Category Archives: Economics

Kootenays Now Takes Economic Hit

Look out Fernie / Sparwood / Blairmore…you’re next. 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.

Is Canada Corrupt?

Is Canada corrupt? You go to work every day and pay your taxes. Your taxes are intended to provide services which benefit the public good. Naturally, human resources are required to administer such services. Your government also assesses your country’s standing in the world and maintains relationship with other nations in the context of preserving freedom and quality of life for citizens. 

Then we have a system of commerce which operates under the guise of “capitalism”. In a capitalist system, small businesses and large businesses operate with particular reasonable regulations relevant to their industries and such regulations are imposed also in the context of the “public good”. An inherent trait associated with “free enterprise” is the right of business to “fail” due to whatever underlying factors are confronted. It is not the business of governments to pick and choose winners and losers through political bias, personal relationships, or preferential treatment due to the geographic jurisdiction of stakeholders. If such a landscape was permitted to exist, free enterprise would lose its appeal as a viable commercial system to engage with freewill unencumbered by systemic bias. 

Today, as learned through an ethics report – your country has failed you because in spite of you playing by the rules, you’ve come to learned that your federal government has a interfered in the legal process of a defendant charged with improprieties in the name of “picking winning and losers” in the capitalist system.  One must ask, as a nation, are we any different from third world countries which make ever day habits of conducting affairs on such terms?    

Cursory Review Calgary Arena Deal

I’ve seen some initial reaction to this deal and thought…why not take a closer look at what is available for information. Did you know that there is a “land option” within this deal whereby the Flames have the “option” to acquire and develop nearby lands which have not been wholly disclosed in total? What’s the option price and the current market value of such lands? The “majority” of event revenue will go to the flames and it appears by induction we are lead to believe that this “majority” amount will be 98 per cent with 2 per cent ascribed back to the city as a “facility fee” capped at $3M for the first five years. CTV news has me believing this is all the city is going to get with respect to revenues. Just so this is clear….Calgary will pay half building costs and receive back 2 per cent of revenues. No parking. It’s Just 2 per cent of aggregate revenues. You best hope that people still like hockey in 20 years. 

Break even cash flow is what’s going to prevent a tax increase.  I’m suspect….yet the city apparently is promising no tax increase in lieu of the deal. The facility fee would be the biggest single revenue source with respect to the city’s interest and this is a huge variable dependent upon the Flames ability to book events in addition to its hockey games. The naming rights are chump change. Would there be finance charges associated with the City’s construction and demolition component? How is the non-sporting taxpaying Calgarian supposed to benefit from a non-descript “community engagement program” or “community sports funding”? Are these payments back to the city indexed for inflation? What if the Flames organization runs into financial trouble and becomes ill equipped to pay these amounts which are the second most material source of city benefit? Yes, benefit and not cash given the funds would be allocated to special interest group(s) and not available to appease shortfalls.  As for accessory tax revenue from adjacent businesses – well in theory alternative developments would also generate such revenues.

What Is A Market Maker?

A market maker was an investment industry professional who had a responsibility to create a market in an environment of low liquidity. This was manual job when automated trading was not fully deployed. The market maker represented a firm with a seat on the exchange and would put up a bid or sell order in order to create the market among stock issues of low or nil volume. With fewer retail investors looking to trade, the market maker has taken up business elsewhere. Why is this topic relevant you ask? Well, Jim Rickards – author of Currency Wars claims that when the next stock market crash arrives, it could be a quick turn south without market makers stepping in to purchase during a panic. Sure, there are triggers to seize trading amidst a panic but what about when the light turns green once again.

In a market which quickly turns negative, mutual funds would be relying on fund managers to be decisive and quick at the switch – but with mutual fund’s exposure to such large relative weighting in one stock compared to a retail investor, how orderly could an exit be? The mechanics of trading in a stock market are worthy of anyone’s attention. Are there hedge’s available to you, the retail investor, which are not being disclosed to you because of a misconceived “fiduciary duty” which a broker thinks he possesses. That is, a notion that you lack sophistication to understand a hedge. Education in finance is important to all. Bankers should not be suggesting you lack capacity and of course you’re familiar with your responsibility to manage your finances.     

Mid Tier Gold Companies Since June 11th 2019

Yamana Gold, $ 1.92 USD to $2.55 USD for a 32 per cent move

Eldorado Gold (EGO), $ 4.11 USD to  $6.22 USD for a 51 per cent move

New Gold (NGD) went from $0.72 CAD to $0.94 CAD for a 30 per cent move

Detour Gold (DGG) went from $13.25 CAD to $16.58 CAD – 25 per cent

McEwen Mining (MUX) went from 1.39 CAD to $1.82 CAD for a 30 per cent change

Argonaut Gold (AR) went from 1.71 CAD to 1.84 CAD  for 7 per cent

Royal Nickel (RNX) – yes a gold company  went from $0.50 CAD to $0.64 moving 28 per cent

….and how much did the price of gold change from Jun 11, 2019 to July 3, 2019? Well, 9.6 per cent.

