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.

A few years ago, many Canadian banks raised around $1b as interest rates fell to record lows.  Firms like Microsoft did the same thing.  Not one needed the money, but it was just too cheap to pass up to fund investments and it was cheaper than issuing stock and paying a dividend.  Soon many other big corporations were doing the same thing.  Ant Group (Chinese) has applied to list its shares on the Hong Kong Stock Exchange.  If successful Ant hopes to raise $30b in added capital via issuing new shares.  Tesla is in the process of raising new money by selling $5b in new shares, or by borrowing money.  The London Stock Exchange is trying to buy Refinitiv, a market-data firm for $27b.  All the above are in U.S. dollars.

Today, a billion dollars is fast becoming a small amount.  This is a worrying signal that money is losing value.  A decade ago, you could buy a nice size home for about a $1/4m.  Today that home value has risen to near $1m.  Today, including one’s home, the world has the highest number of millionaires on record.  Billionaires are now common, while 10 years ago there were only a handful.  

For years you could buy all the apples, oranges, tomatoes, and so on for under a dollar per pound.  Today count on $2 or higher for just 1 of the 3.  One Honey Crisp apple, which is a large locally grown apple for sale in our local Save on Foods, costs close to $4.  This is more expensive than a sugar rich ice cream cone.  If lucky, the local farmer might get 50 cents for each apple.  Other varieties of apples maybe up to 30 cents a pound.

My point is our money is fast losing purchasing power which is making everyone poorer.  Unless we get a change of attitude out of Ottawa, which has created this inflation, we can expect prices for everything to continue to rise until the public is forced to stop buying.  We believe we are now entering this phase.  To make matters worse pay raises will be thing of the past for the next year or so because business will not be able to afford to give raises due to COVID-19. 

Ottawa is bankrupt if proper accounting is conducted because of an out-of-control debt mountain and falling tax revenue.  They will raise taxes, but revenue will not increase since Canadians are already one of the highest taxed in the world.  The taxpayer must give up spending elsewhere to meet the coming tax increases.  This is something no one in Ottawa understands.

Ottawa is setting the country up for an economic crash.  The 1929-39 crash was made greater by politicians doing the wrong thing.  Back then it was taking too much cash out of the system.  Today, the problem is the floating of too much inflated dollars.  Ottawa has no clue that savings are the backbone of every economy.  They should be encouraging people to save and allow higher interest rates to reward savers.  This money goes into the banking system where it is lent out to create jobs, built plants, machinery and so on.

We have no idea of how long this party can continue.  If it does the big question of the day will soon be who will be the first person to be worth $1 trillion dollars.   Will it be Bill Gates, Jack Ma, Elon Musk, Jeff Bezos or someone whose name we do not know today?  And being a billionaire will become what a millionaire is today - just someone who has a little extra cash.

Strange as it is, cash is what is needed when the correction comes.  So much value will disappear over night just as what happened during the 1930s.  Avoid unnecessary debt because it will be a fast trip to the poor house.  As was shown during the 1930’s once the economy slips past a certain unknown point it can not be stopped until it has run its course.  The 1929 crash took 33 months to reach the bottom.

You want some of your cash tied up in only blue-chip shares that will continue to pay dividends, as well as insured money market investments.  No politicians will allow insured money market vehicles to default as this would mean the politician will never get re-elected.

Commonsense and caution are the order of the day.

Breath of fresh air

There is a worry that if Mr. Biden is elected President that he will attack the energy sector.  Unlike Justin, he will do little to destroy the oil and gas sectors.  Washington (and Ottawa) is going to need all the taxes and employment this sector provides.  If cancelling existing contracts, then the government is opening itself up to lawsuits which will cost billions rather than make billions of tax dollars. 

Mr. Biden will be too busy mending fences with the Europeans and Asian countries.  He will also have to restore America’s finances.  Money will also be needed to maintain their military power throughout the world. Hopefully, he will be open to listen to his advisors, something Trump never does.  What we must watch is Vice President Harris.  Mr. Biden has stated he will not run for a second term due to age.  This means Ms. Harris has a chance to become his replacement in four years.  It is what her opinion on the energy sector is what we need to watch for. 

            Environmentalists are coming back full force after six months of being missing in action.  They now want to eliminate natural gas in favour of more expensive green energy sources like solar panels and wind power. To their dismay, not one country will abandon such a cheap form of energy as natural gas. This would force all cities in North America to rebuild their infrastructure.  Where will the money come from?  There is 400 years worth of natural gas around the world which will make it cheaper than renewables for centuries to come.  Coal also has 400 years worth of reserves. Not one country will abandon such a cheap and easy form of energy.  

            We are bullish on the gas and oil sector.  Natural Gas will be needed for decades to come. Solar and wind power have too many problems such as weather, location, the cost to build and maintain, and people will not allow wind power in their neighbourhood due to noise and the sight of them.  Not to mention, both wind turbines and solar panels consume far too much arable land.  

            Oil is a depleting resource. Estimates range between 50-and-80 years worth of reserves left.  Sadly, too much of the reserves are in the unstable Middle East.  As a result, science is going to have to figure out what can replace the liquid sources that make our medicines, plastic containers for Covid vaccines and its transport, lubricants, paints, shoes, house siding, tires, and roads - just to name a few. This does not include the cheap energy oil is responsible for.   If there is a find to replace the liquids, you can be sure the Greens will be first in line to complain because they will cost more than fossil fuels.

             The Greens will be the least of North America’s worries. They will continue to lie and try to destroy our economy, but the energy sector will continue to prosper and thrive for decades to come.  It will be business that will make the environment healthier through innovation, just as they have done for the last century.  It is simply good business sense to work at trying to make the environment safer, and business is doing just that.

