Bonds, biotech & cheap cigars

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DOUG  By Guest Blogger Doug Rowat
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The last time the US Federal Reserve moved this aggressively with its interest rate increases, the 25-cent AC Grenadier cigar-smoking gentleman pictured above was in charge:

How long ago was that? Long enough ago that you could, apparently, puff cigars during Fed meetings and long enough ago that this same magazine advertised this as the latest in video-game consoles:

Flash forward to the present and, thanks to Jerome Powell doing his best Paul Volcker impression over the past nine months (minus the cigars), we’ve seen the US investment-grade bond market plunge. At one point this year it was down by more than 20%. It’s since recovered modestly but is still down more than 14% y-t-d.

This has led many investors to conclude that bonds are ‘broken’ and that prices will only continue to drop as the Fed raises rates. However, interest-rate cycles always end (even this unusually aggressive Volcker-esque one) and the bond market will almost certainly be driven by two main factors over the coming year: inflation expectations and the relative attractiveness of bond yields.

First, inflation. We’ve argued in numerous posts that we believe inflation has peaked. Countless inflation indicators suggest that this is the case, but look no further than the most important indicator of all: US headline inflation. Headline inflation fell from 9.1% y-o-y in June to 8.5% in July, 8.3% in August, 8.2% in September and, most recently, 7.7% in October. The inflation battle’s not over, of course, but the trajectory’s undeniably encouraging.

And if the Fed oversteps with its tightening and slows growth too much then interest rate CUTS could be on the table. Yes, this seems impossible at the moment, but please don’t tell me that you consider the Fed infallible? Signs of moderating inflation, which translates to an eventual pause in rate hikes, will continue to be positive for bond prices, but signs of outright easing? This will spark an even stronger bond-market rally.

Second, yields. On an absolute basis, of course, bond yields have become rapidly more attractive. The boring US 10-year Treasury yield, for example, recently hit 4.2%, almost 6x higher than it was just two years previous. Sure enough, this yield was compelling enough to draw investor interest as the US 10-year Treasury yield now sits at only 3.7%. Further, corporate bond yields relative to equity dividend yields are now more attractive than they’ve been in almost 15 years. For income, the equity market is no longer the only game in town:

Bloomberg US Corporate 3-5 Year Index yield vs S&P 500 Index 12-month dividend yield

Source: Invesco

And what does history tell us? Excluding the current bear market, the US investment-grade bond market has recorded six negative total-return calendar years over the past 30 years, but each time the bond market subsequently rallied:

US Investment Grade Bond Index forward returns following negative-return years.

Source: Invesco; annualized total returns

So don’t give up on bonds. They’re as important to balanced portfolios as cheap cigars were to Paul Volcker.

$       $       $

Finally, the biotechnology sector has been the best performing area of our client portfolios this year. The biotechnology sector often does well during recessions or even periods where a recession is feared, but the sector has also been buoyed by tremendous innovation over the past several years and by attractive valuations. As of January 2021, for example, the biotech and pharmaceutical industries had roughly 12,700 projects filed with the FDA, a 33% increase from five years earlier. And with respect to valuations, the biotechnology sector looks compelling. Needless to say, lots of future M&A activity is expected:

Nasdaq Biotechnology Index members trading below their cash value

Source: Purpose Investments

If you don’t have biotechnology exposure in your portfolio, now might be the time to consider it.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Investment Advisor, Private Client Group, Raymond James Ltd.

 

86 comments ↓

#1 RowatNation aka Prince Polo on 11.26.22 at 9:35 am

Today’s magazine will have the PS5 as its cover model.

#2 Dharma Bum on 11.26.22 at 9:43 am

It seems like a lot more got accomplished back in the times when the room was completely smoke filled, ashtrays overflowing, neckties loose, and styrofoam coffee cups half full.

You know…the good old days!!!

https://www.google.com/search?q=looks+like+i+picked+a+bad+week+to+quit+smoking&oq=looks+like+i+picked+a+bad+week+to+quit+smoking&aqs=chrome..69i57j0i22i30l3j0i390.16623j0j15&sourceid=chrome&ie=UTF-8#fpstate=ive&vld=cid:e3dcc072,vid:VmW-ScmGRMA

#3 PBrasseur on 11.26.22 at 9:57 am

Biotech is a speculative, often fraudulent jungle, always vulnerable to the next lawsuit, failed test or stock emission. Stay away unless you really know what you are doing or at least limit yourself to EFTs or mutual funds.

#4 Emma Zaun - Greater Fool Unpaid Intern #007 on 11.26.22 at 9:59 am

OMG Doug, you too!?

We have to start work yet again at 9 am on a Saturday to moderate the deplorables just for you?

Why can’t you be a slacker like Garth and sleep in til the late afternoon?

Enjoy the strikes if you and Ryan plan on taking over after Garth’s retirement next year.

We are quiet quitting today and will be filing a grievance. Again. Enjoy your extra workload.

Emma Zaun
Shop Steward
CUPE (Canadian Union of Peelers and Exhibitionists)

#5 chalkie on 11.26.22 at 10:10 am

For those that knew it all, you even look dumber now, with the rising interest rates being paid on your home as your variable mortgage interest heads for the moon with no landing cushion-yes, you are getting hammered both ways, home dropping in price and need a higher budget for the banks interest rates, your spread running 180 degrees in the wrong direction.

This get rich quick as worked for so few, it is like buying a lottery ticket and reading in the papers who the winner was, thousands of miles away.

Have you been at the Rogers Center in a crowd of 55 thousand and one person was going to win the car, you do not feel that lucky, do you? your chances of winning the top price Lotto Max are for the whole of Canada, not just the Rogers Center crowd, comparison was similar when the real estate agents told you, they are not making any more land, but you notice now there is still plenty of land around you, it’s just a little cheaper, how did that work out?

Your chances to have scored on those ridiculously high home prices and variable interest rates 8 months ago was the same, it was not real for the most part.

Instead of listening to those who know it all encourages get-rich-quick speculation: today’s rising interest rates and markets mean a return to the old-fashioned kind of investments that use money and workers more efficiently to create real economic value and more cash flow for you.

During the panic home buying, first time home buyers used every accessible means of gathering up the down payment, everything from savings to investments was cashed in that was possible to cash out. The tide has now turned: You will hear at some point, the numbers of people again returning to their favorite financial advisor, they have begun to return quickly and will soon return to their advisors in droves, mom and dad were right all along, slow and steady does the job, just be patient.

Markets have outperformed real estate for over 400 years, The New York Stock Exchange traces its origins to the Buttonwood Agreement signed by 24 stockbrokers on May 17, 1792.
If you want to argue this one, do not listen to your investment advisor but rather call your friends, the same ones with all the answers, the same ones you took your get rich home buying and then crypto advice from a year ago, how did that work out for you today?

I used to have a friend who has since passed, his favorite saying to people that he saw smoking was: Keep smoking those cigarettes, we must pay off that deficit.

Quote of the day: Getting rich quick thinking leads to three basic errors, (1) getting involved with things you do not understand, (2) risking borrowed funds that you cannot afford to lose (3) making hasty decisions. Together, they constitute a sin called greed.

#6 crowdedelevatorfartz on 11.26.22 at 10:53 am

Will the Fed “pivot” too soon and inflation come roaring back?
That’s the Trillion dollar question.

