“…I should end this brief appreciation of genius leadership by noting it has inspired other countries. Just today Ukraine has declared a 30-day state of emergency. This is the same length as ours, but in Ukraine’s situation it comes with a lesser threat. Just a massing of Russian soldiers on the border threatening armed invasion. It’s not like some insidious workers are parking their trucks and setting up bouncy castles. Now that’s an emergency!”

…Rex Murphy, National Post, 02/25

Professional protesting in Canada became a big industry pretty much when Trudeau came to power. Over the last 6 years there have been numerous protests. Many involved blocking roads, the railways, and work sites. Some were for social concerns.  Axe wielding environmental extremists destroyed a pipeline camp during the Ottawa protests. Many protestors have ended up in court but face no consequences when they disobey court orders. This is a signal to all professional protesters that they will have a free reign to stop the actions of businesses and in some cases governments.

Some of those scary truckers lost their trucks, had their bank accounts frozen, put in jail, and threatened to never be able to have a passport again. While it must have been annoying for the residences of the wealthy and autocrats in their downtown Ottawa neighbourhood, it is to be expected now and then in the capital city of any country.  Not according to Trudeau though, unless it is about climate change.   

The Ottawa protest was big news around the world. The President of El Salvador was recorded laughing at Canada for how Trudeau handled it. This was true for many major broadcasters from other countries. So many world leaders wonder what is wrong with us.  Especially since we have the potential to be one of the planet’s wealthiest countries because of our resources.

Whenever a leader decides to bend the rules to fit their needs like Trudeau does again and again, democracy becomes at risk and a decline in the standard of living followed.  Canada today is on the slippery slope of losing its democracy. We must change our attitude and get responsible people running the country. Justin is so out-of-touch with the real world it is mind boggling and scary.

Today the immediate threat to Canada is if Justin decides to prorogue Parliament again. He has said he wants to be PM for life. He believes he is the smartest person in the land when he is an expert on nothing. If he does pull this gimmick again and no one stops him, Canada will be in deep trouble. You think the Convoy to Ottawa was bad, the proroguing of Parliament will bring out violent protests from coast to coast and military use will not be ruled out.  Without all rules of law being followed the same way, democracy will disappear. Canada desperately needs new people who truly care for our country.

Because of both political risks and higher interest rates, we feel deflation will occur by late spring and those with debt will feel severe financial pain. Consumer spending for the last half of 2022 will be weak because of this. Deflation will first appear in the real estate market because interest rates are rising and there is way too much investment in the market. Crypto’s have already started to collapse. Bitcoin alone has lost over $1t in value over the past 3 months and it is believed the rest of the crypto market has lost another $1.5t.   Plus, how many investors have already been wiped out?  This means less money available for consumer spending and investment.

With the price of oil soaring and interest rates beginning to climb, we must suggest you raise your cash weighting to 40% from 30%.  Both will delay the global economy from recovery by a few months.

During the late 1970’s and all of the 1980’s the hottest economy was Japan.  It’s main stock market, the Nikkei, was one of the best performers during this period.  So much wealth was created for the Japanese that the worry of the day was they would end up buying the world.  At the time they were buying prime real-estate across the globe.  Their companies were amongst the wealthiest and Datsun at the time was the leader in the building of reasonably priced cars.  It seemed as if nothing could go wrong for the country.

By the late eighties, the economy started to slow.  On December 29, 1989, the Nikkei closed its all-time high of 38,916. After falling for over 8 years, it bottomed in February 2009 at 7,650, or by roughly 80%. The collapse of the stock market was not because of horrible earnings but rather too much debt. On December 31^st   of last year, the index closed at 28,000, which is still 33.8% below the peak set 32 years ago. 

 Japan’s interest rates have been stuck below one percent and there were a few short periods of negative rates since then.  Yet the economy never really experienced a depression. It mostly bounced along as asset prices deflated around them.  It is interesting that home prices fell by 70% by 2001 even though interest rates stayed low. This is because there were no more capital gains to be made and investment left slowly, creating rental yields that competed with dividend.  The same will occur in Canada.

There are many similarities between Japan 30 years ago and the West today. Mainly record consumer and corporate debt on the back of record low interest rates. Throughout history whenever bouts of wild speculation like we are experiencing occurred (Tulip Bulb, South Sea Bubble, U.S. railroad bonds, the Tech Bubble etc.), all the excess money was eventually wiped out of existence and left many people and banks bankrupt.  When one looks back, we are now into 77 years without a meaningful contraction.  This is either the longest on record or close to it.

