Category Archives: Economics

Editorials In Lock Down

Whenever I click an editorial on line and am prompted for a news subscription trial I come away thinking, “fat chance you’re going to get me to pay for this second rate opinion”. I harbour no ill will toward editorials in lock down and news outlets needing to fund their reason for being. I’ve just taken the opinion that since the internet company is taking a material payment from me monthly and I expose myself to the deluge of advertisements, I simply will not subscribe to one news outlet. Have you ever been frustrated by having cancelled a memberships with precise administrative protocol but then see the charge show up the following month? Exactly.

At the same time, it’s important to underscore the contribution which journalists make to society. Journalists ask questions which you don’t have time for because you are at work and tending to kids. Journalists serve you in that they isolate problems with government decision making which impact you. Journalists also expose injustices of humanity which would go otherwise unnoticed by those who can intervene.

There has been a new phrase coined recently – “fake news”. While there are degrees in quality of journalism largely because of the profit motive and stakeholder’s potential for bias, standards in journalism still exist and are being executed. To subjectively paint all journalists as compromised is simply irresponsible.

In fact, there has never been a larger role for journalists during this time in history when democracies are being administered more like “elected dictatorships” with ultra party partisanship and fear of voting ones’ conscience in elected houses as the new norm. Under these conditions in particular, the diligent reporter’s industrious efforts should be emboldened. In this light, I suggest to the journalism industry to lift your lock down of editorials for those of us suspicious of monthly credit card auto charges and appeal to us differently for your funding.   

Favre Speech Money And Lessons Learned

It’s a talking point I trumpet often with my clients. Your money is yours and you must know what you are doing with it and where it comes from. Somebody apparently forgot to share the message with Brett Favre.  He will now return 1.1 million dollars to the U.S. welfare system for money received for speeches that he did not give.

Investment advisors have been wrong often. Bankers are not investment professionals and typically don’t deploy investment analytics as they should in recommending investments. Nor, do they necessarily have a feel for the economic pulse.  Yes, they did not anticipate a “Black Swan” event in the context of a risky political environment. Portfolios have lost money and investors are assuaged with the mantra that they are in for the long term. 

It may be unfathomable to you that somebody can receive 1.1 million dollars and not know that it hit their account. I can actually believe it when the numbers get big and individuals don’t have the right financial professionals in place to question financial transactions. In fact, the accounting profession had lost its way ten years ago in the context of derivative books getting out of control while off balance sheet obligations went unscrutinized. When internal controls get loose during times such as these, temptations of the morally weak are incited. The environment right now is really interesting and I’m paying special attention. Governments are spending money like drunken sailors. The U.S. federal government just fired a watch dog responsible for overseeing disbursements from the federal treasury in the context of pandemic relief. There’s never been a more acute time in your living history to be educated in finance.     

Pandemic Reveals Canada’s Health Care Cracks

While Canadians turn to twitter and laude the public relations campaign by Alberta’s Chief Medical Officer, Deena Hinshaw, let me remind fellow Canadian regarding the disparity of pay between her, and care aides tending to the elderly.

You see, The Canadian Medical Association for decades has ensured that Canadian doctors hit the gravy train right out of school with automatic jobs because of ridiculously tight spots in medical schools. Entrance standards at medical school have been set artificially high in order to serve a market demand favouring doctors.  Having come to grips with the problem, the importation of doctors from abroad became necessary.

The Edmonton Journal reports that Canadian doctors earn $349,655 per year. Many care workers tending to the elderly have been earning minimum wage. Do you see a problem here? Okay. Who do you think has the bigger voice when negotiating pay? You guessed it. Doctors. Mostly, front line care aides don’t actually have representation.

The health care budget in Alberta is near the 45 per cent range. Think about that for a minute. You as the taxpayer are so interested in your public health care system that you are willing to spend $0.45 of your provincial tax dollar to fund public medicare – yet today your Prime Minister has announced that the salaries of these aides for the elderly are going to be need to be topped up and you guessed it….there will be not mention of where this new money will come from. 

Vancouver Teetering On Edge of Bankruptcy

Beneath The Beauty

Is Vancouver teetering on the edge of bankruptcy? Are you old enough to remember the federal immigration policy instituted by Brian Mulroney which encouraged capital investment from abroad via the immigration system? Come to Canada and invest a sum while guaranteeing to employee a few. This was the start of the of the real estate growth wave in Vancouver. The program was only loosely monitored and became the conduit for infusing money into the lower mainland thereby ousting those native born without ancestral ties access to the market.

The demographic of Vancouver changed dramatically in a short time frame and there was a definite cultural shift amidst a policy of “multiculturalism”. This was new vocabulary established partly to challenge the xenophobe while complementing robust immigration policy. When we look around at the cultural mosaic today in lieu of the government message, we see some success but greater failure. The greater failures were middle aged and older Asians not really making the strong effort to immerse along with a white contingent who was not overly welcoming. So, there was a contrast between the government’s ideal and the urban reality. When we look around today, we can give strong marks to the immigrants of millennial and younger generations for gravitating toward their own Canadian destiny.

