After the Liberation Day market flush, equities have been very robust. Everyone likes to see their portfolio grow but as the saying goes, “Offense Sells Tickets, Defense Wins Championships”. Amid the current market euphoria the principles of Mass Psychology are predictive. This webinar will focus on asset classes, sectors and regions that continue to offer upside potential, as well as the factors that are preparing us for the next correction and how to navigate these challenges.
Register now to join us on Tuesday, October 14th at 7PM MST for our webinar: “Dancing Near the Door: Preparing for the Next Correction.” We’ll cover the following:
- Mass psychology at work — understanding investor euphoria and how it sets the stage for reversals
- Defense wins championships — disciplined portfolio tactics to protect gains and reduce downside risk
- Risks hiding in plain sight — European instability, debt troubles, and gold’s flashing signal
- How we stay rational in irrational times — cutting through the noise with rigorous, evidence-based analysis
- Opportunities that still shine — AI and other sectors with real upside, even in frothy markets
(Webinar recorded on Oct. 14th, 2026.)
Full Transcript
0:03
Hello everyone and welcome to Dancing Near the Door, Preparing for the Next Correction.
0:09
It’s our regular seasonal webinar and we’re so happy that you’ve joined us, whether it’s live or via recording.
0:16
So we decided to name it Dancing Near the Door because there are so many things going on that we want to make sure that people remain aware that there’s always risk on the horizon.
0:27
We don’t think that it’s catastrophic risk or anything like that.
0:30
But as you can see here from this graphic, when you’re caught up in the dance, caught up in the party, you can lose track of time, you can lose track of what’s going on.
0:41
So dancing near the door is a way of saying, you know what, we’re still part of the party, but we’re ready to step out, get some fresh air whenever necessary.
0:53
I’d like attendees to think about this as a little bit of a combination of perhaps a fire drill or a practice like athletes go through on an ongoing basis.
1:05
And we want to give you some insights into how our portfolio managers manage risk.
1:09
And for our clients, this would be a good reminder.
1:12
And for those who aren’t yet clients, I would ask you to ask yourself, how is your current investment manager, your current investment team managing risk?
1:21
So we’re going to have a Q &A following the formal presentation as always, but let’s get rolling because we have a ton of stuff to go through.
1:27
So our agenda, we’re going to talk about mass psychology at work in the markets.
1:32
It’s always there, of course.
1:34
What’s going right, what the risks are hiding in plain sight, the philosophy that defense wins championships, how we stay rational in irrational times, and talk about some opportunities that are still shining.
1:47
And again, dancing near the door doesn’t mean that we’re going entirely to cash or anything remotely close to that.
1:53
it’s about making sure that we’re managing risk and keeping things as as steady and as as Unrisky and under unnerving as possible So that’s me on the right the one stumbling over his words and that’s sandor on the left on the back end here tonight on the control board So why do clients choose IWM?
2:18
Well, it’s largely because clients like dealing with a firm that shares their values, sovereignty of the individual, the Western Canadian way of life, and being driven by reality, not by popular narratives.
2:33
So the way that we work, of course, is we help to clarify your life goals and update them over time, find the right people, tools, and strategies to help you achieve your life goals.
2:42
And through a vigilant process, we stay on track to help you achieve your life goals with ongoing discussions and analysis of your situation.
2:49
And we do this using this model.
2:52
That’s our wealth management model.
2:56
And you can see that in the middle there is your family’s life goals.
3:00
And those life goals are the specific objectives that flow from your values, beliefs, and priorities as an individual and as a family.
3:11
So question, what’s keeping clients up at night?
3:14
Well, of course, when’s the next correction coming?
3:16
because things have been really good, honestly.
3:19
And how bad will it be?
3:20
Talk a little bit about global instability because our clients tend to be rather well informed because they source out independent media and don’t just go with the mainstream.
3:31
And so they have a little bit more of an inside track of what’s actually happening.
3:36
We’re gonna talk a little bit about the state and trajectory of Canada for future generations, including inflation, real inflation, housing affordability, jobs, and healthcare, of course.
3:45
And what a lot of that leads to is thoughts of intergenerational wealth preservation or transfer for our clients.
3:53
And that really comes down to who and what is the money for.
3:57
So, the calm before the storm. Things have been very, very sunny.
4:02
We see some storm clouds on the horizon, as you see here.
4:06
Back in June, on June 10th specifically, we did a webinar called Debunking the Doom.
4:11
It was basically a contrarian view about what was happening in the markets at that time.
4:17
People were still, I would say, very skittish following the so-called Liberation Day tariff announcements and we had the post-Liberation Day flush that bottomed on April 8th, but folks were still pretty tense and we still didn’t have a lot of clarity on tariffs and a whole bunch of other things.
4:38
And, of course, right now, we have a run-up in equity markets, especially, and in gold.
4:45
And prevailing optimism in markets usually portends something is going to change fairly soon.
4:51
So, in this context, at this time, what we mean by a storm is basically a garden variety type of correction, pardon me, nothing terribly well-threatening, I’ll say, or particularly scary.
5:07
But of course, anytime markets start to pull back, we always wonder, is this the big one?
5:11
Is this the big one?
5:12
And we’re going to talk to you a little bit about some of the early warning signs that are being monitored.
5:18
So we are, of course, an independent firm, and we work with independent portfolio managers.
5:24
And that independent perspective has allowed us over time to really bring some things out in advance of a lot of the rest of the investment community, such as private alternatives in real estate infrastructure, private credit, and even royalties.
5:40
Our core and explorer strategy for commodities, the short-term corporate credit model and bonds to help us avoid government bonds and the like.
5:51
And large institutional managers simply cannot be as nimble because they’re too big and they’re almost always behind the curve in terms of innovation because large organizations tend to be a little bit too bureaucratic and not make decisions too quickly. So what have you done for me lately? That of course relates to portfolio performance.
6:12
On a year-to-date basis, net of fees, our clients’ balance portfolios are up at the very low end, about 7% year-to-date, and in the 13% neighborhood at the top end, the vast majority of clients are between 10 and 12, I’d say.
6:27
Only the very conservative portfolios would be in the 7 or 8% range, and only the most aggressive, growthy portfolios up in the 13% range.
6:38
And equity performance, these are the pools before fees. Our three different managers’ core growth pools are up about 16%, 29%, and 31%, respectively.
6:49
And the more conservative dividend grower models, or what we call pension style, are up by 22%, 11% to 15%, depending on Canada or US, and 15% respectively.
7:03
And that compares very favorably with SPY, which is the SPY ETF, which tracks the S &P 500.
7:11
It’s up more in US dollars, but in Canadian dollars, it’s up about 13.2% on a year to date basis.
7:19
And XIU, which is the TSX 60 ETF, actually the world’s first ETF, by the way, and that’s up about 22% largely on the back of financials, but also especially more recently on gold miners.
7:38
I wanted to mention as well that it has been a tremendous run for the commodity markets as most people know.
7:45
Our corn explorer model is something that we started on March 18th of 2021.
7:51
Only six weeks after we attended the 2021 World Outlook Financial Conference online, the one that’s held in Vancouver every year.
8:00
And the focus there was, we’re in the beginning, the very early stages of a commodity super cycle.
8:06
Six weeks later, we had this strategy up and running on a year to date basis at 41%, 42.8 on the one year.
8:14
Three year compound averages at 25% since inception, 21 and a half, compared to 15.7% for the benchmark.
8:24
And with standard deviation, and that’s only slightly higher than the benchmark.
8:27
This performance has been exceptional and we’re very happy with it.
8:32
And in fact, today we actually did a little bit of rebalancing where we took some of the money off the table in our gold shares as well as in our uranium ETF.
8:47
So let’s talk about what’s going right.
8:50
The saying that’s fairly famous is that earnings are the mother’s milk of stocks.
