Markets are giving mixed signals.  The Baltic Dry Index which measures the cost of shipping dry goods has been in a two month decline but the CRB Index (dry goods) has gained 9%. The latter means inflation is in gear and the first says the global economy is moving less product.  Gold is at all time highs, Bitcoin is up 32%, and both experience abnormal swings each day. For example, one day Bitcoin soared 3% only to drop 4% the following one. We have witnessed gold jump $56 one day to over $2,400 and then close $28 lower.  These two are warning of wild speculation.  Generally, this style of investing often signals the peak of an economic cycle.

According to the Bank of Canada “…when you compare Canada’s recent productivity record with that of other countries, what really sticks out is how much we lag on investment in machinery, equipment and, importantly, intellectual property.” Between 2014 (when it first appeared Harper was on his way out) and 2022, Canada’s inflation-adjusted business investment per worker (excluding residential construction) declined 18.5 per cent, from $20,264 to $16,515. This is worrying considering the necessity of investment on economic output and standard of living.  To increase productivity, we need governments to accommodate investment, not scare it away.

Underinvestment will be exacerbated by the most recent budget. Specifically, Canadians desperately need tax relief.  Keeping the Capital Gains tax where it is at will keep more money in circulation and eliminating the Carbon tax will immediately put cash into our pockets, something that is desperately needed today to keep the economy growing. Higher taxes deter investment and, no matter if it is foreign or domestic funds, encourage an outflow of investment.

The budget forecasts Liberal deficits for at least the next five years which increases the likelihood of future tax hikes and creates even more uncertainty for investment. Such an unpredictable business environment will make it harder to attract business to Canada. Thankfully, this is changing the more it looks like the Liberals on their way out. Even Warren Buffett mentioned he is looking at Canadian investments again. Given he sold his sizeable stake in Suncor after Justin got into power, it would not be surprising if he is looking for similar assets knowing that the Justin is gone next year.

According to the Fraser Institute, the provinces and federal government are expected to spend $81.8 billion on interest payments in the next year, assuming every level of government balanced the budget today. It is also expected our nation will pay close to a trillion dollars in interest by 2035. That is money the future generations will never see but pay for the rest of their lives via higher taxes. What would this money do for our country if it was directed at education, policing, healthcare, and military? The path Trudeau is taking us down we will not have enough soldiers or hardware to defend our borders, let alone others, by the end of this decade.  Is this not a form of treason?  Sadly, similar government mismanagement is prevalent across the globe.

Preserve your cash.  Depending on your age and risk level, keep 40% of your portfolio in insured Guaranteed Investment Certificates (GIC’s) for now. Stick to one-year terms which today offers around 5%. Try and keep GIC’s in registered accounts so the interest is not taxed and favour dividend stocks in your regular account since the income is taxed less via the Dividend Tax credit.   Buy and hold only blue-chip shares that offer a dividend yield between 4-and-8.5%. When interest rates start to fall mutual funds will be big buyers of these shares due to their attractive yields. Plus, we believe when we get rid of the useless government in Ottawa, Canada will be the number once country to invest in. The future is Canada.

Greece came asking for our Natural Gas (NG) last month. Justin turned them down like he did to Germany and Japan. What he does not understand is Greece has all the needed pipelines in place that can deliver our NG to Eastern Europe.  This would have been a perfect opportunity to hurt Russia and China but Justin is scared to offend his totalitarian idols.  This is without a doubt his biggest mistake and shows contempt for all Canadians and our allies.  Furthermore, it provides further evidence of how out of touch he is with the real world. 

We will never know how much tax revenue, profits, and jobs this deal would have created, but we do know that shortly after Trudeau told Germany selling our NG lacked a business case, they signed a $50b deal with Qatar. Trudeau is delusional if he expects all governments around the world to follow his example and eliminate fossil fuels. Does he really expect Africa to keep their population in poverty by not developing their recent NG discoveries in the name of something that science dictates a natural phenomenon? Only horrible leaders like Trudeau prevent a population from moving forward.    

Justin tries to defend his climate policies on protecting future generations, but with history as our proof, humans only care about such issues when they have a roof over their head, when their bellies are full, have some savings in the bank, and disposable income left over. Surviving cold, heat, starvation, and everything else that comes with poverty are the enemies of environmental preservation because trying to survive consumes all your thoughts and energy. Only when people are comfortable and healthy will they begin worrying about climate change and be willing to make positive changes. 

Every developing country wants what we have, and natural gas will allow for this to happen. Both sides of the deal benefit. It creates jobs, provides energy to industry twenty-four hours per day, is ridiculously cheap, and contrary to MSM, it is a clean source of energy.  Unfortunately, just like he believes his twenty-thousand-dollar watch tells better time than what the common folk wear, Trudeau believes energy that costs more is the better option. 