The capital infusion into B.C.’s lower mainland didn’t stop with the economic immigrant. Banking regulation in Canada has been lax. Imported capital has not been scrutinized. Dirty money has been making its way into Canada for decades and politicians have turned a blind eye. Bankers liked it. Bank shareholders have liked it. It’s only been as recent as four years ago that money laundering activity at casinos in Vancouver became targeted by regulators.

These two sources of capital have been substantial in the real estate market in Vancouver. As of this writing during the COVID-19 pandemic, the City of Vancouver has suggested bankruptcy as an option in the context of 65 per cent of Vancouverites missing their April 1, 2020 property tax payment. Fifty-five per cent are projected to miss their May 1st 2020 payment. What’s the correlation between a hypothesized artificial rise in real estate valuation and the failure of the city to collect taxes amidst the COVID crisis? I suggest that the city’s budget and historic spending grew in tandem within the context of a property tax system built on a weak structure of property valuation and hence the house of cards is now teetering amidst a black swan. 

Monetary System and Bankers Code

Canada is facing a large increase to the money supply in the context of new social programs associated with COVID-19. Your government in conjunction with financial news outlets do not want to use language like “increase the money supply” because it may be deemed alarming or inflationary. Instead, it refers to the monetary system in bankers code.

In essence, government securities are floated for distribution to commercial banks via the country’s “central bank”. The creation of this “security” (example would be a treasury bill or bond) in effect provides the directive for printing press operators to flip the switch. However; in advance of the creation of the new security, the central bank will check its “reserves” to ensure that the “vaults” are sufficiently equipped with an “asset” to merit the production of a new “security”. This is where things get interesting.

It used to be the case that gold characterized the reserve asset. However; gold lost its lustre as a reserve asset when President Nixon took the U.S. off the “Gold Standard” in 1971. President Roosevelt Roosevelt in fact ordered Americans to return gold for dollars as a mechanism to cope with The Great Depression.  

So now, we have the creation of new money without a tangible assets being served as its foundation for existence. Furthermore, we are presented with ever increasing national debts represented by the apparent financing of governments by holders of such securities which will stretch way beyond ledgers of domestic commercial banks. We also have the vast majority of economists supporting such a system and special interest groups professionally organized to acquire government funding.

What can happen when a Black Swan event such as COVID-19 compels governments to inject new money in the hands of consumers in the context of a monetary system which has no tangible asset at its root? Inflation or deflation of course. This is the great debate. Logic dictates that prices should rise with a larger monetary base. However; when social conditions deteriorate, a hoarding impulse may compel folks to store their cash thereby producing deflation. Every economist will tell you that the worst economic scenario is one of “deflation”.

 Politicians without any exposure to “Austrian Economic Theory” will naturally defer to “Keynesian” (flooding market with currency during demand drop) doctrine of mainstream economic thought. Will next generations be contented with paying interest on seemingly unsustainable national debts or will there be a consolidation at some point? Author Jim Rickard has referenced the “Special Depository Right” as a new unit of currency established by the International Monetary Fund.      

Canadian Practical Measures COVID-19 & Economic Crisis

Recommendations for the federal government of Canada in lieu of corona virus pandemic and economic crisis. Will they listen? I don’t know.

  1. Permit the purchase and sale of unused RRSP contribution room.
  2. Permit the direct tax deductibility of net capital losses up to a maximum of $25,000 per year.
  3. Rewrite usery laws prohibiting lenders from charging more that a seven per cent differential from the Bank of Canada overnight rate.
  4. Reassess affordability of Canada Child Benefit program.
  5. Expropriate treaty land deemed necessary for commercial development from which fair negotiations have failed.
  6. Proclaim jurisdiction over tide water ports with constitutional amendment if required.
  7. Assign able bodied unemployed men to environmental remediation projects.
  8. Improve service channels to Canadians via CRA and Service Canada.
  9. Impose and enforce director liability for environmental negligence.
  10. Responsibly incentivize investors interested in the development of our natural resources.

If any reader finds this list appropriate, do feel free to copy the items into a letter addressed to any Canadian politician you deem open minded.  

Banking Credit Specifics Amidst COVID-19

You’ll notice that your governments are speaking in code much of the time when it comes to addressing the financial impact, consequences to your household, and detail pertaining to your access to credit facilities in the context of COVID-19. Your Prime Minister is once again scheduled to address the nation at 11:30am EST. We’ll see if he get his “head of his a@s” and starts speaking in terms of your household cheque book.

While the Bank of Canada rate has been reduced over the past decade, margins between the “overnight rate”, “prim rate” and “retail lending” has widened. That’s right…the banking system has done very well because you my fellow Canadian has been too happy to pay interest in the wide margins. 