             Mr. Biden and Ms. Harris will be a breath of fresh air.  The energy sector will benefit from the two.  If our “I Am Sorry” Justin wants to get re-elected, he will have to change his attitude toward the energy sector. If not, the Canadian dollar will be heading to $0.60U.S., unemployment will be near double digits for years to come, and his trust fund will take a whacking.  It will all be due to his hatred toward the energy and resource sectors.  The future for Canadian resources remains positive, just as long Justin uses his education and ‘acts’ like a Prime Minister.    

Ottawa cares nothing about our elderly. For those seniors who do have savings tend to put their money into savings accounts and insured GICs.  Today, rates earn nothing after taxes and inflation. In fact, money as we know it is losing value.  Many retirees face a bleak future.  It can force many to move to cheaper accommodations and be forced to cut back on needed medicines.

The Liberal Party has no clue how hard it is becoming for the elderly. Most politicians do not care. Yet they have just given themselves a $5,000 pay raise while most governments around the world have cut their salaries.  This means their ‘gold plated’ government pension, which they get after only six years of service, will automatically increase.  This pension is protected from inflation and each past and present member of Parliament gets free medical and often discounted air fares. All the elected members of Parliament have said little but are willing to take a huge pay increase.  This is at a time when so many Canadians are losing their jobs or taking pay cuts.  Shame on all of them!

Ottawa has no idea what our nations finances are. This is the first time in our history when no one knows what the true financial picture is.   The Finance Minister refuses to disclose last years spending because even he does not know what it is. It is not surprising considering he has no clue what his personal bills are. To the common Canadian, WE would notice a $200 expense off the bat.  Not Morneau though!  He conveniently overlooked $40,000 worth of travel expenses from a trip to see the progress of the Liberals beloved WE foundation.

No one knows exactly how broke Ottawa is or how big the government debt truly is.  Lack-Of-Ethics Justin is only interested in giving us our children’s money so he can be loved.  He neglects to mention our future generations will have to repay all this ‘free’ money.  He clearly does not understand there is only one taxpayer. 

Justin has been using the virus to set himself up as the closest thing to a dictator that democracy will allow.  He admires that type of power.  He thinks Castro was great.  He loves Xi Jinping who let his dad roam around China during WWII so he did not get drafted.  Justin is one of those people who believe he knows what is best for you.  Who needs Parliament is his belief?  

Justin is independently wealthy because of inheritance. He has never had to worry about a job.  He has never been responsible for sustaining jobs, let alone creating them. He does not understand the importance of profit.  Being a Golden Spoon Boy, he has never had to save or watch his spending.  But only he knows what Canadians need.

Hypocritically, his family fortune was founded on oil. His grandfather owned gas stations throughout Quebec.  Yet, since becoming so-called Prime Minister, he has tried to destroy the whole energy sector.  So far, he has eliminated 900,000 full-time jobs. Most paying above the average income.   

Canada needs desperately to clean house.  If there is not a change, Canada is toast.  We need new leadership, not a bunch of puppets like we have today in Ottawa.  We need new programs and legislation to create economic growth and reasonable tax revenue for all governments.   Canada has the greatest opportunities in the world, but we are sliding backwards due to zero leadership in Ottawa.

The EV Dream

We are told by various governments that in thirty years time all vehicles must be powered by electricity.  However, there are two major problems with this which no one talks about that will inhibit its growth.

 First, there is not enough lithium to meet the future demand for the needed batteries.  According to the University of Technology in Sydney, Australia, lithium production world-wide must increase by 8,840%.  This is impossible to achieve because reserves must increase by 280%.  No one knows where the lithium will be discovered.  Currently, Chile has the largest reverses, followed by Australia and Argentina. Many mines are proving to be unprofitable. Bolivia recently cancelled a $1.3b lithium mine development. Likewise, last March the Argentina government also cancelled a lithium mine project.

Mining lithium needs lots of water of which there will always be a limited supply high in the mountains of South America.  Plus, contrary to the Greens belief that the EV is the cleanest method of transportation, it too leaves a massive carbon footprint. Lithium mining also produces toxic chemicals causing water pollution leaving the potential for poisoning rivers and the water supply of communities. Lithium is also bad for the respiratory system.  Not to mention, extraction also depletes soil curtailing agriculture.  It is odd that environmentalists turn a blind eye to this.

In 30 years the world will be lucky to see 25% of the estimated demand. China today is the world’s biggest producer of EV’s. As a result, you can be sure today China is buying and stockpiling all the lithium they can.   This means the price for lithium will continue to rise due to shortages causing the purchase price between EV’s and the combustion engine to widen, if not remain where it is today.    Since there is no new viable battery on the horizon, a serious lithium shortage is probably a decade away.

Missing in the argument for the EV is that North America will need to build over 200 dams just to meet home and EV future electricty demand. This also means nuclear and coal fired power plants must also be built over the next three decades. The same is true in China where there is currently over 200 coal fired plants in construction with an additional 200 in the planning stage. Ironically not one Green anywhere in the world has protested these forms of energy.

If we are incorrect about the EV, Canadians can expect the price of electricity to increase for decades to come.  Soon it will become the household’s biggest expense.  B.C. should be let off lightly due to the existing Revelstoke Dam and those situated on the lower rivers close to the U.S. border.  The Site-C dam, which every environmentalist wants to prevent from being completed, will save B.C. and probably Washington State.  Ontario’s future is of constantly rising electricity bills.  Quebec will get cheap power from the soon to be completed Muskrat Falls in Labrador and Newfoundland.

The only saving grace for the EV will be if there are new scientific discoveries to replace today’s huge batteries and its compounds, which is doubtful.  If there are, and given the time is has taken to get to the technology that we have now, it is probably at least a few decades away.  The future for the EV is bleak for the time being. Sell your Tesla holdings!