Insights: Electric vehicles, alternative energy solutions, underused housing tax + eight-legged friends
Good reads:
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·???????? Weekly Investment Strategy
·???????? Syrah Is California’s New Red Darling
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Best quote of the week:
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“Coming up with an idea is the least important part of creating something great.” – Larry Page
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Best soundbites of the week:
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The Wall Street Journal reported that electric vehicle (EV) sales have risen 51% this year through September, but the growth rate has slowed, and unsold inventory is starting to pile up for some brands. WSJ notes that carmakers are reacting to the slackening demand by cutting prices and offering discounts on EVs, so that’s good news if you’re in the market for one. But is the slowing a cause for concern if you’re a potential EV buyer? There are a few reasons for the slowdown, but none are related to EV quality:
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The first wave of buyers willing to pay a premium for a battery-powered car has already made the purchase, dealers and executives say, and automakers are now dealing with a more hesitant group, just as a barrage of new EV models are expected to hit dealerships in the coming years […] many consumers are reluctant to make the switch, deterred by high sticker prices and the inconvenience of driving a vehicle that has a limited range and needs regular recharging […] For many consumers upfront costs remain too high, especially with interest rates going up, dealers and analysts say. Prices will likely have to come down to appeal to a wider range of car shoppers, many of whom are accustomed to paying under $40,000 for a new vehicle. – The Wall Street Journal article
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When many investors think of the term ESG (Environmental, Social, Governance), they think “green” or alternative sources of energy. In the lead up to the 2020 U.S. elections, many alternative energy stocks outperformed traditional energy stocks by a significant amount, only to give up that performance gap over the last three years. Many people have blamed the political backlash against ESG, but it hasn’t been that at all:
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What changed? Interest rates. While government mandates are driving investment, private sector demand has slumped on higher borrowing costs […] Higher interest rates are impacting these companies' finances […] higher financing costs are much more costly for these companies. Higher interest rates are also pushing down valuations of these stocks.
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What led many ESG stocks to give up all their relative gains wasn't policy changes, earnings disappointments, or the cost of oil; it was largely the result of rising interest rates. While higher interest rates may maintain the unattractive environment for ESG stock performance in the near term, should interest rates begin to decline it is possible alternative energy stocks could regain their lost luster for investors. – Charles Schwab & Co, Inc. article via Advisor Analyst
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Best visuals of the week:
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If you hear the term “VIX” in financial media, they’re referring to something called the CBOE Volatility Index. By definition, it is a real-time market index representing the market's expectations for volatility over the coming 30 days.
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As I’ve talked about in the past, the periods when investors are most negative about the markets are typically during periods of high volatility…and is often a good indication that markets are about to change for the better in short order.
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Below is an interesting chart and quote from my Raymond James analysts that shows how the VIX has historically moved over the course of a year. Often the late part of the summer and into the fall is when the markets can be the most volatile (and therefore the VIX is a higher number).? The last quarter of the year tends to be a stronger period for markets, so the VIX (and correspondingly, general investor stress) tends to go down.
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“This is the average seasonal pattern using data from the past 30 years, and as you can see, we are currently in the final stage of strength for the VIX. Generally, a falling VIX corresponds to stabilization in the equity markets, so if this year follows the historical norms, we could be putting the worst of the declines behind us sooner rather than later.”
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Below is an interesting visual that I came across from McKinsey & Co. They found that products with environmental, social, and governance-related claims gain 1.7 percentage points of sales growth compared with products that don’t. Millennials and Gen Z especially indicate a willingness to pay more for products that are environmentally friendly.
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Underused Housing Tax:
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Canada’s new Federal Underused Housing Tax (“UHT”) has been in effect for owners of Canadian residential properties as of December 31, 2022. Although it is intended for non-Canadian owners, it can catch some Canadians too. Below is some great information from accounting firm Andersen on who might be impacted:
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“…where individuals own the property in their capacity as a trustee of a trust or partner of a partnership, they are not excluded owners but “affected owners.”?Affected owners are required to file an annual UHT tax?return to report their ownership and claim their exemption to the tax.
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Many Canadians own shares in private Canadian corporations that own Canadian residential properties. These Canadian corporations are required to file the annual UHT tax return to claim applicable exemptions.”
