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Canada’s bank earnings, job vacancies and Michael Sabia’s new job: Must-read business and investing stories

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Canada’s biggest banks reported their second-quarter earnings this week as concerns about economic downturn threaten the sector.Alex Lupul/The Canadian Press

Getting caught up on a week that got away? Here’s your weekly digest of the Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.

The second-quarter earnings from (most of) Canada’s biggest banks

Canada’s biggest banks kicked off this week’s second-quarter earnings season with disappointment. Only one of the Big Six banks, Canadian Imperial Bank of Commerce, topped analysts’ forecasts. Meanwhile, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal and Royal Bank of Canada all fell short of analysts’ expectations. Stefanie Marotta reports that economic uncertainty, inflation and higher interest rates combined forces to hit the profits – and that a worsening economic outlook is prompting lenders to set aside more money for loans that could turn sour. National Bank of Canada will release its results next week.

Michael Sabia expected to be named CEO of Hydro-Québec

Michael Sabia, one of the federal government’s most trusted economic advisers, is leaving his position as deputy minister of finance and finalizing arrangements to become the next chief executive officer of Hydro-Québec. Nicolas Van Praet and Bill Curry report that talks between the Quebec government and Mr. Sabia began after the release of the federal budget in late March. The veteran business leader stepped down as CEO of pension fund giant Caisse de dépôt et placement du Québec in 2019 after a decade at the helm, and has been a central figure in federal policy since the 2015 election of Prime Minister Justin Trudeau.

Have a high-school diploma? Canada has a job for you

Job vacancies in Canada have soared as the economy recovers from the COVID-19 pandemic, but, by and large, these vacant positions have required very little education. According to a new Statistics Canada report, there was a quarterly average of 563,000 job vacancies in 2022 that required a high-school diploma or less. It’s a different story, however, for those with postsecondary education. Last year, there was a quarterly average of 117,000 positions that required a bachelor’s degree or higher – or less than half the volume of unemployed people with that level of education. Matt Lundy takes a closer look at the national shortage of highly educated job seekers in this week’s Decoder.

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Ring of Fire project at risk due to red tape, billionaire owner says

Andrew Forrest, the Australian billionaire owner of mining assets in Ontario’s Ring of Fire region, says the project is at risk because of red tape, the cumbersome consultation process and persistent delays. The project is a key part of the province and Canada’s plans to become a player in metals for electric-vehicle batteries, but it has sat undeveloped for the better part of two decades. Niall McGee points to unproven economics, tension with Indigenous communities, a lack of political consensus and the gigantic capital cost requirements as reasons behind the glacial pace of development.

Introducing a survey gauging the mood of Canada’s most powerful CEOs

What’s on the minds of Canada’s most powerful CEOs? A first-of-its-kind survey from The Globe’s Report on Business and Nanos Research asked a group of top business leaders, representing companies with combined revenues of roughly $224-billion, to anonymously share their views on trade and investment policy, interest rates, labour shortages, cyber attacks and their overall outlook for the Canadian economy. Jason Kirby reports on a few insights from the survey, including figures that reveal more than six in 10 CEOs believe Canada is on the wrong track when it comes to being a place for businesses to invest.

How common is it for adult kids to help parents financially?

The Bank of Mom and Dad is a common catchphrase for parents helping their adult children, but what do we call it when kids support their parents? There’s also some demographic urgency to the issue. Canada’s population is aging, and life expectancy keeps rising. The 2021 census shows that one of the fastest growing age groups is people who are 85 and older. Rob Carrick wants to dig into the economics, and is asking adults who provide financial help to their older parents to fill out this survey.

Sign up for MoneySmart Bootcamp: If you want to improve your financial fitness, The Globe’s MoneySmart Bootcamp newsletter course is for you. This new five-part course written by personal finance reporter Erica Alini will improve your personal finance skills, including budgeting, borrowing and investing. Subscribe to the MoneySmart Bootcamp and you’ll receive an e-mail a week to work a different financial muscle. Lessons will land in your inbox Wednesday afternoons.

Now that you’re all caught up, prepare for the week ahead with the Globe’s investing calendar.

 

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India-Canada row: Visa suspension will not affect OCI services, says official – Hindustan Times

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Wonderland roller coaster stuck upside down for 25 minutes – SooToday

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  • Develop and improve new services
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Non-personalized content is influenced by things like the content you’re currently viewing, activity in your active Search session, and your location. Non-personalized ads are influenced by the content you’re currently viewing and your general location. Personalized content and ads can also include more relevant results, recommendations, and tailored ads based on past activity from this browser, like previous Google searches. We also use cookies and data to tailor the experience to be age-appropriate, if relevant.

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Will Canadian Banks Cut Dividends? The Pending Recession + Good Reads From The PF Community

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Hi everyone, I just realized that it’s been a while since I put together a good read from the personal finance community post, probably because it takes me a while to put together such articles. Anyway, it’s time to resurrect the good reads articles again.

People have been talking about the pending recession for over a year now. Some people believe that high inflation and high interest rates will trigger the global economy to slow down. Somehow, both the US and Canadian economy remain resilient so far in 2023.

As a reminder, some factors that can trigger a recession include:

  • high inflation
  • increasing interest rates
  • reduced consumer confidence
  • higher unemployment rate
  • reduced spending and investment activities

The biggest question is if the economy can continue to grow at a modest rate, instead of shrinking.