#7 Doug Rowat on 11.26.22 at 10:54 am

#3 PBrasseur on 11.26.22 at 9:57 am
Biotech is a speculative, often fraudulent jungle, always vulnerable to the next lawsuit, failed test or stock emission. Stay away unless you really know what you are doing or at least limit yourself to EFTs or mutual funds.

—-

You’re right about the ETF, but fraud is everywhere. Would you avoid the stock market because Enron once existed?

Biotechnology is a legitimate and investable sector. Most biotechnology indices have posted double-digit annualized returns over the past decade.

—Doug

#8 Summertime on 11.26.22 at 11:07 am

An overly optimistic, to large extent qualifying as a cheerleading article today regarding inflation.

Of course inflation is here to stay and will not go away any time soon given current monetary policies and the historical high level of debt as well as the strongly negative rates and very limited upside to productivity and the brewing wages inflation storm.


What did Larry Summers say about inflation?
“If we’re going to bring down inflation, you likely need a policy more restrictive than the policy that’s contemplated by the markets or the Fed,” Summers told Tully. “The Fed continues to be excessively optimistic.”

There is NO WAY from economics’ fundamental perspective for this to happen/the inflation to be subdued, given current conditions and supply side inflation drivers.

Comparing the situation to Paul Volcker’s times: We have much more debt now and it took 15-18 % rates at the time in order to somehow ‘revert the inflation to normal’.

There is no way in hell for inflation to go bellow 2 or 3 % even the bastardized CPI/god forbid real inflation like food and services as an average for the next decade or two.

While it is still cheaper to borrow than to save/i.e. real rates stay strongly negative/ the inflation will stay persistently high and no amount of wishful thinking and talks will change that.

Watch the wages inflation and increasing velocity of money, we could be facing soon the need to really have again double digit rates.

#9 Tony on 11.26.22 at 11:19 am

I just look at this as a stage show put on in America to lure more buyers for Black Friday sales the Christmas holiday sales and Boxing Day sales. Once these are over inflation will come screaming back this January. Like I said before I’m shorting the market at the very end of this year.

#10 Sail Away on 11.26.22 at 11:32 am

Thanks for the post, Doug!

We appear to be reapproaching the Benjamin Graham territory where investment decisions are made by weighing known bond yield vs expected stock return.

The recent mantra that bonds should be a big portfolio percentage even when yielding 1% has never made a lick of sense to me. Even worse in an ETF where capital depreciation can happen. Of course bonds are bought for yield.

#11 Summertime on 11.26.22 at 12:24 pm

#10 Sail Away on 11.26.22 at 11:32 am


Of course bonds are bought for yield.

Apparently some think that putting the bond in a frame and hanging it in the washroom while ‘earning’ minus 4-5 %/taxbale!, maybe even more is a sound investment.

How can bond really bring real positive returns while we are at peak debt, combined with strongly negative real rates, capped productivity and roaring inflation is beyond me.

The only case is when any other investment is worse, i.e. likely to lose less money on bonds when compared to alternatives, which does not stay well with the proposed normalization of markets.

#12 millmech on 11.26.22 at 12:31 pm

Do you use the “Kelly Criterion” formula when taking position sizes because of the volatile nature of this sector.

#13 Faron on 11.26.22 at 12:36 pm

#10 Sail Away on 11.26.22 at 11:32 am

Of course bonds are bought for yield

Except when you buy them in a deflationary environment like the hayday of neoliberalism. Look up the price history of TLT over it’s lifespan. Capital gain, positive real yield, low vol. This is why 60-40 was viewed as the best option for investing. It all changed mid 2020. RIP 60-40.

#14 Summertime on 11.26.22 at 12:41 pm

Is it possible that we could be facing a total inflation of necessities to the order of 60-70 % in the period of 4 years – the last one and the next 3, while enjoying the ‘hawkish’ central banks talks with rates averaging 4 % for that time and with markets fluctuating around the top or around 10-20 % down from the top?

Yes, if central bankers can talk they way through and things ‘turn well’ for everyone.

If not…

#15 jack on 11.26.22 at 12:42 pm

I’m beginning to believe that a major contributor to inflation is large wage increases at the low end of the job market – what were once minimum or low wage jobs. I just saw an ad for 50k a year to work at a&w – just as a line cook! Roofers in my area are making over $50 an hour – that’s out of high school with no experience. Trade wages are through the roof as well. Even general laborers with no experience can make over $30 an hour. This has to be contributing to price growth.

#16 Doug Rowat on 11.26.22 at 12:48 pm

#8 Summertime on 11.26.22 at 11:07 am
An overly optimistic, to large extent qualifying as a cheerleading article today regarding inflation.

Of course inflation is here to stay and will not go away any time soon given current monetary policies and the historical high level of debt as well as the strongly negative rates and very limited upside to productivity and the brewing wages inflation storm.

There is NO WAY from economics’ fundamental perspective for this to happen/the inflation to be subdued, given current conditions and supply side inflation drivers.

Comparing the situation to Paul Volcker’s times: We have much more debt now and it took 15-18 % rates at the time in order to somehow ‘revert the inflation to normal’.

There is no way in hell for inflation to go bellow 2 or 3 % even the bastardized CPI/god forbid real inflation like food and services as an average for the next decade or two.

—-

Where do I put a timeframe on inflation going to 2%? Or even suggest 2%?

You only need signs of progress for stocks and bonds to rally as we’ve seen over the past few months.

And finally, the only thing that’s more ridiculous than an absolute, unwavering prediction (with “NO WAY” and “no way in hell” added pointlessly for emphasis—as if that’s going to make it true) is one that purports to be accurate over the “next decade or two”.

What are we going to do anonymous poster? Look you up in 2 decades and see if you were right?

—Doug

#17 DLT INC on 11.26.22 at 12:48 pm

As I read this blog I can’t help thinking that the human race is living on something like the Titanic and we are all at a casino trying to figure out our best gambling strategies. Of course, we are told that the best players are not gambling but have a system which guarantees them success. Meanwhile, our ship is chugging away, ever closer to the iceberg. And, it’s not just any iceberg. This one is a monster. What I am talking about is climate change. We may argue whether the iceberg is real, though the best climate scientists on the planet agree that it is and if something is not done to shift course, we will surely hit it. When we do, whether we profit or lose at the roulette table won’t matter because we will all perish. But before we do, we will have to deal with tens and maybe hundreds of millions of climate change refugees coming across our borders. They will be fighting for their lives because their own lands will no longer in inhabitable. And that will be because we, in the developed countries did not see fit to do what was necessary to avoid the catastrophe.
Clearly our system is broken and one major reason is because, rather learning to utilize the earth’s resources in the most efficient manner possible, we squander them because we see ever increasing growth as the answer . So we make goods that don’t last and when some little part fails, we throw them away and buy a new one. That way revenues always go up and profits increase. Until they don’t because, of course, we do not live in a world of infinite resources, so they eventually run out and we are stuck with mountainous landfill sites, garbage dumps, if you will, to show for our efforts.
The only real game that matters is fighting climate change. In the long run, nothing else will matter.

#18 Broader Mind on 11.26.22 at 12:49 pm

Bonds attractive at 4% for ten years. You must be joking. At 7% inflation (presently) the cost of goods doubles in 10 years. So buying a ten year bond for a hundred bucks guarantees you will not be able to purchase a happy meal in ten years. Till bond yields reach double digits there is no respect for money or it’s value. Lend your money to the government for a guaranteed loss definitely takes greater fools or a deep knowledge of the fixed game central banks play.

