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Hello everyone and Welcome to our Q2 2024 web capsule. I'm here with Joseph Antoine MCD Delani, our financial planner, and myself Karim Zakher, your portfolio manager. We're going to break this capsule down into two segments. The first one being little brief discussion on the uh capital gains tax inclusion that was imposed as of June 25th 2024 by the federal government. And then we'll talk about uh the market the situation uh we're in right now which is quite positive but we have to also reflect on 25 years of Economic and financial history that we'll touch on a little bit because it could determine where we're headed going into the future. So uh on that note let's begin with the capital gains inclusion rate information. Perfect Karim. Okay so let's discuss now about the capital gain new tax rule inclusion. So before we start uh what's a capital gain? Very simple. Capital game is when you buy an investment and you resell the same investment at a higher price that you purchase the investment initially. So I did a small um case here where someone is buying for example a second property or rental property at a price of 500,000 and is reselling the property at a price of 1 million. So in this case there will be a capital gain of 500,000. Before the new the new rule um the capital gain was taxable at 50%. Now things are a little bit different. Um you will have the first portion of 200 thou 250,000 that will be taxable at 50% but the second portion of 250,000 will be taxable well 66.67% will be included in your taxable income. So this being said if we add these two to together 290,000 for this transaction will be added to your taxable income compared to before June 25th the tax the added amount would be would have be 250,000. So for the same situation with the new rule 40,000 more will be added to your taxable income uh which is going to bring me to my second Point. Uh the type of revenues inside of a portfolio. You usually or investment you usually have three types of revenues. So you will have interest dividends and capital gain. So let's take this example for someone that is in the higher tax bracket. Um the interests are taxable at 53.3%. Dividends are taxable at 40%. And before the new rule capital gain were taxable at 26.7%. So it was a no-brainer before uh capital gains were the best choice of uh revenues because they were the less taxable. But with the new rule now 35.5% becomes taxable. Uh third topic here is the holding uh companies and the trust. So that rule is the new rule is applying directly on the first dollar of capital gain that is generated. So that makes a huge difference. That makes a huge difference for the capital gain exemption for the operating company. Before the new budget and the new rule it was 1 million that was Exempted as a capital gain when you're selling an operating company. Now the new amount is 1,250,000 that is possible to be exempt from a capital gain selling of a business. Thank you very much Joseph. Very pertinent uh could be very important to a lot of people. It's important to say that if you encounter this situation and you're fortunate enough to make a very large capital gain and you don't want to be hit with the high income taxes give us a call because we have certain tax shelters that are made available to our clients such as flow through shares. It's something I have to explain uh in more detail. I can do it on the uh capsule. You could run it by your accountant your tax specialist and see if it maybe is to your advantage. Let's jump now into the second topic. Uh Karim you've been in the industry for many years now. A portfolio managers for many years as well. Um I want to ask you the question what did the market teach you during the last 25 years? Let's begin with what's going on now. So the markets are uh doing very well. Uh and Main re main participants in this market that's pulling the market up since actually January 1st 2023 are the Magnificent Seven companies. The technology sector. And it's all because of artificial intelligence. It is going to be fundamental. Let's look back at time first. Okay. Let's Zoom back and get it and see what happened over the last 25 years. Okay so we've been through a lot. Okay. Uh especially me being in this industry. I've been through a lot in more than 25 years by the way. But let's just go back 25 years. So we've been through the technology bubble back in 1999. Had you invested in the NASDAQ which is comprised of technology stocks uh at the peak of the bubble in 1999 uh and the bubble of course we all know it burst in 2000 uh it would have taken you 14 years to recuperate your money. Now if you were smart enough to invest a year prior to the to the peak of that bubble it would have taken you 11 years to recuperate your money. So um we must remember that these scenarios can unfold. Right. In addition to the bubble I mean we've had in over the last 25 years wars. We've had terrorism. Uh we've had our housing crisis in the United States. A financial crisis around the world. And more recently we all remember the pandemic. Uh and so we have to also look at the fact that Cycles do repeat themselves to a certain degree. They're not identical but they do rhyme. And eventually in the next five maybe seven years something's going to happen. It's expected. And the only way to mitigate one's portfolio is to be properly Diversified. Which means that you need to buy uncorrelated assets within the portfolio. It's our responsibility to manage the risk within a portfolio. And often I get asked well why isn't this company why isn't this stock going up and why is that thing not doing you know anything. Uh simple reason is you don't want everything to be correlated. What's going up today may not go up tomorrow. And what's not gone up today is probably going to go up tomorrow. So you want to have an uncorrelated portfolio. You want to be Diversified. Because diversification is like an insurance policy. It protects you from situations like 1999. By studying economic and financial history you'll have a better grasp as to what can happen. And it will happen. It's just a matter of time. Right. Right now we're enjoying a nice rally. I'm expecting it to continue until the end of the year. It will not be a straight line. Expect volatility. But the reason there's a rally is because like I said earlier artificial intelligence is going to change the world. It's beginning to change the world. Just like the electric light bulb changed the world. Just like the automobile changed the world. Just like the internet changed the world. Look what we're doing right now Joseph. We're communicating through the internet. Something we could not be we could not do 25 years ago. So the world is going to change. And we've got to change with it. We got to be invested in the right sectors in order to profit from it. But uh at the same time we must always be vigilant that uh things can happen. It could turn on a dime. So uh I'm still very hopeful. It's also good news that the Bank of Canada lowered its interest rate by a quarter point uh last June. Uh it looks like there's going to be another couple of drops between now and the end of the year with their interest rates. That's going to be positive for final assets. The Central Bank in the United States or I should say the Federal Reserve in the United States is also looking to lower rates. So expect a couple of drops between now and the end of the year. Again positive for the markets. Throwing in the fact that there are people sitting with at least six trillion dollars in cash on the sidelines. Uh this is eventually going to make its way into the market. Because this is the least liked bull market I've ever seen. Or one of the least liked bull markets I've seen. Many are not participating. That's not the case for our clients. Because our portfolios are doing well along with the markets. Uh but there are many people sitting on the sidelines waiting for Armageddon. And uh and you know things to collapse. And it never really goes that bad. Okay. When markets go well people think it's going to continue to go well. And when markets go badly like in 2020 during the pandemic people have this belief that it's just going to keep going bad forever. It's not the case. Markets work in Cycles. On that note I want to say thank you for listening to us. Enjoy your summer. We'll be back in October just before the US election. So that's going to be interesting. Uh to see what transpires with that. See you soon. Bye.