ReportWire

Tag: Investments

  • Are we in an AI bubble? How to protect your portfolio if your AI investments turn against you.

    Despite stellar earnings reports from Nvidia (NVDA) this week and record returns of tech stocks related to artificial intelligence so far this year, there is still a lot of hand-wringing about a possible AI bubble.

    The 70 stocks that comprise the Global X Artificial Intelligence & Technology ETF (AIQ) have lost $2.4 trillion in value since Oct. 29, according to an Investor’s Business Daily analysis.

    The November 2025 Bank of America Global Fund Manager Survey reported 45% of respondents believe an AI equity bubble is the most significant current market risk. More than half of the money managers believed AI stocks are already in bubble territory.

    Are we approaching an AI bubble? And if that’s uncertain, how do you protect your portfolio if your AI investments turn against you?

    Read more: Thinking of buying Nvidia stock? Consider buying others just like it.

    Past failures often haunt stock market investors. The dot-com bust of the late 1990s and early 2000s is a recurring nightmare for some. Are we approaching a similar stock market cliff? Two noted analysts disagree.

    Carolyn Barnette, head of market and portfolio insights at BlackRock, doesn’t see the symptoms of a dot-com crash. Today’s AI investments are “a fundamentally different landscape — one supported by real profitability, disciplined capital allocation, and broad-based adoption,” she wrote in a report to advisors last week.

    “Unlike the speculative frenzy of the late 1990s and early 2000s, today’s technology leaders are anchored by fundamental stability. Strong profitability, steady cash generation, and healthy balance sheets provide a foundation for continued investment and growth,” Barnette wrote in the analysis.

    Barnette notes that, unlike the dot-coms, AI capital investments are being funded by earnings and cash rather than debt.

    “This self-financing makes the sector more resilient to higher interest rates and less vulnerable to liquidity shocks. Many companies are investing from a position of strength, not speculation,” Barnette wrote.

    Yet, many experts with their own charts disagree, saying we are in an AI investment bubble.

    One is Apollo Global Management chief economist Torsten Sløk.

    “The difference between the IT bubble in the 1990s and the AI bubble today is that the top 10 companies in the S&P 500 today are more overvalued than they were in the 1990s,” Sløk wrote in a July analysis.

    Sløk believes the overheated AI sector was born out of the zero-interest-rate environment before March 2022. When the Federal Reserve began raising interest rates, tech companies stopped hiring, borrowing costs rose, and investor risk appetites diminished.

    “The bottom line is that the bubble in AI valuations was simply the result of a long period with zero interest rates,” Sløk wrote in May. “With upward pressures on inflation coming from tariffs, deglobalization, and demographics, interest rates will remain high and continue to be a headwind to tech and growth for the coming years.” (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

    AI bubble

    Read more: Create a stock investing strategy in 3 steps

    If the experts disagree, perhaps it’s best to prepare for both AI scenarios: boom and bubble.

    Kevin Gordon, Schwab’s senior investment strategist, said investors should first determine what kind of AI investments they hold.

    “I think one of the ways to hedge and diversify around [the risk] is actually thinking about the difference and the important distinction between the AI creators and the AI adopters,” Gordon said in a Schwab video released in September. “So much of the focus over the past couple of years has been on the creators. We’ve spent a lot of time thinking about who are the ‘adopters’ and who could benefit from the technology.”

    He believes adopters are going to become a critical next leg of the investment cycle for industries that don’t have the ability to be an AI creator. Consider diversifying your portfolio with those who benefit from the technology rather than those who create it.

    Gordon also believes investors should periodically revisit their investment time horizon and risk tolerance. When will you begin tapping your investments for cash, and are your investments built for that inevitability?

    “I think this is one of those moments where you need to look at your portfolio to see where those align,” Gordon said.

    The UBS chief investment office recommends international exposure, high-grade bonds, and gold to protect a portfolio.

    “We think the equity bull market has further room to run, and have reiterated that an easing Federal Reserve, durable earnings growth, and AI investment spending support our attractive view on US equities. But we also believe investors should diversify their portfolios beyond US equities,” UBS said in a note to clients.

    UBS highlighted three “appealing opportunities”:

    • China’s tech sector and Japanese equities: “We particularly like China’s tech sector as we believe Beijing’s push for tech self-sufficiency and innovation creates a foundation for the rally to continue.”

    • Quality bonds: “We would expect quality bonds to rally in the event of fears about the health of the US economy or the durability of the AI rally. With yields still at relatively elevated levels, the risk-return profile for quality bonds is appealing.”

    • Gold: “Gold remains an effective portfolio diversifier and hedge against political and economic risks, and we view this week’s sell-off as a healthy consolidation. While volatility is likely to persist in the near term, lower real interest rates, a weaker US dollar, and concerns over government debt or geopolitical uncertainty should continue to boost demand for bullion.”

    Read more: How to invest in gold in 4 steps

    Source link

  • Covered call ETFs have high yields but come with a trade-off – MoneySense

    Prerna Mathews, vice-president of ETF product strategy at Mackenzie Investments, said covered call ETFs typically invest in dividend-paying equities and further enhance income by writing call options on those holdings. A call option provides the right to purchase a security at a set price. She said covered call ETFs essentially earn option premiums in exchange for “giving up” some of the stock’s future gains beyond the set option price.

    She noted covered call ETFs have flourished in the market recently, fuelled by investor enthusiasm for their higher yields. Mathews said these products can be attractive to those who prioritize income over growth and help manage market volatility.

    “There’s definitely a trade-off; there’s no free lunch. The higher yield off the options premiums is coming off of the fact that you are giving up long-term return in the stock,” Mathews said. “Those options premiums, you’re getting paid out on them today, but that total return impact is usually much more significant than the yield that you’re actually generating off of them.”

    Mathews said there is more onus on investors to do due diligence and not get “distracted by a flashy yield number and marketing material.”

    Covered call ETFs offer income—but at a cost

    Fred Masters, president of Masters Money Management Inc., said the best way to view these products is to think of them as “enhanced income products” that use options strategies to boost their yields. He said retail investors shouldn’t base their portfolios around these products, pointing to higher fees and lower overall returns. Though he said they can work as a smaller part of a larger portfolio. 

    Masters highlighted that management fees for these products can be “up to ten times higher” than a typical ETF in the same category.

    “You can’t control outcomes in many cases when investing in equity markets, but you can control costs and keeping costs to a minimum year after year is a crucial tenet of long-term investing success,” he said. “We know these covered call ETFs are expensive and that eats into returns annually.”

    Covered call ETFs can shine when markets stall but lag in rallies

    Covered call ETFs can perform better under certain market conditions though, according to Nick Hearne, a financial adviser and portfolio manager at RGF Integrated Wealth Management. In a range-bound market, where stocks are moderately increasing, and in declining markets, he said covered call ETFs will often outperform traditional strategies due to the income investors receive. 