#19 Dolce Vita on 11.26.22 at 12:58 pm

Doug must no be a Vegetarian.

https://financialpost.com/commodities/agriculture/how-to-fix-canadas-lettuce-problem

Market Research:

https://twitter.com/blogTO/status/1596348015505281025

#20 Feds on 11.26.22 at 1:20 pm

Not sure why you think you can call inflation now when you couldn’t call it last year? What changed? Could just be a short term pullback and then off to the races again. Sure doesn’t look like China is opening up right now – how will that affect supply chains? Sure doesn’t look like Ukraine is supplying wheat to the world right now with no electricity. Be careful about being too sure with the inflation peaking call.

#21 West New West on 11.26.22 at 1:24 pm

Thanks Doug, that was a good read. I was in Eastern Germany in the 90’s and smoking was still full bore, everywhere. I remember being in a day long meeting, 12 at the table, 10 smoking. At times I could hardly see the guys near the other end….I would say that visibility was around 6 feet and that was about it. They brought in sandwiches at noon and they sat there for quite a while, getting smoked on. Around 2 pm it was time for lunch but I just could not do it. Half got eaten and the rest sat there, in the smoke and the sun and we finished at 7pm in the dark and some of the guys finished those damn sandwiches. One of the options was steak tartare on open faced baguette, thats raw beef, cooked in tobacco smoke and sun rays. Never thought much of it at the time.

#22 Dolce Vita on 11.26.22 at 1:28 pm

Denmark 1 – Mbappé 2

Killian was great. Score flattered Denmark.

France 21 shots on goal, Denmark 10. Shots on target 7 to 2. Denmark horseshoes up their … yet, they looked good as a team to me.

Christian Eriksen back in form, great. Jun 12 2021 collapse at the Euros, when his heart stopped.

https://wwos.nine.com.au/football/euro-2020-christian-eriksen-health-denmark-team-doctor-says-heart-stopped-in-march-against-finland/4f304642-fba0-4203-979f-373240619855

Then, fans did what they could only do, Denmark and Finland fans chant Christian Eriksen’s name:

https://www.youtube.com/watch?v=VkWN2Y-x38c

The BEAUTIFUL GAME.

————–

See if Argentina can beat Mexico tonight and save some face.

#23 Dogman01 on 11.26.22 at 1:32 pm

10 Sail Away on 11.26.22 at 11:32 am

The recent mantra that bonds should be a big portfolio percentage even when yielding 1% has never made a lick of sense to me. Even worse in an ETF where capital depreciation can happen. Of course bonds are bought for yield.

——————————————-

True-dat!

As Interest rates go up House Prices go down.
As Interest rates go up “old” bonds price go down.

A 5yr sub 2% Govt of Canada bond is less value than a 5yr 5% Govt of Canada Bond.

An Amateur can time and predict Interest rate rise and falls with reasonable accuracy. You do not need to know the Lyrics, your just have to be able to hum the tune.

High Rate Bonds will compete for my Money with equities, maybe even GICs will have an appeal.
So as Interest rises headwinds for equities.

I got out of my ETF’s with Bonds as soon as Interest rates went below 1% ….

Maybe Pension funds bought the sub 1% zombie bonds ….as they are not agile?

#24 Dogman01 on 11.26.22 at 1:47 pm

#17 DLT INC on 11.26.22 at 12:48 pm

The Iceberg is not Climate Change. Degradation of the environment is but a symptom. You are confusing “Means” with “Ends”.

The Iceberg is overpopulation of Humans…all inexorable striving for a globally unsustainable 1st World Lifestyle at scale.

Solutions in progress:
– Population decline in all First World societies
– Mass Immigration to First World societies to relive pressure on both those societies and places suffering over population pressure.
– Gradual reduction of standard of living in all First World societies.
– Education and Information access to Female population the world over.

“whatever your cause, it’s a lost cause without population control”.

Climate Change is a primary vehicle to gain acceptance by the West’s population, a multi faceted unrelenting campaign to gain “cover” for polices to create a lower standard of living in the West.

Here is great video outlining the problem, 10+Billion people cannot live like we do in the West, however the 9 Billion will not accept a permanent lower standard. Hence they need to be brought up and the West’s progress at a minimum needs to be stopped and better yet to decline.

Hans Rosling: Global population growth, box by box
https://www.youtube.com/watch?v=fTznEIZRkLg

#25 Dolce Vita on 11.26.22 at 1:48 pm

Well Doug, here’s my US Inflation Chart.

https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/#:~:text=In%20October%202022%2C%20prices%20had,data%20represents%20U.S.%20city%20averages.

2% breached in Feb/Mar 2021.

From there using start of month, about 460 days to the June 2022 peak. Peak to October about 120 days.

A Month of Sundays figuratively before it ever gets back down to 2% or projecting from the above chart, October 2022, only

335 days to go

until 2% (Sept 2023).

ONE MORE YEAR OF Consumer Misery to come and $30 Romaine.

#26 Sail Away on 11.26.22 at 2:03 pm

@Faron:

100% of your comments in the last 2 days have been focussed completely on moi. Just a bit of data.

#obsession

#27 Totalinvestor on 11.26.22 at 2:32 pm

There are many Nasdaq Biotechnology Index members trading below their cash value but you also have to know what the cash burn rate is. These biotechs go through cash very quickly, so what might seem like a bargain today will be a painful investment lesson in the future.
If you like the biotech sector, you are better off with an ETF.

#28 Nonplused on 11.26.22 at 2:33 pm

I guess this is why a balanced portfolio also needs a balance of tenure within the bond portion. Short tenure bonds like the 1 year you can ride them out to maturity and then purchase new bonds at better rates, so only the long term bonds cause you to miss out on the higher rates for many years. Also within the long term bonds you can stagger the maturity dates, so not all of the bonds you hold will last for say 5 or 10 years.

Of course all of this tenure planning only makes you get the long term bond yield over time, same as having everything in 1 year bonds would, but it’s not as volatile. The phrase that comes to mind, I can’t remember who said it, is “Over a long enough time period, the survival rate for everyone drops to zero”. You can’t hedge the very long term, nor should you try.

Remember folks, all forms of hedging merely reduce the volatility of your portfolio. It doesn’t really improve or impair the long term performance.

You can observe this phenomena by watching what’s happened to energy companies and their hedging programs over the years. When prices were falling, all their hedges were in the money and CEO’s took great pains to pains to make sure everyone and their dog knew how smart they were. As soon as energy prices rose and the hedges went out of the money, shareholders wanted to scrap the program. But if it were a true hedge, the goal would have been to stabilize cash flows, which they did, both when the price was falling as well as when it was rising.

So why hedge? Well, for a corporation the main reason is so you can pay your bills (including debt service) when prices fall below the number you used in your investment decisions. But the tradeoff is you won’t print the profits you could when prices go up. Instead you get nice steady returns and can ride out the lows.

For an individual, you hedge to protect your principle and cash flows. If you don’t mind watching your portfolio go up and down 30%, and you have the wherewithal to ride it out, you don’t need to hedge.