Since we rarely learn from past mistakes, are we about to repeat history?  Prices can still go higher since greed is abundant around the world and money is cheap.  No one can say when the party will end, but it will.  Most people and all governments are not prepared for a correction.  Both are drowning in debt with little savings in the bank, a prescription for future trouble. 

A correction across the whole economy is inevitable. Prepare today, so you’re not caught off guard.  It is amazing when trouble begins how many buyers disappear and how many investors are forced to sell at any price to save what they can, thereby sending prices even lower.

Most of the 11,000 crypto will become worthless over night.  Bitcoin has already wiped out over $2t of investors money since late November. Once all the borrowed money used to buy it is included the losses total $2.5t.  Home prices will fall in Canada to a level justified by family income (buying a home at 3-4 time’s household income compared to 6 today).  Like cryptos, NFT prices will collapse as there is no real exchange for this market.  How do you sell at fair market value without one?  I have never seen one standardized trading history of crypto tokens and NFT’s. 

We believe we will go down the same path Japan did over 30 years ago and experience a generation of price deflation and slow economic growth. The economy will experience a slow leak before flattening.  Prices for just about everything today are too high because of debt, low interest rates and temporary supply issues. When you add in low personal savings and huge debts, trouble is just around the corner. CASH is and will stay for months to come the number one investment as assets decline in value.

The only thing holding Canada back is Ottawa. This will be the case until the Liberal’s days are numbered.  They have zero leadership. They only react rather than plan for tomorrow.  Surely the next PM cannot be as bad as the one we have today.

Since Canada has the best potential (energy, metals, farming, water) of any country in the world, you can feel safe holding only blue-chip shares that pay a dividend yield of between 4-7%.  Get rid of all debts.  Place at least 30% of savings in insured GICs for a term of one year.  We expect 3 interest rate hikes during 2022.  Yields are terrible today but the aim is preserving your life savings rather than speculate with it.   

Only six years ago Canada was one of the most respected, successful, and wealthy countries on earth.  Since then, we have been walking on a slippery slope with no bottom in sight. We are now looked at as a bunch of fools led by climate extremists.  

The Liberals handling of Covid has made us broke. It is estimated that over the next 4 years our useless PM and bobblehead Finance Minister are planning to increase the debt to $1.5t.  With interest rates set to move higher, the cost of servicing our debt will move in lockstep.  The only way to make a dent in the debt will be severe budget cuts and higher taxes.  Trudeau does not understand the first but does the second well.  Between excessive debt, higher taxes, and climate extremism, Canada will lose any competitive advantage we have.   

Trudeau’s possible interest in Quebec’s Covid Revenue Agency’s health tax on the unvaccinated is asking for trouble and should have never been pondered by a PM of a country that prides itself on universal healthcare.  It is not about Covid or the medical system but rather politics. If it wasn’t why not levy the tax on the obese, drunk drivers and smokers years ago? The truth is our politicians are only concerned about power and they will do everything possible to take more control of our lives.

Trudeau wants a social credit system like China.  One that allows the government to monitor one’s activities and offer rewards or penalties-based on one’s behavior. The vax pass was step one and Canada was one of the first to implement, albeit on the provincial level first. Would you have thought that not being able to leave your own country or enter a gym without a vaccine passport a conspiracy theory a year ago? I would have laughed at anyone who told me that. But, as time moves on, the conspiracists appear to be winning. Canadians who believe these passports will disappear with Covid may be surprised. Trudeau is on record saying he respects China’s way of governing. He will try his hardest to keep the vaccine passport. Let’s not forget, he supports Bill C-10 which will censor the internet. Once a society gives up a little bit of rights, it is rare to get them back without severe pushback which there is none from Canadians.

The government has already been spying on us by tracking 33m Canadians via their cell phones during the first lockdown. It most likely has never stopped. The vax pass just makes it easier. Sadly, Canadians are fine with all this and are contributing to the downfall of what was once a well respected and free country. Do not worry though. We are not alone.  This is occurring across Europe, a mass of land that Canada helped defend against the same style of rule that much of the rich world is trying to impose on their own people today.

His only experience is apologising, which he does well. But, Trudeau is far from a leader. He passes everything onto the provinces and territories who are also lost. Thankfully, they’re attempting to tackle the issues. But unfortunately, the way governments have managed the virus has done more harm than good. Most business sectors are suffering in some form. Debt has hit record highs. Education has turned sub-par. No matter what one’s vaccine status is, you have lost freedoms and rights.  Tens of thousands lost their livelihoods because of mandates. Substance abuse has increased, and overdoses outnumbered Covid deaths in many parts of the country.  The list goes on. 