    Article Continues Below Advertisement


    “Where they’re going to underperform is when the market increases significantly over a period of time … what they’re really doing is when they sell those call options, they’re selling their upside. That’s the downside,” Hearne said. “And over the long term, (covered call ETF investors) have less exposure to the market because they are selling part of their exposure, and so the expectation would be that a long-only or traditional strategy would outperform a covered call strategy.”

    Steady payouts attract retirees despite added market risk

    Mathews said covered call ETFs can be suited to investors prioritizing income, including people in retirement who can’t handle as much volatility in their portfolio. “Fixed income will only get you so far. In 1995, you could generate a 6% yield off of just Treasuries and investment-grade (bonds). And today, getting to that same 6% yield is so much more challenging,” she said.

    However, investors choosing this path are taking on a higher level of risk through covered call exposure compared with fixed income, Mathews noted.

    Despite any trade-offs, covered call ETFs have been gaining momentum in the market. Mathews said there are 17 providers that offer covered call products in Canada, with over $35 billion allocated to covered call ETFs as of September. “We continue to see very strong flows even year-to-date into these products and, unsurprisingly, with an aging demographic in Canada, we’re seeing that trend persist,” she said.

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about investing:



    About The Canadian Press


    About The Canadian Press

    The Canadian Press is Canada’s trusted news source and leader in providing real-time stories. We give Canadians an authentic, unbiased source, driven by truth, accuracy and timeliness.

    The Canadian Press

    Source link

  • How to read your investment statements  – MoneySense

    This guide breaks down exactly what to look for so you can quickly assess your investments and make informed decisions.

    Why review your investment statement? 

    Regularly reviewing your investment statement allows you to: 

    • Confirm that transactions are accurate
    • See whether your portfolio value is performing as expected
    • Understand what you own and how much it’s worth
    • Make sure your investments align with your goals and risk tolerance

    Developing the habit of looking at your statement helps reduce uncertainty, strengthens your financial awareness, and ensures there are no surprises down the road. 

    Compare the best TFSA rates in Canada

    Why investment statements are often overlooked 

    Investment statements often go unread because they can seem long and complicated. The numbers and financial terms are not always easy to make sense of, which can make the whole document feel intimidating. Some common challenges include: 

    • Too much information: With multiple pages of data in fine print, it is hard to know where to start and what to look at.
    • Not sure what matters: Certain sections are more important than others, but that isn’t always clear. 
    • Mixing up values: The difference between book value and market value is often assumed to be the return, which is not always correct. 

    Once you know what to focus on, the statement becomes much easier to read. Instead of feeling stressed, it can be a helpful tool to check your progress and confirm your investments are on track. 

    Reviewing an investment statement doesn’t need to take much time. By focusing on a few key areas—like total value, transactions, and performance—you can quickly gain a clear understanding of how your portfolio is doing.  

    Treating this as a regular financial check-in, much like reviewing a budget or tracking monthly expenses, helps build familiarity and confidence. Over time, the process becomes easier, and what once felt complicated turns into a simple habit that keeps you feeling in control. 

    Think of it as a monthly check-in with your future self. The more familiar you become with your statements, the easier and more natural the process will feel. 

    Article Continues Below Advertisement


    Key areas to focus on 

    When you start reviewing your statement, here’s where to direct your attention.

    1. Total portfolio value 

    Start with the big picture. Look at the total value of your portfolio and compare it with the previous month’s figure. This indicates whether the overall value has increased or decreased. While market changes are normal, this quick comparison helps you track your progress over time. 

    2. Transactions 

    Next, review the activity in your account. Did you make a deposit or a withdrawal? Did you purchase a new investment? What fees were charged? 

    Every transaction should line up with your expectations. If you notice something that doesn’t make sense or if a transaction appears to be missing, it’s important to follow up with your financial advisor. 

    3. Portfolio holdings 

    The holdings section shows what you own and the value associated with each investment. Here, you’ll typically see: 

    • Book value: Also referred to as “adjusted cost base” or “ACB” is the price you paid for the investment, adjusted for tax purposes to reflect any dividends reinvested or other cost adjustments to ensure you don’t double pay taxes when you sell. 
    • Market value: What that investment is worth today if you were to sell it. 

    It’s important to know that the difference between book value and market value doesn’t always show your real return. For example, if dividends are automatically reinvested back into an investment, your book value goes up even though you didn’t put in extra money yourself. 

    4. Asset allocation 

    Your statement will also display your allocation to categories such as stocks, bonds, and cash. This breakdown should reflect your risk tolerance and long-term goals. If your allocation has shifted significantly due to market performance, it may be time to rebalance to get back on track. 

    5. Performance and fees 

    Finally, look at your overall performance and the fees charged. Some statements include your rate of return, though not all do. If yours does not, you can request a performance summary from your advisor. 

    Sybil Verch

    Source link

  • I Started Side Hustles to Pay Off $40k Debt and Build Wealth | Entrepreneur

    This as-told-to story is based on a conversation with Marissa Cazem Potts, a Bay Area-based Intuit financial advocate* and financial literacy professional. The piece has been edited for length and clarity.

    Image Credit: Courtesy of Intuit. Marissa Cazem Potts.

    Want to read more stories like this? Subscribe to Money Makers, our free newsletter packed with creative side hustle ideas and successful strategies. Sign up here.

    Growing up, I experienced the pitfalls of my parents not understanding how to manage money.

    My father is second-generation American-Filipino, and my mom is half Black and half white and has enslaved person ancestry. Both of them wanted to make money and create a better life for themselves, but they didn’t know how to invest or even save their money. We spent a lot and would find ourselves in jeopardy. There’d be a year where I couldn’t get the new shoes I wanted for school because my parents didn’t manage their money well, but thankfully, we always had a home and all the things we needed.

    I wanted to be the generation that stops the cycle of being financially irresponsible.

    Related: The Shopping Strategy I Used to Pay Off $22,000 Debt and Save $36,000 Might Sound Extreme — But It Worked. Here’s How.

    I knew I had to go to college. My mother finished college; my grandmother had her master’s degree in education. I felt I had to at least get my undergraduate degree, coming from a legacy of women who considered education the way to financial freedom. My parents said they could help with my rent during college, but that was about it. I got a part-time job at Nordstrom and actually made a lot of money doing that.

    But when it came to tuition, there was no game plan. My parents dropped me off at the financial office at the University of California, Santa Barbara. The office told me that I could take loans out and wouldn’t have to pay them back until I graduated. I just wanted to make sure I got my education. So I signed the documents. I had a series of different loans, but I didn’t read the fine print. I didn’t understand the concept of interest, and I let the loans sit.

    I graduated in 2010 with that debt over my head and didn’t have a plan for paying it back. The first thing on my mind after graduating was getting a good job, making sure it paid well and thinking about what career I wanted to have. I’d always had a passion for writing, communicating and speaking, so I got an internship at E! News. That was unpaid, but it was a great opportunity.