By blocking the sale of our NG, Trudeau is hurting Canada’s future generations. He is like a CEO of a major retailer stopping the sale of their best-selling product in the name of virtue signalling. Like all companies, Canada cannot afford to lose revenue. Trudeau needs to go.

There was not a word in the media about the price of natural gas (NG) falling under $2 last month.  On February 18^th, the price hit $1.52, the lowest in over 25 years (other than Covid).  What a huge break for all consumers this could turn out to be.  If the price remains at these levels, it will make green energy even less price competitive. The day the price went under $2, two greens on the radio announce that all fossil fuels must cease immediately.  They clearly expect all consumers to pay substantially higher energy bills for no improvement to the climate.  Greens have no idea what to replace NG with that is competitive in price.  We expect the price to trade between $1.50 and $4 for decades because of global reserves close to 350 years thanks to new finds in Africa.

We are told solar and wind power are the best ways to lower greenhouse gas emissions. In theory this is true, but it will never happen because they cannot power the planet all day like fossil fuels. Proponents of this energy can talk about the potential of the technologies as much as they want, but the reality is the world is so far away from being able to manufacture, utilize, and maintain this technology efficiently and reliably as NG.  In the grand scheme of things, the biggest emissions reductions will be a shift from coal to natural gas. It produces only 10% of the air pollutants and 50% of the CO2 that coal does. The smart governments will choose NG.

Because it is used in so much manufacturing, the cost to do so will decline in price where governments do not impose a tax on carbon. The savings will be realized in lower costs in home heating, cooling, cooking, food prices via lower cost fertilizers and transportion costs, as well as in chemicals like those used in sulphur-based drugs and in plastics. These price cuts will result in more disposable income. Unfortunately, In Canada’s situation, any drop in price will be consumed by the increase in the Carbon tax.

There is now a push to ban natural gas in homes. Nanaimo, B.C. is the most recent town to jump on the bandwagon. It will be interesting to watch because it will make zero change to the level of emissions but cost the owner more. In July, Bloomberg Businessweek wrote “cooking with NG accounted for 1% of U.S. residential energy consumption and 3% of overall NG consumption in 2020. Residential natural gas cooking was responsible for about .1% of U.S. greenhouse gas emissions.” These numbers are not a threat to the environment.

Just to show how out of touch the Climate Cabal is, the IEA estimates that if “oil and natural gas consumption were to evolve as projected under today’s policy settings, limiting the temperature rise to 1.5C would require an entirely inconceivable 32 billion tonnes of carbon captured for utilization or storage by 2050, including 23 billion tonnes via direct air capture. The amount of electricity needed to power these technologies would be greater than the entire world’s electricity demand today.” There will never be enough renewable energy to accommodate this.  More importantly, who is going to pay for the needed infrastructure? The consumer of course through higher electricity prices and taxes to cover the subsidies. It is a recipe for economic disaster.   

We should be rejoicing the fact we are warming. If anything, we should be focusing our efforts on surviving the next ice age because the cold kills more life than the heat. We already know how to survive Saharan temperatures, like people have been doing for thousands of years. We also have natural gas to keep us cool, can desalinize water, and have a thorough knowledge of greenhouse farming.

How many profitable “green” companies are there in Canada that do not rely on Government subsidies? How many businesses have environmental mandates that costs them profits and tax revenue for the government to fund healthcare, military, housing, and education? When Trudeau turned climate extremist Canada's economy started to slow. As a result, we had to make up the billions in losses and shortfalls with debt which resulted in higher interest rates and a devalued currency, all of which destroy wealth.

Given both the global political climate and that the finances of most countries are a mess, there will be increased pressure for energy policies geared towards cheap NG.  Any government that refuses to accept this will be left in the dust. It proves they do not have their citizens best interests in mind and investment will look elsewhere for a home. NG will be the number one energy source around the world for a century at least. Everything else will cost more and make no improvement to the environment. NG is our future.

Falling NG prices will be bad for the producers who are heavily leveraged. Some will go bust but there will always be someone willing to buy them at a proper valuation that allows for a decent return.  These assets are not going anywhere. We prefer pipelines and integrated oil companies rather than companies that just produce NG.

Canadians need to ask what we have to show for the Liberal’s monumental fiscal and monetary failure except higher taxes, growing lines at foodbanks, inflation, a decaying Medicare, military and education system, increased drug use and homelessness, and a wealth-destroying devalued dollar. 