Covid was a lesson in failed government policy and management on a global scale. Healthcare has been in trouble for decades and Covid was the awakening.  When a few thousand people in ICU beds can wreak havoc nation-wide, we must face the facts; the issue is not the pandemic, but rather governance and it will only get worse with the aging Boomers. 

The B.C. Nurses Union offered to have every unvaccinated employee take a test before every shift.  The government said no because they love power over healthcare.  I am beginning to think by not keeping these people the government looks at saving millions of dollars in salaries rather than saving lives.  It is going to take a decade to re-staff our hospitals. Today’s policies make zero sense.  

Trudeau’s only solution is to fire and segregate all unvaccinated people, shut down the energy sector, divide the nation, and try to shut down the whole economy.  Why would any foreigner want to invest in Canada with such a regime in power?   

We are trying to keep our bullish outlook on Canada, but it will soon begin to deteriorate if we do not change our ways.   Depending on if we are allowed to take advantage of them, our resources are a source of wealth for centuries.  Unfortunately, our population is fine with our government limiting our potential and freedoms. One day Canadians will wake-up, but there will be pain felt to get to that moment. If one is young, a wise decision would be to leave Canada for the time being, at least until a few years after Trudeau is gone.  Parliament Hill is Canada’s number one problem and hopefully Ottawa changes its negative ways.  Failure to do so and Justin will be successful in making Canada a 3^rd world country, something he obviously wants.

The world will head into deflation within the next 2 years. Interest rates will be increasing in 2022 and push asset prices lower like they always do. Government policies are also destroying trade which does not correct itself over night.  Maintain investing in sectors that are needed if the economy slows. This includes some resources, energy, finance, some tech, and utilities.  Make sure they have a history of increasing dividends. Stick to companies you are not afraid of holding for years.  Maintain a 30% cash position.   

I have been in the investment business for 57 years. Never have there been 4 major assets trading at the same time in the stratosphere.

Over $1t went into crypto currencies in October. Meanwhile at the same time a handful went broke and disappeared. New cryptos are rising daily. It is estimated there are now 11,000 in circulation, up 30% in six months. The price of Bitcoin traded above $69,000 in November. This makes no sense because it is backed by nothing but wishful thinking and promotion. It is the perfect house of cards.

An article in The Economist read that “in Britain the average home currently costs more than 8 times average earnings; a level that has only been breached twice in the past 120 years”. In Canada we are paying roughly 6 times for the average home ($672,000 and rising). Places like Toronto and Vancouver are above 10-times incomes. In the U.S. this figure is an affordable 4.3 times. They clearly have the last real-estate bust in the back of their minds.

The rule of thumb when applying for a mortgage is a 20% down payment and maintain a mortgage at 3- times household income. This can be around 4-times in a low interest rate environment like we are experiencing today. Based on the average house price across Canada, a 20% downpayment equates to $134,000? Other than the top 20%, who also often have trouble saving, who can save that amount in a reasonable amount time? Very few. This is the reason for so many resorting to big mortgages with less down payment.

The data company Teranet announced the largest segment of the national real estate market is now investors. “This group now accounts for 25% of all new deals and is the first time that investors have purchased more than first buyers (22%).” The company stated, “that in a “normal” market half of all real estate transactions are first-time buyers”. The Bank of Canada added to this and found that the number of mortgages taken out by investors in the last year doubled. “Loans to repeat buyers are up 60%. New buyers, in contrast, account for a 40% gain”. Real estate in Canada is a ticking time bomb.

Since the November issue the TSX hit its 58th all-time high for 2021. The Dow Jones hit its 42nd, and the S&P 500 broke its record for the fifty-fourth time this year. The NASDAQ created 46 new highs and is currently trading around 100 times earnings. When it comes to the NASDAQ, if earnings stay flat it will take only 100 years to get your initial investment back. Plus, this multiple implies investors believe that earnings will double in roughly 10 months which is impossible. There is no doubt about it, the NASDAQ is experiencing the Tech-bubble Volume II.

Based on historically price earnings ratios the TSX is around 30% above its norm since 1954. For the Dow Jones, it is 41% above its average since 1920. The NASDAQ and the S&P500 are trading 400% and 61% above their 67-year averages, respectively. Over the past couple of years earnings have increased slightly, but not enough to justify today’s share prices.

The third hot investment is Non-Fungible Tokens (NFT). Like crypto, they are pure speculative. An NFT allow investors to purchase a part ownership in rare assets like art or comic books. During November the prices for most of these tokens soared. The trouble with this market is there are no exchanges to trade on, nor records of the past trades and values. Many of these tokens are proving to be a fraud, leaving investors with nothing.  At least stock markets have the various security regulators. NFT and crypto have none. It is estimated $14.3b have gone into the NFT market this year. Investors beware – this will not end well.

