Bart Melek

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. Every day, I'll be joined by guests from across TD, many of whom you'll only see here. We're going to take you through what's moving the markets and answer your questions about investing. Coming up on today show, will be joined by TD Securities Bart Melek to discuss what's been driving that recent move higher in gold and whether that trend can continue. Moneytalk's Anthony Okolie is going to give us a preview of what to expect for some of this week's big economic releases and in today's WebBroker education segment, head of the filing deadline, Jason Hnatyk will show us where you can find tax forms on the platform. So here's how you get in touch with us. Just email moneytalklive@td.com or you can follow that viewer response box under the video player on WebBroker. Before he gets our guest today, let's get you an update on the markets. We are in the thick of earnings season now. We have some heavy weight tech names on deck this week. South of the border, we got the rails and some other names that are gonna be showing us their latest quarterly results in Canada later this week. A bit lacklustre to start off the trading me. And 20,650, you got the TSX down 42 takes, about 1/5 of a person. Did notice some modest movement higher in some of the energy names, so let's check in on Crescent Point right now. 10 bucks and $0.17 per share, it's up about 2%. It's going to be a big week for Teck Resources as well on Wednesday, that is the scheduled day of the shareholder voted in terms of the company's plans to split into two. Glencore in recent weeks has shown up with a bid for the company, doesn't think they should be splitting the company into. There will be a lot developing a couple of days. We'll keep an eye on that today. Tech right now down about 1.8%. South of the border, let's check in on the S&P 500. Some tech heavyweight names are on deck this week, including Meta, the parent of Facebook. I wish they would've kept the name Facebook. But hey, that's just me. Other names on deck this week, including makers. Right now at 4120, your down about 1/3 of a percent. Let's check in on the NASDAQ right now, see how it's raining against the broader market. A bit weaker. Down almost 100 points or almost a full percent. And First Republic Bank, this one is reporting after the closing bells today. There's been a lot of focus on US regional banks. There has been a substantial pullback in the name but today ahead of those earnings at 1540 per share, it is up a little bit more than 8%. And that's your market update. The price of gold studying after a big move higher in recent weeks, but as investors consider the future path of interest rates, will that trend in gold hold? Joining us now to discuss is Bart Melek, global head of commodity strategy at TD Securities. It was great to have you on the program. >> It's always good to be here. Thank you very much for inviting me. >> It's been interesting over the past several weeks to see this pretty aggressive move higher in the price of gold. It seems to be settling right now, waiting perhaps for the next catalyst. What got us here and what lies ahead? >> Okay. Well, it has been a very, very great time for gold. Gold over the last 12 months has outperformed pretty much every other major asset class. It has done well last year, for much of it anyway. It has done very well this year. And our view continues to be quite positive on gold. But in the interim, we do you think there is room for a bit more of a correction. But what got us to this great performance by gold? I think gold has done very well despite of the fact that we have a very, very hawkish Fed, one that has continued to signal a very restrictive narrative for the balance of the year. Inflation continues to be high, yet gold has done very well. And there is a bit of a two-sided story here. At the beginning of the tightening cycle, everyone agreed with the idea that we were gonna have some higher rates and monetary policy that will be restricted. And gold, to everyone's surprise, certainly all the gold bugs were happy to see, gold performed well. And we attribute this to the fact that central banks and retail investors and other investors around the world have very, very strong appetite for physical gold. Indeed, last year, we saw a record 1136 tons of gold being acquired by central banks with even China officially telling us, after a long pause, that they are accumulating gold. Retail investors as well, during a period of high inflation in Europe, in Asia, we've seen very, very strong demand for gold and silver as well and as investors want to have physical metal to protect against the ravages of inflation. >> What are they trying to protect against by record buying a physical gold? >> Well, they are trying to protect against inflation broadly. There is an element of distrust, where they feel much more secure in holding physical bars as opposed to IOUs. And let's not forget that gold is no one's liability. If you have a bar, you have a bar. There is intrinsic value. Nobody has to pay you an interest rate. You just have a bar of gold. That's worth something. And for the central banks, it looks like there is