This work allows me to travel often. Each place I visit tells a story. My most recent trip was to New Zealand and the Cook Islands. I have been to New Zealand around 18 times during my last 25 years of travel.  It is one of my favourite destinations. However, my trip in November scared me. 

The Prime Minister of NZ, Jacinda Ardern, is like Trudeau. She is implementing disastrous green policies that are shrinking the middle class. Just like Justin, she is a hypocrite. She recently okayed the right to import more Indonesian coal even though they have an abundant source of untapped natural gas.  Clearly, she too believes there is not a “business case” for natural gas like our Justin.    

Her leadership is taking the country down a road of very limited long-term growth, if any at all. Their strict COVID policies were some of the harshest in world.  They did a lot of damage and I do not see the country recovering for several years.  Last month she announced that she was going to hit all the big banks with higher taxes because they are making too much money, just like Trudeau.  One of Ardern’s puppets stated the big tax hike is good because the banks are generating too much greenhouse gas (don’t worry, it confused me too).

Like Canada, most who invested in real estate over the past five years is heading for financial disaster. Even if the property has no debt it is still stuck with growing costs such as city taxes, energy prices and general upkeep. Throw in declining equity and the market looks very gloomy.

NZ is now the most expensive country I have ever visited. They are making our prices look extremely cheap.  Food, fuel, and home prices are in the stratosphere.  A similar home that costs $800,000 in Canada, goes for around $1,550,000CDN there.  Kiwis make about the same as the average Canadian and pay slightly higher taxes.

I witnessed empty stores and large buildings with For Lease signs everywhere.  It appeared that many of them have been neglected for a couple of years.  There are so many empty stores that rents will have to drop drastically if the owner wants an income.  It is a safe bet that it will take a generation before real estate prices make new highs in New Zealand.

I have visited Rarotonga, Cook Islands numerous times.  The country imports most of its goods from NZ. The food from NZ is generally cheaper in the Cook Islands.  A few years ago, I reported that the ice cream cones were cheaper in Raratonga even though all the ice cream was made in NZ.  Today the price is roughly 50% cheaper than in Auckland. This is due to Ardern raising taxes and imposing strict useless climate change regulations on business.  

New Zealand will be very lucky to escape a deep recession because of the pending real estate crash.  Canada we can easily slide into a recession for the same reason, but nothing like what is coming to New Zealand.  We will be saved by the energy sector, which when we get rid of Trudeau, will grow, and become even more important than it is today.  If Trudeau wins the next election (which is doubtful) and continues his destructive policies, Canada will become unrecognizable.  

2023 is an election year in NZ.  If the poles are correct Ardern’s days are numbered.  Let’s hope so because like Canada, NZ does not deserve to be governed by crazy elected officials whose platforms take a 180° turn from what they were voted in for.

Should we divest from Canada?  No. Today’s issues are 100% political, nothing else.  If anything, our index offers some exceptional opportunities.  As soon as we get a new government, our reputation of a reliable trading partner and ally will return.  With it will be the trillions of investment dollars that left under Trudeau. We will be one of the best countries to invest in.  New Zealand will be toast for years to come.

Be patient with your money.  Maintain 50% of our funds in one-year GIC’s. If you do not rely on the dividend income for spending, you can reinvest the income in companies with a great dividend history.  Our current recommendations have a very favourable outlook given their current yield. In the meantime, do what the world is doing and find humour in politicians such as Ardern, Trudeau and Freeland making fools of themselves.

By clicking on the above thumbnail, it becomes evident how investors feel about Trudeau. 

The Liberals and NDP continue to live in a fantasy land.  With soaring interest rates, high energy prices, a weak currency, a healthcare and military in shambles, and wasteful spending, Trudeau has announced he intends to make things worse by increasing the federal debt. He is also going to increase the useless carbon tax even though carbon dioxide emissions have increased every year since the tax was imposed. This is a policy that has been, and will continue to be, a 100% failure. It is designed to hurt the average family, not save the planet.

Ottawa does not care about its finances.  The only thing keeping the Loonie at current levels is our energy sector, and Trudeau wants it closed by 2035 even though it is Canada’s biggest tax and job creator.  Around the world countries are ditching green policies and opening more fossil fuel energy plants. Canada is the only country marching in the opposite direction. 

