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!

It is now known that the COVID-19 virus began in mid November.  It was not until the first week of January when most world governments were told of the virus. Yet, most did nothing until about it until mid February.  Our Minister of Health, Patty Hajdu, announced what a great job China was doing.  Anyone who follows China knows you never believe what they say.  Even today it is believed China has not reported the true death total which is estimated to be up to 50% more than reported. 

Every day Justin continues throwing money out the door.  Obviously, no thought has gone into these gifts as numbers appear to be picked out of thin air  There is no clue on how much money is being handed out, nor, how and when then funds will be paid back. Ottawa is broke and they are making their finances worse with no prospects of better times.  The truth is this is turning into a 100% mess. 

To be fair he is trying to save people financially for next few months so they can re-arrange their finances.  He is going about it the wrong way though.  Ottawa should have dished out X amount to every Canadian over 18 for a few months no matter their employment status. If they did not need the funds to cover living costs, they should be forced to use the money towards debt, then savings and discretionary spending after that.   It would cost more in the short term but save in the long run.

Justin has used the virus to try and make himself Canada’s first ‘First Supreme Leader’.  First, he tried to get a law passed that would give him free rein to borrow, tax, and spend as much as he wanted until the end of 2021. In effect Parliament would not be required.  Last month he tried to end “Freedom of Speech” throughout Canada when he attempted to decide what was to be reported.  Thankfully, once the public caught on what he was doing he backed off.

Parliament has been in session and hardly any of the Members show up.  They have been missing in action for months hiding behind Covid even though they would have been given the best protective gear.  Yet, this bunch allow health/ home care workers to wear second-rate protection.  Why can’t our politicians wear the same protective clothing as home/health care workers and show up for work? Why do they not put in plastic shields around their desks in the House of Commons? Banks and groceries stores can do it why not Ottawa? 

Governments and corporations across the globe are cutting wages while Ottawa just gave each Member of Parliament their annual $5,000 salary increase.  A handful have said they will donate it to charity.  Note, not one refused the increases.  You and I as taxpayer will have to come up with roughly $1,400 for the tax deduction to the charity giver.

It is scary that the bunch in Ottawa are supposed to bring us out of the pandemic economy and make Canada prosper - what a dim prospect.  Ottawa needs to be cleaned out today.  They are making it impossible for a fast recovery and destroying Canada and its finances.  If they do not start to withdraw all the free money immediately be prepared for a 60-cent dollar.  This will cause all Canadians to become substantially poorer.  But, do not worry, the self-serving politicians in Ottawa will take care of themselves. 

Not Over Yet!

Over the long term all stock markets are based solely on earnings.  At the end of 2012, the Dow Jones Industrial Average was trading at 13,190 while the combined earnings of the companies listed on the index were $89.98. On January 2, 2020, with the DJIA at 28,868 points, the average earnings were $145.44, a 61.6% gain. Meanwhile, the index was up 118%.  

At the time Wall Street was predicting the stock markets would continue to soar. On February 12th, the DJIA average set a new all-time high.  At the same time the earnings had slid to $140.82.  This was when the world’s attention began to shift to the Covid-19 virus causing unemployment to inch up.  As I post this, earnings are $135.37, off $22 from a year ago and down from $145.44 on January 2^nd.

Obviously, the virus has had a direct effect on the world economy. The consumer began to cut back on spending in January. Today, it is in a free fall and could be for months to come. Corporate profits will join in the downward trend and government subsidies will not be enough to maintain consumer spending. Corporate profits will stay down for a few quarters after the economy reopens, at best.

Over the past 100 years the average price earnings ratio on the DJIA was 14.2 times.  Since the beginning of this century the average price earnings ratio has risen to just under 16.  Historically, stock markets always return to their long-term average.  

We expect second quarter combined earnings on the DJIA will be down to around $100 and stay there for the rest of 2020 (2021 could see a slight increase). Based on prior corrections the DJIA could fall to the 15,000 area. However, in every major down trend the index has gone under the historical average. This means the DJIA could be heading to between 13,000 and 14,000.  

 Remember that banks and brokers will always be bullish. If you do not buy securities, the brokerage industry will go broke.  I rarely ever listen to them.  It is rare for them to issue sell orders because they fear being sued by the company being talked about. When I used to listen to them, 90% of the time it cost me money.