    Related: I’m a Millennial Who Quit My Job Last Year to Do What I Love. Here’s How I’ve Made More Than $300,000 So Far.

    While I worked that unpaid internship, I had to make money on the side. So I started side hustles. I worked as a receptionist at a dance studio. I sold my old clothes. I was building income, but then I was spending it — on gas, food, something nice. At that point, I wasn’t thinking about paying the student loans or saving money.

    I was in Los Angeles for a while, then slowly navigated back home to the Bay Area for a career in technology. In the back of my mind, though, I always wanted to do something for myself, too.

    “I needed to start saving and investing, building a 401(k).”

     Eventually, I landed a job at Intuit and was introduced to financial education. There were tools like TurboTax, and at the time, Mint, Credit Karma. I realized I needed to get my finances in order. I needed to start saving and investing, building a 401(k).

    Then I took a job at LinkedIn and had a daughter, and I really didn’t want this $40,000 debt, increasing year over year, on my back. I’d learned a lot in my professional communications career — and realized I could spin that skill set into another side hustle, helping coach and advocate for executive women. So I started that executive coaching business on the side; I took on a few clients in the early morning, after hours or on weekends.

    Related: This Couple’s ‘Scrappy’ Side Hustle Sold Out in 1 Weekend — It Hit $1 Million in 3 Years and Now Makes Millions Annually: ‘Lean But Powerful’

    The side hustle kept me busy, and I had to sacrifice time with my young daughter and husband, so I made it a little spicier and reminded myself of my ultimate goal by funneling the money into an account called “Marissa’s Freedom Fund.” Any time I had a check from an executive coaching job or another side gig, it went straight into that account, and anything left over, whether $10 or $100, went into an emergency fund.

    I began paying off my six loans in 2022 and finished paying them off in 2023. I got that email from Navient, my loan processor at the time, saying, “Congratulations, your loans are paid off,” and I felt totally free.

    “Financial wellness means utilizing the tools that are available to you.”

    It’s important to treat financial wellness as self-care. The first step is looking at your debts and your accounts: I didn’t want to look at my student loan debt or credit card debt, but I had to see the big picture and figure out where to start. Financial wellness means utilizing the tools that are available to you, tapping into your network and practicing consistency — that’s the hardest part. You are your own worst enemy. You have to ensure you’re sticking to a routine when you’re working toward a financial goal.

    It can be intimidating, especially if you grew up in a home where you didn’t talk about money, but you should start your financial wellness journey as soon as you can. I try to talk openly with my daughter about finances so that she understands the power of a dollar. You can start small: $10 a month can grow into $100 a month, then $500 a month. Create savings and investment accounts. Also, be a conscious consumer — if you regret a purchase, return it.

    Related: ‘It Was Taboo’: Parents Shape Their Children’s Relationship With Money. Here’s How to Set Kids Up for Long-Term Success Instead of Struggle.

    Don’t feel defeated if you have debt. You have the agency to attack it by setting up different income streams. I still have that entrepreneurial drive today. I channel it both into my role as a financial advocate at Intuit, where I empower Gen Z (like my younger sister) and Gen Alpha with financial education and confidence, and as an intrapreneur, pursuing stretch projects and impact within my day-to-day work.

    It’s so important for younger generations to see that you can take the time to build skills, grow a network and test a business idea on the side while working in a traditional corporate role. A recent Intuit survey found that 26% of Gen Z already have a side hustle, and 37% want to start a side hustle.

    Related: Gen Z Is Turning to Side Hustles to Purchase ‘the Normal Stuff’ in ‘Suburban Middle-Class America

    By using your agency and leveraging free tools like Intuit for Education and other resources, you can prepare to launch a business full-time — if and when that path feels right for you.

    *Potts is not an official financial advisor; her tips are for “general informational purposes only and should not be considered financial advice. It is not a substitute for professional guidance.”

    Amanda Breen

    Source link

  • How to Spot a Real Day Trading Mentor (and Avoid Pretenders) | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    There is no shortage of people who talk a really impressive game about how they’re rich, have the whole “day trading” thing dialed in, and are willing to teach you how easy it can be to follow in their footsteps to become the next great day trader.

    I’m not one of them.

    Yes, I day trade for a living, and I’ve done OK. But I’m first in line to tell you that day trading is not easy. It takes dedicated effort over time to start becoming solid at day trading. Then it takes even more time and work to turn it into a profession.

    You have two main choices when it comes to learning day trading: You can learn by doing, or get a teacher. Teaching yourself — in other words, making all the mistakes yourself — is a really costly way to do it, in time, money, and stress. I recommend that you stand on someone else’s shoulders and at least avoid many of the mistakes they made.

    Because this is not a sales pitch to stand on my shoulders, I will describe five things to look for in a day trading teacher. You can then apply those tests to whichever teachers you find.

    Related: Before You Start Day Trading, Know These Stages

    1. You want someone who’s seen it all

    How long ago did they begin to day trade? You don’t want someone who claims to have done great in the last few months or maybe a year, and now feels bulletproof. The strongest teachers will have traded and survived through great markets, but also sideways markets and downright terrible ones.

    You also don’t want someone who claims to be “a natural” at day trading; in fact, you should hope they have lots of figurative scars, which often accompany lessons thoroughly learned.

    2. They need to be currently in the game

    Michael Phelps may have hung up his competitive swimsuit years ago, but he could be a great swimming coach for decades to come. Not too much changes in competitive swimming, other than younger people regularly breaking records.

    Not so with day trading. The markets constantly change in terms of which stocks are listed, regulations being updated and technology continually improving.

    Your teacher should be trading every week and preferably every day. Day trading is difficult enough; you shouldn’t make it even more difficult by working with someone who’s been a spectator for too long.

    3. They must be able to explain and remember

    We’ve all known some people who are great at what they do, but terrible at explaining it to others. Maybe they’re not very articulate, or they speak so fast you can’t follow them.

    When I say “able to remember,” I mean that experts can easily forget what it was like to be a beginner. After making literally 25,000 trades in my career, I can glance at four monitors filled with hundreds of bits of data, and it all seems so clear to me. But I do remember the feeling of confusion and even despair while looking at just a fraction of this firehose for the first time.

    Look for someone who’s clear, patient and willing to explain — sometimes again and again — until the topic makes sense to you. Day trading is all about near-instantaneous judgments, but your questioning and learning zone should be judgment-free.

    Related: Want to Be a Stronger Mentor? Start With These 4 Questions

    4. Seek a specialist

    If you have a heart condition and need surgery, do you want to go to a surgeon who’s worked on a few hearts, done some tennis elbows and is a fairly good plastic surgeon, too?

    You want the person with deep experience. The kind who could write a 500-page book that’s an “Introduction to…” instead of the 50-page pamphlet that’s “The complete guide” to something. Although many day trading principles indeed apply to commodities, cryptocurrency and other investments, I have yet to meet someone who’s equally expert at all those types of investments. I certainly am not.