Recommendations:

Only recently has gold started trading lower. Meanwhile crypto currencies are backed by nothing and have soared. Gold will always have value as history has shown. It is needed for jewelry, dentistry, electronics, and trade. Gold has also been a reliable indication of whether the world economic system is heading into inflation or deflation. Because the price is beginning to trade south, we believe deflation is coming.

The world today is in a massive cash bubble. There is too much money floating around looking for some party to join. History proves that markets always wipe out all this surplus. It will not be any different this time. We have no clue when the correction will arrive. It could be tomorrow or still 2 years away. But make no mistake about it, it is coming, and trillions will disappear over a short period of time.  

• Dump all investment real-estate, including the REITs.
• Keep at least 30% of your investment assets in insured GICs to protect your savings.
• Continue to invest in energy, Canadian banks and hold all pipelines. All three-offer incredible long-term value.

Make sure every holding has a long history of increasing the dividends. It will be dividends received that will be your portfolio profits during Trudeau and Biden’s leadership. Ottawa and the Greens will be determined to limit the vast potential of Canada for the next four years. Sit patiently and collect those rising dividends.

Canada is an energy producing country and will be for the rest of this century. Canadian oil and natural gas will be in great demand by locals and foreigners if Ottawa allows it. It is only a matter of time before Canadians will not stand for shutting down our country for climate scare reasons.

One for the Greens

The Climate Change party in Glasgow was a success for the Greens.  The rich and powerful warned of impending doom because of climate change. Even Jeff Bezos warned of rising sea levels while behind the scenes bragged about his new $70 million ocean front home. Over 400 private jets flew into Glasgow and then had to fly all over the place to park because there were not enough spaces locally.  After the party, the jets returned to Glasgow and took their few passengers back home emitting CO2 that could have been limited if fewer large aircraft were used.

Justin appointed a climate extremist to Environmental Minister.  He is bent on destroying Canada’s fossil fuel industry. Both have no idea what to replace it with. By inhibiting cheap energy, the Liberals are determined to make Canada a 3^rd world country. The cheapest form of reliable energy is the main ingredient in the recipe of a healthy economy.  Energy prices are the same as taxes – they eat away both business and household disposable income which is responsible for all commerce and investment.  By encouraging a switch to more costly energy, our nation will become non-competitive with those who do not fall for this trap.

Columbia is the biggest coal exporter in South America.  Three weeks ago, they announced they will be increasing production to meet the growing demand from countries like China.  Of course, there was not a word from the dedicated Greens. 

China announced that coal will be their main source of power for the next 50 years. One cannot blame them.  Coal is the cheapest form of energy; the average household income is low and there is roughly 400 years’ worth of reserves.  Does anyone think places like China, Africa and most of South America will give up their coal so they can spend more money on less reliable forms of energy?  I doubt it because spending more on economic inputs such as energy hinders development.  More importantly, relying on intermittent energy like solar and wind cannot be trusted for keeping the lights on and keeping your population from freezing. Last winter in Texas is a prime example.         

Natural Gas, nuclear, hydro, and geothermal are the cheapest and cleanest forms of energy. Not one form of renewable energy comes close in price and efficiency overtime. Yet Greens are against all four because they create carbon dioxide. Instead, they prefer energy that is more expensive, has its own way of disrupting surrounding habitat, consumes far more land and water, has a similar carbon footprint, and makes very little difference to the climate, if any at all.

Thanks to the Greens, Parts of North America and Europe are short of energy.  Winds have been disappearing around the U.K. shutting down the wind turbines. This is not uncommon. Russia sees this as an opportunity to blackmail Europe which went green and are now paying the price.  Canada could have helped to solve the mess with the West-to- East Pipeline, but the climate activists put an end to that. This would have been a steady and reliable source of natural gas for Europe and Asian countries. More importantly, it would have created thousands of jobs and billions in tax revenue for Ottawa and the provinces to squander. 

There will always be a use for solar and wind power.  Just on a smaller scale. The future will remain with the fossil fuels, hydro, and thermal power. Hydrogen will also become a common source of energy over the next decade. Everything else is going to be too expensive and unreliable.

Your home heating bill this winter is just a taste of what to expect for years to come.  It will be a direct result of Green policies. The Greens have been winning but market forces will take note of the destruction they are doing and force change. The reality is that over the next 50 years coal, oil, natural gas, hydro, nuclear and geothermal power will be the main source of energy.