As you can see, a premium has been offered to companies with moderate market caps compared to the majors. Risk capital would have been well served with positions here. 

What is Shadow Stats?

It’s a newsletter written by John Williams. John received his degree in economics from Dartmouth in 1971. He considers it his duty to help the interested understand street level economic indicators in real terms as opposed to the terms expressed through nuance by government agencies. For example, John will take the unemployment statistic and incorporate variables filtered out unjustifiably by the U.S. government. If somebody is a “discouraged worker” without a job should we then consider them not to be unemployed? No. John believes as you and I do that this government approach is nonsensical. Hence; he infuses the common sense into his analysis when recalculating economic statistics.

He also has enough experience with the numbers to see trends, trend reversals, and anomalies. When a couple of figures travel in line over time but then diverge, you acquire knowledge of your investing landscape. While CNBC is regurgitating tainted data, you can access Mr. Williams through (www.shadowstats.com) and you need not even subscribe. He gives you some links for free on his page.

I’ve just wrapped up listening to his interview with Greg Hunter and his reference to the sustainability of debt along with the consequences of default. What I like best about Mr. Williams is his hopefulness in spite of dismal statistics as well as his humble disposition. Here’s the youtube video. https://www.youtube.com/watch?v=GOos-Ae0qGI

Ever Been Blind Sided?

One reduces the risk of being blind-sided with awareness. The problem with awareness is that we are lacking it due to the imposition and acquiescence to life’s complexities. Even when one deploys discipline in erecting barriers to special interests, variables outside our control compel us to accommodate for the sake of functional conformity.

So, here we are in the information age where values are being blunted at the edges. Liberties are taken in the name of new culturally perceived norms when in actual fact subconscious minds are at work processing the impact of changing goal posts and impingements upon freedom.

Could there be a “reckoning day” when there’s a return to values in their pure form due to the consequences of such a negative change in behaviour? If so, what would that “reckoning day” look like?  Would it be tripping the circuit breaker of the New York Stock Exchange? Perhaps, it would be the removal of ATMs from banking kiosks? Then there’s the unthinkable but that which is showing up in the news. How about a tax revolt? As we speak, things are so dire in Venzuela that mothers are turning to prostitution in order to feed their kids. A report out today sponsored by Canadian firm MNP espouses that “48% of Canadians are on the brink of insolvency”. That’ right. Supposedly, first world country Canada has financially impaired citizens almost as its majority.

Perhaps it’s time to take the blinders off and examine what is actually happening behind the scenes in the offices of your elected officials, board rooms of banking executives, and line ups in corridors of corporate, environmental, and indigenous lobby groups. Perhaps, it’s time to reflect on the line item detail of government Balance Sheets and the injustice of untried tax evasion of elite cheats with offshore accounts. How about regulatory measures of our fractional reserve banking system in the context of spiralling public debt out of control with no apparent plan to pay back? Did you know that our tax system is over 3,000 pages of fine print?

John Titus has exclaimed that when the money supply retracted thirty per cent from 1929 to 1933, there were hundreds of U.S. financial institutions in play regurgitating financial paper. Right now in the U.S. Citigroup, JP Morgan, Wells Fargo, and Bank of America basically represent those hundreds from the early thirties. These four banks are interconnected with derivative positions and they really are too big to fail in the context of what the effect would mean. When there’s deceit inherent within levers of power, there are strong winds ahead.          

Steve Eisman Is Shorting Canadian Banks

Over at bnn.ca they kept the video link front and centre for three days. The fellow gained notoriety for correctly calling and profiting from the U.S. financial meltdown in 2008 having suspected issues with collateralized debt obligations. Now, he is shorting Canadian banks.

It’s no secret. Housing prices are under pressure. Mortgage qualifying criteria has contributed along with weakness in the oil and gas sector arising from distribution bottlenecks. Oh yes, there’s also the carbon tax, socialist policy, and higher taxes all tempering business investment. Governments of today don’t quite understand the fuel feeding their public sector pension plans. So, why is it then that a banking official in response to Steve Eisman’s rationale for shorting three Canadian banks makes the claim that he has “no basis in fact”? Mr. Eisman simply purports that loan loss provisions in the face of economic headwinds have been underrepresented in bank’s quarterly earnings. On an accrual basis, it seems fair that record profits under our current circumstances seem circumspect. After all, if you can under report your loan loss provision, you can keep that dividend in tact thereby satisfying institutional investors. 