8:55
The actual earnings on the S &P 500 as of the end of September were at 261 in the aggregate and the price earnings multiple or the PE ratio was at 25.
9:09
Earnings estimates are for the future for 12 months, F12 means forward 12 month estimates.
9:16
That’s estimated at around 8.5% and on current prices that’s about a 23 multiple.
9:23
So, things are getting stretched, but the majority of the price earnings multiple being high is really heavily, heavily influenced by the Magnificent 7, and of course there’s 493 other stocks of the S &P 500.
9:45
We also have some other technical indicators that are suggesting continued strength.
9:49
We have continued buying momentum, I’ll show you a little bit on the bull bear sentiment in a bit here.
9:55
And we’re kind of in a situation where we’ve got some FOMO going on, which is the fear of missing out. Overall, employment is still pretty good.
10:04
Canada is close to a long-term average. We’re higher than in the US, but that’s pretty typical.
10:09
And we’ll focus on that a little bit more in the future, our future here tonight. So what’s going right?
10:16
Back in June, we actually showed the same technical, it’s a summary of technical analysis indicators.
10:25
And it was a strong buy back on June 10th on a monthly basis, and it’s still on a strong buy.
10:31
Now, if you look at it on shorter term basis, like they’ve got an hourly and a five hour and a daily, which is kind of useless, but also on a weekly basis, it’s still on a strong buy.
10:44
So that aggregate of technical indicators and moving averages are still in strong by territory. That’s good news.
10:53
So inflation rates. We know that inflation is a highly manipulated figure, and that’s because governments tie pensions, public pensions, but private pensions also tie their indexing to the official CPI number.
11:11
And the same thing happens with government benefits, like old age security and some of the other social programs that we have, they get tied directly to inflation.
11:24
One thing that we’re happy about, though, is the fact that it is trending downward, as you can see over here.
11:31
And frankly, that’s the most important thing, is that it’s trending downward.
11:36
That’s a positive.
11:38
And, yes, we are due for a pullback, but this is healthy.
11:42
On average, we have a pullback of the 5% to 10% variety about three times a year, and that happens in about 94% of years.
11:51
Correction is defined as 10% to 20% down.
11:55
We get one of those a year on average, and that happens in about two-thirds of years, or 64%.
12:01
and a bear market, which is a decline of 20% or more.
12:05
We have that happen about one out of every four years.
12:10
So pullbacks, even a correction that goes 10 to 20, it’s still not that bad and it’s pretty normal.
12:17
And what I would like to say is pullbacks within a rising market are actually very healthy and they are in fact the pause that refreshes.
12:28
So we’ve all seen this before, I’m sure.
12:30
We talk about mass psychology and its effects on markets, especially at the extremes.
12:37
And of course, here we have the beginning of, or partway through a rising market where we have optimism and excitement and thrill.
12:46
And then we get to the euphoric stage and the things start to roll over and we start to feel some anxiety, denial, fear, desperation, panic, capitulation, despondency and depression.
12:56
And frankly, this is typically where a lot of people uh who are watching things too closely or who are on a portfolio that is too volatile for their financial pain threshold will sometimes turn well often turn a temporary decline into a permanent loss so where i think we are right now is somewhere between thrill and euphoria we’re not quite at the extremes of optimism um but um i think at this stage there’s some things that make us a bit vulnerable to a pullback.
13:29
Now the important thing to remember is that markets are about masses of people, mass psychology, and by definition the masses are wrong at the extremes but they help to create the trend in between.
13:43
Now if you’re a sports aficionado of any kind you may have heard the expression that offense sells tickets and defense wins championships and that’s very we play defense include sector and geographic rotation, stock rotation and position sizing, meaning going from partial to full positions or back to partial positions or completely exiting. We manage cash levels actively. They do active currency hedging.
14:15
And when things start to get really heated on the upside, we’ll often buy some option strategies, some options specifically, not to guard against, you know, kind of the garden variety, like five to eight percent little pullback, but typically those options are out of the money until we get to about 10% down and then they start to provide some exceptional portfolio protection.
14:40
Now most institutions can’t or won’t use all these tools mostly because of their size.
14:45
So I ask the question again, does your current investment team make use of all these tools?
14:50
Now this is the structure of of how our portfolios are all built.
14:57
We like to say that strength and flexibility equals durability.
15:01
If something is strong, but rigid, it becomes brittle.
15:05
And thus its real strength is far less than it looks like on the surface.
15:09
We typically have three different components in portfolios.
15:12
We have the stable income generation with corporate bonds and private alternatives.
15:17
We have the income and growth stocks or what we like to call stocks you can tolerate.
15:21
that typically is the lower beta dividend grower style of equity management, which long-term has the highest rate of return, but it also has the lowest volatility, which is excellent.
15:36
And then our portfolios all have an explore or opportunity seeking component, whether it’s in a growth strategy or in small caps or in cyclicals, such as commodities right now.
15:48
I want to talk about something we haven’t talked about in a while, and it bears being reminded when times are good.
15:57
And this is the importance of understanding why we need to minimize declines.
16:03
So if we have a target return of 6% per year on $1 ,000, the value after one year would be $1 ,060, and the value after two years would be $1 ,123.
16:16
If, however, in example one here we have a portfolio decrease of 15% and we’re withdrawing money from the portfolio, the value after year one would be $1 ,000 minus the decline of bringing it down to $850 and then the 5% withdrawal makes it $800.
16:36
In order to get back on track to your target return in year two, you would need to have 40.3% return. And if we look at that over a two-year basis, we would need a 22% return per year.
16:49
And if we are in a situation where it’s much, much deeper declines, if we have a very aggressive portfolio that we don’t take any risk management on, we are down 25% in a year, and we are withdrawing, of course, it takes a 60% return to get back on track by the end of year two, or a 41% return over a two-year basis.
17:13
And this is really important because minimizing declines keeps portfolios within each client’s financial pain threshold.
17:21
And that prevents them from turning temporary declines into permanent losses by selling near the bottom.
17:27
Now, anybody here in the audience who is not a pilot, but has looked onto the flight deck of any kind of modern airliner, you know what this looks like.
17:39
and it’s pretty it’s pretty overwhelming a lot of a lot of buttons a lot of gauges a lot of graphs a lot of monitors and don’t really know what we’re looking at here that can be pretty confusing and that’s kind of what it’s like for a lot of people when they’re looking at risk controls so some key indicators that our managers actually use to stay invested in rising markets but still be prepared to get defensive are first of all of course always looking at price earnings ratios It’s what what you’re getting for what you pay looking at credit spreads between corporates and and in government bonds.
18:16
And those are credit spreads right now are really tight, which is concerning.
18:21
It’s showing an awful lot of optimism.
18:23
It’s also credit spreads between tens and twos.
18:25
So 10 year bonds and two year bonds, the VIX, which is a measure of the put call ratio.
18:31
And it’s basically referred to as the fear index.
18:34
There’s the bull bear sentiment and ultimately Places where we have money market stress particularly in the over overnight market interbank lending Such we had such a an event back.
18:49
I believe was September 16th of 2019 Where we had the overnight market go from 2% to an 8% annualized return in a matter of a few hours So, some real-world signs of brewing trouble. This is kind of anecdotal, but it’s speaking to something that’s really concerning, which is wealth disparity.
19:12
And we’ll show a little bit more about that.
19:15
But on a one-year basis, going to the end of September, the consumer staples subsection or subindex of the S &P 500 was up 0.22%, but consumer discretionary was up essentially 21%, meaning people who have the extra money for discretionary spending are spending it and it’s up 21%.
19:38
Whereas the staples, the things that people absolutely need, that index is up only 0.22%.
19:46
The exceptions within that consumer staple sub-index are Walmart and Dollarama, which are having a fantastic year.