It becomes clearer everyday that Trudeau loves dictators because they are one person governments, something that he is on camera saying he admires.  In attempt to be one, he makes sure his Liberal members are allowed to say or think only what he tells them to. Even though we have enough fossil fuels for ourselves and others, he prefers to give Saudi Arabia more money each year for theirs.  

Justin also wants to help his idol Xi Jinping by relying on him for Made in China solar panels and EV batteries.  The country has cornered the market for lithium, the heart of the electric batteries.  The mineral is trading at its all time high, up 192% from a year ago.  Canada has the potential of opening a handful of lithium mines, but investors do not want to waste their time. Thanks to Trudeau’s useless environmental policies, it can take upwards of ten years just to get the permits to build.  

No doubt the provincial and Federal governments will throw billions of dollars at the building of batteries because without it there would be fewer buyers of EVs due to pre-subsidy pricing.  The number of handouts is already so high that the Ontario and Quebec governments announced they will not tell us how much free money these manufactures will receive.

Let’s hope the Liberals and NDP wake up one day before their term is up and do what is best for Canada. We doubt it though. We need educated people in Ottawa, not the freeloaders we have today.  Every proposal Ottawa makes under the guise of so-called Climate Change has done nothing for lowering emissions or the demand for oil.  This will not change for at least a decade, even under a green economy.  In a recent issue of Forbes magazine one sentence stood out: “Electricity prices in fact, have tended to be highest in places with the greatest share of renewable energy”.

Energy prices are set to go higher this winter and will stay high for the next 18 months.  Ninety percent (our estimate) of the coming increases will be due to Ottawa’s foolishness while remaining ten will be due to market forces.  This is the cost we must pay because we do not support our own resources.  Canada could easily have a ‘Made in Canada’ price, but Trudeau chooses to support unethical governments rather than Canadians.  Prepare your finances for higher energy prices.  You know who to thank. 

Energy shares over the next year will be one of the best to buy and hold. We expect lots of dividend increases. The closer we get to an election the better our resource sector will perform. Foreign investors hate Trudeau and are waiting for him to leave before they return their funds to what should be one of the most prosperous nations on earth.  It is time for Trudeau and his followers to decide whether they want to continue to support countries like China and Saudi Arabia, the unelected Greens, or finally do something positive for Canada. 

Currencies trade based on similar fundamentals as shares in a public company.  The main difference is that management of the currency is voted in by the citizen rather than the shareholder.  Too much debt, low revenue (GDP), more cash leaving than coming in (negative trade balance/cash flow) and issuing more shares (currency) affect the price of both negatively. Today our currency managers are so out of touch with reality.   

If our government continues to make horrible decisions such as issue stupid amounts of debt, limit our resource sector, increase taxes and government bureaucracy, the Loonie will soon be worth 70 cents U.S.  If Ottawa refuses to react, which is likely under Trudeau, a fall to around 60 cents over the following 36 months is likely. 

A falling currency causes price inflation because it takes more Canadian dollars to import foreign priced goods.   Our inflation rate has soared since the Loonie dropped 5% against the Greenback. It is not only losing value to the US$ but the Euro as well. The latter has increased 9.5% against our dollar over the last year.  This is considered a huge drop for a currency.   The biggest decline has taken place since Trudeau told Germany it would not help the country by selling our natural gas to them because there was “not a business case for it”. Clearly, Trudeau does not know what a business case is and hates this country.    

Every government must always protect its currency and make serious efforts to increase the value of it.  In our case we would do very well with a Loonie at par with our southern neighbors.  This one move will kill inflation and corporate tax revenue will soar because foreign investment will return to Canada. 

Our country’s management strategy is to borrow as much as possible then waste it. Notice no major infrastructure has been built in Canada under Trudeau? They are trying their hardest to destroy our resource sector, the farmer, and do nothing for the healthcare or the military. All the above are a source of business and personal tax revenue that they are restricting.  This aids in a weakening currency. 

If Trudeau and his puppets get re-elected our dollar will hit 50 cents U.S. by 2030.  Canada will become unrecognizable because our standard of living would crumble. Both Trudeau and Freeland do not understand that a weak currency equals a weak economy,  just like a share in a bad company.   Canada has so much potential, but we are led by a group that make zero effort to achieve it.  The Liberals and the NDP are 100% responsible for the weakening Canadian dollar.  