So don’t sweat it when your bond prices fall. If you hold the bonds to maturity you will still get all the cash you bought. You are just kicking yourself for nothing if you compare what you could get today to what you did get yesterday. The whole point was to not be exposed to those fluctuations.

It would be nice if there was a way to hedge the downside but still have all the upside. Oh ya, those are called options. But those are very expensive. In most cases the premiums will eat up a large portion of your average returns, causing you to underperform the market by a considerable amount.

#29 Wrk.dover on 11.26.22 at 2:35 pm

#24 Dogman01 on 11.26.22 at 1:47 pm
Climate Change is a primary vehicle to gain acceptance by the West’s population, a multi faceted unrelenting campaign to gain “cover” for polices to create a lower standard of living in the West.
_____________________________

No matter the price of fuel, North Americans wear their cars. Never mind the commute to work and the need to drive spawn to exercise venues a half hour away, other than that, how necessary is daily driving? They just won’t wean from it!

I have plenty of the offending cars and vans, but between my wife and I, we ‘only’ burn four litres per day on an ongoing yearly average, though we are a dozen miles from minimal shopping, 60 miles from health care and 150 miles from the city services.

The peeps with kids, seem to care the least about the situation!

Bringing down the western standard of living is a self-fulfilling chain of events, what with the inputs we all collectively stoke.

#30 Dr V on 11.26.22 at 2:38 pm

8 Summertime

“Watch the wages inflation and increasing velocity of money, we could be facing soon the need to really have again double digit rates.”
——————————————–

I was pondering this, and trying to relate velocity to inflation.

Current velocity still looks well below that of over 2 years ago, as well as below typical 60 year average

https://fred.stlouisfed.org/series/M2V#:~:text=The%20velocity%20of%20money%20is,services%20per%20unit%20of%20time.

A little more googling and I located this:

https://corporatefinanceinstitute.com/resources/economics/velocity-of-circulation/

“There is a conflict of belief between Monetarists and Keynesian economists regarding the concept. Monetarists believe in the stability of the velocity of circulation and argue that there is a direct relationship between money supply and price levels and between the rate of growth of money supply and rate of inflation. On the other hand, Keynesian economists believe that the velocity of circulation is an unstable concept that can change rapidly, leading to changes in the money supply.”

So it seems there are opposing views on this matter.

Always “on the other hand”….

#31 Westcdn on 11.26.22 at 2:40 pm

I hope Canada does well in the World Cup. They are good men. So, I want them to prevail.

#32 Shawn on 11.26.22 at 2:41 pm

Bonds, James, Bonds.

#33 Rina on 11.26.22 at 2:42 pm

Inflation is going much higher, interest rates are going much higher. It may take a few months, maybe a year but 10 year US treasury will be 5.5% to 6% by next year some time. You can refer back to this post in 2023.

#34 Quintilian on 11.26.22 at 2:44 pm

Hey Doug,
When a 300 pounder goes on a diet, the first 10 lbs are easy to lose.

The headline inflation came down, but not because of the increased rates. They have a long way to go yet.
The central banker haven’t broken anything yet. Output gap still closed.

Most of the heavy lifting was done by the drop in energy, possibly because of the election.

But that is another story, for another time.
Back to the 300 pounder… the rest of the weight is going to be hard to lose.

Inflation is going to be sticky, very sticky.
At this point you may want to buy bonds as insurance for some degree of capital preservation, but the cost to the investor will be reduced purchasing power in the future. Good trade off if you don’t have the stomach for too much risk.

Tick Tock, Tick Tock

#35 crowdedelevatorfartz on 11.26.22 at 2:47 pm

Gee Ponzie.
Seems I was right again.
ALL the excess surplus in the BC Govt’s windfall of an extra $5 BILLION dollars in the 2022 revenues can be attributed to Personal and corporate INCOME TAX.

https://vancouversun.com/opinion/columnists/vaughn-palmer-david-eby-has-far-more-financial-leeway-that-his-predecessor-thanks-to-5-7-billion-budget-surplus

No brilliant accounting.
Just the same lazy taxes taxes taxes that govt is so quick to implement and so slow to drop.

Let’s see how quickly they squander it.
This time next year will be a different story when people are paying $10 for a head of lettuce.

#36 willworkforpickles on 11.26.22 at 3:09 pm

BANNED (Abusive)

#37 Ustabe on 11.26.22 at 3:15 pm

#26 Sail Away on 11.26.22 at 2:03 pm

@Faron:

100% of your comments in the last 2 days have been focussed completely on moi. Just a bit of data.

#obsession

Hey Sail Away, did you know that Elon’s step sister is also his step mother?

Also it is focused.

#38 RIP 60-40 on 11.26.22 at 3:22 pm

#13 Faron on 11.26.22 at 12:36 pm

#10 Sail Away on 11.26.22 at 11:32 am

Of course bonds are bought for yield

Except when you buy them in a deflationary environment like the hayday of neoliberalism. Look up the price history of TLT over it’s lifespan. Capital gain, positive real yield, low vol. This is why 60-40 was viewed as the best option for investing. It all changed mid 2020. RIP 60-40.

———-

Ok, so what is the new proper weighting if not 60-40 in your view?

#39 Summertime on 11.26.22 at 3:37 pm

Where do I put a timeframe on inflation going to 2%? Or even suggest 2%?

You only need signs of progress for stocks and bonds to rally as we’ve seen over the past few months.

And finally, the only thing that’s more ridiculous than an absolute, unwavering prediction (with “NO WAY” and “no way in hell” added pointlessly for emphasis—as if that’s going to make it true) is one that purports to be accurate over the “next decade or two”.

What are we going to do anonymous poster? Look you up in 2 decades and see if you were right?

—Doug

BoC states the following, it is their official policy:

Under the 2022–26 agreement, the cornerstone of our framework remains an inflation target of 2 percent inside a control range of 1 to 3 percent.

https://www.bankofcanada.ca/core-functions/monetary-policy/monetary-policy-framework-renewal/

You trust them as they are doing apparently a good job on fighting inflation. You said it, many times. So which part of the 2 % CPI target timeline is not clear?

Based on that as current CPI is 7-8 % we should expect then no inflation/CPI whatsoever in the next 3 years for BoC to be correct in their statement, is that not logical?

I normally capitalize a statement that is an absolute certainty, and that rarely, as I am kind of tired of stating the obvious and be questioned on it.

You choose to question the form and not the context, these statements are not pointless but as a certainty they are worth it in order to enforce the message and here is it again:

– All that talk about inflation control and the assured certain central banker’s success, is just that: a talk, pure and useless BS.

There is implications from stating things that can not be done and in enthusiastically supporting it.

As for the timeline and the outcome: I am not looking for moral redemption. And not promoting stocks or bonds either. One thing I know well for sure is inflation/still IMHO.

#40 Balmuto on 11.26.22 at 3:38 pm

I’m not convinced that inflation is under control or that rate cuts are on the horizon once the damage of higher rates sets in.

We could have a long period of “wait and see” where high rates are ravaging the economy but the Fed can’t cut because inflation is still well above their target, even if trending down.

Still, I agree that it’s a good time to buy bonds. The fact that bonds are finally paying a decent yield again means you gotta jump on them. Like how you wanted to lock in rock-bottom fixed borrowing rates two years ago, now you want to do the opposite and lock in higher fixed lending rates. Because if and when it becomes clear that short-term rates are headed lower, those juicy long-term yields will be gone.