This crisis has hit while you are highly leveraged meaning that many more of you will now be faced with bankruptcy unless your government starts REGULATING THE BANKING SECTOR in terms that assist you in managing your debt. The board of directors of your chartered banks won’t be too warm to that idea especially in lieu of their confounding argument that masses of Canadians hold chartered bank stock in their registered investments.      

From what I can see so far, your government is going to be floating more “paper” in order to free up credit. The term “paper” refers to securities which may take the form of derivative contracts. Oh ya…you remember those – the ones that produced the financial crisis of ’08 / ’09 (mortgage backed securities). Of course your government will also be referring to the “purchase of bonds” which is code for creating new money out of thin air with a charge to your grandchildren’s future.

Newsy Week Eh

From the stand point of the stock market, this is a lesson that so many folks needed to learn. Your investment advisors are simply people with vulnerabilities like the rest of us. The buy and hold mantra has cost you money. You must put attention on your own investments and you must actively manage your portfolio with input from financial people who know more than you. You must be the torch bearer of your own financial destiny. You must be in a mode of “continuous learning”. What about locked in accounts and government pensions you ask. Well, you are at the mercy of portfolio managers but you still have access to your accounts with a right to know what you own.

So….how do I find the time to manage my own investments? You fit it in. You stop succumbing to the bosses request for overtime. You put boundaries around your schedule. You stop being a pushover when it comes to your calendar. This might mean helping your spouse understand that that second vacation within a calendar year goes bye bye.  Boo hoo! What would you rather have  – an earlier with compounded accelerated rate of return and an earlier retirement or that second vacation just because your kids get a spring break?

Now that I’m on a roll ‘cause I put this together having just returned from an empty gym ‘cause of the psychology behind avoiding sweat boxes now that we’re dealing with this corona virus, I expound further.  Have you seen the chart on the Dow 30? The thing has been going straight up for years. Did you not think that it was overdue for a major correction in response to some kind of Black Swan event? Hell….I simply took a look at the incompetence of governments in running budgets given deficits and debts and on that basis alone considered the market over heated. Have you not perceived the weakness currently in our North American political leaders??  There’s another factor right there in and of itself worthy of shorting the market or running for the hills. 

Era of Non-Confidence

If you feel like you’re being hosed. You are. We’re in an era of non-confidence and nobody wants to own it because the exclamation lacks personal power. You hate ceding your power and I don’t blame you.  Ideally, you pick your choice worthy battles. You fight them thereby appeasing your conscience while incidentally assuming that bigger fights with more moving parts will be handled effectively by those in higher power structures. Here’s the thing…..the credibility of those higher power structures has been eroded. The affect is a not necessarily apparent on the surface but once you get behind the doors of a broke household or board room…..the scene may look more vivid.

Whether it be a deceitful president of the United States, a government authority overstepping its jurisdiction, a tepid minded Prime Minister, protesters impeding commercial activity, a police department being indifferent, a legal system operating atrociously slow, a tax system redistributing wealth, or an electoral system exercising regional disparity, people in my opinion are feeling more powerless now than in the past. This is my sense. What are the implications of this? Not much happens in the beginning. Fringe movements rise up and energies fade. It’s not until groups in large numbers feeling similarly aggrieved amass that any traction takes hold.

Insular leaders living in a vacuum clueless of what’s being discussed at the supper table is a phenomenon of the day. The election of Donald Trump should not have been a surprise for elitist liberals but indeed this pompous bunch had their worst nightmare come true. The wide swath of political blue painted across the map of the Canadian prairies in 2019 should not have come as a surprise. Elitists again were caught off guard. 

People expect competent leadership with commercial interest playing a vital part in decision making. People expect merit based pay. People expect entrepreneurial risk to be rewarded. People expect their tax dollars to be spent wisely. People expect the responsible development of resources within environmental guidelines along with the permitting process to be reasonable. These are not difficult concepts but the intransigence at every turn by figures of authority mixed with a political landscape of deceit and unreasonable demands by First Nations people are more than just getting on the nerves of ambitious Canadians. 

Kootenays Takes Economic Hit

Look out Fernie / Sparwood / Blairmore…you’re next. Kootenays take economic hit. Teck laying off 500….and it’s yet to be reported exactly where the blue chip miner is going to apply its cuts. Their steel producing coal isn’t quite as appealing to the markets. Could it be time to start promoting golf courses and casinos with the forestry industry also in the doldrums? The sleepy towns of Cranbrook and Kimberley get by (barely) with the closing of Cominco years ago. This corner of B.C. is still holding on to some semblance of conservative values in the face of a rising industrial backlash but it could all be about tourism once the next movie star catches a glimpse of the Teck open pits fuelling rhetoric for light weight politicians.