Should we divest from the Loonie?  No.  Current management will be voted out.  It is already decided in the polls. Unfortunately, Trudeau will not call an election even though the world wants him removed.  He will hold out until the bitter end. He loves his tyrant ways and spending your money frivolously.  The day he is gone, foreign investment that took flight once he became CEO will rush back, and if the next management improves Canada’s balance sheet as well as the income and cashflow statement, the Loonie will take off and return to pre-Trudeau levels within a year. 

A Few Questions

1. Justin will stop all fossil fuels by 2035, so he says.  What is he doing today to prepare the country for the transition?  Should he not make it law right away that all future buildings can no longer be fitted with natural gas?  Do governments believe the homeowner should have to pay for a complete renovation to their home?  Where is the skilled labour going to come from to reach a Green Utopia by 2035?  Forcing such a quick conversion to renewable energy will become one of the biggest hits to the middle class in history and perhaps one of the largest fails as well. In Canada there are over six million homes using natural gas.  In London, England five out of six homes rely on natural gas. 
2. Where is Ottawa going to make up the lost tax revenue from fossil fuels, plus the jobs for the forced-out energy workers?  Rechargeable and renewable will never replace the jobs fossil fuels create. There is only one fix for the lost tax revenue: higher electricity prices.
3. Why is the NDP still around when they sold out to the Liberals?  If any member of the NDP had principals and disagreed, they would have resigned or sat as an independent. 
4. Why does Trudeau love to prorogue Parliament? Members of the House of Commons have recently voted that for the next 11 months they do not have to show up for work in Ottawa. Why is this not being protested by the rest of the House of Commons?
5. Since Trudeau has announced that all of Canada’s farmers must resort to organic farming pretty much, when is he going to make trade pacts so we do not starve?  It is impossible to feed all Canadians based on organic farming.  Plus, this means eliminating one of our biggest exports, wheat.
6. Why do all levels of governments never promote mandatory finance and economics courses in school curriculum? If this was in place, perhaps Trudeau and Freeland would understand why deficits do matter.  Finance should be mandatory. Saving and budgeting should start in late elementary, followed by courses in securities, financial markets, basic accounting, economic history, and financial leverage beginning in middle school. But this is unlikely since the finance sector would lobby for an abrupt halt to the curriculum because it relies in large part on the financially illiterate for their profits.
7. Why does Canada need 39 cabinets when most governments have around 10?  It has become so bad that many cabinets are overlapping so very little gets done. Trudeau’s latest idea is adding a second cabinet minister to an existing cabinet.
8. Why is Saudi Arabian oil better than ours?  Why transfer billions yearly to countries with horrible human rights records when we can become self-sufficient plus still export?
9. If EV’s are the answer, then why is it that almost every government is subsidizing the manufacturer and the consumer? Why waste money on this while our medical system and military is crumbling?  Equality, which Trudeau claims to fight for, would include giving those who cannot afford a basic car (the numbers are growing) a larger subsidy so they can travel further to a better job and drive their kids to school.  The truth is there will be zero effect on the environment, and it will cause higher car and electricity prices.
10. What is the West’s obsession with CO2? The fact is, more the better. We are currently at 440ppm of it in the atmosphere.  At 150ppm plants begin to die and humans are quick to follow. At over 1000ppm, plants flourish. Today, the earth has the greenest coverage since the last ice-age.  This will occur going forward until the next cooling cycle, just like science has proven throughout the last half billion years. There will be more carbon in the environment each year for the rest of this decade and probably well into the next because China, Russia, and India will still favour cheaper fossil fuel energy. It is these countries that are responsible for most emissions so why does Ottawa say we have to pay for their pollution via our useless Carbon Tax?  Perhaps Trudeau’s confessed love for Xi Jinping’s method of rule is the reason.
11. Why is the government fearful of higher interest rates? It is because higher interest charges on our historical national debt is making them look bad.  Higher rates are also beneficial to the economy because those with savings are making more on their investments which is spent in or reinvested into the economy. Savings are greater than debt overall, so the benefit of higher rates is greater than the loss. Furthermore, interest and dividend income is organic unlike home equity which requires an interest-bearing loan that consumes a large chuck of the equity on the property. It is an indirect tax on your wealth.