#41 Randy on 11.26.22 at 4:01 pm

The market value of your property will go down substantially…..but yet your property taxes will go up substantially….Funny how that works …

#42 Summertime on 11.26.22 at 4:02 pm

Simple logic: With CPI target 2 % stated clearly by central banks, 16-20 years cumulative CPI will be around 37-40 % total cumulative CPI.

As we know that deflation will not be allowed, stated also clearly by central banks, we could have 2-3 more years of 7-8 % CPI and will be over that target.

So no need to wait 1-2 decades for me to be correct.

Let me offer you a private bet: I will eat my shoes as Charlie Chaplin in ‘Gold rush’, row or boiled if I lose on that statement:
That the central bankers will fail for sure to revert CPI/inflation to their current official targets in the next decade /two.

Would you do that as well?

#43 DLT INC on 11.26.22 at 4:28 pm

#17 DLT INC on 11.26.22 at 12:48 pm

The Iceberg is not Climate Change. Degradation of the environment is but a symptom. You are confusing “Means” with “Ends”.

The Iceberg is overpopulation of Humans…all inexorable striving for a globally unsustainable 1st World Lifestyle at scale.

Solutions in progress:
– Population decline in all First World societies
– Mass Immigration to First World societies to relive pressure on both those societies and places suffering over population pressure.
– Gradual reduction of standard of living in all First World societies.
– Education and Information access to Female population the world over.

“whatever your cause, it’s a lost cause without population control”.

Climate Change is a primary vehicle to gain acceptance by the West’s population, a multi faceted unrelenting campaign to gain “cover” for polices to create a lower standard of living in the West.

Here is great video outlining the problem, 10+Billion people cannot live like we do in the West, however the 9 Billion will not accept a permanent lower standard. Hence they need to be brought up and the West’s progress at a minimum needs to be stopped and better yet to decline.

Hans Rosling: Global population growth, box by box

I agree that overpopulation is certainly a major problem but my concern is that the challenges of changing climate, together with resource depletion, will not be successfully overcome by innovation. With fewer people, it may take longer before the sh$t hits the fan and even the well to do nations will suffer the consequences of global warming. The speaker in the video you recommended didn’t address the issues of pollution, climate change or resource depletion.

As far as mankind having to resign itself to a lower standard of living. I don’t buy it. The real question is whether there can still be enough to provide everyone with their needs as well as enjoy a sense of well being.
If this sense requires an ever increasing level of material wealth, then I would agree that mankind’s future is bleak. A world in which the economy is based upon ever increasing consumption flies in the face of reality. Nothing can increase forever.
Recall the story of the peasant who, as payment for a good deed asked of the king one grain of rice on the first square of a chess board and a doubling on each subsequent square. Well before the 64th square is reached, the peasant would have been entitled to more grains of rice than exists in grains of sand in the entire universe. That is why our economy must eventually get off its current economic model of constant growth.

#44 crowdedelevatorfartz on 11.26.22 at 4:35 pm

@#36 EmptyPickleJar

Banned

+++

Like beer in Qatar.

#45 the Jaguar on 11.26.22 at 5:01 pm

Volker resembles a ‘Capo de Cosa Nostra’. The cigar likely Cuban contraband, but peeps in the Federal Reserve likely have pals in the US Treasury. His expression says ” We’re both part of the same hypocrisy, Senator, but never think it applies to my family. “..

As for inflation and the associated hand wringing, just channel your grandparents who actually experienced hard times. If lettuce is too expensive get creative with cabbage instead. Ever hear of the 100 mile diet? Read up on it, because part of the solution to supply chain issues is going to be ‘go local’. ( one application of Doug’s biotechnology).
Lose one of the cars in your driveway and try public transport, especially since one person is likely home office these days. Let the kids walk to school and activities instead of driving them everywhere, and drop one of the streaming service subscriptions. Get a public library card and learn what a valuable and free service they offer to the community.

It’s a lot like people who complain about back pain. The solution? Do some damn sit ups to strengthen your core. Jesus, I should be running the country…….

#46 Yukon Elvis on 11.26.22 at 5:04 pm

#26 Sail Away on 11.26.22 at 2:03 pm
@Faron:

100% of your comments in the last 2 days have been focussed completely on moi. Just a bit of data.

#obsession
++++++++++
Family and acquaintances often say after the fact”we had no idea” or “there were no signs of abnormalities”. Plenty of signs here. Check your brake lines, maybe wear a vest, be alert. Keep the dogs nearby especially at night.

#47 Balmuto on 11.26.22 at 5:27 pm

“#34 Quintilian on 11.26.22 at 2:44 pm
Inflation is going to be sticky, very sticky.
At this point you may want to buy bonds as insurance for some degree of capital preservation, but the cost to the investor will be reduced purchasing power in the future. Good trade off if you don’t have the stomach for too much risk.”

It’s also that there aren’t a lot of good alternatives if inflation is sticky.

Stay in cash and you lose even more purchasing power. As for stocks, while inflation may provide a tailwind for corporate profits, the market seems to be far more concerned with what inflation means for interest rates. Same with gold, which has traditionally been a hedge against inflation, but certainly hasn’t been acting like one this time around.

Defensive stocks that pay good dividends and some niche plays like biotech like Doug is suggesting might be the only other game in town.

#48 Nonplused on 11.26.22 at 5:40 pm

#29 Wrk.dover on 11.26.22 at 2:35 pm

“Bringing down the western standard of living is a self-fulfilling chain of events, what with the inputs we all collectively stoke.”

Why does everyone seem to want the “western standard of living” to go down? To what end? Who convinced so many people that this was a good thing?

In my utopia, the standard of living for everybody goes up, up, and then up some more! It’s been doing so for thousands of years! Ever since Adam and Eve left the garden of Edan. There’s been set backs along the way, it has been uneven, and ya we sure got some problems. But there is no reason to think Gen IV nuclear or nuclear fission are impossible. If we get those working with a decent EROEI, we should be able to do just about anything, including save the whales. Interstellar space travel might be the only thing that’s out, assuming Einstein was right about the whole speed of light thing, but if there is a loophole, we should be able to exploit that too.

Given the choice between “more” and “less”, I’ll take “more”, thank you.

#49 Sail Away on 11.26.22 at 5:43 pm

#46 Yukon Elvis on 11.26.22 at 5:04 pm
#26 Sail Away on 11.26.22 at 2:03 pm

#obsession

—————

Family and acquaintances often say after the fact”we had no idea” or “there were no signs of abnormalities”. Plenty of signs here. Check your brake lines, maybe wear a vest, be alert. Keep the dogs nearby especially at night.

—————

Stay alert, stay alive!

#50 Sail Away on 11.26.22 at 5:50 pm

Had a fine hike up Benson today with the 13yo ‘old vet’ of the pack joining. A few bum pushes up the rocky pitches and a bit slower pace down, and all was well. A little snotty at the summit with wet snow blowing in, so we’re happy to be chillaxin’ now with coffee and pig ears in front of the fire.

That dog’s career is the stuff of legend. He’s earned every bit of dotage he refuses to take. Best dog.

#51 PeterfromCalgary on 11.26.22 at 5:55 pm

The inverted yield curve is when short term bonds yield a higher interest return than long term bonds. This is considered a warning sign that we may have a recession.

