We Lost a Legend this Week, CRA Throws Accountants Under the Bus

The Week in Review

The TSX led the way this shortened trading week, and we saw both the S&P 500 and the Dow post marginal weekly gains and again finishing at record-high closing levels. March also now marks the fifth straight positive month for the major U.S. stock indexes and over the five months, the S&P 500 has gained 25.3%. It’s been a nice run.

It was a pretty quiet week from an economic standpoint, but one piece of news that came out caught my attention. In the U.S., the government adjusted its final estimate of Q4 economic growth, now showing GDP rising at 3.4%, up from an earlier estimate of 3.2%. This adjustment didn’t have any immediate affect on the expectations that the U.S. Central Bank will start cutting rates in June.

U.S. Consumer spending, which makes up around two-thirds of the U.S. economic activity, increased at a rate of 3.3%, adding 2.20 percentage points to the GDP growth. This was also an upwards revision from the previous estimate of 3.0%

Last Week’s Poll Question: Ok, this makes more sense. A slight tweak to last week’s poll question fell more into line with what I would have expected. The community was pretty much split right down the middle when it comes to assessing whether the strong bull markets we’ve seen has introduced more caution into investors’ portfolio strategies.

Personally, although I remain predominantly invested in equities, I do feel a bit more caution is warranted right now, and I guess 50% or so of you agree with me. I love how investing is always forward-looking, and it’s only in hindsight that we see the results. The decisions we make today will ultimately shape those results.

In this Edition of The Pulse:

• We Have Lost a Giant - Daniel Kahneman Passes Away

• CRA Blindsides Everyone with Bare Trust Flipflop

• BCE Pays out Big Bonuses

• The Real Estate Fee Landscape is About to Change

• Disney & Ron DeSantis Settle Legal Disputes

• Home Depot makes Record-Setting Deal

• Market Movers | Winners & Losers

THIS WEEK’S POLL QUESTION
(Results in Next Week’s Newsletter)

LAST WEEK’S POLL RESULTS

S&P 500 Weekly Overview

S&P TSX Weekly Overview

Overbought

The Relative Strength Indicator (RSI) can provide a signal that suggest a stock is either overbought or oversold. A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell. Always perform your own due diligence.

Oversold

A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

IN MEMORIAM
We Have Lost A Giant

When I started my investment career back in 1994, one of the most influential figures I came across was Daniel Kahneman, the Nobel Prize winning Behavioural Economist. Mr. Kahneman passed away this week at the age of 90.

His works went beyond economics and covered psychology as a whole, but his groundbreaking work in behavioral economics left an indelible mark on how we understand human decision-making, challenging the long-held belief that people act purely out of rational self-interest.

Mr. Kahneman’s contributions spanned from debunking the myth of purely rational behavior to authoring the best-selling book Thinking, Fast and Slow, which brought the complexities of human thought to the broader public.

As we say farewell to this brilliant man, I’m reminded of the power of thought and the enduring quest to understand the why behind our choices.

As I manage my investment portfolio, and along with it my and my family’s financial security, I will continue to reflect on Kahneman’s teachings as I consider the intricate dance between intuition and logic that guides our every decision.

If you’re not familiar with Kahneman’s works, it’s not too late to start. His wisdom is timeless.

TAXATION
CRA Backtracks on Bare Trust Reporting

Totally coincidentally, I was chatting with my accountant on Thursday this week, and in the roughly 25 years I’ve worked with his family firm, I’ve never heard him as upset as I did during this call.

After literally months of work, and with the past week spending pretty much his entire days scrambling to complete the new CRA requirements for bare trust reporting, just as the bell was about to ring the government threw both accountants and taxpayers under the bus.

Under new tax reporting rules, bare trusts, often used in simple family and commercial transactions, were on the hook to file a T3 return for 2023. Then, unbelievably, literally at the deadline, the CRA did a 180, and announced that those bare trusts didn’t need to be filed after all.