19:56
And they both show up really strongly and that shows that even within the consumer staple sector, shoppers are drawn to the lowest price retail options.
20:04
It’s kind of a concerning thing because of course everybody is hyper price conscious if they’re tight on funds.
20:12
This is one of the dashboards that I made reference to of core indicators, total of six of them.
20:17
I just listed a lot of them off there.
20:19
One of them I wanna draw attention to right here though is in the bottom right hand corner, which is the bull bear sentiment.
20:26
Right now, the bulls and the bears are actually really close to each other in terms of optimism and pessimism.
20:34
So the bulls are at 42.5% and the bears are at 39.2%.
20:41
So that is extremely balanced and that is actually a good sign that there’s probably some more upside left in the markets.
20:51
And this is another set of proprietary signals that another one of our managers uses.
20:55
This is their, again, their proprietary signals that they use.
20:59
They send these to us every month following the monthly investment call and share those with us.
21:06
We know kind of where they’re leaning and it’s a very, very data-driven, very unemotional, very numbers-focused and stats-focused way of looking at things.
21:18
And this, frankly, is a really big part of how our managers are able to stay rational even when markets are getting pretty darn rough, like they might be in the near future.
21:32
So let’s shift to unemployment.
21:36
So we can see here, of course, we had that super spike unemployment back with COVID in the US and now we’re back down here.
21:47
This is the current level and you can see it’s still at a pretty good low rate right now and that frankly is it’s despite mass uncontrolled immigration in essentially these four years in here until very recently.
22:07
So that’s a sign that the US economy overall is still relatively robust, and certainly pretty close to full employment.
22:17
In Canada, our unemployment rate’s a bit higher.
22:20
We’re in the 7.2% neighborhood, but as you can see here, this current level, it’s still not far off long-term averages.
22:30
So we’re actually doing okay.
22:33
Canada has always had a higher structural unemployment rate than in the U.S.
22:39
That’s largely due to our unemployment insurance benefits that we have that are a little bit more generous than in the U.S.
22:48
And in particular, when we take a look at the unemployment rules in Eastern Canada, particularly with the folks in the fishing industry.
23:00
So these are all the things so far that we can see that are going right.
23:04
Now let’s look at the risks.
23:06
So you see here, this is the same table that I showed you in terms of things that are going right.
23:13
That’s true.
23:15
So valuation levels can be both a risk and a sign of still more opportunity for growth.
23:22
So when we look at what the actual price earnings ratio is right now, including the mag seven, which kind of stretch this, it’s around 2021.
23:30
if we take the Magnificent 7 out of this number and that means basically overall that we’re paying if we take the Mag 7 out we’re looking at paying $20 for every $1 of profits so that price earnings ratio is 20 to 1 now what happens in optimistic markets is that this number tends to expand as people get more optimistic multiples expand now where we are right now these are the actual earnings in aggregate for the S &P 500.
24:03
And this is the forward 12 month earnings estimate based on an estimated 8.52% growth rate.
24:10
And that’s consensus of all the Wall Street analysts that Bloomberg surveys.
24:16
So what that means is that at today’s share prices, it’s about a 23 multiple overall, assuming that eight and a half percent growth.
24:27
Now some cautions and some risks is that essentially if we start to get a bit of a pullback, we can have the multiple contract.
24:36
So even though forward estimates have not necessarily gone down, we might still have a little bit of time until the next earnings season, but investors are getting a little bit more skittish.
24:52
And then there’s also another risk here, and that is the risk that the growth rate of 8.52% built into these numbers doesn’t come to fruition.
25:03
So any external events can cause multiple compression and that growth of 8.5% might not meet estimates.
25:09
And if that’s the case, that’s fuel for a pullback.
25:13
We also have really concentrated returns.
25:16
We’ve talked about the MEG-7, but even looking at the ETF here, XLK, which is the broad technology large-cap technology ETF in the US It’s at a forty and a half Price earnings multiple that’s really really high and that’s not just the mag-7.
25:35
That’s all large-cap tech So that’s a that’s a pretty concerning number.
25:39
I’d say also In Toronto, we’re at all-time highs basically now and why would that be if the Canadian economy is not doing that?
25:49
well. Well, it’s basically because the price of gold is doing really, really well.
25:54
And with the price of oil being quite muted below 60 right now, we have very, very good profitability for gold producers.
26:03
So companies that have proven reserves and they’re in production, they have lower energy costs and that adds substantially to their profitability.
26:12
And right now, because there’s a lot of optimism in the gold miners, people are willing to pay up for that Future growth that they’re anticipating So that’s a bit of a risk though because of the concentration So speaking of gold, what is gold telling us?
26:29
well, as you know gold is not a function of strictly of Inverse relationship with the US dollar.
26:38
It is not a hedge against Inflation even though it gets talked about all the time.
26:43
It’s one of the weirdest things that analysts always talk about That’s just patently untrue.
26:49
And it’s also not specifically about the debasement of the currency.
26:53
Those things can kind of add fuel to the fire.
26:56
But the fact is that gold has always been a hedge against chaos, and especially chaos in the Middle East.
27:04
So right now, gold is rising in all currencies, which tells you a lot.
27:08
And it’s largely been driven.
27:10
The tailwinds have largely been driven or have been generated by central banks.
27:14
They have been essentially buying more and more gold and even some Bitcoin Instead of US dollars and it’s primarily because gold and Bitcoin are in fact a political So, of course the US dollar is the world’s reserve currency has been used to to maintain kind of an economic and military hegemony around the world and so central banks are buying their reserves for, for future, for stability for their, for their own countries.
27:50
So in terms of an outlook for the gold price, Martin Armstrong’s number is still at the $5 ,000 U.S. number, with the first real resistance coming in at $4 ,500.
28:03
Just saw one of his private, private blog posts today. And I’ll just read from it briefly.
28:10
Our initial resistance This week stands at 42.46 with our extreme target for, for next week standing at 44.38.
28:18
The week of the 27th of October is still a panic cycle around the world in many markets.
28:22
This does not appear to be something related only to gold. Even the Dow bounced today, with Tuesday being the key target. So that’s kind of where we see things with gold.
28:32
um it’s been very very stable it’s been a great winner for uh for our clients especially in the the corn explorer strategy um and what about silver well silver has always been uh you know obviously much lower cost per ounce it’s much more common in the earth’s crust and it is of course both a precious and an industrial metal and it’s dual status as Industrial as well as precious has made it has been a bit of a weakness, but it’s starting to show up a little bit more as a as a strength because as as we go forward with increased electrification and Need for compute power as well as of course just the ubiquity of tablets and cell phones Silver is an essential element as part of the construction of those So we think it has higher upside potential.
29:32
In fact, today we got a note from industrial institutional advisors, which is Ross Clark.
29:39
And he says that Silver’s at the top of their interim trend channel.
29:45
And the next highs down the road are at 75 and $125.
29:52
Silver of course is right around that $50 neighborhood right now.
29:55
So those were some pretty big moves.
29:57
And he sees those coming to fruition that’s 75 and eventually 125 in sometime in 2026.
30:04
And right now, on both gold and silver, their upside exhaustion alert is not quite to the point where they’re ringing the bell to, you know, to trim positions or anything like that.
30:16
But we’re getting closer and closer.
30:18
And of course, we’ve been rising, we’re riding this rising tide for four and a half years for clients and very happy that we’ve done that.
30:27
So let’s talk a little bit about some risks in plain sight. First of all, we’re in an everything bubble.
30:35
All equity markets around the world really are in the green year-to-date, some greener than others, but basically on even on a quarterly basis, most equity markets around the world, even in Canadian dollars, are up anywhere between 7 and and 11% just on the quarterly basis.
30:54
That tells you that there’s a lot of frothiness, a lot of optimism, and I would say, again, starting to get close to that euphoria stage.