If this inversion continues or gets worse I can see interest rate hikes moderating or pausing for a while. That in turn might be good for equities unless the market gets really spooked with recession fears. Flip a coin I guess.

#52 Bill zufelt on 11.26.22 at 5:55 pm

You’re more confident than most that rates have even a chance of coming down over the next 2-3 years. We’re nowhere near finished with this thing and soon as you think it’s over it comes roaring back(think back to 1973 to 1982).I get what you mean that rates have gone up a lot but c’mon comparing 3.75% to 20.00% is a real stretch.

#53 Sail Away on 11.26.22 at 6:02 pm

#37 Ustabe on 11.26.22 at 3:15 pm

Hey Sail Away, did you know that Elon’s step sister is also his step mother?

—————

That’s cool. Thanks for sharing.

#54 Flop… on 11.26.22 at 6:04 pm

#88 crowdedelevatorfartz on 11.24.22 at 6:41 pm

Yo Floppie!
On holidays in the deep south?

/////////////////////////////////////

No Crowdie, heading down to Tempe in about a month, pretty soon I’ll start counting the days.

Not looking forward to this week in Vancouver, a couple days of snow and then some minus 8 overnight will give my world-class glass ankles a workout.

Hey, why move to New Brunswick when it’s weather can come to you?

I went to put up a real estate post maybe 3 weeks ago, and the two Septic Yanks were going at each other about abortion rights in the States, so I decided it was time for a good old fashioned Blog Break.

Checking back in, the abortion talk seems to have dropped, but the two protagonists are still going at with each other.

Just don’t remember it being this hateful 7 or 8 years ago.

Maybe I missed something along the way.

When did this blog get filled up to the brim with so many extremists…

M48BC

#55 Penny Henny on 11.26.22 at 6:09 pm

DELETED (Abusive)

#56 BCWally on 11.26.22 at 6:11 pm

Agreed bonds are where it’s at 1Q 2023. Hoping you guys are looking at foreign sovereign bonds, particularly Mexican. That central bank is serious about inflation control. 10% CB rate!
No clear ETF for that asset class though, and currency value a consideration long term.

#57 Yukon Elvis on 11.26.22 at 6:11 pm

#49 Sail Away on 11.26.22 at 5:43 pm
#46 Yukon Elvis on 11.26.22 at 5:04 pm
#26 Sail Away on 11.26.22 at 2:03 pm

#obsession

—————

Family and acquaintances often say after the fact”we had no idea” or “there were no signs of abnormalities”. Plenty of signs here. Check your brake lines, maybe wear a vest, be alert. Keep the dogs nearby especially at night.

—————

Stay alert, stay alive!
++++++++++++
Yah. He has files on us that go way back. Brags about it. Threatens to use them. Sometimes does use them. Signs.
I’ve got the claymores out. How about you?

#58 Penny Henny on 11.26.22 at 6:12 pm

#29 Wrk.dover on 11.26.22 at 2:35 pm
#24 Dogman01 on 11.26.22 at 1:47 pm
Climate Change is a primary vehicle to gain acceptance by the West’s population, a multi faceted unrelenting campaign to gain “cover” for polices to create a lower standard of living in the West.
_____________________________

No matter the price of fuel, North Americans wear their cars. Never mind the commute to work and the need to drive spawn to exercise venues a half hour away, other than that, how necessary is daily driving? They just won’t wean from it!

I have plenty of the offending cars and vans, but between my wife and I, we ‘only’ burn four litres per day on an ongoing yearly average, though we are a dozen miles from minimal shopping, 60 miles from health care and 150 miles from the city services.
////////////////////

How many kilometres do you get to the acre?

#59 Scott in Gibsons on 11.26.22 at 6:13 pm

There’s a hypothesis floating around that what the Fed is actually fighting is the great resignation. Too much money got into the hands of the little people during the pandemic. Time to pull it back out of their pocket so they get back to work.

#60 I don’t know on 11.26.22 at 6:46 pm

Good post.

Of course inflation has peaked. And of course rate hikes are nearing an end. Of course debt is now attractive and yields will fall. Of course bonds are attractive and, as always, should be an important part of a portfolio.

Anyone who says otherwise has a view that should be interpreted with extreme caution (basically ignored and categorized as alarmist tripe).

The inflationary pressures we are experiencing today are worlds away from what was experienced in the 1970’s and 1980’s when Volcker was in charge. There is a list of about 10 key reasons why.

Volcker’s legacy is mixed at best. Inflation was “tamed”, but at an hugely unnecessary cost. His policy left deep scars and left lessons of mistakes that the current crop of CB’s are desperate to learn from and not repeat. This is why the current round of rate hikes were front loaded and steep, as an example.

To be fair, inflation was measured differently at the time, and there was no mandated “2%” target, so Volcker was operating somewhat in the dark. That’s why he often had to stop and start the rate hiking cycle, and overshot by a large margin.

If you own real estate, stocks or bonds (preferably all three), the strategy is all the same: do nothing and ignore the noise.

IDK

#61 Sail Away on 11.26.22 at 6:46 pm

#57 Yukon Elvis on 11.26.22 at 6:11 pm

I’ve got the claymores out. How about you?

—————

I tell neighbour Marla somebody may come by interested in hearing about her gall bladder surgery

#62 Dogman01 on 11.26.22 at 6:53 pm

#43 DLT INC on 11.26.22 at 4:28 pm

#48 Nonplused on 11.26.22 at 5:40 pm

To use Hans Roslings model:

Let’s SWAG
– The 3 Billion Very Poor have Sandals and aspire to Bicycles, have 1x Impact/Resource Use.
– The 3 Billion Poor have Bicycles and aspire to Automobiles, have 2 x Impact/Resource Use.
– The 1.5 Billion Global Middle Class have Automobiles and aspire to Jet Planes have, 4X Impact/ Resource use
– The 1 Billion First World have Jet Travel and aspire to say Private Jet or Yachts, have 8x Impact/Resource use
– The 100 Million 1% have Private Jet or Yachts, have 16x Impact/Resource use

Assume Earth is a closed system with carry capacity of 21 Units, we are at peak.

Dynamics:
– Humans populations tend to grow
– Humans are unrelenting in the drive to higher affluence (progress)
– Each Human needs x Resources per level of Affluence (only Technology can change X)

Then only a few ways out:
A) Technology which has done the trick thus far, aspire to Fusion power, Asteroid Mining, another agriculture revolution. – need time for that and perhaps the low hanging fruit is picked…
B) Population reduction (or just population Growth reduction) – One Child Policy, highly Incentivize childlessness especially in First World.
C) Affluence Reduction (reduce standard of living)

So until I see B ,Population Reduction addressed explicitly by our Global leadership, and a proper “campaign” say on the scale of WWII (multiple Manhattan Projects) for Technology Solutions Option A , I will wholeheartedly reject Option C…for my society and if you are a young person, you should too.

All the Billions upon Billions already wasted on on “Climate Change” non-solutions, (cronyism and boondoggles) should be funneled into say Fusion research as an example until those researchers say enough.

As far as I can see the “Climate Change” campaign in the West is led by a class of Climate Grifters (from the small Private Jet\Yacht class) to gain your acceptance of a lower standard of living.

You should reject it and demand they do-better.