This rollercoaster ride traces back to the 2018 budget aimed at dodging tax evasion bullets. But lumping in bare trusts? Overkill, according to experts, who argue it did more harm than help in the grand scheme of things.

One accounting professional who is keeping a clear head is John Oakey, from the Chartered Professional Accountants of Canada. He praised the CRA’s last-minute decision, and counts it as a victory against red tape.

Who knows where this will go from here. Will the who issue be shelved? Will a one-year extension allow everyone to figure it out and do it right next time around? Only time will tell, but hopefully this will serve as somewhat of a catalyst for better guidance and collaboration between the CRA and the Department of Finance, making things more fair for the taxpayer. I’m crossing my fingers, but not holding my breath.

SPONSORED CONTENT
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Disclaimers

¹ Source: BMO Global Asset Management Mar 15 2024. ZMMK performance: 1 yr 5.08%, 3 yr x, 2 yr 3.87%, SI 3.45%. ZST performance: 1 yr 5.37%, 3 yr 2.53%, 5 yr 2.26%, SI 1.95%.

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This content is sponsored by BMO Exchange Traded Funds.

This content is intended for information purposes only. Beavis Wealth is compensated under this arrangement by BMO Exchange Traded Funds. The views expressed herein are subject to change without notice. The content contained herein is not, and should not be construed as, investment advice to any party. Any securities described herein must be evaluated relative to the individual’s investment objectives and risk tolerance, and professional advice should be obtained with respect to the individual’s particular circumstances.

The views expressed herein regarding a particular company, security, industry, or market sector should not be considered as an indication of trading intent of any investment funds managed by BMO Global Asset Management. Any reference to a particular company is for illustrative purposes only and should not be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by BMO Global Asset Management is or will be invested. This social media network is an independent organization and is not affiliated with BMO Global Asset Management.

EXECUTIVE COMPENSATION
BCE Bonuses

In a move that's raised eyebrows and stirred up more than a few conversations, BCE Inc. has dished out millions in bonuses to its top brass—even as it missed the mark on its 2023 financial targets.

BCE's CEO Mirko Bibic is pocketing a $2.96 million bonus as part of a $13.43 million compensation package for the year. His bonus saw a slight dip from $3.09 million last year, but that's still not a bad deal if you can get it.

Wade Oosterman, the retiring president of Bell Media, wasn't forgotten either, securing a $1.08 million bonus within his $4.87 million farewell package. And it doesn't stop there—three other executives enjoyed bonuses ranging from $853,470 to $923,400.

This all unfolds against a backdrop of BCE announcing 4,800 job cuts due to challenging economic and regulatory landscapes.

Despite these cuts and slowing its dividend growth to a 3.1% increase for 2024, BCE insists that its executive compensation strategy is all about attracting and retaining top talent.

Ms. Murphy says that the pay reflects the company's performance, aligning with strategic goals and ESG objectives, even as they acknowledge missing all three financial benchmarks for bonuses.

With a corporate performance index at 93% and bonuses adjusted for individual performance, it's clear BCE is trying to balance market competitiveness with performance rewards.

Mirko Bibic's compensation, interestingly, increased by $500,000 to address market competitiveness, with his stock award rising to $8 million. Despite these numbers, his total reported compensation actually dropped by about $160,000, thanks to a decrease in the estimated value of his pension.

REAL ESTATE
Real Estate Landscape Set to Change?

There was some pretty big news coming out of the real estate market this week, and even though this is U.S. based, it’s not hard to imagine that the way things are done here in Canada can’t be too far behind.

In a groundbreaking move in the U.S., a real estate trade group has agreed to a landmark deal that could see the end of the long-standing six percent commission. Here at home, two current lawsuits are challenging the status quo, aiming to shake up how Realtors charge their fees.

Lawyer Garth Myers says that these lawsuits are calling out what they see as a monopoly on how fees are set, pushing for transparency and fairness in the market.