    It may be true that you don’t yet know what specific investments you want to focus on. That’s cool; shop around! But at some point, when you decide the investment type you want to bear down on, look for a teacher who’s done the same thing.

    5. Insist on a truth teller

    Of course, you want a teacher to make it as easy as possible, but day trading is not easy. It’s not even easy for me at my stage, because every day I must earn any reward, and am quickly punished for forgetting key principles. Stay well away from anyone who gives you the impression that day trading can be picked up without much difficulty.

    Also, it’s incredibly important that you find a teacher who shows you ALL of their trades — the fabulous ones, the okay ones, and the “what were you thinking” terrible trades. I can’t say much about day trading with absolute certainty, but I’m certain about this: Every trader on the planet continues to have green days and red days. Every trader loses occasionally.

    The only difference is how much they’ve lost, and what they do about it. The smart, surviving traders check themselves into what I call “trader rehab.” This allows them to return to the basics, rebuild their confidence, and get back in the game. Anyone who’s not showing you these scars is not being straight with you, and they should not have your trust.

    Social media is full of people who say they took up day trading and scored. More power to them; I do believe in beginner’s luck and once had it myself. You don’t need a teacher at all to have beginner’s luck. But if you want to continue in this profession — not if but when that beginner’s luck runs out — that truth-telling teacher will be the best trade you take.

    There is no shortage of people who talk a really impressive game about how they’re rich, have the whole “day trading” thing dialed in, and are willing to teach you how easy it can be to follow in their footsteps to become the next great day trader.

    I’m not one of them.

    Yes, I day trade for a living, and I’ve done OK. But I’m first in line to tell you that day trading is not easy. It takes dedicated effort over time to start becoming solid at day trading. Then it takes even more time and work to turn it into a profession.

    The rest of this article is locked.

    Join Entrepreneur+ today for access.

    Ross Cameron

    Source link

  • Making sense of the markets this week: November 3, 2024 – MoneySense

    Making sense of the markets this week: November 3, 2024 – MoneySense

    Amazon earnings highlights

    Share prices were up 5% in after-hours trading on Thursday after the strong earnings beat.

    • Amazon (AMZN/NASDAQ): Earnings per share of $1.43 (versus $0.14 predicted) and revenues of $134.4 billion (versus $131.5 billion predicted).

    Amazon Web Services (AWS) remains the golden goose, even though very few of Amazon’s retail customers know it exists. Revenues climbed 19% during the quarter, and totalled $27.4 billion. Amazon’s advertising revenues were another highlighted area of the report, as they were up 19%. Overall operating profits grew 56% year over year to $17.4 billion, mostly credited to the 27,000 jobs cut by the company since 2022.

    Founder, executive chairman and former president and CEO of Amazon, Jeff Bezos was in the headlines this week in his role as owner of the Washington Post. He refused to allow the Post’s editorial team to print their endorsement of Kamala Harris for president, and it was met with widespread outrage from Post readers. As of Tuesday, more than 250,000 subscriptions were cancelled as a result. 

    Source: The Sporting News

    Fortunately for Bezos, he purchased the Washington Post (one of the world’s premier news brands) for “chump change”—$250 million (roughly a mere 1.2% of his net worth). So, if he drives it into the ground, I don’t think he’ll shed tears.

    No doubt co-founder and CEO of Tesla, Elon Musk, is making similar calculations with his luxury purchase two years ago of Twitter (which he rebranded as X). Critics say he has turned the social platform into an echo chamber for Republican presidential candidate Donald Trump. What are the billions for, if a person can’t even enjoy themselves by buying a little media, am I right? (That’s sarcasm.)

    So far we’ve yet to see analysis to show Bezos’ editorial decision affecting Amazon’s share price or revenue numbers. Apparently Republicans buy Amazon Prime, too.

    Canada’s best dividend stocks

    Microsoft, Meta and Google: Predictably incredible earnings

    While not having quite as large a market cap as Nvidia and Apple, other mega tech stocks in the U.S. are no slouches. For example, Microsoft is also as valuable as the entirety of Canada’s stock exchanges at $3.2 trillion. Alphabet and Meta clock in at $2.1 trillion and $1.5 trillion respectively. (All figures in this section are in U.S. dollars.)

    Other Big Tech stock news highlights

    Here’s what these companies announced this week.

    • Alphabet (GOOGL/NASDAQ): Earnings per share came in at $2.12 (versus $1.51 predicted) on revenues of $88.27 billion (versus $86.30 billion predicted).
    • Microsoft (MSFT/NASDAQ): Earnings per share of $3.30 (versus $3.10 predicted), and revenues of $65.59 billion (versus $64.51 predicted).
    • Meta (META/NASDAQ): Earnings per share coming in at $6.03 (versus $5.25 predicted) and revenues of $40.59 billion (versus $40.29 predicted).

    All three companies crushed earning estimates across the board. However, shareholders’ reactions to these earnings beats were still muted. Meta shares were down 2.5% in after-hours trading on Wednesday, and it was a similar situation for Microsoft. Alphabet fared better as its shares were up 3%.

    It’s hard to put these numbers into the massive context into which they belong, because the world has never seen anything like these companies before. Here are highlights from the earnings calls. (Scroll the chart left to right with your fingers or press shift, as you use scroll wheel on your mouse to read.)

    Kyle Prevost

    Source link

  • Making sense of the markets this week: October 27, 2024 – MoneySense

    Making sense of the markets this week: October 27, 2024 – MoneySense

    Despite these setbacks, CPKC posted an income gain of 7% year over year. The four categories that made the most impact were grain, energy, plastics and chemicals, and they grew revenues by 11%. CPKC says the shipment of wheat to Mexico from the Canadian and American Prairies over the past 12 months was exactly the type of “synergy win” that it was hoping for when the former Canadian Pacific acquired Kansas City Southern back in 2021. This railway remains the only one to span Canada, the United States and Mexico.

    CNR CEO Tracy Robinson commented on the railway’s operational challenges. “Our scheduled operating plan demonstrated its resilience in the third quarter, allowing us to adapt our operations to challenges posed by wildfires and prolonged labor issues,” she said. “Our operations recovered quickly and the railroad is running well. As we close 2024, we will continue to focus on recovering volumes, growth, and ensuring our resources are aligned to demand.”

    CNR’s revenues were up 3% year over year; however, increased expenses meant the company’s operating ratio rose 1.1% to 63.1% (indicating that expenses are growing as a share of revenue). The railway announced it was  raising its quarterly dividend from $0.79 to $0.845. This raise of nearly 7% is right in line with CNR’s mission to conservatively raise its dividend payouts each year.

    For more information on these railroads, check out my article on Canadian railway stocks at MillionDollarJourney.ca.

    Canada’s best dividend stocks

    Rough day for Rogers 

    Thursday’s revenue miss left some Rogers shareholders shaking their heads. 

    Rogers earnings highlights

    Here’s what the large mobile company reported this week:

    • Rogers Communications (RCI/TSX): Earnings per share of $1.42 (versus $1.34 predicted) and revenues of $5.13 billion (versus $5.17 predicted).