31:04
So we’re also gonna talk a little bit about here in the future slides, the next slides, global geopolitical clouds, sovereign debt levels, U.S.
31:12
government and macro policy, and talk a little bit about inflation, interest rates and central banks.
31:17
So let’s talk global geopolitical crowds.
31:20
This is probably the clouds.
31:22
This is probably the thing that has our clients the most concern and frankly with good reason there is rising probability of conflict military conflict or escalation of current military conflict Notwithstanding the the recent Gaza deal that Trump pulled together with with Israel and Hamas There is an increasing concern that now that, you know, the Hamas ceasefire is in place, we’ll see how long it lasts, but the protests against Benjamin Netanyahu are revving up again, just as they were before the October 7th Hamas attack that kicked off the current demolition of Gaza.
32:13
And once the war ends, Bibi Netanyahu could be in a position where his government could fall apart.
32:22
And if that happens, he and his wife are overwhelmingly likely to go to jail, because they have been accused very credibly of massive corruption over the decades.
32:34
And so I think he probably wants to maybe stay out of jail.
32:37
So that raises the risk of of an attack on Iran, which Israel refers to the the head of the the radical Islamic snake And of course, we’ve got the situation in Venezuela where there’s continued escalation I’ll say poking and prodding from the US Blowing up boats off the coast of Venezuela with people in them and claiming that they’re drug boats even though drugs don’t usually get transported in speedboats with 11 people on them when those speedboats only have a range of a couple hundred miles and can’t reach the US.
33:16
But I mean, when you’re the US and you have the ability to blow things out of the water with impunity, why not, right?
33:24
So now there’s a conflict in Europe, which specifically we’re talking about, of course, is in Ukraine.
33:29
And right now I think the biggest problem that we have is besides the highly imprudent, impulsive, and I would say irresponsible talk from the US, including Trump, but also clowns like Keith Kellogg and Jack Keene who you see on Fox News if you watch that.
33:53
And you know, they’re all talking about Russia being a paper tiger and they’re poking and prodding and you know being insulting But I think the biggest issue really comes down to the three amigos factor the three amigos if you remember that was a movie in the 80s with With Steve Martin Chevy Chase and Martin Short and of course, they were three actors in Mariachi Outfits and they were of course morons.
34:19
So the The political equivalent today in Europe is Keir Starmer, Prime Minister of the UK, little Napoleon Emmanuel Macron in France, and Black Rock Mertz in Germany.
34:37
Now the UK and France have been sniffing around looking for an IMF bailout.
34:42
Why would that be?
34:44
It’s because their economies are in real trouble.
34:46
We’ll show a little bit about that in a moment.
34:49
And the way that Marty characterizes it, the way that he’s brought out some definitions on why you might want, why these folks might wanna be poking the bear and trying to start a war again or escalate the war in Russia is what he calls diversionary theory of war or the scapegoat theory.
35:09
So you create a foreign enemy and that tends to focus any disgruntled folks on the domestic basis and focuses their ire elsewhere.
35:22
And particularly if you can send those young guys to war, you know, to fight that evil enemy that you created, they can’t make trouble at home because frankly it is usually the young single males that create the most problem in terms of civil unrest.
35:40
Danger right now I think is that we could see some kind of a, I’ll say a plausible false flag.
35:45
The EU’s been trying to, to make it look like Russia’s been flying drones into Poland and, and over, over the Baltics. Those, those claims have been debunked so quickly, it’s not even funny.
35:59
But they’re trying very hard to make Russia into the big, bad bear that wants to come and take the rest of Europe.
36:06
And so I’m concerned that they might try and do that. Why would they want to do that?
36:11
Well, overall, I think it’s because of the fact that they have this massive, massive overhang of debt that they really don’t have much of a possibility of growing out of.
36:22
And war is a very common excuse used by governments to default on debt. And so they get to start with a clean slate.
36:30
So rather than admit that there’s a problem with their, their, their socialist experiment called the EU, they’ll just try and create a distraction and write the debt off and blame it on an external source.
36:42
And of course, we also have declining social cohesion, particularly in those same three countries, Germany, France and the UK.
36:49
We also have it in Italy and Spain, but it’s probably the worst in, in UK, Germany and France.
36:56
And that’s because they have these massive, massive unfettered immigration programs over the last 7 or 8 years, in particular the last 3 or 4 years in in France and the UK. And so you have both open borders and a welfare state in all three of those countries.
37:16
And that does not bode well for your fiscal stability and solvency.
37:22
So here we have, where’s this as of, I think it’s as of 2025 here, remember. But we see Germany here with 62% debt to GDP, France at 114%, and the UK at 94%.
37:40
Now, Germany at 62 looks pretty low.
37:43
I’ve heard some other figures from different sources that may be counting some other liabilities that aren’t being counted here, but they put the, the German debt to GDP at closer to 70%.
37:55
But at any rate, it’s been rising quickly.
37:58
And again, that’s because of open borders and having a welfare state, and in particular in Germany, because of its deindustrialization. And we’ll show that in a moment.
38:10
What’s not shown here are two really important countries that are on a completely different part of the planet.
38:16
And those would be Japan, which has a 230% debt to GDP, and China, which has a massive but far more difficult to actually define debt to GDP.
38:30
And Sanders pointed that out, and we’ll certainly explore that in future.
38:36
For the purposes of this, this webinar, we wanted to just focus on the biggest risk areas, which we see as being Europe. So here’s that deindustrialization piece that I talked about with Germany.
38:50
This was a screenshot that Sandor actually pulled off his phone, so we couldn’t, couldn’t make the graphic fit the slides any better.
38:58
You can see, of course, industrial production dropped very rapidly here in 2020 with COVID, as it did everyone else.
39:08
But this here is basically what’s happened since we had the end, or since we had the escalation of the war between Ukraine and Russia.
39:17
And if you look here, that’s that’s the end of 2022. And that was really the beginning of the end.
39:23
And what what was significant about at the end of 2022? Well, that’s actually when the Nord Stream pipeline was blown up.
39:31
And so they, Germany lost access to basically an unlimited supply of very inexpensive gas through Nord Stream 2.
39:41
And that has certainly accelerated their deindustrialization.
39:46
So in Europe, they’ve got an unemployment problem as well with the exception, and I say the positive exception of Great Britain, not quite sure why their unemployment rate is as low as it is because their economy is fairly stagnant, but they look to be close to full employment.
40:06
This here is Germany, which is at a much healthier rate and kind of at 6%, 6.25% neighborhood.
40:13
The most concerning one here is French unemployment, because they have the highest debt to GDP of those three countries.
40:21
And, and of course, their economy is languishing.
40:26
They’re on their sixth prime minister, I believe, in about five years.
40:32
And Macron refuses to actually call presidential elections or parliamentary elections even.
40:38
He’s just going to try and actually shove the prime minister who resigned after 27 days in office. He resigned about 10 or 12 days ago.
40:49
And Macron’s telling him to go back in there and give it another college try and try and form a government again.
40:53
It’s really quite a joke. The bigger problem in Europe is youth unemployment.
41:00
Again, Great Britain is in a much more favorable position. But here, we have looks like 11, almost 12% youth unemployment in Germany.
41:13
And up here in France, we’re closer to the 18 or 19% youth unemployment rate. Why is that concerning?
41:22
Well, again, it goes back to the that young men are usually the people who lead civil unrest and eventual revolution. So I’d say that you’ve got a lot of people who are out of work.
41:36
Of course in all three of these countries a large part of the youth who were unemployed are recent migrants, very different cultures, different countries, different languages, very different standards in particular, how they treat women and and many of many of those folks actually come from from countries where war and violence was much more common. So that’s very concerning.
42:05
Now let’s talk a little bit about another factor here.
42:11
Talk about the good and the bad with US government and macro policy.