continued a movement towards a bully and, particularly in emerging markets where we have seen the share of gold relative to the US dollar increase and the share of dollars in FX reserves for emerging markets has been going down in favour of gold. And I think that stands from, to some extent, the sanctions that were imposed by the Western world, the US, Europe, on Russia, where it looked like half of their FX reserve in dollars and euros and other Western currencies was rendered useless. There's nothing they can do with it. Meanwhile, gold, we suspect, they can physically move over and get credits at other banks were central banks, and that's something we cannot stop. And the view out there is, not that we agree with, as tensions between China and the Western world, the US in particular, rise, that might be a strategy that the Chinese might want to follow. After all, the Chinese have a massive foreign exchange reserves, about $3.18 trillion, and only about 3.6% of it is in gold. And you compare that to United States, which is well over 60, France, around 60, Germany over 60, Italy, over 60. So they are very much underrepresented in the share of gold they hold in their reserves. Many reasons aside, geopolitics, you might want to have a larger share because the dollar's share in trade it may go lower and you should have currencies and assets that are consistent with your trade flows, not necessarily in what you consider to be a good investment always. There are also worries by central banks and other investors that the US is sky high debt, unfunded liabilities in the form of Social Security and other expenditures, taxes that are relatively low and there might be a stealth monetization where interest rates might remain lower than they ought to, inflation higher above target. In fact, that is a reason why gold has done so well. There is a big discrepancy in what the Federal Reserve thinks the interest rates will be a year from now. >> Than the bond market is thinking, right? >> Yes. I said in my paper that there are 110 basis spreads between the dogs and where the Fed funds future markets says. That was up and down but that is quite a chasm here where traders, gold speculators and investors have a… The Fed has a credibility problem with them. It will remain to be seen who is right in the end and if we see some of that change, we ultimately think that that spread is going to close down a little bit over the next few months. The US economy continues to do quite well and could very well be, we think that it's likely, we are going to have a May hike and that has already started to pricing. >> Is that the short-term pressure on gold? Short-term, medium-term? >> I think that's probably exactly what happened. This rally, the most recent one that brought gold to 2048 or so, the peak, it did extremely well, was very much short cover driven. So people were short covering their positions. There were, of course, some long extensions. Now that we think that spread between where the Fed is and where the market is might be coming in, we could see new shorts being acquired again and maybe some long liquidations where people might want to take some profits. After all, they did very, very, very well. Our view continues to be that the average second-quarter price for gold will be about 1975 average, so almost by definition, given the fact that quarter to date, price is averaging by $2004, so if you do the math, we are still expecting some downside. >> Always interesting self with Bart Melek. We are going to get your questions about commodities for Bart in just a moment's time. And a reminder that you can pass with us at any time. Just email moneytalklive@td. com or fill out the viewer response box under the video player on WebBroker. Right now, let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading. Coca-Cola says higher selling prices are not denting consumer demand for its products. the soft drink giant beat revenue and profit expectations in its most recent quarter. Sales volume grew across soft drinks, sports drinks and its coffee and tea division. When it comes to costs, Coca-Cola does say shipping rates are obviously coming down but it still feeling the effects of higher commodity prices. Bed Bath & Beyond has filed for bankruptcy protection following months of warnings about its viability. The retail says it will start a wind down of its business with a plan to close all of its stores by June 30. Bed Bath & Beyond has been struggling for years with declining sales and a growing debt load. Of course, the name became a favourite among the traders focused on the so-called meme stocks during the pandemic and it did see some pretty large price swings as a result. Disney has started another round of layoffs as it targets 5 1/2 billion dollars in costs savings. This latest round is expected to bring total job cuts to 4000 across several divisions of the company. Disney is expected to embark on 1/3 round of cuts in the coming weeks. Of course, has a target of reducing its staffing levels by 7000 employees. A quick check in on the market, we will start here on Bay Street with the TSX Composite Index. A bit of a down day to start the week. Nothing too dramatic. You're off by 29 