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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

June 19, 2018 | Hopeless

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

My, my. He’s at it again.

Donald Trump has suggested new tariffs of 10% will apply to $200 billion of Chinese goods. The Chinese have replied saying (essentially), suck on this. Former Conservative leader Rona Ambrose says she’s sure the White House will impose stiff tariffs on Canadian-made cars, shattering the spirit of the decades-old Auto Pact. NAFTA appears to be toast. And TD bank said this week the Trump assault on maple-made vehicles will permanently scar our economy, putting at risk one of every five factory jobs in Ontario. National economic growth in 2019 will be stunted, and the effect in Ford Nation will be four times more acute.

The Canadian dollar, at 82 cents US not so long ago, is plowing towards the 75-cent level. That currency devaluation stokes inflation and helps push the central bank towards another rate increase to shore the buck and mitigate the damage.

Meanwhile equity markets are not happy. Trump said weeks ago “Trade wars are good, and easy to win.” Investors think that’s naïve and strange. There’s never been a trade war anyone won. They increase costs for businesses and consumers, limit choice, reduce economic activity and make everyone poorer. These days a global trade war also tears away at treaties and arrangements – like NAFTA – which took years (sometimes decades) to negotiate and tweak. Observers, like those at TD, estimate the damage about to be done could linger for a generation.

And this is all because of one man.

Trump, some say, is using the same technique on the globe as he used on Kim. Threaten devastation and damage (‘fire and fury like the world has never seen’) in order to force the other side into a deal Trump wants. But the worry is that China – population 1.38 billion and on its way to being the biggest economy – won’t buckle. The American president is also alienating key allies, causing the USA to stand alone. He expertly dissed and destroyed the recent G7 summit.

(The intimidation tactic, critics say, extends to taking migrant children away from their parents at the border and housing them in large cages within detention centres. He’s using the kids as a bargaining chip to get a border wall, a new immigration bill, and send a message to immigrants. Opponents call it child abuse.)

Trump stands for nationalism, protectionism and America-first. His supporters wildly endorse this, and his popularity has risen from recent lows. Others despair that trade barriers, inhumane immigration laws and jingoism – while praising tough-guy leaders like Kim, Vlad Putin and that weird Erdogan dude – are leading us merrily back to the 1930s.

Well, where’s this going?

Short answer: not to a good place. Canada stands an excellent chance of being Trump roadkill since it’s evident he doesn’t care about the country, our bilateral trade or especially Mr. Socks. The forex market is saying this, as well as the equity and bond traders. TD says the chances are high of a recession in Canada as a result of trade damage, and that a broad swath of our manufacturing sector could be wiped out – forever. Then we can truly be a place where people just take out mortgages and sell each other condos.

As far as investing goes, stay the course. In times of volatility and uncertainty it’s rash to try and anticipate unknown events, time various markets or diddle with currency trades. The best defence is to be balanced, diversified and liquid. Have both growth assets and safe ones. Do not buy individual securities, but rather ones holding a whole market. Maintain a global exposure, and don’t give up on maple. It appears a new round of weirdness lies ahead, now that the world is being jerked by one person who defines unpredictability.

For some strange reason, this pathetic blog attracts Trump supporters. My words are hopeless. These zealots defend every quixotic action, inaccurate statement and bully Tweet. They pine for having a similar alt-right champion in Canada and yearn for a world gone by.

They must all be independently wealthy, or retired with fat DB pensions. Because everyone else is in for some hurt.

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June 19th, 2018

Posted In: The Greater Fool

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