I will start this blog by stating that today’s writeup, while absolutely pertinent to the Canadian stock market and economy, contains a few of my personal opinions. Imagine that – me – outspoken! Never! (Ha!).
I’ve gained a reputation in contrarian investing (I even wrote a book on it recently here). In fact, I attempt to question many commonly held beliefs, and look beyond crowd-think. I’ve discussed these tools in both my book and during lectures for the MoneyShow and the CSTA. As a point of interest – one tool, should you be interested in developing a contrarians mindset, is to subscribe to Skeptic Magazine. I have for years. To be a contrarian sometimes means questioning the popular narrative – something that sounds great to ascribe to, but is always controversial when you do so. People unknowingly tend to seek refuge in the herd, while – knowingly or not – viewing those who walk away from the herd “potentially dangerous outsiders”. Its the way our brains work. Read Smart Money to learn more about that human predisposition. Its all about the Limbic system.
Case in point – my bullish stance on the markets last week, where I wrote a STRONG suggestion that the bottom had been put in (for the time being… see my EWT blog here). I suggested it was time to start buying. That was on January 24th when the SPX was bouncing around 4300. I reviewed my various reversal signals and contrarian indicators. I noted I was buying stocks with the cash we had raised in late December for our Platforms at ValueTrend. Of course, we now see in hindsight that my call was reasonable (SPX is 5% higher…so far). But – I was questioned by many people (the crowd) who were convinced the market crash had just begun. Such is the life of a contrarian.
So here I go again – I’m once again going to take on a controversial topic, because that’s what I do. I question the narrative. Todays blog is going to question some popular narratives. Its going to raise come hackles. Skip it if you can’t handle an opinion outside of the crowd. Oh – and I’m gonna pick on Justin Trudeau again. Don’t send me emails encouraging me to discontinue this type of topic. I won’t – and your email will be ignored. Unsubscribe if you don’t like my occasional rants. I’m not offended. Many subscribers enjoy my accurate market commentary enough to bear with my rants. Many even agree (imagine that!).
Disclaimer: this blog doesn’t necessarily represent the views of my employees. So hate me, if you like. Not them.
I recently watched an interview with Dan Kelly CEO of the CFIB (Canadian Federation of Independent Business). ValueTrend has been a member of this wonderful organization since 2008.. With the increasing pressures by government on small businesses, the CFIB has been an advocate for us little guys, and great resource. If you own a small business – no matter how small – I highly recommend joining. In the interview, Kelly noted CFIB’s research predicting an oncoming wave of approximately 180,000 small business closings in Canada! This, even if/ as / and when the economy re-opens after the recent Covid Wave. The problem is, according to Kelly, after a myriad of shutdowns and restrictions, many business owners cannot see a pathway to recovery.
According to the CFIB, Canada has seen the most # of days of lockdown of anywhere in the entire world!
As one small business owner explained to me, if you run a restaurant (he does) and:
- It gets closed by the government
- then re-opens,
- then closes again,
- then reopens again
After this ridiculous cycle – the original employees go and look for another more stable line of work. Can you blame them? Hence the difficulty these businesses are having. How can they be expected to retain employees, then lose them in a lockdown, rehire new employees, lose these new ones, then find new rehires AGAIN, then lose THOSE employees…over and over?
Canada leads the way… in a bad way
This country has seen 430 days of lockdowns and restrictions (CFIB statistics) for small businesses since the pandemic began in 2020. As noted above…This is more than anywhere in the world! We’re number one!…. Yay?
Further, the Canadian Government has pushed a number of mandates that have proven NOT to make a difference after a certain point of vaccine distribution. Lockdowns, masks, and mandatory vaccines and “passports” have been carried forward — despite Canada passing the BMJ Journal for medical professionals recommended saturation point of 60-80% (more emphasis was placed on vulnerable portions of the population and less-so on less vulnerable–but it averages out to 60-80%). This, after Canada reached an 84% vaccinated rate. As the world has discovered, you can still catch, AND spread Covid if you get vaccinated. Just ask Justin Trudeau, who has had the full double shot and booster regime. Yet he recently announced he has Covid! Thats right, he got Covid! While fully vaccinated and boosted! And because vaccines don’t prevent the spread, he is isolating. So mandatory vaccines and passports are because…why?
BTW–before I’m labeled as an anti- vac-er (this is a new word..I have not located the proper spelling of it). I got the Covid vaccines. They reduce the potential of death or serious repercussions in certain vulnerable individuals, although based on my health, I am not in that group. Still – I did it. I have no issues with the vaccine… It’s the enforced mandates and freedom restrictions – after an 84% Canadian voluntary vaccine adherence that I – and so many others – are concerned about. The vulnerable, and even the not so vulnerable, are pretty much covered now. Just like Justin is. And it hasn’t done much to stop guys like him getting it, and spreading it. Why is he isolating if vaccines stop the spread? From my understanding, its main benefit is to reduce your vulnerability should you get the disease. So – its great that the vulnerable are now covered. And its great that 85% of Canadians (including the less vulnerable) are covered bringing us up to the recommended saturation points.