points, a little more than 1/10 of a percent. In south border, has earnings season rolls on, we are going to hear from some tech heavyweights this week, a bit of a lacklustre start but nothing too dramatic. You're down about 11 points on the S&P 500, about 1/4 of a percent. All right, we are back with Bart Melek, take your questions about commodities. Plenty of them coming and peered the schedule another one. It makes a robust discussion with gold off the top. We knew the viewers were going to ask about your view on oil. Bears pound the table and recession, bulls pound the table and supply shortage. Who is right? >> We are still bullish on gold. >> On oil? >> On oil, sorry. I've recently published on the subject matter. Look, there will be some selling pressure as we have seen recently. There are all sorts of concerns on the demand side. We are having a Federal Reserve that probably will continue to lift rates in May. Who knows? Maybe one more after that. The other problem continues to be other central banks around the world where we are seeing inflation quite high and they may keep rates higher for longer. Certainly that could well be the case in Canada and that has scared off some people in the market where they've taken off some of the long beds and started to maybe take some short positions. We have written about it, on Friday as well, the derivative side. And there could be some more downside pressure. However, when we look beyond the second quarter, the second quarter is going to be trying for, I think, for a lot of commodities, certainly gold and oil. We see deficits and part of the reason for that, actually, the main reason here is OPEC. OPEC has committed to sharply curtail production. In fact, when we even look at the second quarter were before we were looking at a surplus of may be 1/2 a million barrels a day or so, now we are looking at a deficit. Why? Because OPEC is cutting production, well over a million. Russia is getting in on the game as well. They are thinking that they should cut production. So OPEC is acting very strategically. They want to make sure that when demand slumps due to a slowdown in global economic activity, there aren't going to be the severe price declines. We've seen oil, W BTI, move down 65. Now we are back up. We went north of 80… >> I was going to ask you about that. In the wake of the surprise production cut from OPEC, you got the chart move higher but we sort of drifted. I think we are roughly where we were before the surprises. I mean, is this just a short-term time dynamics of the market? >> I think so. people are of two minds aware demand going to go. Our view is that as we move deeper into 2023,China is going to deliver as much is 1.4 million barrels per day of gross and demands. That's one versus the last quarter of the year. The reason for that is we expect a normalization in China, post-COVID shutdown, it takes time for things to normalize. That would mean logistics, manufacturing. That would also mean jet fuel demand, we think is going to do a lot better and be one of the key drivers. Travel, just like in North America, there is a lot of pent-up demand and you can imagine people being cooped up in their house because of COVID restrictions in China. They want to get out and there is every bit of evidence suggesting to us that that is going to happen and probably accelerate as things normalize. And then you take on the cuts from OPEC and we can envision deficits in the latter part of the year and those deficits will take out a lot of inventories that were built out over the previous 12 months. And to us, that's a recipe for higher prices where we wouldn't all be surprised to see crude trade above $90. >> Is the biggest challenge that these is just a recession that's deeper than we fear? >> Well, that is always the case. If we have an outsized recession that is much deeper and lasts much longer than I think all bets are off, but we are thinking that yes, we will have a slowdown, but it is unlikely to be a very severe and prolonged one. Of course, if that is the case, prices will go below our targets but high still would be positive for me be the latter part of the year in early 2024 because OPEC is very, very able to cut supply. We have a situation where the Western world, US shale and other producers have not really being in invest staying and capacity. Most of the cash flow they have been receiving has been going to pay dividends, buybacks. They've paid off the debt. It's not so much been used to increase capacity. What does that mean? Ultimately, it means OPEC and cut as much as it wants to, virtually, without worrying that they are going to lose market share. If you recall, immediately in the aftermath of the pandemic collapse, OPEC cut close to 10 million barrels per day. So 1 million and a bit is a lot, but they can go a lot more if they need to. They are, I think, quite adamant in saying that they will make sure that the market is in balance and based on their history, it shows that about 90, 90 something W BTI is something they are comfortable with and something, price level they think won't destroy long-term demand but at the same time will assure solvency of their governance so that they can fund programs