For those wondering whether this is a big deal or not, let’s look at a few numbers. In places like Toronto and Vancouver, the average home sale could rack up to $61,250 in Realtor fees. In these cities and many more across the country, fees on a $1-million home could range between $29,500 to $34,000.

While this legal drama unfolds, the conversation has sparked a broader debate. The U.S. settlement has been met with resistance, with some saying it misunderstands the real estate business.

As the U.S. and Canadian real estate industries brace for potential changes, it's a reminder of the evolving landscape. Murtaza Haider, a real estate management professor, tempers expectations, suggesting that changes won't upend the market but will offer buyers more negotiation power.

Garth Myers says that the way things have been done for so long may actually cross the line into criminal behaviour.

So, whether you're selling, buying, or just watching from the sidelines, this saga is one to keep an eye on. It's more than just about fees; it's about the very fabric of real estate transactions.

LEGAL
Disney / Florida Drama Deal

Walt Disney and Florida Governor Ron DeSantis have called a truce in their long-standing legal battle.

After years of legal disputes and public disagreements, the two parties have agreed to a settlement that promises to turn a new leaf in their tumultuous relationship.

The heart of the conflict began when Disney publicly opposed a Florida bill that critics dubbed "Don't Say Gay," sparking a fiery exchange between the entertainment giant and DeSantis. The governor retaliated by dismantling Disney's special privileges within the Central Florida Tourism Oversight District, a move that Disney did not take lightly, leading to multiple lawsuits flying back and forth.

However, in a plot twist worthy of its own Disney movie, both parties have decided to lay down their arms. DeSantis put a positive spin on the whole thing:

The agreement involves Disney dropping its lawsuit against the special tax district over public records, and both parties withdrawing from all state-wide litigation against each other.

This resolution not only marks the end of a high-profile feud but also sets the stage for Disney to potentially enhance its development plans in Florida. As both Disney and DeSantis move forward, it seems they're both ready to leave behind the battles of the past and look towards a future that benefits both the magical world of Disney and the sunny state of Florida.

MERGERS & ACQUISITIONS
Home Depot’s Biggest Deal

Home Depot has announced an $18.25 billion deal to acquire SRS Distribution, setting the stage for a big move forward in its goal of servicing the needs of professionals in the industry. This isn’t just any acquisition; it’s Home Depot's largest ever, making a clear statement about their commitment to dominating the pro sales market.

The deal, expected to close within this fiscal year, will be financed through a combination of cash on hand and debt.

Ted Decker, Home Depot’s CEO, described the acquisition as “a complementary accelerator” to their ongoing efforts to draw in more professional customers, boosting Home Depot’s total addressable market by $50 billion. The move comes at a time when the Atlanta-based retailer is doubling down on its network of distribution centers designed to efficiently supply pros with essential materials directly to job sites.

Despite potential regulatory hurdles and the anticipated dilutive impact on earnings per share due to amortization, Home Depot is optimistic about the deal's approval and its positive cash earnings impact in the first year post-acquisition.

With plans to open new stores and distribution centers, Home Depot is gearing up for a new phase of growth, aimed at delivering even more value to its professional and DIY customers alike.

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BMO ETF Disclaimer:

This content is intended for information purposes only. This content has been prepared by Beavis Wealth and represents its assessment at the time of publication. Beavis Wealth is compensated under this arrangement by BMO Exchange Traded Funds. The content contained herein does not necessarily represent the views of BMO Global Asset Management. The views expressed herein by Beavis Wealth are subject to change without notice. The content contained herein is not, and should not be construed as, investment advice to any party. Any securities described herein must be evaluated relative to the individual’s investment objectives and risk tolerance, and professional advice should be obtained with respect to the individual’s particular circumstances.

The views expressed herein by Beavis Wealth regarding a particular company, security, industry, or market sector should not be considered as an indication of trading intent of any investment funds managed by BMO Global Asset Management. Any reference to a particular company is for illustrative purposes only and should not be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by BMO Global Asset Management is or will be invested. This social media network is an independent organization and is not affiliated with BMO Global Asset Management.

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