    While solid earnings numbers did take away some of the sting, Rogers’ share price was down 3% on Thursday. Lower-than-expected numbers for new wireless customers were at the root of low revenue growth. The oligopolistic Canadian wireless market remains uncharacteristically competitive as Rogers, Telus and Bell all continue to fight for market share. That competition is hurting profit margins for all three telecommunications giants at the moment. (Unlike in past years, when the three telcos all enjoyed charging some of the highest wireless plan fees in the world.)

    One highlight for Rogers was its sports revenue vertical, which was up 11% from last quarter. Rogers has really doubled down on its sports media strategy over the last few years and now owns a controlling share of the: 

    • Toronto Blue Jays in the Major League Baseball league (MLB)
    • Toronto Maple Leafs in the National Hockey League (NHL)
    • Toronto Raptors in the National Basketball Association (NBA)
    • Toronto FC in Major League Soccer (MLS)
    • Toronto Argonauts in the Canadian Football League (CFL)
    • SportsNet, a major Canadian sports network
    • Toronto’s Rogers Centre and Scotiabank Arena venues
    • Naming rights of sports venues in Edmonton, Toronto and Vancouver
    • National NHL media rights in Canada
    • Local media rights to the NHL’s Vancouver Canucks, Calgary Flames and Edmonton Oilers
    • Partial local media rights to the Maple Leafs and Raptors
    • Several minor-league franchises and esports (gaming) teams

    Despite owning all those household-name sports assets, it’s worth noting that Rogers’ wireless and cable divisions were responsible for close to 90% of revenues, with sports and media making up the rest.

    Kyle Prevost

    Source link

  • Making sense of the markets this week: October 20, 2024 – MoneySense

    Making sense of the markets this week: October 20, 2024 – MoneySense

    Netflix shows a steady stream of profits

    Netflix (NFLX/NASDAQ) shareholders were happy on Thursday, as they saw share prices rise 5% in after-hours trading on the back of another excellent earnings announcement. (All figures in U.S. dollars.) Earnings per share came in at $5.40 (versus $5.12 predicted) and revenues were $9.83 billion (versus $9.77 billion predicted).

    Paid memberships also topped expectations, at 282.7 million, compared to the 282.15 million predicted by analysts. Netflix chalked up the increase in viewers to new hit shows such as The Perfect Couple, Nobody Wants This and Tokyo Swindlers, as well as new seasons of favourites Emily in Paris and Cobra Kai. Looking ahead to the next quarter, Netflix is banking on the new season of Squid Game and its foray into the world of live sports. Two National Football League (NFL) games and a massively anticipated boxing bout between Jake Paul and Mike Tyson represent new attractions for the streaming giant.

    Photo courtesy of United Airlines

    United Airlines shares take to the sky

    Tuesday was a massive earnings day for United Airlines (UAL/NASDAQ) as earnings per share came in at $3.33, well outpacing the $3.17 that analysts were predicting. (All figures in U.S. dollars.) Revenues were $14.84 billion (versus $14.78 billion predicted). Shares were up more than 13% on the outperformance and the news that the airline was starting a $1.5-billion share buyback program.

    Corporate revenue was up more than 13% year over year, while basic economy seat sales clocked an even more impressive 20% increase. Last week, the company announced new international routes headed to Mongolia, Senegal, Spain, Greenland and more.

    The best online brokers in Canada

    The inflation dragon has been slain

    It doesn’t seem that long ago that annualized inflation rates were topping 8%, and there appeared to be no end in sight. Well, the end has arrived. Statistics Canada announced this week that the Consumer Price Index (CPI) annualized inflation rate for September had dropped all the way down to 1.6%. That’s substantially lower than the Bank of Canada’s 2% target.

    Led by deflation in clothing and footwear, as well as transportation, the downward trend appears to be widespread. Gasoline was also down 10.7% from this time last year.

    List of items contributing to decrease in CPI, September 2024

    Source: Statistics Canada

    Of course, increased shelter costs remain the major concern for many Canadians. Rent increases were up 8.2% year-over-year; while that’s down from August’s figure of 8.9%, it’s still a bitter pill to swallow for many.

    Kyle Prevost

    Source link

  • I Was a Founder Before I Became an Investor — Here’s How It Shaped My Investment Strategy | Entrepreneur

    I Was a Founder Before I Became an Investor — Here’s How It Shaped My Investment Strategy | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    Before becoming an investor at Bread, I was a startup founder. I know what it’s like to stand before a room full of people, palms sweating, asking them to believe in me. I also know the relentless effort it takes to prove, time and again, that their faith — and their money — will pay off. My journey from founder to funder was shaped by these experiences, and it’s why I approach investing differently.

    As a founder, I benefited most from investors who went beyond providing capital. They mentored me, guided me through difficult decisions and became true partners in my entrepreneurial journey. Now, as an investor, I aspire to offer the same kind of support to the founders I back because it’s something that the startup world has long been missing.

    This founder-to-funder transition isn’t unique to me — I’m seeing a growing number of entrepreneurs take their hard-earned experience and apply it to venture capital. What’s more, there’s an increasing number of former founders taking on strategic consulting roles for young companies. These “founders for hire” aren’t just giving advice from the sidelines; they’re applying years of entrepreneurial experience to help today’s founders plan, execute and grow their businesses.

    Both founders-to-investors and founders-for-hire are transforming how startups are funded and nurtured, and I believe it will have a profound impact on the startup ecosystem for years to come.

    Related: How Saying ‘Yes’ to Every Opportunity Helped My Startup Make $1 Million in the First Year

    A unique perspective

    Successful founder VCs have investment success rates that are 6.5 percentage points higher than professional VCs. This doesn’t surprise me. Founder-turned-investors bring something to the table that isn’t common in the VC world: operational knowledge. They’ve experienced the highs and lows of startup life, understand the challenges of scaling a business, and have a keen eye for identifying promising ventures. Investors with startup experience can relate to founders on a deeper level, offering insights that traditional investors might miss.

    My co-founders and I built our first product company, Density, from the ground up, which has shaped my approach to supporting my portfolio companies. It’s a common misconception that innovation in business is all about technological discovery, when really it’s about solving “boring problems.” I look for founders who are just as excited about their hiring practices, operational processes, and financial planning, as they are about their product development. When you’re excited about the boring things, you build better products and run a more stable business. I wouldn’t know this without the firsthand trial-and-error experience I gained as a founder.

    How experiences shape investment strategies

    If you’re a founder looking to raise capital, here’s why you want to look for an investor with startup experience:

    1. Emphasis on product and market fit: Having built products themselves, a founder-turned-investor is able to quickly assess a startup’s potential to solve real-world problems.
    2. Realistic expectations: They understand the challenges of scaling and are often more patient with growth trajectories.
    3. Focus on fundamentals: They tend to prioritize sustainable business models over hype-driven metrics.
    4. Empathy for founders: They’re more likely to back passionate founders who demonstrate grit and adaptability.