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Not sure if this applies to you?? Here are some examples outlined by Andersen:
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UHT tax returns are required in the following situations:
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·???????? Canadians who own their homes in a trust, such as seniors who have set up Joint Spousal Trusts or Alter Ego Trusts;
·???????? Canadians who hold residential property in title for another person where it results in a trust relationship;
·???????? Canadians who own their property as a partner in a partnership;
·???????? Canadians who own shares in a Canadian corporation that owns Canadian residential property.
领英推荐
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The penalties can be pretty hefty if you don’t file on time (upwards of $10,000 depending on your classification under UHT). Consult with your accountant if you’re unsure of your status.
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You’re Invited: Quarterly Update and Market Outlook
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Join Neil Linsdell, Head of Investment Strategy, RJL, Eugenio Alemán, Chief Economist, RJA, and Tavis McCourt, Institutional Equity Strategist, RJA, for a quarterly update on financial markets and insights on what to expect through the end of the year.
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Date: November 2, 2023
Time: 10:00 am PT/ 1:00 pm ET
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Contact me for a complimentary registration link.
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I’d love to hear from you:
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Do you have a question about the markets? Or perhaps you’d like to learn more about a particular financial planning topic? Maybe you’ve got a question about your own personal situation?
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Send me your question, and I’ll include it as a topic in an upcoming newsletter: [email protected].
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Beyond the markets:
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Okanagan Similkameen Stewardship shared some great facts about Western Black Widow spiders in their latest newsletter. Given that we are just around the corner from Halloween, I figured it would be a great time to share them here.
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·???????? Female black widows are recognizable by their infamous black and red hourglass motif, but males look completely different. Male black widows are mostly greyish brown with a bit of striping on their abdomen and more resemble a run-of-the-mill garden spider than their striking female counterparts.
·???????? Many highly venomous animals have distinct colours or patterns that let potential predators know that hunting them is a bad idea. This is called "warning colouration" or "aposematic colouration".
·???????? Female black widows are more venomous than the males.
·???????? Male black widows almost never bite and are also about half the size as the females.
·???????? When the males are looking for females to mate with, they will stop feeding and use all their time looking for the right lady. When they find a female, the males will use her web to communicate and let her know he is present. After an elaborate courtship, they will mate.
·???????? It is thought that the female eats the male after mating to help her produce a healthier brood, but this doesn't happen every time. If the female is well fed and has enough stored energy to produce healthy offspring, the male might not be eaten.
·???????? There is also evidence that male black widows can tell which females are hungrier and more likely to eat them, and so, the males avoid them.
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Source: Okanagan Similkameen Stewardship
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As an aside, the above picture was from this summer, when I got the opportunity to hold a female tarantula. Her name was Rosie and she was definitely one of the highlights of the day!
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Thanks for reading, and I wish everyone a great weekend!?
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Cheers,
Kim
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Kim Inglis, BCom, CIM, PFP, FCSI, RIAC
Portfolio Manager
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T: 416.777.6417 (Toronto)
T: 604.654.1160 (Vancouver)
T: 250.979.1803 (Kelowna)
TF: 1.877.363.1024
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The opinions expressed in this newsletter are those of the Financial Advisor Kim Inglis, BCom, CIM, PFP, FCSI, CAFA and not necessarily those of Raymond James Ltd. (“RJL”) or Raymond James (USA) Ltd. (“RJLU”).? Statistics, factual data and other information presented are from sources, believed to be reliable but accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James Ltd. and Raymond James (USA) Ltd. is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James Ltd. and Raymond James (USA) Ltd. financial advisors may only transact business in provinces and/or states where they are registered. Follow-up and individualized responses involving either the effecting of or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in provinces or states where the financial advisor is not registered. Raymond James Ltd. is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund. Raymond James (USA) Ltd. is a member of FINRA/SIPC. Raymond James (USA) Ltd. (RJLU) and advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. This provides links to other Internet sites for the convenience of users. Raymond James Ltd. is not responsible for the availability or content of these external sites, nor does Raymond James Ltd endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same privacy policy which Raymond James Ltd adheres to.