to mystically. >> A great breakdown on the oil trade there. Another question. I feel like we've got the winter behind us. Heading into this winter we had a lot of concerns about natural gas. How to play out and how are we going forward? >> I hope you're right about the winter. My wife tells me there's no enrichment hills today. So we can only hope, but natural gas has been much, much lower than I think a lot of observers have expected and the key reason is in spite of the fact that winter has been long and dreary, it hasn't been particularly freezing, and we've had some shutdowns of natural gas processing plants. We've been saying new supply from Asia. Well, LNG, that was destined for that market, that wasn't consumed to a great extent because of COVID demand declines heading up facilities in ports in Europe and now with the new capacity, assuming the weather cooperates and we don't have a massive heat wave where air-conditioning demand is very high, we don't see natural gas surge much higher. Probably higher, but were not probably going to go to six, seven dollars again. >> As always, make sure you do your own research before making any investment decisions. we will get back to your questions for Bart Melek on commodities and just moments time. And a reminder of course even get in touch with us at any time. Just a moment to talk live 18 a,. Now, look at our educational segment of the day. With the filing deadline fast approaching, we are having a look at where you can find tax documents on the WebBroker platform. joining us now with Maurice Jason Hnatyk, Senior client education instructor at TD Direct Investing. Jason, people are going to need those documents. Take us through. >> Even if we have the best intentions to get this out of the way early, the deadline is upon us so let's jump into WebBroker so we can see exactly how we can get all of those important details to proceed with our taxes. So the first place I'd like to show everybody is up at the top of the page underneath the accounts tab, under the right hand column, self-service, there is a tax information Centre. On this page, there's lots of frequently asked questions, loss of key dates, lots of really good information. As you said, it's a resource centre to refer back to to make sure you have all the most important details to stay up-to-date on. This link is worth referring back to on a regular basis. All the key dates in terms of mailing time frames on documents as well as tax filing deadline information as well. One quick side note before we can jump into where we can find the documents are on the platform, even with the federal strike here, the tax filing deadline is not changing so everybody needs to make sure they keep that in mind when they are completing their own personal information, their own taxes. So into the platform now, let's jump back into the accounts tab of the top of the page. To get into it the e-services section, it's on the left-hand side under account details, all the way towards the bottom of the column. On this page, you have access to seven years of information. Restored all of this very convenient place. But access to statements, confirmations, tax documents as well as other many important details as well. Let's use tax documents. What's interesting about this section is you contorted by individual taxpayers to kind of really narrow down what you are looking at or you can go back and look at each and every year that we've got stored for you. Were able to search it, we can print, we can download, you can save it to the computer and get it off your account and make sure that this goes off without a hitch and get everything done on time and can accurately reported. >> Okay, so now we know where to start looking around on the plover. What about other support you confide in WebBroker when it comes to taxes? >> You're certainly right, Greg. WebBroker has other support this offer here to you as well. I'm gonna jump back into the platform and show you all of the educational resources that are related to taxes that are available for you. This time, we will go to the learn tab at the top the page. We are going to choose video lessons. Our party taken the opportunity to filter these videos for tax related information. You can see we've got 22 separate videos that are here for your review. So we've got some tips on tackling those taxes early or making it a year-round endeavour. We got some tax-loss selling. Lots of really wide breadth of information is going to help educate the individual investor to make sure you stay on top of this to make sure you are not caught off guard by the CRA at inopportune times. After a tough as always, Jason. Thanks a lot. >> My pleasure. >> Jason Hnatyk, Senior client education instructor at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars. And on a programming now, if you're wondering about how to better utilize low broker plot from, stay tuned for tomorrow's show. Hiren Amin from TD Direct Investing will be answering your question. And right of the contact us at any time. Do you have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so send us your questions. There are two ways you can get in touch with