    Investors with startup experience also offer much more than access to capital, often providing founders with access to their network, partnership opportunities and guidance on every part of the business.

    The importance of hands-on involvement

    One of the most significant advantages that a founder-investor brings to the table is a willingness to roll up their sleeves and get involved in portfolio companies. They often want to know the ins and outs of product development at every company they invest in and the operational challenges they’re dealing with.

    Are they struggling to hire the right people? Are they lacking clear processes for project deliverables? Are they conflicted about which product feature to prioritize?

    Whatever the challenge, founder-turned-funders are not afraid to get into the trenches with their portfolio companies. Personally, I’ve spent hours helping founders reshape their visual identity, refine their marketing strategy or even relaunch their product if necessary. In many cases, I am literally in the code with them.

    Investors who’ve started their own companies know how hard it is. They want to provide emotional support and guidance through the intense ups and downs of startup life. By being a sounding board for the founders I work with, I hope to make the journey a little less stressful, which can make achieving success a bit easier.

    Related: What Should You Value More — An Investor’s Money or Their Experience?

    The future of the founder-led startup ecosystem

    Just as founder-led venture capital firms offer early entrepreneurs access to operational guidance, working with a consultant who has started their own company can provide invaluable mentorship opportunities.

    What sets a founder-for-hire apart from a traditional consultant is the depth of their involvement. They’re not just helping startups refine their sales motions or market strategies; they’re actively shaping products, helping find market fit, and even assisting in building out teams. It’s a level of engagement that goes far beyond typical consultant-client relationships. It’s also a flexible way for startups to tap into years of experience without needing to hire someone full-time or give up too much equity.

    Having a founder-consultant on your team is one of the smartest things you can do as an early entrepreneur. The combination of practical experience is invaluable in those first stages of business growth.

    Related: I Shifted From Founder to CEO 20 Years Ago and Never Looked Back — Here’s How to Successfully Make the Leap

    Bridging the gap

    The rise of founder-turned-investors and entrepreneurial consultants is changing the game for both venture capital and startups. By mixing financial knowledge with the real-world experience and hands-on involvement of former founders, these new players offer a unique level of business development and growth potential for young companies.

    For new entrepreneurs, this means a more supportive and understanding investment landscape. And for the startup ecosystem overall, it means a clearer path to success for everyone involved.

    Rob Grazioli

    Source link

  • Making sense of the markets this week: October 13, 2024 – MoneySense

    Making sense of the markets this week: October 13, 2024 – MoneySense

    Canadian Natural Resources doubles down on Canada

    For a decade now, big acquisitions by Canadian oil-and-gas producers have mostly been met with distaste by investors. So we’ll take it as a heartening sign how well the markets received Canadian Natural Resources’ (CNQ/TSX) decision to buy the Alberta upstream assets of Chevron Corp. (CVX/NYSE) for USD$6.5 billion in cash. CNQ stock rose 3.7% Monday in the wake of the announcement. Chevron was up 0.7% on a day when oil prices increased.

    The assets in question comprise a 20% stake in the Athabasca Oil Sands Project, along with 70% of the Kaybob Duvernay shale play. That should add 122,500 barrels of oil equivalent per day to Canadian Natural Resource’s 2025 output, the company said. It also announced a 7% bump to its quarterly dividend, to 56.25 Canadian cents a share, beginning in January.

    Chevron explained the asset sale in terms of freeing up cash for U.S. shale acquisitions as well as targeted positions abroad, such as in Kazakhstan, which it considers to hold better long-term profit potential.

    Canada’s best dividend stocks

    Nvidia moves up to number 2 in market cap

    Reports of the death of the Magnificent 7 tech stocks’ decade-long run are greatly exaggerated, Nvidia (NVDA/Nasdaq) seemed to say this week as its shares rose past $130. (All figures in U.S. dollars.) That pushed its market capitalization ahead of Microsoft Corp. to $3.19 trillion. That leaves only Apple, with a market cap of $3.4 trillion, worth more than the AI-focused chip-maker.

    Nvidia’s stock is up 26% in the past month, compared to a 6% advance for the S&P 500. Nvidia has grown tenfold in just two years. The price movement this week appeared to come from a positive report from Super Micro Computer, a provider of advanced server products and services. It found that sales of its liquid cooling products, deployed alongside Nvidia’s graphics processing units (GPUs), would be even stronger than expected this quarter. Analyst estimates of Nvidia’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the three-month period ended this month is $21.9 billion.

    The best online brokers in Canada

    Pepsi earnings leave a sour taste

    Posting its second straight disappointing set of quarterly results on Tuesday, beverage-and-snack maker PepsiCo lowered its full-year guidance for organic revenue unrelated to acquisitions. 

    Results were hampered by recalls of the company’s Quaker Foods products, related to potential salmonella contamination. PepsiCo also experienced weak demand in the U.S. and business disruptions in some overseas markets, such as the Middle East. Pepsi’s North American beverage volumes fell 3% year-over-year, mostly due to declines in energy drink sales. Meanwhile, its Frito-Lay division suffered a 1.5% decline.

    “After outperforming packaged food categories in previous years, salty and savory snacks have underperformed year-to-date,” executives said in a prepared statement. Overall, PepsiCo revised its 2024 sales growth outlook from the previous 4% to low single digits.

    Michael McCullough

    Source link

  • Making sense of the markets this week: October 6, 2024 – MoneySense

    Making sense of the markets this week: October 6, 2024 – MoneySense

    Some experts speculate the real sticking point in negotiations isn’t about wages but protection from automation. The ILA refused to allow its members to work on automated vessels docking at U.S. ports. As a result, American ports are getting more and more inefficient, ranking not only behind ports in China, but also Colombo, Sri Lanka. (The Container Port Performance Index is put together annually by The World Bank and S&P Global Market Intelligence.)

    For reference, the highest-rated port in Canada is Halifax, listed at 108th in the world. Halifax’s port efficiency was well behind not only Sri Lanka, but also economic powerhouses like Tripoli, Lebanon. To give further Canadian context, Montreal is 348th, and Vancouver is 356th, which is just ahead of Benghazi, Libya.

    Something tells me that negotiating for USD$300,000-per-year dockworkers is not going to help these North American efficiency numbers. The higher salaries get, the more attractive automation strategies will quickly become. Clearly there will be an eventual reckoning. In the meantime, for at least one more important presidential news cycle, dockworkers will be able to extract large wage gains as they hold the broader economy hostage.

    Why utilities aren’t “boring”—any more

    As income-oriented Canadian investors start to grow less enamoured of high-interest savings accounts and guaranteed investment certificates (GICs), the dividend yields of dependable North American utility stocks should begin to look more attractive. Given how quickly interest rates are likely to fall, it’s clear that there is a stampede of investors heading for the stocks of utility companies. 

