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July 2, 2020 | Rethinking Canada During the Greatest Recession

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

The federal government and taxpayers are the ultimate backstop for all help and bailouts extended. Canadians will be paying the last decade’s debt-fueled spending bill for years to come. What we direct ‘stimulus’ to now will make all the difference in terms of whether repayment is manageable or cash flow-crushing going forward. Spending to fuel just consumption, or to further prop up asset prices, and elongate dying business models will not fix what ails us but only make our future prospects worse.  See:  “Fitch’s Canada downgrade won’t be the last”, David Rosenberg.

The focus must be on big picture infrastructure and innovation that reduce waste and illness (rather than subsidize it), increase health and productivity and spread financial resources to a broader base of the population while going after tax evaders and their helpers.

For an excellent overview of areas of focus that will be most impactful see RethinkX’s latest publication Rethinking Humanity: Five Foundational Sector Disruptions, the Lifecycle of Civilizations, and the Coming Age of Freedom.

As for the loonie versus the US dollar, as shown below in my partner Cory’s long term chart since 2000, the low hanging fruit has been picked here with the USD already up 43% against the CAD since the secular commodity cycle peaked in 2011.  Still, Canadian exports are moribund amid the broadest global recession in 150 years.

From here, we could see further CAD weakness as today’s ‘greatest recession’ continues to throttle global demand and asset prices into 2021.  USD support is noted by the green dotted line below in the 1.32 area, while a break above 1.45 would bring the 1.50-1.60 area from the USD 2000 cycle top into range– a potential 12-16% further loss for the CAD from today’s level.

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July 2nd, 2020

Posted In: Juggling Dynamite

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