us. You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send. We'll see if one of our guests can get you the answer right here at MoneyTalk Live. All right, we are back with Bart Melek. We are taking your questions about commodities. Let's get to them. What's your view on silver, Bart? >> I like silver. I like it a lot. I like it even more than I like gold and there are several reasons for that. One, of course it's the fact that silver is twice as volatile as gold. It's not great when gold is moving lower because silver is typically related to the one. So if we have a 1% increase decrease in the gold price, silver tends to go on average 2% lower. So that's not great. However, when gold as well, like we think it does, silver should do twice as good. Not always twice as good, but that is historically a very good indicator that silver will do well. So when gold is seen to do well into the latter part of 2023, we think silver does well again. So several reasons for that. One is of course its strong correlation to gold and the fact that it is also a monetary unit with intrinsic value like gold is. Quite often, some refer to it as poor men's gold. >> Yeah. >> You can get a lot more ounces for a lot less dollars. So it's relationship to gold, the same set of factors that drive gold tend to drive silver. It monetarypolicy, high inflationary rates, government debt, international politics, all of those factors. But then silver is a much more used in industrial uses. It's up 60% or so, but more than that. It's for industrial uses, for things like capacitors, electronics, catalysts, chemical agents. And it is one of the key metals that will be used and is used currently for electrification. We are using much more silver per vehicle then we used to because cars are much, much more loaded with electronics. Now, the estimate is we are using between one or 2 ounces of silver per vehicle. Remember, we are producing globally about 100 million+ vehicles. That amount of silver per vehicle is going to grow as these vehicles become more and more EV, electric vehicles. When we incorporate self driving components, all that uses electronic components, computers. You can imagine solder, which uses a lot of silver. Capacitors, chips. So silver is very, very important to electrification and that's just the vehicle market. And then there is solar. Solar panels are one solution that we have been using and we will continue to use and that is going to be a big, huge source of demand. Just remember, the US just recently passed their inflationary reduction act which will subsidize a lot of these carbon free sources of power. And that means silver. For all things electrical, expanding the grade, also silver. You might use copper wiring and you might use aluminum wiring for high voltage transmission, but for all the electronics, for all the… You will use silver as a conductor that will be required. So we see silver as performing quite well and as we recover from a slowdown later in the year, silver for catalysts in the chemical industry, petrochemical industry, pharmaceutical, you name it. That component should increase in demand as well. So silver is going to get benefit from two sides, from a gold like characteristics and from its very, very, very strong association with industrial demand. And there's another factor, supply has been… Not great. Last year, we had a large deficit in silver. I can't remember the number exactly, but somewhere around 400,000 ounces or something like that and in 2023, according to metals focus, we are going to see another deficit. So not only is demand going to tighten things up, but we are going to be functioning in an environment where we are going to see insufficient amount of metal to balance the market. And what usually happens during these situations is you're gonna have to convince somebody to use less and the way to do that is to pay them. So silver, in our opinion, has a lot of upside. >> That's a lot of upside. I gotta ask you, what's the chance that it was the other way? >> Well, there's always a chance. >> Yeah. >> If we have a deep, deep recession, then I think temporarily we could move lower. But remember, deep recession sent to always mean that we will have monetary policy that ultimately after eases. So investors will probably help silver out if we see industrial demand not keeping up and dropping here. So I think with supply and demand fundamentals long term and its growing use in electrification of the world, I think make it a good bet. There is no doubt that there are short-term risks for a correction. But to me, it would probably be a good time to consider if it can go up from there. So we like silver. Little bit more than gold. >> There is somebody intrigued by your musings on silver. We just got a question coming and saying, all right, what's the best way to buy silver? If you're not a big time commodities trader. >> Well, I'm not even sure I'm qualified to give that advice,Silver ETFs. There are ETFs that have silver participation, as there are gold ETF where you can buy physical silver. You know, when I was in equity analytics and strategy many, many, many years ago, we've always heard people talk about the strong relationship between mining company valuations and the underlying commodity. So to the extent that prices move higher, that probably implies that profitability in price earning ratios for some of these companies should do better. Of course, this isn't advice. I'm just exploring what it looks like. > They can check it out for themselves. Great stuff. You mentioned copper briefly there. We are talking about electrification of everything. Someone asks, where you see the price of copper headed? >> there's a strong likelihood that we will see a bit of a correction. 