42:15
So on the good side here Trump has done pretty good job of sealing up the borders and basically freezing the illegal immigration on their southern border, also gone after abuses of the H-1B visas, which is seen to be supportive of American engineering jobs in particular, and that would be, you know, in electrical engineering, computer engineering, and the like.
42:44
Trump has definitely managed to attract significant capital investment to the U.S.
42:50
in the trillions of dollars.
42:51
Of course, that happens over a series of years.
42:55
They certainly have been getting tougher on crime.
42:59
The big, beautiful bill was far from a perfect bill, even though it was big and beautiful, of course.
43:07
It was huge.
43:07
It was like the biggest, most beautiful bill ever.
43:10
So, tax policy there, on the income side of things, we actually saw some significant decreases in income taxes, particularly for the higher end of the income spectrum, but probably the most important tax policy change was actually allowing for 100% write-off on capital investments in the single year.
43:32
That is truly huge, to use a Trumpism.
43:37
However, the biggest and probably the best things that Trump has done on the economic side of things are actually in the realm of deregulation.
43:45
Senator printed off a list here of major 2025 deregulation orders and actions, and I’ll just read the highlights.
43:52
The 10 to one deregulation mandate, self-explanatory, regulation freeze and review, so no new ones without further review.
44:01
Departmental efficiency orders, so that agents have to identify and rescind rules deemed inconsistent with the current administration’s policy.
44:09
Enforcement limits that agencies have been directed to exercise enforcement discretion and reduce enforcement of unnecessary rules, especially those conflicting with the new executive regulatory posture, revocation of diversity, equity, and inclusion orders.
44:26
And that’s a good thing, getting back to a merit-based system.
44:30
Environmental and energy deregulation.
44:32
This is particularly important when it comes to repeal of methane emission requirements.
44:40
And that’s when we, of course, always wanna be careful on because we don’t want to get too lucid goosey with that just in search of energy production.
44:49
Labor market deregulation, executive oversight expansion, rollback of, and rollback of sector specific rules.
44:57
Some executive actions focused on repealing or weakening rules in capital markets, finance, healthcare, energy, trade, and consumer protection.
45:03
And there are others but I think that’s quite enough of a laundry list on the not-so-good side of things Tariffs tariffs have essentially been like a bait and switch.
45:16
So while The big beautiful bill has brought about some income tax relief for people It has actually brought along some increases in costs through tariffs So in many ways, that’s kind of a bait and switch where, you know, here I’m giving you some of your tax money back through income tax cuts, but, you know, reaching around to the back pocket and saying, yeah, but you’re going to pay more for your groceries and your other essentials.
45:45
And there is a lot of dissatisfaction, frankly, in the mega base and Trump’s base, where he appeared, not appeared, he was very explicit in the campaign about wanting to stop wars.
45:59
He claims to have stopped eight wars in eight months.
46:02
It’s a grotesque exaggeration, of course.
46:07
And that we know that Trump is want to do that all the time.
46:12
Everything is huge and wonderful and glitzy and marketing.
46:15
And he says he stopped eight wars in eight months.
46:18
Not so much.
46:20
And the fact is, is he’s trying to start a war in with Venezuela and he’s not done anything meaningful to actually stop the death in Ukraine.
46:33
And of course, there’s also been some overreach with bringing the National Guard into certain places where it’s not been requested by governors.
46:41
He’s won some recent appellate and even a Supreme Court decision saying that he is allowed to use the National Guard to actually protect ICE agents who are in cities uh doing raids and and deporting illegal migrants uh but it’s a it’s a it’s a pretty uh challenging site uh to see and of course uh kicks up all kinds of dirt uh around racism and anti-immigration sentiment or pro-immigration sentiment and the like and of course then there’s the murders at sea i think uh so far uh the almighty um u.s navy has has bravely blown uh three different um vessels out of the water without any proof that they are actually drug spugglers, but what the heck?
47:29
When you’re the US Navy, you can pick on a country that isn’t really able to defend itself and they’ve got oil, why not?
47:36
And of course, we also have the risk of politicized central banking.
47:40
That has happened significantly in the US and that is a Trump berating Powell all the time.
47:48
And a loss of central bank independence is a really big problem.
47:53
they need to be left alone to do their job.
47:57
So as we look here with central banks and interest rates, you can see here in blue, this is the 10-year yield on Canadian 10-year bonds.
48:06
And up here, we still have higher rates in the US.
48:11
This is what Trump is trying to push Powell to continue dropping rates, thinking that if they drop the overnight rate or the Fed funds rate, that the 10-year yield will automatically drop, and that doesn’t necessarily happen, of course.
48:27
But higher yields in the US right now are definitely attracting bond investors.
48:33
This is where things get really concerning.
48:36
When you see that uptick in interest rates on new 10-year bonds, as we showed just a moment ago here, you can see rates are substantially higher than they were back in 2022, or especially here in 2020.
48:54
So this is where it gets concerning.
48:56
Here’s the total debt, federal debt that the US has been, this is the US federal debt at 120% of GDP, roughly speaking here, that’s the left scale.
49:11
And here we have the increasing cost of servicing that debt, interest as a percentage of gross domestic product.
49:18
And that number keeps climbing and climbing, that is obviously an extremely concerning trajectory.
49:25
And right now, the annual interest costs on outstanding federal debt is north of a trillion dollars.
49:33
And that’s roughly the same amount that they actually spend on their military.
49:39
This is another longer-term concern.
49:41
I’m not going to say it’s necessarily one which is an immediate concern in terms of equity markets or or or such but it’s a very long very big long-term concern so if we start here at the bottom three and a half percent that’s the share of net worth held by the bottom fifty percent so from the first percentile to the fiftieth percentile that’s the share of total wealth that they own started out three and a half percent around 1990 and as you can see went down substantially in the aftermath of the Great Financial Crisis, and we’re still only back at around 2.5%.
50:21
The next one here in green is the share of net worth held by the top 1%. Wow.
50:28
So it’s gone from 23% up to, up to right around 30% or 31%. It’s hard to tell which of those is which. I think it’s 30.1%.
50:39
And then we take a look at the next one up, which is share of net worth from the 90th to the 99th percentile. So just below the top 1%. And you can see that it’s been at 38%.
50:52
And we’re still at 36%.
50:54
And then of course, there’s the, the share of the net worth from the kind of the mushy middle, which is the 50th to the 90th percentile in this blue dash line. And you can see that that has been drifting lower.
51:10
So another look, Another way to look at wealth disparity, and this is a different form of graphing, bar graphing, and it actually includes the US, Canada, and the UK.
51:22
So the way that we read this is that the top 1%, so this one here in blue is the US in 1990, and this is the US in 2025.
51:33
So the net worth share of the top 1% in the US has gone up dramatically to that 30 or 31 percent number that we just showed you.
51:45
Here in Canada, it’s gone from this neighborhood, which is about 11 and a half, 12 percent. It’s gone up to about 16 percent.
51:54
And these two bars here represent the UK in 1990 and the UK in 2025.
51:59
So you can see in all three of these these countries, there’s been a substantial increase in the share of net worth owned by the top one Then if we look at the next 9%, you can see that it’s gone up in the US, gone up more substantially in Canada, actually, which is a little bit surprising. And it’s gone up, of course, in the UK.
52:21
And when we take a look at that mushy middle that I referred to, the 50th percentile through the 90th percentile, their share of net worth has gone way down in the US, in Canada, and in the UK.
52:35
and when we look at the bottom 50% which is always the most vulnerable we see that the their share of net worth has declined significantly in the US here in Canada and somewhat surprisingly really it stayed about the same in the UK not really sure why the difference there but at least there’s less of wealth disparity for that group which is good we also want to talk about some home own problems that we have here in Canada.
53:08
We want to contrast ourselves with other countries, but also look at problems that we’re creating for ourselves.
