Week Ending Friday, October 23, 2020 www.mackaygroup.com 1-800-561-4468 MacKay Group Wealth Management. Our mission is to provide our clients superior investment advice, products and service. Serving clients and friends at RBC Dominion Securities Inc. – a member of RBC Financial Group since 1983. HOW I SEE IT – by Bruce MacKay real GDP growth 33.4% annual rate (consumption, Grant Conference/Infrastructure+/ More growth. business investment, homebuilding, government, Equity markets drifting lower this week- is it the trade, inventories) - without shut down US economy calm before the storm - the election storm - media would have grown 2.5% versus a year ago - without sure think so. Morgan Stanley says buy stocks if full reopening economy will likely take until 2023 to there is an election plunge (Bloomberg). get back to where it would have been otherwise - we look forward for more growth in the quarters ahead Positives: AAII investor sentiment this week - but nothing anywhere close to this pace.” bullish up to 35.75% - bearish down to 33% - while not a good buy indicator definitely a good positive sentiment reading. Negatives: Jim Chanos of KYNIKOS Associates Bruce Flatt (CEO Brookfield Asset Management) comments from the Grants Conference include - presented at Grants Conference Tuesday - THIS TIME IT IS DIFFERENT - reoccurring theme‘s highlights include - "$75 trillion of private from bubbles past include- 1. Disruptive narratives/ institutional money to be invested - look for all technologies. 2. State sponsorship/ involvement .3. infrastructure assets to move to private hands - Larger than life pied pipers 4. Financial innovation. instead of capital crowding returns the investable When the ducks quack feed them - US IPO and universe is growing - governments can tax or sell SPAC $ raised at all-time highs. SPAC s are blank infrastructure - those with liquidity great check IPOs and have raised $54B in 2020 year to opportunities emerge in a recession - great assets in date and exceeds the combined $ raised from 2008- weak hands like properties will recapitalize through 2019. acquisitions - publicly listed securities globally are "If you bought every company that lost money in trading at fraction of long-term value and are great 2019 that had a market cap of $1B (approx. 261) long-value purchases - strong will get stronger you’d be up to 65% so far this year "Joel Greenblatt. while traffic is down customers are excited to be back in our stores and their intent to purchase is Collective Wisdom Quotes from E = Mac2. high (CEO Foot Locker) - long leased office cash If you don’t know where you are going you will end flows are the same today as pre-Covid - low interest up someplace else. Yogi Berra. rates = higher office valuations ( free cash flow to owners is higher + Cap rates are lower = values are Be well. Bruce higher) - Data infrastructure is very large , 100 year upgrade opportunity ($5 trillion opportunity) - rates Stock of the Days this week include: CAE, UNH, are low and look to stay that way - investment pools BAM.A, NFLX, ENB. of $100 trillion are looking for yield - investable universe expands as government deficits grow" Brian Wesbury (First Trust) Monday -. "There is nothing normal about 2020 recession - US GDP drops at 31.4% annual rate in Q2 - biggest drop since the 1930s - now a V-shaped recovery - expect 3Q Page 1 10/23/2020 THIS WEEK’S NOTES & QUOTES - News and Opinions Worth Repeating Feds 'exploring all options' as airlines grapple with COVID-19 Industry Minister Navdeep Bains said the federal government is "exploring all options" for Canada’s airlines as the industry attempts to navigate a historic collapse in air travel due to the COVID-19 pandemic. "What the airline industry is facing is something they never could have imagined. The border restrictions and the lack of travel have significantly had a negative impact on the balance sheets of the airline industry," Bains told reporters Thursday. "We recognize that as we go forward we need to explore all possible options. I don’t want to prejudge the outcome, but I would say we are exploring all options." Bains did acknowledge the government is working with the airlines on "next steps on how to support them and the workers and their communities" but didn't specify whether it would demand equity stakes or board seats from companies that tap any industry-specific financial aid packages. Airline requests for financial assistance from Ottawa have thus far failed to materialize in funding while the United States and some European countries have offered carriers billions in financial aid, with strings attached including partial government ownership and emissions reduction