Come the warm summer months you can see with your own eyes just how bad the economy is.   Watch for cars for sale on corner empty lots and on driveways.  There is a huge glut throughout North America already, and many who cannot afford them.   By August there will probably a flood of RVs up for sale as well. Even going by your local hotels and motels, are they full or half empty?  Watch Craigslist for the number of jewelry and electronics to spike. Keep an eye on the number of For Sale signs on real estate and the number of empty store fronts.  If it is a flood of new listings you will know the economic slowdown will last well into 2021. This is a sign of people desperate for cash.          

In summary one must use common sense and protect what assets one has. Listening to Wall Street experts will cost you money.  We do not have a clue when the bottom will be reached, nor does anyone else. It could be well into 2021 or a few months from now.  Our recommendation is to stay on the sidelines, hold your current dividend paying shares and build up cash.  Eliminate debt and favour cash as future investments for the time being.  We anticipate a period of deflation ahead of us.

Justin & Finance Minister Morneau have so far offered $82b to save families from the Covid-19 virus in order to keep the economy going.  $27b of that will be used wisely through various government benefit programs.  The remaining $55b is 100% fancy bookkeeping solely to make Ottawa look good.  This is a tax deferral that will be reversed once 2019 taxes are collected.    The amount could be $1b or $55b, no one knows, but all that matters is that Ottawa looks good and is supposedly saving the country.

Realistically, Ottawa cannot afford to offer much relief without penalty, either be a lower credit rating or higher borrowing rate, because contrary to what they say, it too is broke.  Yes, they can still borrow, and the Bank of Canada can print fiat money, but it is today’s outstanding debt and the interest charges that is squeezing the government’s finances.  Borrowing more money today only increases future problems which Ottawa will have no clue how to resolve. 

Once today’s economic slowdown reverses, everyone’s taxes will go up substantially. There is no doubt about it.  This is because Justin does not understand what budgeting is. One cannot blame the guy!  After all, he has a huge trust fund that allowed him to never worry about money, and now a gold-plated pension that will lift him into the top 5% of income earners in the world.  

We get a daily update from Justin, which I turn off because he is part of the problem.  He loves to say he has “our back”.  To date, he has done nothing other than create more problems. Thankfully we have Dr. Henry, Dr. Tam and all the other medical professionals giving us daily updates.  They make sense. Justin just babbles.  We are in good hands with our medical system and all those who are aiding in delivering the care.  We thank them all for taking on such risk to carry out the excellent work they are doing.

If unemployment is going to increase to record numbers, it is likely the Canadian Emergency Response Benefit (CERB) and income supplements will not be enough of a cushion to prevent a deeper recession for the simple reason it will only cover living costs.  There will be no money leftover to spend in the community.  Furthermore, these programs do not offer any relief for many people such as part-time workers or seniors.     

A policy that would cost the government less and still cushion a downturn immediately would be to instate temporary tax changes such as increase the personal exemption, eliminate the GST, PST, and various other consumer taxes, eliminate taxes on dividends, capital gains and interest altogether. This will be a bonus for seniors.  Sadly, the chances of these simple acts, even for a year or two, will not happen because the bunch in Ottawa only want to be seen giving out benefits upfront, whereas nobody will notice the three tax changes until 2020 tax time.  

Cash in the hands of the consumer is the only way for the economy to recover.    Ottawa has shown that when pushed they can get things done.  The payments to flow now were done within a month.  There is no excuse why they cannot begin to plan to boost the economy today for when the virus is yesterday’s news.

Another easy path to recovery is to get rid of the destructive Bill C-69 immediately.  There are plenty of infrastructure projects (energy, mining, highways, dams, and bridges) needing to be (re) built that would generate so many high paying jobs across the country.  It is crazy to need up to 10 years, which Bill C-69 pretty much requires, to get these projects all the permits needed before they can break ground.   Justin will never go for this because it would make him look bad even though it would cushion the economic effects from the Covid-19 virus.        

More importantly, we need fresh blood in Ottawa.  Our political leaders today, except for a couple of them, are clueless.  Have you noticed that wages are being cut across the country (including directors and CEO’s), meanwhile Ottawa has not mentioned that their wages should be cut?  The politicians just gave themselves their annual salary increase that became “law” years ago.  Only a handful of MPs’ declared they would donate their salary increase to help with the fight against todays problems.

For the next year CASH will be the number one asset.   We are fortunate the virus is striking during spring and summer when our costs are lower and one’s immune system tends to be healthier.  This is a chance to build up your savings, which we strongly recommend you do. Continue to hold your blue-chip shares that pay a steady dividend. Other than that, sit on the sidelines and accumulate cash. If the virus does not change course by winter, the world will come to a complete shut down.  I do not think this will occur, but we do expect the global economy to slow down dramatically either way by summer.  In other words, the world has a few months to find a remedy.