These are just a small sample of questions that have been around for years, yet to date there has been no action by Ottawa or the provinces.  Of all countries in the world, Canada has the best prospects but there is zero leadership or the will from our government.  If we do not get an answer to all of the above questions you can see Trudeau’s dream of making Canada a third world country come true and the Loonies will be worth $0.50US by 2030.  This alone guarantees that every Canadian will become poorer.  Ottawa must be cleaned out today, not three years from now.  If not, it will be too late and the damage will have occurred.

Gold has fallen 13% since March and is warning deflation is coming.  If the price falls under $1,500, declining asset prices will be definite. It will exist for at least a year as the financial system cleans itself of excess debt.  This is needed because the financial system is the most leveraged it has every been, thanks to historically low interest rates.  There is positive to this however, it is needed to begin a new period of organic economic growth.  Just make sure you are prepared for it.

We believe inflation is on its last legs and this could be the beginning of the third major deflationary period in the last 100 years. The first one, the Great Depression, began on the last Friday in August 1929. North America’s economy was devastated.  A drought exacerbated the situation. The following three years destroyed the DJIA.  It fell 89.9% by the time it hit the bottom in May 1932 and did not hit its August 1929 high until the spring of 1954.

The second period began in 1978 when interest rates started a 3.5-year climb. At the peak a Canada Savings Bond was 21% for a one-year term. A bank 5-year GIC paid l7.5%.  The five-year mortgage was a painful 21.5%. This caused many personal and corporate bankruptcies.  When this bubble burst, falling interest rates began a long-term trend down that ended last year. This played a large part in creating today’s wealth.

There have been noticeable ups and downs, like 1989, but it mostly affected the stock markets, not the economy. On October 19, 1987, the Dow Jones Industrial Average experienced its largest one-day drop in its history, falling 508 points (22.6%). The market got spooked by higher interest rates which climbed for two years to 9.83%.  Thankfully they had room to drop rates and the index recovered.   That market did nothing to the world economy because they had room to drop rates, which they did until a minor jump in 2010.

Today, all asset classes will fall in value. It is a given.  Interest rates alone dictate this.  Those that produce zero-income like most commodities, cryptos, NFTs and many stocks will be hit more.  Interest rates are already hurting the housing market.  This market is dictated by income and interest rates.  Banks cannot lend as much principal when interest rates increase because the payment is based solely on the income that finances the mortgage.  So, when the interest expense climbs, lenders are forced to lend less principal since interest consumes more of the payment financed by the borrower’s income.  This is not only true for principal residences but for investment properties as well.    

Over half of homes sales are due to death and divorce. This means we will always be at the mercy of the market and prices can also go down.     Throw in scared investors and the outlook looks horrible for a few years, at least.    The losses will easily be in the hundreds of billions of dollars in Canada alone. Add in the excess consumer, government, and corporate debt in existence, it means slow economic growth and less discretionary spending for at least the next couple of years.

The stock markets are forward indicators and they have already priced in a recession.  There are noticeable up trends like today, but it will be short-lived.  At 13.57-times earnings, the TSX is currently bouncing around its average price earnings ratios since WWII, which is roughly 13 to 16 times earnings. The index is down from 19.9-times-earnings last year.  The DJIA is currently trading at a still expensive 19.9-time earnings, but is down from 24.2-times-earnings last year.   Companies are cutting expenses (including jobs), paying debt as fast as possible and hoarding cash.  The consumer is doing the opposite.   We predict the Toronto stock market will decline maybe 10% and most others between 15-and-25 percent.

Bottom line is what we have been saying for months; cash is king.  This will be true for the next few years. Stick with 40% cash and equivalents in the portfolio with the remaining money in companies with a positive cashflow and a history of increasing dividends. Today, one can earn a reliable dividend yield between 4 to 6%.  Anything above this and the risk levels begin to climb exponentially. 

You should avoid buying real estate as an investment for the next few years.   If the gold price continues to fall it will tell you how bad things can be. Speculation is out.  It will be a trip to the poorhouse. Capital preservation is in. Common-sense is our guide for many months to come.