inheriting a cottage?

    The short answer: It depends on your relationship to the person who owns it. Are you an extended family member? Their adult child? Or are you their spouse? Find out how inheriting a cottage can affect taxes for a spouse with children and the steps to take to minimize what’s owed. 

    Read: Inheriting cottage and the capital gains implications

    How to reduce taxes on the sale of a cottage

    This next article goes through the multiple factors that can influence how you plan for capital gains on family-owned cottages, including: 

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    Lisa Hannam

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