    The iShares U.S. Utilities ETF (IDU/NYSE) is up more than 30% year to date, and the iShares S&P/TSX Capped Utilities Index ETF (XUT/TSX) is up about 15% year to date. (Check out MoneySense’s ETF screener for Canadian investors.)

    Most of the time utilities (especially those in sectors regulated by federal and local governments) are perceived as “boring.” Sure, the profits are dependable, but if the government is going to determine how much is paid for electricity or natural gas, then a company’s profit margins are tough to change. The dividend income is dependable. But that’s really the whole sales job in a nutshell.

    Lately, however, due to AI’s electricity needs and possible AI-fuelled efficiency increases, utilities have been getting some glowing press. Falling interest rates mean that annual interest costs will drop (utilities often have to borrow a lot of money to complete big projects). Meanwhile, Canadian investors looking for safe cash flow are pouring in. Utility stocks make up about 4% of the S&P/TSX Composite Index. The largest utility companies—such as Fortis, Emera, Hydro-One and Brookfield Infrastructure—are some of Canada’s largest companies.

    Some of the same income-oriented investors who like utility stocks may also be interested in two new exchange-traded funds (ETFs) that J.P. Morgan Asset Management Canada just launched. The JPMorgan US Equity Premium Income Active ETF (JEPI/TSX) and the JPMorgan Nasdaq Equity Premium Income Active ETF (JEPQ) use options strategies to “juice” the income already provided by higher-dividend-yielding stocks. 

    Kyle Prevost

    Source link

  • Making sense of the markets this week: September 29, 2024 – MoneySense

    Making sense of the markets this week: September 29, 2024 – MoneySense

    The Chinese government commands the economy to grow

    Many people like to sort countries’ economies as either communist, socialist, capitalist or free markets. But these days, every country has some version of a mixed economy. The practical implementation of fiscal and monetary policy is becoming increasingly more grey than our old black-and-white economics textbooks would have us believe. Yet, even within the grey, China’s approach for its economic system is uniquely difficult to define.

    Back in 1962, when asked about building a socialist market economy, future China leader Deng Xiaoping famously said, “It doesn’t matter whether the cat is black or white, so long as it catches mice.”

    Well, the current China leaders have let the fiscal and monetary cats out of the bag, and they’re hoping those cats are hungry.

    We wrote about China’s housing problems about a year ago, warning about rising deflation fears. These issues seem to have gotten worse, and the biggest news in world markets this week was that China’s government decided enough was enough. And in a “command” economy (which is probably the most accurate way to describe its approach), the government has a very high degree of control over economic levers. Consequently, markets reacted swiftly and positively to this news. 

    Here are the highlights of the multi-pronged fiscal and monetary stimulus that the Chinese government has decided to implement:

    • Banks cut the amount of cash they need in reserve (this is known as the reservation requirement ratio) by 0.50%. This will incentivize banks to lend more money (basically “creating” 1 trillion yuan, USD$142 billion).
    • The People’s Bank of China (PBOC) Governor Pan Gongsheng said another cut may come later in 2024.
    • Interest rates for mortgages and minimum down payments on homes were cut.
    • A USD$71 billion fund was created for buying Chinese stocks.

    That last point is pretty interesting to me. Here you have a supposedly communist government essentially creating a big pot of money to spend within a free stock market. The fund is to directly purchase stocks, as well as providing cash to Chinese companies to execute stock buybacks. Good luck defining that action in traditional economic terms. 

    The idea is to give investors and consumers faith that they should go out there and buy or invest in China’s expanding economy. Clearly something major had to be done to jolt Chinese consumers out of their malaise.

    Source: FinancialTimes.com

    Early reports are speculating that the Chinese gross domestic product (GDP) could fail to rise by less than the 5% target set by the government. If so, we’re about to see what happens when the commander(s) behind a command economy decide that the GDP will rise no matter what.

    Kyle Prevost

    Source link

  • Making sense of the markets this week: September 22, 2024 – MoneySense

    Making sense of the markets this week: September 22, 2024 – MoneySense

    U.S. Fed cuts rates for the first time in four years

    The U.S. dollar remains the most important currency in the world, and the American economy is arguably the most important financial system as well. Consequently, when the U.S. Federal Reserve makes a big announcement, it creates an economic wave that ripples everywhere. That’s why Wednesday’s decision to cut the key overnight borrowing rate by 0.50% is a very big deal.

    Many speculated the U.S. Fed would begin cutting rates this week, but it was generally thought it would go with a 0.25% drop to begin an interest rate-cut cycle. The 50 basis points cut lowers the federal funds rate range 4.75% to 5%.

    Source: CNBC

    The U.S. Fed announced in a statement: “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

    Federal Reserve Chair Jerome Powell said, “We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with this inflation. That’s what we’re trying to do, and I think you could take today’s action as a sign of our strong commitment to achieve that goal.”

    Immediately after the news of the U.S.’s first interest rate cuts in four years, major stock market indices responded with a brief jump on Wednesday. But they ended the day nearly flat. That seemed to be a bit of a delayed reaction from investors, as the Bulls returned Thursday with Nasdaq soaring 2.5% and the Dow leaping 1.3% to pass 42,000 for the first time ever.

    Notably, former U.S. President Donald J. Trump continued to criticize the monetary decisions made by the U.S. Federal Reserve. This despite centuries of financial wisdom telling us that politicians getting involved in short-term monetary policy is a bad idea. (See: Turkey – Erdoğan, Tayyip.) At bitcoin bar PubKey on Wednesday, Trump said, “The economy would be very bad, or they’re playing politics.”

    The larger-than-expected rate cut left some commentators questioning if this action would spook the markets. But, if the U.S. Fed manages to thread the needle and cut rates without a recession, it could be a good thing. The historical precedents are very positive for shareholders. 

    Source: EdwardJones.ca

    This large rate cut helps ease pressures on emerging markets that borrowed in U.S. dollars. And, it takes some of the pressure off other central banks around the world that didn’t want to see their currencies devalued too much relative to the mighty USD.

    Kyle Prevost

    Source link

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

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

    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.

    Kyle Prevost

    Source link

  • Private equity, private debt and more alternative investments: Should you invest? – MoneySense

    Private equity, private debt and more alternative investments: Should you invest? – MoneySense

    What are private investments?

    “Private investments” is a catch-all term referring to financial assets that do not trade on public stock, bond or derivatives markets. They include private equity, private debt, private real estate pools, venture capital, infrastructure and alternative strategies (a.k.a. hedge funds). Until recently, you had to be an accredited investor, with a certain net worth and income level, for an asset manager or third-party advisor to sell you private investments. For their part, private asset managers typically demanded minimum investments and lock-in periods that deterred all but the rich. But a 2019 rule change that permitted “liquid alternative” mutual funds and other innovations in Canada made private investments accessible to a wider spectrum of investors.

    Why are people talking about private assets?