8600 or so price and acceleration at the latter part of the year, as demand picks up and these markets tighten up. Copper has been very interesting this year. If we talked six months ago about copper and I think we may have, we would be talking about the big risks associated with oversupply of copper this year. Well, as it turned out, that didn't materialize. Many companies around the world, for various reasons, labour issues in Peru, logistics and still COVID, meant that we had record amounts, maybe not a record but very strong, very large interruptions in mining activity. And when we look at the supply fundamentals for copper for 2023, we are looking at a balance to a deficit market. That means that the previously predicted sharp declines aren't going to materialize. We are still thinking that we will continue to be off the 9000+ level on the levels I mentioned, but then I think we have a fairly quick recovery. Beyond 23, we see more of a flat and may be some downside pressure mainly because all of those interrupted projects that weren't delivering through 2022 ON through 2023, we think might start to deliver supply and maybe reduce the tightness. However, the longer term, I think copper is going to be fundamentally undersupplied and that is one model, is there any metals in the world you would say that are critical, we talked about critical metals, critical minerals for the transition into electrifying the global economy, that is copper. It is essential to use in EV cars, four electric motors to drive them, for transformers to step down voltage from high-power lines, for switch gears, for the grid, for the components within the vehicles. So it is the quintessential metal for electrification. I would just on a seminar just this morning talking about the massive underinvestment over the next few decades for copper and we are not going to have enough of it and in our opinion, that could very well hinder the speed at which electrification happens and the move to zero carbon. We probably will need significantly higher prices than people are estimating to generate the returns that the market will need to incentivize minors to invest in it. I like copper. It's going to be in short supply. It doesn't mean we don't have challenges over the next year or two. No. We most likely will. We will get some more questions in a moment. As always, make sure you do your own research before making any investment decisions. and a reminder that you contact us at any time. Do you have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so send us your questions. There are two ways you can get in touch with us. You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send. We'll see if one of our guests can get you the answer right here at MoneyTalk Live. As we get deeper and deeper into earnings season, perhaps we are not thinking as much about central bank policy but we've got a pretty big one coming up in the coming days. Our Anthony Okolie joins us now with a breakdown of what we can expect outside of earning. >> Thanks very much, Greg. Yes, we get a look at second-quarter GDP, not second-quarter GDP but GDP for February rather in Canada and TD Securities is looking at a 0.2% increase in Canadian GDP was will be in line with consensus market forecast but will be below stats Canada's estimate of 0.3% GDP growth in February. Now TD Securities believes that should drive headline print was a large contribution from natural resources and construction. However, with the manufacturing industry being a drag on GDP. Retail, wholesale trade will also be a drag on services by TD Securities believes an increase bodes well for the sector. As 0.2% rise leaves first-quarter GDP tracking comfortably above 2% by TD Securities expects a lower flash estimate for the month of March, which will contribute to a lower Q2 printed for GDP. Finally, the February outlook suggests that the economy cooled slightly from January, which is where GDP grows 0.5%. Another focus this week will be the BOC minutes for April 12 Bank of Canada rate decision with a central bank maintained its overnight rate at 4 1/2%, while stating it will continue with quantitative tightening. Of course, the big focus of the minutes will be for any hawkish leaning messaging in which the Bank of Canada will look to be resuming interest rate hikes. Now previously the Bank of Canada governor had discussed whether the central bank raised rates enough at its IMF media roundtables that will be one of the focus is for sure. On the subject of rate cuts, TD Securities did not expect the bank to start cutting rates until the first quarter of 2024. The Bank of Canada remains confident in accordance TD Securities that the economy will slow