This is a technical analysis blog. But I thought I would take a moment to share some notes I made while attending a special meeting between a group of prominent local business leaders in Barrie, Ontario – and PC leader Andrew Sheer.
Attending the meeting were such predominant businesspeople as Ron McArthur, President of Napoleon Group; Robert Flack, President of Masterfeeds (Ag Processing), Brian Smith, President of Barrie Welding & Machining – as well as representatives from BMO, Housing developers and of course, myself from the Investment Industry.
Andrew Sheer had asked local MP Alex Nuttall to arrange a roundtable, where these business leaders could present their thoughts on how NAFTA, trade tariffs, and government regulations were – or will – affect business. I was encouraged to observe Mr. Sheer’s ability to genuinely listen to the concerns of these business people, without using the opportunity to propagate his own views. In some cases Mr. Sheer commented, but for the most part he was there to hear from business, rather than the other way around. Here is a very, very brief summary from the notes I took as each member of the “round table” spoke their piece, and my paraphrased comments by Mr. Sheer, if applicable:
Steel and industrial production
Companies affected by steel and aluminum tariffs noted that – due to uncertainties surrounding the NAFTA talks – steel and aluminum prices change daily. For the first time in one companies long business history, they are having to provide only “ballpark” quotes on jobs, given these price gyrations. One company noted that the higher costs and uncertainty surrounding them has forced them to increase costs on products by an average of 8% – passed directly on the consumer.
Sheer’s comment: Steel in particular is subsidized by many other countries – not just Canada.
Housing developers noted that with the multitude of government barriers to developing new projects, housing prices have been kept high. Delays and red tape cost money. As one developer stated: Ironically, affordable housing is available if we had less government interference”.
Sheer’s comment: Less government, and less regulation, leads to less costly red tape. This goes a long way towards alleviating this type of problem in many industries, and ultimately enhances growth and employment within the country.
Banking leaders noted that the potential tariffs and other possible effects resulting from NAFTA have created the need for a far greater need for individual industry diligence on lending to several industries. Who and how they will lend to has changed for the banking industry, which in many cases discourages growth – and in some cases places significant pressure on businesses.
Canadian dollar and the TSX
My own comment circled around the declining loonie and underperforming Canadian stock market. Both of these are barometers for Canada’s economic health. I am paid to make money by following the trend. The longer termed soft loonie and lower stock market performance has forced me to reduce my model portfolio’s weightings in Canada – and I expect the same type of underperformance going forward. Ontario – Canada’s highest producer of GDP – received credit downgrades by S&P, Moody’s and very recently by Fitch. When Canada’s largest economic force (double Alberta’s second-place standings) gets hit like this, it highlights irresponsible government policies (i.e. Kathleen Wynn’s famous “off book debt”—a name applied when the outgoing Liberal leader blew through the provinces debt ceiling, but wanted the gravy train to continue). It’s not just hitting us at the provincial level – Similar warnings from the Fraser Institute surround Canadian Federal debt and spending, along with household debt. I noted that I and many others in my industry remain bearish on Canada. And this is a sad thing, indeed.
Sheer’s comment: Responsible government involves fiscal responsibility.