This coming budget year Ottawa will almost spend as much money on interest charges from the debt it has accumulated than it will on health care. The federal government spent $11.3 billion in interest payments during 2023’s third quarter, 36% higher than the same quarter in 2022. This will increase every year until the current government is gone and means higher taxes and less disposable income for consumers to save.  So, prices for most goods will have to decline inline with shrinking disposable incomes. This is a perfect example of interest charges destroying an economy and people’s pocketbooks for zero benefit.  

It is not just finances that are hurting the economy but the current government’s social policies such as immigration and a decaying education system. The issues in our education system surprises only our politicians. As schools opened last year, they discovered we have a shortage of teachers. Obviously, we desperately need more that specialize in math since no one in Ottawa understands the subject. 

A prime example is using company forecasts, it will take until 2043 for the federal and provincial governments’ $28.2b 'investment’ in two new electric vehicle battery plants in Ontario to breakeven. This is much longer than the five years the Liberal calculations showed. 

The Liberals’ poor math skills can be seen in housing as well. They are the only ones to blame for our home prices.  We built 250,000 units last year, an increase of 25,000 from the year earlier. During this period, we allowed one-million immigrants into Canada, plus we have maybe a few-hundred thousand young people trying to leave home and roughly 70,000 foreign students to house.  Ottawa says it will allow in only a half-million more immigrants in 2024. Guess why the housing situation is out of control? It is not the lack of money, but nobody in Ottawa realizes we cannot fulfill demand because our schools do not turn out enough skilled labour.

Housing debt is destroying many household finances. This is not surprising because it is hard to understand how most can afford the average price of $678,000(2023) in Canada without a CHMC mortgage which requires a $270,000 downpayment. Based on the average family income of around $125,000, it takes decades for most to save that.   More importantly, if you can save that amount within a reasonable time, one will be far better off renting and continue saving. Specifically, there will come a time when the income from the savings will cover rent or mortgage payments for the rest of your life. This will occur long before the mortgage is paid off. It is hard to justify purchasing the average home at today’s prices without a 20% downpayment because the interest cost would consume all the benefits of ownership. Specifically, the difference between cash-outlays for property taxes, repairs and maintenance, mortgage interest and the opportunity cost from not investing the downpayment is far greater than renting in todays market.   

Because Canadians cannot lock-in a 25-year mortgage like the US, we are at the whim of the market which can change drastically between renewal dates, like what we are witnessing today.  This is why it is critical to never have a mortgage larger than three or four times your household income. If you’re not a big spender and can direct more money to the mortgage than the four-times household income is fine, but it is better to stick to three-times if you prefer more discretionary spending. Anything above this you either must lower your expectations or rent and wait for prices to correct further. 

Prices will correct further eventually.  Since this is a man-made shortage, price declines are slow but this will not prevent prices from declining to meet what the average family can afford. This means a potential 50% price decline (worse case scenario) from peak.  

Trudeau does not understand that if we allow this level of immigration, and using Statistics Canada’s average housholde size of 2.51 people, there is a need for almost four hundred thousand new housing units today. The above demand does not include the natural turnover of homes or for renovations which lowers the amount of available labour for new-build construction. Home prices are clearly a result of demand outstripping supply. Until things changes, there will be an ongoing shortage of shelter and prices will remain out of reach. 

Immigration should be based on available social infrastructure, housing, and attracting skills the economy demands.  Not vote buying like it appears the current policy is attempting.  More importantly, it should be guided by population preservation with no more than 1.5% growth (which will double the population every 48 years, not like the 150% increase the Liberals want by 2100).  Any growth above this and the economy does not have time to adapt. As soon as Trudeau’s immigration targets are reversed, all real-estate prices will fall to a level based on income and the rate of interest. It will be a good thing having the average Canadian afford to have a family, buy a home, support the economy, and grow the population properly.

Just when you thought the Liberals could not be any more delusional, our Environmental Extremist Minister announced that all vehicles after 2035 must be electric. Shortly after, the main US auto manufacturers announced cutbacks to EV production on light demand. Even their dealer networks are turning their backs on them with 4000 dealers sending Biden a letter in December telling him to ease-up on his EV dream.  Last week, Hertz announced they will be getting rid of 20,000 EV’s, which is roughly 30% of their EV fleet, because they are too expensive to repair and the customer does not want to rent them. Thankfully criticism of the net-zero transition is growing across the globe because it is proving to be a drain on both our financial and natural resources, as well as our standard of living.

How climate friendly is the EV? Certainly not any friendlier that the ICE once you include the increased mining and the source of electricity. The International Energy Agency found that to meet 2030 pledges of 50% of all cars being EV, “the world will need fifty new lithium mines, 60 new nickel mines, 17 new cobalt mines, 50 new mines for cathode production, 40 new mines for anode materials, 90 new mines for battery cells and 81 new mines for EV bodies and motors”. That’s a total of 388 new mines worldwide, which is not very climate friendly. If Canada wishes to use domestic supply chains for battery metals, we have a lot of mines to establish in a very short time. Unfortunately, this is impossible based on Trudeau’s environmental laws, meaning we will be forced to import the materials on the back of a weak currency.

