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.
Affordable housing
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.
Lending
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.
8 Comments
I feel I should comment on your blog today but can’t top those made by the esteemed round-table participants. Scheer, in particular.
My comment\question is about ATD.B. The weekly charts show a bottoming phase for about three years now but today seems to have broken out of it’s first resistance. There is still the second resistance level to reach. The daily chart shows a significant gap and a definite upward break of the trend. A buy in two more days?
Hi Fred–you know I don’t normally comment on individual stocks on this blog unless I specifically address them in the body of the blog, but it just so happens that I keep an eye on this stock. It needs to bust that lid of $67.50-or thereabouts before it is technically bullish. Its in a sideways pattern. OR…it could go right back down to the bottom of that sideways pattern (since 2015) at just under $53–where I would consider buying. That would be a trade I’d be considering.
Algoma Steel makes armour plating sold exclusively to the U.S military. There is no logic to the American argument that Canadian steel is a threat to their national security.
Yes, there have been issues where the US (Trump) is 100% correct (eg–milk, poultry, eggs – as called out by MPP Bernier a year ago–this has been unfair to both the US AND to Canadian citizens who buy these products–a deal arranged by – good ol’ Pierre Trudeau, as I have been told), but also some of the issues, like steel and grains, where the US are wrong. In trying to understand it all–I believe that Trump is shooting for the moon and will finally settle on what is really important –at least, once hopes he will!
I have personally known quite a number of farmers who have suffered under the price swings in their commodities where the price they get doesn’t even cover the cost of feed. I personally feel they need some protection but when the price of quotas has more value than the farm itself something is very wrong. At the vary least production should be increased and volume of quotas increased to better serve consumers.
Yes I sat beside the Pres. of Masterfeed during the round table and he gave me an idea of what you speak of. I believe the main concern of the US–as it was with MPP Maxime Bernier and others who believe in free markets (myself incl) is the dairy/poultry/egg quota deal. The problem is that these are not the “poor little farmers all over Canada” who are being protected–these are large business interests located in two provinces who have monopoly on those industries and who prevent the struggling little guy to sell those products in a fair, equal business environment –lack of competition ensures higher prices for consumers, and small farms cannot prosper or compete unless they are amongst the few big operations.
Again, Trump is calling out what is right in that case–but he is incorrect on other industries–as you note, Bert.
BTW–I was happy to see Canada did concede on the dairy tariffs. A good and fair start that benefits all (except the big operators, I guess).
Whenever I see someone quoting the Fraser Institute, I give it the same credence as something from the Canadian Labour Congress. I feel that both organizations are highly biased and use selective ‘facts and figures’ to justify their respective positions.
Reality, for the average Canadian, lies somewhere between those two extremes. The challenge is to parse the information presented and find a middle of the road path.
As for the stats Fraser Institute noted–I quoted two major banks, along with the very accurate and unbiased Larry McDonald (very astute independent research analyst out of the US), on a blog a while ago reiterating the same concerns. So in this case, it is not an isolated comment by the Fraser institute, although I did only quote them on this particular blog.
Here are some links quoting multiple sources on the Federal debt, household debt, and real estate leverage in Canada:
https://www.valuetrend.ca/dont-be-the-dip-buying-the-dip/
https://www.valuetrend.ca/it-sucks-to-be-right/
https://www.valuetrend.ca/residential-real-estate-prices-may-bubble/
However—To your point, though, obviously we have to look at multiple sources, and analyse the data ourselves before entrusting one source.