53:15
So, of course, we have housing affordability, unemployment, immigration, business investment per capita, productivity per capita, and debt to GDP.
53:24
So let’s start out with the big one, and this is on a lot of folks’ minds. Will my kids ever own a house, right?
53:32
Or, you know, can I afford to help with the house. Let’s look at the affordability.
53:38
So back here in 1994 in Vancouver, the median household income was $36 ,254 and the median price of an average house was $289 ,000 or eight times the median salary, okay, household income.
54:00
In Edmonton back then, it was at $35 ,000 median income 114 ,000 for a house and so only 3.2 times the income required to purchase that same house.
54:12
In Toronto median income was higher average house price was higher and was about five times the median income for a home.
54:22
Today in Vancouver we see that the average median or sorry the median household income at around $89 ,000.
54:30
$1.3 million is the average single-family home price, which is 14.4 times the median income.
54:38
That is distressing.
54:40
Here in Alberta, up in Edmonton, they have the same measure again, median household income at $94 ,000, so a little higher than in BC and also having lower taxes.
54:50
Average house price at $406 ,000 or 4.3 times, so still much more affordable.
54:56
And then down here in the Toronto area, median income, 95 ,000 almost 96, and just slightly lower price than in Vancouver at 1.156 million, and then that is a 12 times multiple of median income for that house price.
55:16
That is a huge issue. And it’s something that has a great many parents concerned.
55:21
We weren’t able to find a number on the Canadian side of things, but in a recent podcast I heard that the average age of first home ownership back in 1985 was 31, and today it’s 40.
55:40
So that of course has significant knock-on effects.
55:44
It delays normal family formation, it puts downward pressure on birth rates because couples feel less financially secure and they delay having children or they have fewer children or no children at all.
55:56
And then that in turn puts upward pressure on immigration.
56:01
Speaking of which, here is the disaster in line graph form of the Canadian immigration policy.
56:09
So, you can see annual immigration into Canada here, annual immigration, pretty stable for quite a number of years, and oops, here we hit 2015 and things started to go up pretty substantially.
56:23
So, we have the total immigration here in gold, and we have the net or the new permanent residents here.
56:31
So these are essentially going to be refugees and, and approved planned immigration, and went down during COVID, of course, and right back up.
56:43
But here, we have these net non-permanent residents, these are the temporary foreign workers. And these have created massive problems with housing supply shortfall.
56:55
And things just, they’re not getting any better. So here in the US, you can see what ended up happening.
57:02
So this is the annual net temporary and permanent immigration as a percentage of the population.
57:08
So this is adjusted for again, for population, Canada, of course, has a slightly larger landmass and of course, only about a tenth of the population, or a ninth of the population of the US.
57:20
So we have more room. However, as a percentage of the population, it has gone way, way up.
57:26
And when you have this amount of immigration in a short period of time and, frankly, sustained for quite a number of years in terms of growth, you end up having a situation where you don’t have as much assimilation into the culture of the new country that people are coming into and that reduces social cohesion and that is a problem longer term for peace order and good government as the Canadian motto is.
57:56
In Canada, we have an unemployment issue that is not severe at this time.
58:01
Here’s the Canadian unemployment rate at about 7.2%, closer to 4% in the US.
58:08
But with youth unemployment, this is also a very big problem.
58:12
So there’s a lot of challenges coming out of school or just getting a foothold with first jobs.
58:20
And of course, this is, this is, again, the portion of the population, particularly the, the young males that tend to create most of the civil unrest.
58:30
And so when that starts to happen, if you’ve got a lot of folks, a lot of young men who are, who are bored and have an axe to grind because of their financial situation and their lack of a job and lack of future prospects. That is a formula for significant domestic unrest and unhappiness.
58:57
So, we have to actually shed some light on when this really started to happen and how it happened.
59:04
So, Sandra quite correctly labeled the Trudeau and Carney effect.
59:13
Of course, Carney was not Prime Minister back in 2015 when Trudeau was elected, but he was a significant, he was a key economic policy advisor to Trudeau.
59:28
And we see here that business investment in Canada cratered.
59:32
cratered. Of course, it happened, we had the, the, the COVID decline. But then the U.S.
59:38
went back onto its previous trajectory. In Canada, we kind of went up again.
59:44
But then, of course, we said, you know, the budget would balance itself. And we have a prime minister that doesn’t really think about monetary policy.
59:52
And of course, we had a regulatory environment that was discouraging business investment. This is another really interesting one.
1:00:00
So if we at total investment here. Again, let’s go back to 82.
1:00:07
And this is here in Canada, looking at total investment per worker.
1:00:12
So this is where businesses and government employers actually reinvest in the training and productivity and different efficiency tools for their workers.
1:00:26
The area where we see the This drop-off here, and not surprisingly, this is when Trudeau was first elected, massive drop-off here in the resource extraction sector, and things just went from bad to worse.
1:00:39
And this is largely responsible for our overall lack of productivity gains.
1:00:46
So here again, this decline, it doesn’t start back in 2015 when Trudeau was elected, but It does show how far behind the United Kingdom we are in in red and how far the behind the US we are, and we are even behind the euro area 17.
1:01:08
So the 17 largest economies in the EU, and we’re falling behind with them.
1:01:13
And this decline coincides again with a declining economy, our declining economy, which has been exacerbated by the immigration surge.
1:01:22
So we have kind of a double whammy that’s been hitting us.
1:01:27
And then this kind of sums it up.
1:01:29
And this is the direction of overall productivity per capita.
1:01:33
And you can see that the US has been on a path upwards.
1:01:39
And here in Canada, of course, we have not been.
1:01:43
And of course that leads us down to the issue of debt to GDP, Canada versus the U.S.
1:01:50
Now, we need to be careful because there are some measurements that include sub-national debt and some that don’t.
1:02:01
This figure here in the U.S. at about 119.7, you know, in that 120% neighborhood, that is federal debt only, federal debt obligations.
1:02:11
It does not include municipal or county debt.
1:02:16
States in the US are not allowed to actually issue debt, so that burden falls to municipalities and counties.
1:02:24
But this number does not include that.
1:02:27
This number here where we’re seeing Canada at 129%, that includes provincial debt.
1:02:33
So, of course, Canadian provinces are allowed to issue their own bonds, And, and so that gets added to things. Now, the biggest reason why this is a concern here in Canada, say versus the US, is that if we do include all the US municipal and county debt, it’s higher than the debt to GDP in Canada.
1:02:57
But the U.S.
1:02:58
has such a superior growth rate and an increase in productivity per capita that they have a greater chance of growing out of their debt problem than Canada does.
1:03:08
And that’s really concerning.
1:03:10
The good news though is that the debt or the money has to go somewhere.
1:03:15
This is a screenshot off of Socrates where we look at the most recent monthly capital flows.
1:03:24
You can see in red lots of money leaving Russia, and that would suggest that investors there are concerned, increasingly concerned about escalating attacks from Western Europe, from NATO, which is to say mostly the U.S.
1:03:42
And you can see that money is also leaving Germany and France.
1:03:48
Now, that could also be related to the weakness of the euro.
1:03:52
we see capital flowing in a little bit to to the UK not as strongly as into North America but the primary destination is North America and that’s because of course the capital always flees or flows or flees to the US for safety and opportunity so again the money always has to go somewhere and that means that there’s always going to be a bull market somewhere so after talking about all of those those clouds on the horizon and I’ll say things that can go wrong, we still want to be wary or be aware that there are some opportunities for growth.
1:04:34
Particularly we like to look at it in sectors.
1:04:38
We tend to have a bias towards North America again because the capital flows or flees to the US for safety and opportunity and some of that kind of spills over into Canada, and in particular right now, because of our resource-based economy, we see more opportunities going forward in energy, and that’s oil, gas, and uranium, especially uranium, and the materials sector, and the materials sector is dominated by precious metals miners, so gold and silver miners.
