Hello
We have a top ten this week that touches on many subjects as we start the Summer of 2023.
Howard Marks believes this represents the beginning of a new era in the financial markets that will force many investors to rethink how they approach investing, use different risk/reward assumptions, and adjust to more difficult conditions that many practitioners are seeing for the first time in their careers.
An interesting story in the WSJ on ‘Silicon Valley’s Newest Unicorn’. Yes, the billionaires must have gotten the memo on how much mining will be needed if we want to accomplish any of these renewable energy goals.
Mark Mills provides a brilliant overview of ‘The Energy Transition Delusion’. Brad Hayes also gives another balanced viewpoint on why oil will be needed and how energy security is paramount.
(please note….one of Canada’s mid cap energy companies presented to a Norwegian Fund recntly. When they got to the ESG and Carbon Capture part, the group did not want to listen to it as one said, “we will need oil for another years!”)
The great team at Doomberg look at what Ireland may be doing with their cattle population, and they explain how ridiculous it is.
Steve Saretsky’s weekly piece looks at how much the mortgage business has fallen off. Mortgage borrowing has slowed to a trickle. Canadian households added a net $11.2 billion in mortgage debt in the first three months of this year, that’s the smallest increase in two decades, and is down from a cycle high of $58B in Q1 of 2022.
My former UVIC co-op student is doing amazing things at a global real estate firm. Their firm looks at ‘The Doom Loop’ that happened in San Francisco and the risk of it spreading to cities across Canada. The term “missing middle” in housing is the key and two articles are included. I hope the people at our City Hall reads them.
Forest fires have been in the news and the Financial Post and The Fraser Institute gives their take on the ‘truth of forest fires’.
Productivity in Canada continues to trend down, and the National Post’s Tristin Hopper explains that there is no end in sight. One thing that media outlets do not talk about much is the WFH effect. ‘Work From Home’ has some benefits but also many inefficiencies and hopefully some balanced studies come out on that subject.
To close, a piece from Bret Stephens of the NY Times who says to take Bobby Kennedy seriously, not literally. The day before, the brilliant Pippa Malmgren mentioned in her column that “We Americans love a dark horse. We love an underdog. We love somebody with only an outside chance.”. Bret and the NY Times has so much influence and the son of a politician who I admired so much is making it interesting and without the arrogance of one and the forgetfulness of another.
Have a great weekend!
David and Amy
Number 3 - The Energy Transition Delusion - Mark Mills
https://www.youtube.com/watch?v=nA1hqIPbVr8
48:57 Investment experts are predicting a metals super cycle (sustained high prices) due to high demand, low investment for the last decade, the effects of ESG, the higher cost of capital due to the retirement of the Baby Boomers, high inflation and increased geological scarcity. Whether these all actually play out is questionable, however on balance i can’t see a drop.
This is one of the most comprehensive interviews on the energy complex. It explains the entire nonsense of the thought that renewables will take over. “It is not an energy transition but more of an energy transformation.” He says.
Number 4 - Where is oil demand really heading? - Brad Hayes of Big Media
https://big-media.ca/where-is-oil-demand-really-heading/
The problem the world faces today is not too much oil, but too little. Investors have been driven away from oil and gas, protests have slowed or halted oil and gas infrastructure projects, and students entering university are being discouraged from studying petroleum geology and engineering. A huge generational skills gap is widening, and we face the prospect of not having the people we need to maintain oil supply over the next decades. Canada’s oil resources are immense, but production is forecast to rise only gradually largely because of social and regulatory obstacles.
As rich western nations deal with these internal conflicts around oil production, countries with far less stringent environmental standards and substandard human-rights records are more than willing to fill the gap. So, we face not only oil shortages and higher energy prices, but increased geopolitical conflict and economic damages such as those occurring in Europe today as governments struggle desperately to replace Russian oil and gas.
Finally, let’s remember that energy security trumps all other human considerations. It’s easy to say that climate change is your top priority when you have abundant energy at your fingertips – but one’s priorities are quickly re-arranged when energy is not there, as I discussed a few months ago (What the world needs now is energy education and pragmatic energy policy).
Number 5 - Stuck in the Middle With You - Doomberg
“Clowns to the left of me. Jokers to the right.” – Stealers Wheel
Number 6 - Steve Saretsky - Credit Slump
Credit Slump – by Steve Saretsky – The Saretsky Report (substack.com)
Mortgage borrowing has slowed to a trickle. Canadian households added a net $11.2 billion in mortgage debt in the first three months of this year, that’s the smallest increase in two decades, and down from a cycle high of $58B in Q1 of 2022.
Number 7 - The Doom Loop
Attached are a couple interesting articles that outline why we must fix affordability in Canada if we want to have a thriving country going forward. Real estate (33% of CPI), energy and groceries are the heart of Canada’s inflation. These costs have massively increased beyond wage growth and without new housing options, sustainable energy prices and affordable healthy food, the Doom loop could be a description of your City.
Interested in your thoughts!
“Doom loop (noun) — A scenario in which one negative development causes another negative development, which then makes the first problem worse. A vicious cycle.”
Article 1 – San Francisco Chronicle (attached)
- According to research from the University of Toronto, cell-phone activity in downtown SF is 32 percent of pre-pandemic levels. That number is 75 percent in New York.
- In the first three months of 2023, 200 San Franciscans OD’d, up 41 percent from last year. “It’s like a wasteland,” the guard said when I asked how San Francisco looked to him. “It’s like the only way to describe it. It’s like a video game — like made-up shit. Have you ever played Fallout?”
- The city often seemed to operate like an incompetent parent, confusing compassion and permissiveness.
Article 2 – The Doom Loop near you – Toronto & Vancouver
- Canadian cities from Vancouver to Toronto, and even Saint John, should take note as similar problems begin to plague their urban centres and exacerbate one another, forming the beginnings of their own doom loops.
- Middle-class families have been fleeing the city for years thanks to its unaffordability and, in particular, lack of middle-income housing.
- High real estate prices and a dearth of “missing middle” housing has also chased middle-class families, young professionals and essential workers out of Canadian cities at ever-quickening rates.
- The ones who remain find themselves squeezed to the limit. Just one disturbing statistic: 33 per cent of Daily Bread Food Bank users work full-time jobs.
- While perhaps the U.S. can still thrive without a healthy San Francisco, it’s harder to make the case that Canada still thrives if Vancouver and Toronto, or a combination of other major economic engines, fail. Here, it’s easy to imagine localized doom loops become sweeping doom vortexes.
- We must stop the cycle by protecting what’s left of the middle class in Canadian cities and their surrounding areas across the country— and that starts with fixing housing.
https://schneiderwealth.ca/wp-content/uploads/2023/06/Doom-Loop-of-San-Francisco-.pdf
Number 8 - Forest Fires
The truth about forest fires goes up in climate-change smoke | Financial Post
https://financialpost.com/opinion/truth-about-forest-fires-up-in-climate-change-smoke
Forest fires—truth going up in flames | Fraser Institute
https://www.fraserinstitute.org/article/forest-fires-truth-going-up-in-flames
Number 9 - Canadian economic productivity is in freefall | National Post
https://nationalpost.com/opinion/canadian-economic-productivity-is-in-freefall
Per-capita economic production – and relative living standards – are dropping with no end in sight.
We hope you found the Top Ten interesting this week, and are looking forward to another selection of articles, stories, and commentary next week. If you know of anyone else who would be interested in receiving our weekly note, please let me know.
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