#63 Wrk.dover on 11.26.22 at 7:17 pm

#58 Penny Henny on 11.26.22 at 6:12 pm
How many kilometres do you get to the acre?
______________________________

Distances are all in miles, if you go out your front door and cross Welland River and Niagara River, done that?

Kilometer distances sound so pretentious.
_______________________________________

#48 Nonplused on 11.26.22 at 5:40 pm

But there is no reason to think Gen IV nuclear or nuclear fission are impossible. If we get those working with a decent EROEI, we should be able to do just about anything, including save the whales

My Alberta stocks bought me some Cameco, which bought Westinghouse, so, I bought more Cameco but, I don’t think this thing will move much further than Ballard has for dreamers like you.

#64 Ronaldo on 11.26.22 at 7:21 pm

#15 jack on 11.26.22 at 12:42 pm

I’m beginning to believe that a major contributor to inflation is large wage increases at the low end of the job market – what were once minimum or low wage jobs. I just saw an ad for 50k a year to work at a&w – just as a line cook! Roofers in my area are making over $50 an hour – that’s out of high school with no experience. Trade wages are through the roof as well. Even general laborers with no experience can make over $30 an hour. This has to be contributing to price growth.
——————————————————————
Reminds me of Alberta between 2004 and 2007. Tim’s couldn’t get any workers for less than $15 bucks an hour. Everyone was in on the bandwagon from the lowly laborer to the tradespeople.

As one developer said to me when I asked why prices had increased so rapidly between 2005 to 2007, he said “super profits”.

As one young gal who was working in Ft. Mac said to me in summer of 06 that she was making $27/hr. as a first aider and that “that was pretty good for a girl”. I said to her, “that is pretty good for a boy too”.

And then by the spring of 2007 the party was over. And price of housing has barely moved since. If I was young again and looking to start out, that’s where I’d be headed. Agree, Shawn?

#65 Dr V on 11.26.22 at 7:46 pm

54 Flop

“Just don’t remember it being this hateful 7 or 8 years ago.

Maybe I missed something along the way.

When did this blog get filled up to the brim with so many extremists…”
—————————————————

Hey Flop. Your problem is you’re just about the nicest one on this pathetic blog.

I noted the same a couple of months ago. People seemed really angry. The response was “it’s just you (me)”.

Nice to know I am not the only one.

Blog on and enjoy the AZ.

#66 Option B on 11.26.22 at 7:57 pm

#62 Dogman01 on 11.26.22 at 6:53 pm

#43 DLT INC on 11.26.22 at 4:28 pm

#48 Nonplused on 11.26.22 at 5:40 pm

To use Hans Roslings model:

Let’s SWAG
– The 3 Billion Very Poor have Sandals and aspire to Bicycles, have 1x Impact/Resource Use.
– The 3 Billion Poor have Bicycles and aspire to Automobiles, have 2 x Impact/Resource Use.
– The 1.5 Billion Global Middle Class have Automobiles and aspire to Jet Planes have, 4X Impact/ Resource use
– The 1 Billion First World have Jet Travel and aspire to say Private Jet or Yachts, have 8x Impact/Resource use
– The 100 Million 1% have Private Jet or Yachts, have 16x Impact/Resource use

Assume Earth is a closed system with carry capacity of 21 Units, we are at peak.

Dynamics:
– Humans populations tend to grow
– Humans are unrelenting in the drive to higher affluence (progress)
– Each Human needs x Resources per level of Affluence (only Technology can change X)

Then only a few ways out:
A) Technology which has done the trick thus far, aspire to Fusion power, Asteroid Mining, another agriculture revolution. – need time for that and perhaps the low hanging fruit is picked…
B) Population reduction (or just population Growth reduction) – One Child Policy, highly Incentivize childlessness especially in First World.
C) Affluence Reduction (reduce standard of living)

So until I see B ,Population Reduction addressed explicitly by our Global leadership, and a proper “campaign” say on the scale of WWII (multiple Manhattan Projects) for Technology Solutions Option A , I will wholeheartedly reject Option C…for my society and if you are a young person, you should too.

All the Billions upon Billions already wasted on on “Climate Change” non-solutions, (cronyism and boondoggles) should be funneled into say Fusion research as an example until those researchers say enough.

As far as I can see the “Climate Change” campaign in the West is led by a class of Climate Grifters (from the small Private Jet\Yacht class) to gain your acceptance of a lower standard of living.

You should reject it and demand they do-better

——————-

According to CDC data, there were 61,000 excess deaths in the millennial age group in the second half of 2021. That’s a Vietnam war worth of excess deaths among the millenials in 6 months… Same type of excess death numbers in the UK and the scientists are baffled as to what’s causing it.

So, until they figure out what’s causing the excess deaths, option b is in play.

#67 fishman on 11.26.22 at 7:58 pm

The government is going to sell bonds at 2-3% below the rate of inflation for our lifetime. It has to steal from old people to keep some form of sanity on the balance sheet. Combine that with taxes valued on all assets deemed to have been sold at time of death. Barring a black swan they’ll keep the ball in play for years.

#68 Doug Rowat on 11.26.22 at 7:59 pm

#60 I don’t know on 11.26.22 at 6:46 pm

Volcker’s legacy is mixed at best. Inflation was “tamed”, but at an hugely unnecessary cost. His policy left deep scars and left lessons of mistakes that the current crop of CB’s are desperate to learn from and not repeat. This is why the current round of rate hikes were front loaded and steep, as an example.

—-

Correct. Two recessions (one nasty) during his tenure.

—Doug

#69 T-Rev on 11.26.22 at 8:05 pm

AC Grenadiers over a buck now. Smoke em if you got em.

#70 Doing my Part on 11.26.22 at 8:06 pm

Good to see you’re back Flop, I missed your posts.

#71 Faron on 11.26.22 at 8:30 pm

#26 Sail Away on 11.26.22 at 2:03 pm
@Faron:

Just a bit of data

As a professional scientist by training, I did a little quality control on your data and found it of exceedingly low accuracy and, hence, unreliable. We may begin to hypothesize that the collector of said data is also unreliable which may include outright fabrication.

#72 Nonplused on 11.26.22 at 8:37 pm

#62 Dogman01 on 11.26.22 at 6:53 pm

I’m replying to your whole comment but will remind with this part:

“Assume Earth is a closed system with carry capacity of 21 Units, we are at peak.

Dynamics:
– Humans populations tend to grow
– Humans are unrelenting in the drive to higher affluence (progress)
– Each Human needs x Resources per level of Affluence (only Technology can change X)”

So, the problem I see with this kind of argument is that it is linear and an extrapolation that doesn’t hold via observation. Observe:

– Nearly every wealthy nation is in population decline. Without immigration you have to try and bribe women to have more children. But they don’t want to. There are too many other things in life to enjoy when you are rich.

– Birthrates are also highly negatively correlated to women’s education levels, and women’s access to healthcare, two things I propose can continue to be improved by more wealth for everyone.

– Resource consumption is not linear with wealth / standard of living, unless you count energy. The agricultural revolution has proven this. Almost put the Malthusians out of business. With unlimited power, we could have greenhouses everywhere and no CO2 if it comes from nuclear / solar (for photosynthesis).

– Unlimited power means unlimited recycling. Most of the things that are not recycled are not recycled because it costs too much, i.e. it takes too much energy (including lithium). With unlimited nuclear power, near everything could be recycled.