throughout the year. However, if recent months persists or inflation remained sticky about the Bank of Canada's 2% target, then it becomes more difficult for the Bank of Canada's policy stance to keep rates on hold. Now the Bank of Canada has already expressed concerns with the job market as well as wage growth and elevated inflation expectations. As a result, TD Securities continues to see risks skewed towards the upside, towards more tightening in 2023. Greg? >> That's a great breakdown on our economy, the Bank of Canada. I had to double check my calendar here because April is almost over. Next Wednesday, we got a fed rate decision. That we carefully watched as well. Daddy, the Fed rate decision is coming up next week. Markets are expecting a 25 basis point rate hike. Certainly, the Fed is expected to continue to focus on inflation and so the markets are pricing in a hike. Whether or not they will continue increasing on the road, that something that markets will be watching closely. >> On top of all that, we are in the thick of earnings season. Thanks break it down. >> My pleasure. > MoneyTalk Anthony Okolie. Let's do a quick check in on the markets, the TSX Composite Index on the first trading day of the week. Down a very modest 19 points, just 1/10 of a percent. We've got Cenovus getting a bit of a bid today and we have CN Rail on deck this week as well to report. Cenovus up a little bit more than 1%. Let's do a quick check in on CN to see where it's at at this hour. Cenovus Energy… There it is. Dramatic pause. Boom. There Cenovus. It has some green beside it. Canadian National Railway is up modestly. Let's see how the American market is very. Right now you're down just about six points, not too dramatic at all. Let's get back to our conversation with Bart Melek from TD Securities about commodities. What would a downturn mean for commodities? We have flirted around this one and other questions throughout the show. People are still worried about a recession. >>. Look, generally speaking, a downturn, a recession is never good news for commodities broadly. It could very well be good news for gold, but not necessarily good news for anything else. there is a very simple reason for that. A recession ultimately means a reduction in economic activity and that ultimately means less manufacturing, less consumption of all sorts, that include electronics, vehicles, all the things that are made from raw commodities. if you're not producing cars, you're not using steel as much. You are not using petroleum products. There are a lot of plastics and rubber and things like that that use petroleum. We've already talked about silver. We talked about copper, lead for batteries. Less batteries, less demand. So generally speaking, when there is a recession, a slowdown, you use less materials of all sorts. Prices will go down. Lumber, I don't cover lumber formally but you can imagine that as interest rates go up and you have people losing jobs, they are buying less housing, less is constructed, the demand for lumber goes down. And the problem with commodities is this: there is a fairly priced elastic on the supply side meaning that even if prices and demand goes down, it's very tough to reduce supply very quickly, see you have a situation where prices might start dropping, demand keeps falling and supply keeps going higher and higher. in the mining sector, for example, if you have a mine plan and you had a plan for 10 years, you are not going to stop expanding just because there's a quarterly slowdown. same thing with oil. If you have a massive multibillion dollar oil project, you will continue to do it with the exception of OPEC, but there is usually a lag in response. So demand goes down, supply continues and you have these large price adjustments. that's a general trend in commodity price responses to a recession. Usually pretty significant declines. I have to say, this time around, it's been quite different and many analysts say it's different this time. It hardly ever is different, but it has been a little bit different because we don't have as much supply in inventory as we had in previous cycles. So typically at the end of a cycle, you would have high prices, you would have large inventory accumulation and supply really moving higher. We really haven't had that. For most commodities, inventories are leading by historical standards and we have massive product underinvestment peered so yes a decline but probably by historical standards, prices are unlikely to slump as much as they would based on history. > Bart, it's always great to have you here. I know I always learn a lot when you're on the show and the audience does as well. Thanks to you. >> It was my pleasure. Thank you. > Bart Melek, global head of commodity strategy at TD Securities. Stay tuned. On tomorrow show, Hiren Amin, Senior client education instructor with TD Direct Investing will be our guest. He is going to take your questions about how you get the most out of the WebBroker platform. Of course, you don't have to wait until here and is on the show live. Just email moneytalklive@td.com with your questions. That's all the time we have the show today. Thanks for watching, we will see you tomorrow. [music]