    The number of investors and the money they have to invest has increased over the years, but the size of the public markets has not kept pace. The number of operating companies (not including exchange-traded funds, or ETFs) trading on the Toronto Stock Exchange actually declined to 712 at the end of 2023 from around 1,200 at the turn of the millennium. The same phenomenon has been noted in most developed markets. U.S. listings have fallen from 8,000 in the late 1990s to approximately 4,300 today. Logically that would make the price of public securities go up, which may have happened. But something else did, too.

    Beginning 30 years ago, big institutional investors such as pension funds, sovereign wealth funds and university endowments started allocating money to private investments instead. On the other side of the table, all manner of investment companies sprang up to package and sell private investments—for example, private equity firms that specialize in buying companies from their founders or on the public markets, making them more profitable, then selling them seven or 10 years later for double or triple the price. The flow of money into private equity has grown 10 times over since the global financial crisis of 2008.

    In the past, companies that needed more capital to grow often had to go public; now, they have the option of staying private, backed by private investors. Many prefer to do so, to avoid the cumbersome and expensive reporting requirements of public companies and the pressure to please shareholders quarter after quarter. So, public companies represent a smaller share of the economy than in the past.

    Raising the urgency, stocks and bonds have become more positively correlated in recent years; in an almost unprecedented event, both asset classes fell in tandem in 2022. Not just pension funds but small investors, too, now worry that they must get exposure to private markets or be left behind.

    What can private investments add to my portfolio?

    There are two main reasons why investors might want private investments in their portfolio:

    • Diversification benefits: Private investments are considered a different asset class than publicly traded securities. Private investments’ returns are not strongly correlated to either the stock or bond market. As such, they help diversify a portfolio and smooth out its ups and downs.
    • Superior returns: According to Bain & Company, private equity has outperformed public equity over each of the past three decades. But findings like this are debatable, not just because Bain itself is a private equity firm but because there are no broad indices measuring the performance of private assets—the evidence is little more than anecdotal—and their track record is short. Some academic studies have concluded that part or all of private investments’ perceived superior performance can be attributed to long holding periods, which is a proven strategy in almost any asset class. Because of their illiquidity, investors must hold them for seven years or more (depending on the investment type).

    What are the drawbacks of private investments?

    Though the barriers to private asset investing have come down somewhat, investors still have to contend with:

    • lliquidity: Traditional private investment funds require a minimum investment period, typically seven to 12 years. Even “evergreen” funds that keep reinvesting (rather than winding down after 10 to 15 years) have restrictions around redemptions, such as how often you can redeem and how much notice you must give.
    • Less regulatory oversight: Private funds are exempt from many of the disclosure requirements of public securities. Having name-brand asset managers can provide some reassurance, but they often charge the highest fees.
    • Short track records: Relatively new asset types—such as private mortgages and private corporate loans—have a limited history and small sample sizes, making due diligence harder compared to researching the stock and bond markets.
    • May not qualify for registered accounts: You can’t hold some kinds of private company shares or general partnership units in a registered retirement savings plan (RRSP), for example.
    • High management fees: Another reason why private investments are proliferating: as discount brokerages, indexing and ETFs drive down costs in traditional asset classes, private investments represent a market where the investment industry can still make fat fees. The hedge fund standard is “two and 20”—a management fee of 2% of assets per year plus 20% of gains over a certain threshold. Even their “liquid alt” cousins in Canada charge 1.25% for management and a 15.7% performance fee on average. Asset managers thus have an interest in packaging and promoting more private asset offerings.

    How can retail investors buy private investments?

    To invest in private investment funds the conventional way, you still have to be an accredited investor—which in Canada means having $1 million in financial assets (minus liabilities), $5 million in total net worth or $200,000 in pre-tax income in each of the past two years ($300,000 for a couple). But for investors of lesser means, there is a growing array of workarounds:

    Michael McCullough

    Source link

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

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

    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.

    Kyle Prevost

    Source link

  • Bitcoin (BTC) Millionaires Increased by 110% in 1 Year Amid Market Surge

    Bitcoin (BTC) Millionaires Increased by 110% in 1 Year Amid Market Surge

    According to the Crypto Wealth Report 2024 by Henley & Partners, the number of individuals holding over $1 million in digital assets has soared by 95% to 172,300.

    This comes amidst a growth in the crypto market, which has seen its total value rise to $2.3 trillion, marking an 89% increase from the previous year’s valuation of $1.2 trillion.

    Bitcoin Millionaires Rise 111%

    The report revealed that the number of Bitcoin (BTC) millionaires has grown by 111% to 85,400. The number one cryptocurrency has seen notable advancements this year, including its price reaching an all-time high of over $73,000 in March and the approval of spot Bitcoin ETFs in the U.S.

    The Henley & Partners survey also highlighted expansion at the upper echelons of wealth. The number of crypto centi-millionaires, those with digital assets exceeding $100 million, has gone up by 79% to 325. Meanwhile, the ranks of virtual currency billionaires have also seen a 27% uptick, totaling 28 globally.

    Interestingly, Andrew Amoils, Head of Research at New World Wealth, notes that the growth among millionaires has outpaced those with 10-figure fortunes and above, with BTC being a major driver of this trend. “Among the six new crypto billionaires created in the past year, five are Bitcoin-centric,” he explained.

    Amidst this increasing wealth, investment migration has become more relevant. Henley & Partners’ updated virtual asset adoption index revealed that Singapore remains the top destination for investors, scoring 45.7 out of 60.

    Hong Kong and the UAE follow closely, both offering favorable conditions such as tax advantages and advanced digital economies.

    Global Finance Shift

    The report also featured opinions from several experts, with the major theme running through their views being a global financial shift occasioned by virtual currency.

    António Henriques, CEO of Bison Bank, emphasized the transformative effect of such assets on global finance, stating, “We are entering a new era where digital assets are challenging the dominance of traditional fiat currencies.”

    Coinshare co-founder Jean-Marie Mognetti supported Henriques’ view, noting that the SEC’s approval of spot Bitcoin ETFs is facilitating broader institutional engagement.

    Furthermore, Henry Burrows, the top executive at Hoptrail, highlighted a shift in wealth generation, observing that contemporary wealth is increasingly coming from virtual assets rather than traditional investments.

    Another financial expert, Lark Davis, founder of Wealth Mastery, spoke of Ethereum’s pivotal role in the sector, while Guneet Kaur of Cointelegraph pointed out the growing importance of stablecoins as a reliable investment during market fluctuations.

    SPECIAL OFFER (Sponsored)

    Binance Free $600 (CryptoPotato Exclusive): Use this link to register a new account and receive $600 exclusive welcome offer on Binance (full details).

    LIMITED OFFER 2024 at BYDFi Exchange: Up to $2,888 welcome reward, use this link to register and open a 100 USDT-M position for free!

    Wayne Jones

    Source link

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

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

    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.

    Kyle Prevost

    Source link

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

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

    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.

    Kyle Prevost

    Source link

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

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

    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. 

    Kyle Prevost

    Source link