1:05:12
In the U.S., we see there’s some opportunities emerging in healthcare, largely driven by multiple compression, meaning investor pessimism towards US healthcare and pharmaceutical companies, largely based on concerns of impending reforms from Health and Human Services Secretary, RFK Jr.
1:05:36
There’s also some opportunities we think emerging on the energy side of things, oil and gas specifically, because the cure for low prices is low prices.
1:05:45
Right now, in the US, particularly if we’re talking about shale producers, the cost per barrel to produce out of those shale formations is around $62.
1:05:59
And we are down below $62. And so the cure for that low price is for low prices to continue because eventually exploration is going to slow down.
1:06:11
And you might even have some wells that are ready for production or in production that actually get capped waiting for higher prices.
1:06:21
Problem kind of solves itself.
1:06:23
But there are also some opportunities on a go-forward basis, we think, with artificial intelligence and tech.
1:06:30
Yes, it’s been pretty optimistic, sometimes euphoric.
1:06:36
And we still think that there are opportunities in places like data centers, energy provision, which would include nuclear power as well as natural gas and potentially, dare I say it, even some coal production, coal power generation facilities and companies adopting AI for greater efficiency.
1:06:59
So it really, if used effectively, and if you’re in the right kind of business where you can adopt it without losing control of your business or losing the personal touch, AI can really generate some good efficiencies and that can show up in increased earnings.
1:07:17
But of course, we always wanna be careful that we don’t pay tomorrow’s prices for today’s risks.
1:07:23
That’s a little bit of wisdom, I think, from John Muldin, if I’m not mistaken.
1:07:28
And again, capital comes to the US for safety and opportunity.
1:07:33
So to recap, we’re dancing near the door And that’s about preparedness and flexibility.
1:07:40
Again, the structure of our client portfolios is with those forward-thinking portfolios.
1:07:47
If I could describe it overall, it’s strength and structure with flexibility that results in having durability.
1:07:59
We’re not expecting a crash.
1:08:00
We’re looking for a pretty garden variety type of correction or pullback.
1:08:08
Somewhere in that 10% neighborhood, maybe a little bit deeper, not really sure, but nothing serious and hearkening back to Martin Armstrong’s private blog post today.
1:08:18
The week of the 27th of October is looking like there could be some fun in the offing over the next, so that’s about two weeks away.
1:08:25
And again, there are always opportunities somewhere, so we want to make sure that we’re not getting too scared and losing our wits and Staying focused and and riding the rising tide as long as it continues and of course everything that we do with Client portfolios is always done within the context of a very robust Financial plan and this is our model of course focused on your family’s life goals. And again money isn’t just a trophy.
1:08:56
It’s it should be looked at as something to as a means to an end and it’s really important that our goals should inform our strategy.
1:09:05
We want to focus, of course, on life satisfaction, happiness and wellness. And for the vast majority of our clients, that includes children and grandchildren.
1:09:17
Things are not as positive for young adults today as it was, say, 20 or 30 years ago.
1:09:25
It’s always been challenging to be a young adult, but Historically, opportunities to grow your income, become more financially stable and generate a net worth from savings and building equity in a principal residence has been there and it’s a little more difficult today.
1:09:45
So that brings us to where you might be.
1:09:49
Do you want progress?
1:09:52
Obviously we showed you some different ways that our portfolio managers manage downside risk with all the different tools that they have, all the, the analytics, the dashboards, everything that they watch, looking for risk before it really unfolds, buying, you know, options insurance, trimming position sizes, rotating to more defensive types of stocks with, with a lower volatility profile, as well as actually doing currency strategy, currency hedging strategies as well. So all those things together.
1:10:28
But also being able to step on the gas and generate some really solid returns when markets are good.
1:10:34
So if you actually want progress, you need three equal parts of time, money and the willingness to change.
1:10:41
That last one, willingness to change, is the hardest, because we tend to, tend to prefer remaining comfortable instead of making change proactively.
1:10:54
But honestly, if you if you want progress, you got to be willing to, to make a little bit of a mind shift.
1:11:01
And, and in some cases, make a shift to who’s managing your money, which you’re like to be able to apply for that job if you’re in that situation.
1:11:12
Of course, applied knowledge is we’ll do an exit survey as you leave today and a follow-up email of course there will be a link to the recording of tonight’s webinar and of course we’re always happy to offer a complimentary consult on your situation see if we could be of service you can of course visit our website and we have a very robust video and webinar library now and there’s a contact form there of course And I’m going to pause now, catch my breath, come up for air, and we’ll do question and answer here in just a moment.
1:13:13
All right, thanks for sticking with us here.
1:13:15
So we had a question come in from one of our clients, came in in advance actually, said many agencies and individuals on the quote unquote, inside of the Canadian government, the parliamentary budget office, et cetera, have recently commented on the dire economic situation in Canada.
1:13:31
What steps is IWM presently taking and planning to take to protect our buying power?
1:13:37
What data and indicators are you using to make your decisions?
1:13:41
Well, I think we actually did cover that quite well during the webinar.
1:13:47
Of course, the steps that we can take along with our portfolio managers is to actually to keep ahead of inflation.
1:13:56
So you’re quite right to be focused on protecting buying power.
1:14:00
it’s the purchasing power of your capital that matters most not the nominal amount is.
1:14:04
And of course, by investing in things that benefit from an inflationary environment, we actually do help our clients stay ahead of that.
1:14:13
And when it comes to what data and indicators are you using to make your decisions, well, we showed you a couple of different Dashboards and lists of of different technical indicators, you know price earnings valuations Relative strength indexes Mac D moving average convergent divergence Moving averages Stochastics.
1:14:44
Oh, there’s gonna be the VIX there’s going to be the uh the bull bear sentiment there’s going to be things like uh spreads between uh corporate and government bonds and and also between uh 10-year and two-year bonds and those are probably some of uh some of the biggest ones so i think we’ve covered that question uh another question here Has your team ever gone to 100% cash?
1:15:14
No.
1:15:16
If not, what’s typical cash levels and what is a high cash level?
1:15:22
So typical cash levels inside of our equity pools ranges between 2% and 6% or 7%.
1:15:30
And again, that’s just trimming positions, taking profits on things, buying back or buying other positions, when we have a little bit of a pullback in the same stocks or other stocks that we want to own. And a high cash level for us, I’ll use an example.
1:15:53
Going into the crash of the COVID crash in February of 2020, our managers were between 11 and 20% cash.
1:16:03
And a couple of them went from that kind of 11% neighborhood up to about 15 or 17%.
1:16:11
And along with the currency hedging, and the option strategies, which are an even put option strategies, which are an even better defensive tool than than straight cash, as well as holding those reserves, or the cash that we’ve pulled out of the market in US dollars, provides a lot of a lot of comfort, I’ll say and softening of the downside.
1:16:36
So to use the example again of the COVID crash, where we saw equity markets down between 33% and 38%.
1:16:43
Our typical client portfolios were down between 11% and 13%.
1:16:48
We had a couple that were in the 15% neighborhood from top to bottom.
1:16:52
But those were those portfolios had some legacy positions in the energy sector, which of course, got really, really badly hit during that phase.
1:17:02
But of course, they also recovered. Okay, so going towards what cash to hold? Would that be U.S.
1:17:11
dollars or Canadian dollars? In my opinion, U.S. dollars are always the go-to place.
1:17:20
Again, capital comes to the U.S. for safety and opportunity.
1:17:25
And when institutions that have to deploy or store or invest a large amount of capital, whether it’s from stocks that they’ve sold or it’s an institutional investor bringing a large portfolio over to the U.S. from Europe or China or Japan, the U.S.
1:17:47
market is really the only place where they can move large amounts of capital. So the U.S. dollar is still the world’s reserve currency.