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Despite the US and Canadian economies remaining quite resilient, we’re seeing some signs that a recession may be coming…

  • Companies are trimming forces – my company included
  • Overall economic outlook softness
  • A slowdown in consumer spending… many retailers have reported this in their earnings
  • A higher percentage of household income is going toward paying off debt

For people that are still in the accumulation phase, a recession may not necessarily be a bad thing – it will create buying opportunities; for people that are retired or close to retirement, a recession can be more problematic. This is why increasing your cash reserve, reducing equities exposure, and increasing bond exposure are recommended if you are retired or close to retirement.

Many dividend investors are curious whether or not Canadian banks will cut dividends. The Canadian banks have not been performing all that well the past year due to concerns over the Canadian real estate market and mortgages.

Canadian Big Five banks performance

In preparation for a potential economic slowdown, Canadian banks have been boosting provisions for bad loans. This is exactly what the Canadian banks did during the early days of the COVID-19 pandemic.

If a recession does happen and people default on their mortgages, will the Canadian banks cut dividends?

Difficult to say.

My view? Canadian Big Five banks didn’t cut dividends during the financial crisis, they also didn’t cut dividends during the COVID-19 pandemic. Chances are, they will hold off on any dividend increases until the dust settles.

I believe the Canadian banks won’t cut dividends. Instead, I believe they’ll simply hold the payout steady.

But my prediction can only be 50% correct at best. I can be completely wrong!

So, what can dividend investors do? First, don’t put all your eggs in one basket. Make sure you are not over-exposed to Canadian banks. Diversification is important.

Since the Canadian economy is heavily tied to the financial and oil & gas sectors, it’s important to invest in other sectors like consumer staples, high tech, and consumer discretionary. Investing outside of Canada, therefore, is extremely important.

Good reads from the PF community

Here are some fantastic personal finance/investing related articles that I came across recently.

Mark at My Own Advisor wondered, Should you have 100% of your portfolio in stocks? – “DIY investors, readers and passionate investors know from my site that there is no universal answer for every investor, so it’s important to think through both the upsides and downsides when it comes to your investing plan… While a 100% equity investment portfolio could make sense for younger investors, decades away from retirement, keeping 100% of your portfolio in stocks as you enter retirement or remain in retirement could introduce unnecessary risk.

Joseph Carlson discussed things that you need to do before you sell a stock

GYM recently turned 40 and shared 40 Financial Lessons She has learned in 40 years – “Time IN the market is better than timing the markets. Stay invested, stick to your plan. This Visual Capitalist chart illustrates the pitfalls of timing the market. If your money wasn’t invested in the 10 best days of the market, you could lose more than half of your overall return on investment. From 2003 to 2022, $10,000 invested in the S&P500 would yield almost $65,000 but if you missed the 10 best days (which were mostly in 2008 and 2009), you would miss out on more than half of your investment returns than if you kept your money invested.” Congrats GYM on turning 40, you certainly shared similar 40 lessons that I’ve learned.

Risk and Reward of Timing the Market

Mike at The Dividend Guy Blog came up with an interesting Retirement Withdrawal Strategy to avoid panic and enjoy life – “It’s no secret that utilities, REITs, and communications companies, especially telcos, are generous dividend providers. Utilities and telcos are usually mature businesses with stable streams of income, making wealth distribution logical. REITs are obligated to distribute most of their income. Add a few Canadian banks in the mix, you’d already have enough sectors to invest easily 60% of your portfolio, while complying with the “don’t exceed 20% in one sector” rule.

I really like the 17 Questions That Changed My Life from Tim Ferris – “The question I found most helpful was, “If I could only work two hours per week on my business, what would I do?” Honestly speaking, it was more like, “Yes, I know it’s impossible, but if I had a gun to my head or contracted some horrible disease, and I had to limit work to two hours per week, what would I do to keep things afloat?

I thoroughly enjoyed The paradox of the “perfect life” from Rad Reads – “Consider this thought experiment. You and I both aspire to lead rich and fulfilling lives. Good lives. Some might even say perfect lives. Let’s imagine that you worked assiduously to get that perfect life. You have the perfect job. Impactful, high-paying and the ability to be hybrid. You had the perfect home. Massive square footage, impeccably furnished and immaculately clean. You had the perfect spouse. Smart, sexy and a wonderful co-parent. You had the perfect body. Low BMI, 6-pack abs and a full head of hair. Things are perfect. Or are they? Just like the guy with $70 million who’s scared that he’ll have to fend off gold diggers – have you created a new set of worries?

With GIC rate at 5% or higher, is it a good idea to “invest” in GICs? Ben Felix explained why cash is a terrible long-term investment

Katie at Money With Katie explained How to avoid lifestyle creep, don’t live beyond your assets – “It wasn’t until I found myself in a peculiar economic position that a more helpful version of this rule emerged for me: Don’t live beyond your assets.Once I found myself graduating from a median income to a higher one, I straddled the line between two worlds: Do I maintain my exact same lifestyle and invest everything extra, or do I recognize that I can afford a little lifestyle creep?The hard part? There’s no rule of thumb for how to handle such a situation. I felt silly skimping on brand name orange juice, but I was also terrified of backsliding into the old, spend-y habits that used to drain my checking account every month.Just because I was making more money didn’t mean I was wealthy, and I struggled to find balance.

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