commitments. https://www.bnnbloomberg.ca/feds-exploring-all-options-as-airlines-grapple-with-covid-19-1.1511383 CN Rail won't 'chop, chop, chop' to drive efficiency: CEO Canadian National Railway Co.’s top executive said he isn't prepared to further slash costs to keep the railway's operating ratio low while risking the company's long-term future. "There has to be a balance between how hard this whole pandemic is on our people and also our financial performance. We can't do everything related to cost, which is 'chop, chop, chop,'" said Jean-Jacques Ruest, CN's chief executive officer, in an interview with BNN Bloomberg on Wednesday. "We have to look to 2021 and our long-term future and what we need in terms of talent and technology to get ready for 2021, and 2025 and 2030." Page 2 10/23/2020 Ruest's comments come amid early signs that the company is seeing improvement in the Canadian economy and that conditions will continue to improve toward the end of the year. “Broadly speaking we're cautiously optimistic about 2021, but right now there's good momentum that 2021 should be better than 2020,” Ruest said. https://www.bnnbloomberg.ca/cn-rail-won-t-chop-chop-chop-to-drive-efficiency-ceo-1.1511280 10 years on: How Netflix in Canada has evolved a decade later Netflix Inc. has officially reached the 10-year mark in Canada. The streaming service made its Canadian debut on Sept. 22, 2010. “It's just such a good value, I think a lot of people will subscribe," Netflix co-CEO and co-founder Reed Hastings told CTV News in a television interview during the company’s 2010 launch event in Toronto. Indeed, Netflix has built an army of Canadian users. The company signed up one million subscribers within 10 months of its launch. By the end of 2019, it had nearly seven million subscribers in Canada — that’s almost one fifth of the total population. “In the 10 years since Canadians first welcomed Netflix into their homes, we've been thrilled to share so many great stories with our members and to bring some great Canadian entertainment to the world,” Netflix co-CEO Ted Sarandos told BNN Bloomberg in an email. https://www.bnnbloomberg.ca/10-years-on-how-netflix-in-canada-has-evolved-a-decade-later-1.1497551 EU shutting the door to Canadians is a wake-up call to ramp up our COVID-19 efforts What a difference a few months make. Over the summer, Canadians were riding high on the notion they had flattened the curve. In comparison, COVID-19 infections in the neighbouring United States had spiked to new highs. Then the fall arrived, and coronavirus case numbers in Canada started to surge. In response, the European Union removed Canadians from its list of approved travellers on Thursday. Also, U.S. President Donald Trump made a point of noting Canada's COVID-19 "flare-ups" in a recent speech https://www.cbc.ca/news/business/canada-covid-19-cases-surge-eu-travel-u-s-trump-1.5761649 Poloz 'not really' worried about Canada's housing markets Former Bank of Canada governor Stephen Poloz says he’s “not really” concerned about Canada’s housing markets right now even as sales and prices heat up in the largest cities. Poloz made the comment in a conversation with BNN Bloomberg’s Amanda Lang Tuesday at the Bloomberg Canadian Fixed Income Conference, pointing to a “K-shaped” economic recovery that’s taking place amid the COVID-19 pandemic. “The top part of the K has recovered well. Basically, that pertains to around 95 per cent or a little more of the economy,” Poloz said. “The bottom part, where the damage is the greatest, it’s about five per cent or less of the economy,” he added, pointing to industries such as retail, hospitality, and the airline sector that have suffered the most. Poloz said while there’s a possibility of long-term unemployment in those sectors, the other 95 per cent — that is, the upper-half of the K — will determine how the economy will behave. “And with interest rates at generational lows, you are bound to see a certain amount of heat in the housing market,” Poloz said. “We have months of pent-up demand coming through there, and of course we’re seeing the results of that combined with low interest rates now.” https://www.bnnbloomberg.ca/poloz-not-really-worried-about-canada-s-housing-markets-1.1507619 Page 3 10/23/2020 CANADIAN MARKETS I. Canadian Fixed Income IV. News we recommend on our CDN Holdings Benchmark Canada Government Bonds Market prices as of market close on Oct 23, 2020 Corus Entertainment Inc. (CJR) Oversold with Meaningful Upside in a Return to Sustainable Growth Scenario Ranking: Outperform (RBCCM). Price C$3.38 – TargetC$5.00 Canadian National Railway (CNR) Company Q3 below expectations – looking for operating leverage to improve Ranking: Outperform (RBCCM). Price C$137.36 - Target C$144.00.