1:17:57
That will continue until, until it’s obvious that it has changed.
1:18:02
But again, when things get panicky, people go back to the US dollar.
1:18:10
So where do we see oil going?
1:18:12
Talk is it will bottom around 55 bucks, and then up in mid to late 2026 to $70 to 80. Do you agree?
1:18:22
What’s what is our perspective?
1:18:24
So I don’t know who you’re specifically referring to in terms of the talk. Of course, everyone’s got an opinion, it depends on who you follow.
1:18:36
I would not be surprised at some kind of a bottoming close to where we are now, and 55 bucks is real close to where we are right now.
1:18:45
We actually see that the best upside pop opportunity in Canada, and this is the IWM perspective, not necessarily our individual portfolio managers, but we see the biggest opportunity in Canada on a go-forward basis in oil and gas companies, because their balance sheets are in the best shape that they’ve ever been in.
1:19:07
And if we can get some regulatory relief, we can unleash the dynamism of the Canadian oil and gas sector.
1:19:19
And in terms of an upside target, that was a little bit harder to predict.
1:19:24
If we’re looking at things from a demand perspective, I don’t see a lot of tailwinds coming from the demand side.
1:19:34
I see mostly supply shock risk being the biggest catalyst for an upside move.
1:19:41
And you know, is that 75 or $80?
1:19:44
Could be, could be north of $100.
1:19:45
It depends where the supply shocks come from how long they are predicted to last and where they’re located geographically.
1:20:00
Question, would you open a position in gold right now?
1:20:03
If so, what investments would you look at?
1:20:06
If you are just getting started and do not have a current position in gold, I would be holding off right now personally waiting for a little bit of a pullback.
1:20:17
I think we’re gonna see a pullback as per Armstrong and as per some of the technical indicators from charts and markets from Ross Clark specifically the update we got today on the price of gold is that typically the exhaustion level on this particular indicator they have a proprietary indicator that they’ve tracked for for decades when it reaches 150 the first um the first two down days after it reaches that exhaustion level 150 is typically when we see things pull pull back that indicator reached 146 so almost 250 back on October 8th and it’s currently today at 145 so if we see another push higher we could see a pullback in gold I would be I would be waiting for for that kind of a pullback to get to get some money into the gold space and because I don’t know anything about your situation I believe that was Marie who asked that question I couldn’t specifically counsel on which investments might make sense what I would say is that if you’re looking at holding something related to precious metals if you’re looking for insurance you would buy physical and I would say that that’s best in you know Canadian or US or, or South African, one ounce gold coins.
1:21:47
If you’re looking for it on an investment perspective, I would say that you would maybe consider looking at gold producers, as opposed to gold juniors.
1:22:00
But again, it’s it’s difficult to say anything really definitive, because again, we don’t know your situation and prescription before diagnosis is malpractice.
1:22:12
Okay, next question here from Scott, do you think the current the Carney government will address the lack of foreign investment issue in Canada you mentioned, it’s a very concerning trend.
1:22:25
Well, to be frank, I think he is going to try and make it sound like he’s addressing things we seem to have, of course down in the US, we have a president who is very concerned with with optics right.
1:22:43
How do things look? How can he spin it? How can he use his marketing genius and make it look like something’s going really well?
1:22:53
Mark Carney’s kind of a Canadian version of Trump in that way, because he’s really good at saying things that sound really smart and they seem to make sense, but there’s no actual policy follow-ups.
1:23:07
So, I don’t actually think that that’s going to happen, and that of course is part of a catalyst driving the Alberta independence movement, which is very concerning, you know, and I’m not saying that because I’m for or against independence, it’s concerning that there is an independence movement.
1:23:27
if we go there it’s because because the federal government has refused to provide regulatory relief and And and will allow its kind of traditional obstacles to remain as obstacles to further resource development Can we address the future exchange rate of US versus Canada?
1:23:53
Oh, so You’re asking for a currency call Longer term, I would at least until 2028 when the Armstrong model show that the US dollar will start to lose its reserve currency status right around the time that his models also predict the US will break up into at least three regions.
1:24:19
I would I would still hold US dollars as as a reserve.
1:24:25
Who knows how low the Canadian dollar can go, but it depends on how much market volatility that we have, because when we have equity market volatility or bond market volatility, money flows into the U.S. dollar strongly, and that of course drives down the relative value of the Canadian dollar.
1:24:44
I wouldn’t be surprised if we can revisit that 65 or 67 cent level in the next two to three years.
1:24:53
I don’t think that’s imminent, but if we have continued stubbornness when it comes to regulatory relief on the resource development side of things, that’s about the worst I can see it being.
1:25:13
Okay.
1:25:13
And follow up to that question.
1:25:15
further to that is owning gold coins a good hedge on the exchange rate well us dollars or gold is typically denominated in us dollars so if you are considering that you like the us dollar gold coin is is always priced in that so yes that would be a way to to play that that that same currency issue. All right. Next question here.
1:25:50
How active are your managers buying and selling stocks and other investments?
1:25:54
On the stock side of things, there is a couple of different strategies.
1:26:00
There’s a dividend grower approach, which is kind of a pension style model or the dividend model type of approach.
1:26:12
There’s usually in the neighborhood of about 15 to 20 portfolio turnover in any given year in that type of strategy.
1:26:22
And when it comes to the growthier approach to things, the turnover rate rotation between stocks and sectors and such could be as high as 60 to 80% in a year.
1:26:38
It just depends on what the markets are giving us in terms of downside risk and upside opportunity.
1:26:45
So that’s where that stands.
1:26:49
How do managers decide what equity strategies to use in a client’s portfolio?
1:26:54
Well, that’s one of those questions that is answered through a thorough diagnosis process, figuring out what your goals and objectives are, kind of your time horizon, your need for income, your need for liquidity, your ability to tolerate downside risk, and at least as important as that would be your psychological stability or your psychological ability to withstand downside risk.
1:27:23
So that’s how those things are determined and those are all built on an individual client basis.
1:27:29
It says, you showed a dashboard with proprietary signals but didn’t explain how it works.
1:27:35
I saw references to overweight or underweight, but it couldn’t make sense of how it worked.
1:27:41
We didn’t want to spend too much time on it because we didn’t want to get bogged down on that one slide.
1:27:49
It is also a proprietary signal framework, so we also didn’t want to let too much of that out.
1:27:57
But if you are curious about that, just give us a shout and we’ll explain more about how that whole thing works.
1:28:07
And another question that’s kind of related to one of the other ones that was asked previously, does it make more sense to buy gold miners or bullion?
1:28:16
So again, bullion in the form of coins or maybe 10 ounce ingots, bars, wafers, if you’re into that.
1:28:26
Physical is insurance and you buy it hoping that you’re never gonna have to use it Hoping that you never have to make a claim, right?
1:28:36
And gold miners I look at as more of an investment because typically Mining companies that have proven reserves and are in production and are efficient they generate over time they typically give you a little bit of leverage to the price of gold.
1:28:57
Now, in the last three and a half years, we really haven’t seen gold miners, so producers actually outpace the price of gold bullion, but that has actually changed as of the beginning of 2025.
1:29:15
The growth profile on both of them over the last five years, four and a half, five years has been excellent.
1:29:21
But generally speaking, again, physical is insurance and mining stocks are an investment all right so it looks like we’re through with our questions I want to thank everybody for attending and if you stuck around for the question and answer thank you again we do our best to keep these these webinars flowing quickly it’s always such an incredible challenge to whittle down everything that we want to talk about to the things that we feel we absolutely must talk about.
1:29:58
So hopefully we’ve communicated some important things for you to consider.
1:30:03
And if you’re not yet a client and you are curious about how we might be able to help, we look forward to hearing from you.
1:30:09
And if you’re one of our current clients, we look forward to seeing you for our next review.
1:30:16
Thank you and good night.
