Stock markets soared on the results of the U.S. election.  This upswing has placed price-earnings ratios even further into the stratosphere. Meanwhile many blue-chips are in the ditch even though dividend yields have not been as high for years.  While Covid has had an impact, earnings were falling even before it hit and will continue to decline for the next couple of years.  This has happened while governments have been handing out free money to help keep businesses and individuals afloat. 

At first, individuals used the handouts to save and pay down debt.  Many deferred mortgage payments (still 250,000 of them passed due) went to pay down credit cards, while some went to buy toys and cars.  Today the consumer is back to borrowing. According to the Bank of Canada, household debt to GDP reached 115% in Q2 2020, up from 101% the previous quarter. The same quarter last year came in at 97%. House and car sales are strong along with credit card balances again.  

Today’s zero interest rate is a band aid on a sick economy.  The truth is this makes thing worse because it allows people to borrow more which has resulted in higher home prices and stock markets.  Ironically, people are willing to pay higher prices for homes thereby wiping out any benefit down the road from low interest rates.  These buyers will pay a hefty price when interest rates begin to climb, and the amount of debt stays the same.  Just ask any Calgarian who bought a home a decade ago. 

With little to no savings, increasing debt, and a third of businesses on the brink of closing across the country, people will have to stop spending.   Not surprising, the only job growth in Canada comes from the civil service who Justin is happily handing out pay raises to.  For the rest of us he will do nothing.  He is making sure that disposable income will decrease for a generation because taxes must increase to cover our national debt, which now stands at roughly $37,000 per person. 

Justin refuses to move the country forward.  Britain and Taiwan would be more than happy to trade with us, yet there is no effort from Ottawa to encourage it. Our oil and by-products are already demanded across the globe but cannot be supplied because a lack of pipelines.  Plus, China has told all governments, including Canada, do not sell any military equipment to Taiwan or they will feel the consequences.  Justin always listens to his idol Xi Jinping.

He should be opening the fossil fuel energy sector rather than closing it and destroy thousands of jobs.  Non-renewables create mostly one-time construction jobs compared to fossil fuels which require year-round staff to operate.  These jobs would increase corporate, personal and consumption income tax.  Yet after 5 years in power Justin has told foreign investors to go elsewhere. Companies listened and took over $200b of investment out of Canada, mostly from our natural resource sector.

If Mr. Biden follows through on cancelling the Keystone Pipeline, it will be a costly mistake for America.  Not only does it open the U.S. to being sued for billions that Trans Canada has already spent,  it would tell foreign businesspeople Washington cannot be trusted, so their money will move elsewhere.  Much like Canada under Trudeau.  Not to mention, it will increase other energy costs since the U.S. fracking industry is rarely profitable and requires a much higher price of oil to be feasible.  Canada should be taking advantage of this.

As a note of interest, the S&P index has increased 55% since the 2015 election, compared to only 9% for the TSX thanks to Justin’s do-nothing government.  All Canadians have paid a big price as a result. The truth is Canada is going nowhere under Trudeau’s lack of leadership and nothing will change without a new government.