– Unlimited power also means unlimited manufacturing improvements. For example, the computer you are using right now contains a fraction of the materials a computer of far less capability did just 50 years ago. Or look at your smart phone. That is a huge standard of living improvement at very little material consumption. (Assuming it is recycled, which most aren’t because it costs too much i.e. takes too much energy).

– Wealthy nations have a much better record of protecting the environment than poor nations. No need to slash the rain forests for farming if you have modern agriculture. And you can afford to save the whales. Or establish parks, if for no other reason that people like them.

So, yes, the population can’t continue to grow exponentially forever. But it won’t, unless it remains impoverished and uneducated. And we won’t run out of resources, because very few materials cannot be recycled. Food is already abundant, so if the population stabilizes we don’t need more of that. The only real problem is energy. Fossil fuels will run out whether the climate doomsayers are right or not. So we will get austerity whether we want it or not, if we continue to rely on fossil fuels. (And solar and wind don’t work as primary energy sources, we’re wasting our time and resources on them. It’s thermodynamics.)

In the long term, there are only two possible outcomes: Wealth and prosperity for all powered by nuclear, or a return to the Olduvia Gorge. I chose the former, and shun the latter. But I’m happy to rely on fossil fuels and pile up the recyclables in the landfill for now (we can go back for them), until society comes to its senses and starts building Gen IV in earnest. Meanwhile work on fission should continue.

Ya, sure, there are significant hurdles. Will the poor population overrun the wealthy before the poor can be made wealthy? That’s a big potential problem, but making the wealthy poor won’t solve it (probably make it worse). Will we cause global warming before nuclear takes over? Maybe we already have but it don’t matter; the poor will not stop burning everything they can get their hands on until we either give them nuclear or they burn it all up.

The path forward to the future for the optimist is clear. Only the worst of the pessimists think the future lies in the past.

#73 crowdedelevatorfartz on 11.26.22 at 8:59 pm

@#54 Floppie
“When did this blog get filled up to the brim with so many extremists…”
+++
Yeah the snow is coming.
I have a heater on my hummingbird feeder set up. ( a small 7 watt refrigerator bulb, not too hot or too cold….like me :)
Two Hummers fighting for supremacy.
Kinda like Faron and Sailio
I think one is a Trumpist and the other is an apologist.
I’m a Flatulist.
Less stress.

#74 Don Guillermo on 11.26.22 at 10:29 pm

#64 Ronaldo on 11.26.22 at 7:21 pm
#15 jack on 11.26.22
——————————————————————
Reminds me of Alberta…..

As one young gal who was working in Ft. Mac said to me in summer of 06 that she was making $27/hr.

If I was young again and looking to start out, that’s where I’d be headed. Agree, Shawn?
###########

In the mid 80s I went to Ft Mac for 2 years. I was part of a group of contractors working at Syncrude on small projects. It was a resume builder, awesome for my bank account and a great time. We were all young, making great money and full of fun. The experience was key in propelling my career. I look back with fondness and still maintain many of the friendships.

#75 Faron on 11.26.22 at 11:44 pm

#57 Yukon Elvis on 11.26.22 at 6:11 pm
#49 Sail Away on 11.26.22 at 5:43 pm
#46 Yukon Elvis on 11.26.22 at 5:04 pm
#26 Sail Away on 11.26.22 at 2:03 pm

Whadda joke.

#76 SK on 11.27.22 at 12:21 am

#74 Don
You are an excellent example for young people to emulate. Best to think outside the box. No reason at all to be a house poor wage slave, regardless of career. The future is bleak for millennials and gen-x in the GTA , Vancouver , Smokanagan or other over valued locations in this beautiful country. There are plenty of options if one is not a lemming. My 26 year old son and all his friends are making a good go of things in off the radar locations in Canada and the USA and would be considered successful to date.

#77 Russ on 11.27.22 at 12:48 am

#73 Crowdie

I set the missus’ two hummer feeders on lights before heading out to the tropics for a few weeks. The large bulb (15W) on a timer to prevent overheat in case the temperatures are normal (not unseasonably cold like earlier).

Seeing a bit o’ snow in the forecast for Sailor coming this week. Good for hiking the ol’ Benson (keep the crowds away).

BTW in the discussion of 60/40, Garth put out a few gems on the detail of the “40” in little tidbits along the way. I recall the actual bond pecentage to be closer to 20% as a mix of government and high quality corporate. Government portion included non-Fed.
Preferreds play a part of the “40” mix.

Cheers, R

#78 Longterm on 11.27.22 at 1:17 am

#43 DLT INC on 11.26.22 at 4:28 pm

Final someone else on this blog who understands the big picture and has a grasp of reality.

#79 Sail Away on 11.27.22 at 1:52 am

“I mean, I lie if I’m really cornered or something. I lie. I really try not to. I try never to lie on TV. I just don’t — I don’t like lying. I certainly do it, you know, out of weakness or whatever”

-Tucker Carlson

#80 chris on 11.27.22 at 2:15 am

I’d be mindful about getting too excited about biotechs trading below book value. Many of the companies with cash on hand are running very expensive clinical trials (i.e. cash is spoken for) and if they aren’t currently bringing in revenue, it will be extremely hard to raise more capital. most clinical trials fail, but all are extremely expensive.

#81 Damifino on 11.27.22 at 7:13 am

#72 Nonplused

Excellent. Comments such as yours are the main reason I continue to wade in this swamp. Thanks.

#82 David McDonald on 11.27.22 at 9:42 am

Thanks for your insight. My fixed income investments have not done well and it’s terrifying to read the negative outlook of the permabears for the next year. I am tempted to call my broker and go to cash. You give me some reassurance that I should stay the course.

#83 crowdedelevatorfartz on 11.27.22 at 9:48 am

@#71 Faron
“As a professional scientist by training…”
++++
Your parents took the wheels away?

Scientists once believed the world was flat.
Scientists once believed the moon was cheese.
The earth was the center of the Universe.
Travelling on a fast train would suffocate passengers.
Powered flight was impossible.
Etc etc etc.

In other News.
Trump had dinner with a Nazi and Ye.
The sum of the 3 I.Q.’s at the table equalled zero.
Mar a Lago, ground zero for stupid.

#84 Faron on 11.27.22 at 10:28 am

On drugs, harm reduction and the garbage fountain that is the Conservative leader’s mouth.

https://www.nationalobserver.com/2022/11/25/opinion/beware-pierre-poilievre-and-his-simplistic-solutions

#85 crowdedelevatorfartz on 11.27.22 at 11:16 am

@#84 Faron’s Follies
“On drugs, harm reduction and the garbage fountain that is the Conservative leader’s mouth.”

+++
The National Observer?
Seriously?
Aren’t they subsidized by CBC advertisements and Woke university student subscribers?

The anti conservative bias is so over the top it’s painful.
Whats next on your list of informative links?
Montreal Simon?

#86 Tony on 11.27.22 at 12:54 pm

Re: #82 David McDonald on 11.27.22 at 9:42 am

Cover/hedge your longs for January 5th 2023. Just that one day January 5th 2023. Cover at the close January 4th. Every year the U.S. stock market tumbles the trading day after you get money transferred into a brokerage account from a bank and buy for your TFSA. The day you buy for your TFSA would be January 4th and the U.S. stock market will fall January 5th. There’s a pattern every year. The holiday falls on Sunday so it happens on the 5th this year.