Somebody has just specifically called out the Canadian banking sector and he’s done it with his trades.  Who am I to question his analysis especially in the context of political intransigence in facilitating industrial development inter-provincially?

We have weak leadership in Canada right now. We are also confronted by massive public debt which must be serviced. Then there’s the material increase in social programs which must be financed, namely the new generous “child care benefit”. Baby boomers are now tapping into CPP and OAS. The U.S. in recent years has become much more capable of supplying its own energy needs and may not be needing Alberta’s oil in the volumes of yesteryear. The Canadian lumber industry is weakened by trade sanctions. Out east, there are the new tariffs on rolled aluminum. Southern Ontario car plants are faced with unaccustomed competitive, political, and innovative pressure. The City of Calgary is raising property taxes due to mismanaged downtown core land use. 

I’m thinking Mr. Eisman has got it right. Canadian banks are going to pay the price for loan losses associated with home equity devaluations and the consequential inability of consumers to manage unsecured debt. I’m thinking that the culture of entitlement is going to have a reckoning.     

Trudeau’s Year Ending News Conference and The Pipeline

 Not that I’m a fan of Justin Trudeau’s politics but he certainly outperformed the journalists posing questions today. I give Trudeau credit for his thoughtfulness, tact and consistency in articulating positions. He is certainly well spoken. Naturally, the security concerns of Canadians travelling abroad are important, but half the question period was unfortunately taken up by short sighted reporters fixated on the news of the day. Certainly, these reporters should have known they wouldn’t have received any more than what Trudeau was able to give on the topic of the Chinese detention of Canadians.  Instead issues of provincial jurisdiction, taxation, military deployments, veteran’s affairs, government debt, social program spending, and the justice system were not covered.

However; the matter of national unity was actually raised because it’s the knee jerk way of responding to real behaviour of politicians more focused on regional interests than the national interest. The prospect of transporting oil from Alberta to the west coast through pipelines is simple businessand simple economics. Certainly, as a first world country with professionals qualified to construct and maintain a pipeline safely inside an industrial regulatory framework established through decades of first world development experience, this should get done now in the spirit of Canada’s national interest with the enthusiastic cooperation of indigenous people. Just as a reminder…the hard working high tax-paying citizens of Canada grant indigenous people with special exemptions through land and tax not available to non-indigenous Canadians.  Your country also has the right to expropriate your land, garnish your wage, and freeze your bank account. Yet, today your federal government is frozen in time with respect to deploying an asset that you now own, namely the Trans Canada Pipeline.

Apparently, there are some sea mammals that must be accommodated out there on the prospective port. I’m thinking that these sea mammal’s interests could be represented while the pipe is being laid. Lawyers…. well they apparently require a lot more hand holding to save them from their naval gazing and obfuscation through technical legal bafflegab. There comes a timewhen common sense, progress, and economic expansion must supersede bureaucratic bungling.          

JP Morgan Chase In Hot Seat Over Precious Metals

It’s been a contentious issue over fifteen years in the investment community. Are precious metals markets rigged? If you’ve never heard of GATA (Gold Anti-Trust Action Committee) I suppose it’s about time they get some credit for quiet behind the scenes research into irregular trading patterns of precious metals on the COMEX and LME. GATA has in fact appeared before U.S. law makers on the topic of market rigging during the period in which this alleged illicit trading was conducted. Did the U.S. government significantly digest claims made by GATA through GATA’s research? How could the U.S. Senate draft a 396 page report entitled “Wall Street Bank Involvement with Physical Commodities” having not discovered any of these trades though which allegedly number in the “thousands”.

The news….JP Morgan appears (a plea at minimum so far) to be guilty of conducting illicit futures trades in precious metals as reported by CNBC on December 13, 2018 and in fact there is a reference in the article to the trades by an employee of the firm as being conducted with the consent and direct knowledge of his immediate supervisors. A class action law suit is underway representing those who traded the futures precious metals markets between 2009 and 2015.

Chris Powell of GATA speculates in his December 18, 2018 article whether gold mining companies who have reason to trade futures in order to hedge production will participate. Mr. Powell goes on to elaborate why the gold mining industry has been reluctant to postulate about market rigging. Austrian economists could expound greatly on motives for the suppression of the gold price.    

Not surprisingly, we’ve seen the gold price rise to a six month high today. The big question will become…how far up the chain of command will we discover complicity in the conduct of this bank employee?     w