Now that we are at that 84% level – its interesting to examine the effectiveness of other mandates. Cloth masks are now known as ineffective. Yet in Canada, don’t dare walk into a store (if its not locked down!) without one on – as useless as they are. Interestingly, many US states have removed forced masks, lockdowns, and employment vaccine mandates. Further, Biden lost a court case forcing companies with 100 employees to mandate vaccines. That, after having found that an 80% population vaccine rate is an effective and reasonable saturation level. Of note – the US states without the myriad of restrictions have not experienced materially differing fatality patterns from Canada or other states who have kept these mandates. The UK recently announced removing all of these mandates, including masks and vaccine passports, following the pattern of most of the southern states. Iceland too. More are on the path towards ending
Covid mandates. But not Canada.
So why am I writing about all of this “Freedom” stuff on a financial blog? Well, there is an absolute and direct link between short term AND long termed economic growth and these restrictions. As I noted above, ask any restaurant owner about retaining employees over the past year. Ask any retail operation, including grocers or your favorite furniture store, how these mandates have affected deliveries of products. Ask any consumer how this has effected the prices on their purchases!
A new survey by Angus Reid shows that most Canadians now want to end all Covid-related restrictions.
A study by international think-tank Plos Global noted how the relevant degree of lockdowns affected the GDP of various regions and countries across the world. The chart below summarizes their findings. In a nutshell, the higher the restrictions, the greater the negative impact on GDP. 100% lockdown areas like Canada see almost 10 times the impact on their GDP as do non-locked areas. Even as restrictions are lifted (eg – restaurants open at 50% capacity) you still look at a huge multiple of reduction in GDP vs non-locked down areas. Canada, being the most locked-down country since the pandemic began, will have current and lasting impacts by these overblown policies.
This will, of course, impact the public shares of companies impacted by supply chain issues (which are impacted by Covid restrictions) and earnings power. Further, if the CFIB is correct about 180,000 permanent business closures expected over the coming year – this impacts employment, and purchasing power by the Canadian population and the lost purchasing power of these many businesses. Look around you next time you visit any retail operation – be it a grocer or a coffee shop. Lights are on, paper towel is in the washroom, products are being sold, and employees are doing their thing. Now imagine 180,000 of these operations no longer buying the paper towel and coffee, and doing these things. Picture the impact of that loss. The chart above illustrates this on a less-human level. But it is numbers that affect us in the end.
As an investor, you need to be aware of the stocks that have been subject to these lockdowns. The implications are not just temporary on these companies. For example – is it any wonder that companies like Restaurant Brands (QSR-US) has been in a freefall since last fall? What will the lingering effects of the Canadian lockdowns have on their profits – given the high impact of Canadian earnings on their holdings such as Tim Hortons and Canadian franchised stores of Burger King, etc?
Enter the Truckers
Hats off to the Freedom Rally & Truckers Convoy. My two sons drive trucks, and I can relay to you that its a tough job, and they are rarely given the respect they deserve as essential workers in the supply chain crises. As our PM hides from yet another confrontation (Oh, right, he’s got Covid….he cannot speak) – Great Britain News joked that Trudeau and his staff don’t have the courtesy to meet with the Convoy leaders to discuss the issues because they have come down with the dreaded “Panty waste” variant of Covid. The USA has also taken notice of the disconnect between the elite Trudeau government and its citizens, calling Trudeau a “fearful despot” in this Fox commentary here.
The Trudeau government and the establishment has shown their fear of this movement through their disregard of the Freedom Convoy. Trudeau desperately attempts to demonize the convoy – all while hiding away, himself too fearful to discuss their concerns. Indeed, the majority of Canadians concerns. He fearfully (per the Fox newscast) attempts to focus on one or two fools who are bound to show up at these events, rather than on the vast majority of thousands of good, decent, patriotic Canadians who truly represent the convoy. In fact, he recently stated that he regularly attends rallies, but not those he disagrees with. This is leadership….to never hear and discuss the other side of an argument?
This truly is the outward expression of his real fear: a loss of control over the narrative.
As an aside – For a those who enjoy a good laugh, there is a song circulating called “The Cottage Coward” by Corby Kemp- thoroughly funny: Coward of The Cottage.
This so called fringe movement has seen thousands of truckers across the country move in a huge convoy. Millions of Canadian supporters, and in other nations, cheered them on as they travelled. Contributions to the cause flow in every day from ordinary people. Elon Musk, Joe Rogan, Jordan Peterson are just a few of the popular commentators giving kudos. This is no fringe movement. It is a large movement, working towards bringing Canada back to reality, and away from mandates that are well past their expiry date. And hopefully bringing our businesses back in line with the rest of the world – who are lifting mandates rapidly.
Hopefully this movement is the beginning of a move contributing to the recovery of economic, and mental health of Canada. In that way, Canadians can once again enjoy a country and a stock market that is True North, Strong and Free!