In the National Post, Adam Waterous, CEO of the Waterous Energy Fund and former Global Head of Investment Banking at Scotia Waterous, stated “it takes five times the amount of oil to build an EV than it does to build a conventional gas-powered vehicle.” To offset this difference, he explained the EV battery must last 120,000 kms using the electrical grid, assuming the battery lasts that long. So far, an EV battery does not last the lifetime of the vehicle itself, dying out in as little as eight years compared to the ICE which should last over 250,000 km’s. Replacing the battery expands the EV’s carbon footprint even further because one EV grade battery emits over seven tonnes of CO2 emissions.

All governments are slowly being forced to cut back on subsidies because they cannot afford them.  More importantly, it is morally wrong to give handouts for a luxury good when lines at foodbanks, shelters, and hospitals are growing exponentially. Sales are falling with every cut to subsidies. As evidence, Germans became one of the largest consumers of EV’s thanks to generous incentives. However, they began lowering their subsidies early last year and sales of EV’s have fallen inline. According to insideevs.com, electric car (BEV) registrations decreased by 22% year-over-year in November to 44,942, and Plug-in hybrid cars (PHEV) registrations decreased by 59% year-over-year to 18,124. 2024 will be interesting for the German EV market because the government announced an end to all EV subsidies on December 17^th. The EV will not disappear but rather remain a niche market.

Down south, the Texas Public Policy Foundation estimates that the nearly $22 billion in federal and state subsidies and regulatory credits lowered the retail price of EVs in 2021 by an average of $36,000 across the supply chain. Their paper showed that the average 2021 EV would cost $48,698 more to own over a 10-year period without government subsidies. They estimate that home and public charging stations put a significant strain on the electric grid, resulting in an average of $11,833 in consumer costs per EV over a decade. This cost is paid for by all utility ratepayers whether they are an EV owner or not. In a political climate that runs on equality, this is far from that as possible.  EV owners do not pay gas-tax used for infratructure but those with an ICE are responsible for upgrading the electrical system for the EV via higher electricity rates. There should be a sizeable levy on every EV registration for infrastructure upgrades to cover this.    

Back home, the Parliamentary Budget Office (PBO) estimates the total cost of handouts for battery manufacturing to be $43.6 billion between 2022 and 2033—$5.8 billion higher than the Liberals announced. The federal government used a break-even timeline of nine years based on full production in every year for their business model. But, based on the manufacturer Northvolt’s projected annual production schedule, PBO estimates a break-even timeline of 11 years for a $4.6 billion production subsidy. They also predict a break-even timeline of 15 and 23 years for the Volkswagen and Stellantis subsidy, respectively. Breaking even after such a timeline is unacceptable considering these companies can very easily afford to build the plants themselves.

Investment by blue-chip companies in renewable power is slowing and divesting is popular in the sector. The Danish wind developer Orsted announced in November it was cancelling two major projects off the coast of New Jersey after its demands for higher subsidies had been rejected. In its earnings release, Orsted said it was recognizing impairment losses of roughly $4b(USD), blaming supply chain delays, interest rates, and the lack of a profitable amount it can charge a utility company for renewable energy credits. BP and Equinor also announced impairments totalling $840 million combined on offshore wind investments. And last month, GE announced they spun-off their turbine division.  The only investment that appears to be taking place are ones where there are long-term contracts (usually 20 years) involved where the supplier sells the power to industrial projects like manufacturing plants and refineries.

Net-zero is not viable because governments cannot afford to finance it and private capital remains skeptical. It will also stifle the economy by increasing the cost of electricity.  The Business Council of BC believes the transition will make BC’s economy $28 billion smaller in 2030 than it would without net-zero policies. This is equivalent to what BC pays for healthcare in a year. Even the Alberta Electric System Operator estimates the cost of achieving a net-zero electricity grid by 2050 to be nearly $200 billion and “accelerating this timeline to 2035 could add an extra $45 to $52 billion”. These figures do not include the wages or tax revenue that would disappear with the fossil fuel sector.

We have been warning that the net-zero dream is not viable without government handouts. And so far, it holds true.  Any reasonable government will cut these unnecessary subsidies and economic strangling policies because the middle class is suffering. Governments need to stay out of the marketplace and let private capital make the investments. If the investment is not occurring, then there is no money to be made and business will move onto other technologies. Companies make the largest strides in environmental improvements on their own dime if there are reasonable laws and timelines in place.