Canada’s Economy 2018 Trend Analysis

Here is my analysis of Canada’s economy for 2018, for entertainment purposes only, based on my observation of major events. Retail sales in Canada contracted in December, surprising industry analysts who felt it would be slightly above 0% growth. The main cause here was a decline in home electronics and appliances. This corresponds with the recent change in the over-heated real-estate market in Canada. Sales of homes declined 22% and demand cooled dramatically; effected by several strong factors like extremely high consumer debt, lack of interest from foreign overseas buyers for investment properties and soft job growth made up mostly of minimum wage part time positions.

Erstwhile major quakes in the business sector has consumers overly anxious in the short term. Sears Canada went out of business, and the employee pension are in limbo. A major pipe-line project is hamstrung by government red tape at the local level pitting two provinces against one another. A bank is at risk of holding the bag on the environmental clean up of a bankrupt energy company it lent money to. A few civil rights movement are gaining momentum that has gotten the government to commit spending, including Native Canadian claims against industrial pollution and poverty advocates moving subsidized housing up the priority list.

Businesses are concerned with the government movement to offload some of its risk exposure onto private businesses. Case in point is the mortgage-insurance program which protects lenders in case a home owner defaults on payments. The program is mandatory for those at the bottom spectrum of the mortgage market who buys a house with 5% down payment. The government is increasing that up to 10%, so that it can collect premiums from more home owners while diluting the impact of foreclosures on its treasury. The banks meanwhile are thinking of repackaging ‘safer’ mortgages, those not required to enroll in the mortgage insurance program, because those buyers were able to pony up at least 20% as down payment. The banks want to sell these mortgages as bonds, with a guaranteed interest based on the payments made by these more well to do home buyers. Will it get them the extra revenue they are seeking? Honest home owners rarely abandon their homes on purpose so it seems like a safe bet to put your money on hard working people.

More about home loans. Home Capital, an alternative lender to banks, that offered loans to riskier buyers did just that and was at risk of collapse as its portfolio was heavily geared toward low collateral high risk home buyers. Warren Buffet, an investor of this Canadian company, offered to increase his stake but that offer was rejected. So instead, he offered them a loan, which they are using to pay off the interest on ‘same said’ bonds which are those mortgages they repackaged as financial instruments. This is a short term relief for a struggling lender, without which it can not make the dividend payments on its bonds. Why is Warren Buffet involved? Because, for an investor like Warren, its not the home owners he wants, its the real estate (good quality homes in decent neighborhoods) that he can trust if everything collapses. It’s not that hard for a company to sell off an inventory of good homes, at a reasonable price.

Following the Federal government’s promises in its election platform, it is spending money on senior care, environmental protection and child care. But when we look around the country, there are parts of Canada where it is more costly to provide services and modern care. These smaller communities aren’t great business investments but serving them is part of the national agenda. Canada’s private media business is also asking for government assistance. It’s sales are declining as is its revenues. And its hoping the government can subsidize the pay of senior reporters, as we are accustomed to doing for new interns. These media companies aren’t exactly doing well with their investments.

And in news today, PM Trudeau has secured an investment agenda with India, an economy more similar in size to Canada than the USA, and perhaps more complementary as well for professional services, with the USA being much more competitive for Canadians as North Americans, than Asiatic India looking for an affordable North American alternative.

Canada, with all this noted, is in a moral revolution. The government requires students and employers to sign an agreement on abortion and LGBT rights for summer work. It seems like a constitutional fight even if these are already law to have to “agree” as oppose to merely non-discriminate. The United Church of Canada has yet to address the employment of an Atheist Minister. Unlike in the USA, where the invisible enemy is tax abuse, the invisible enemy in Canada is human rights abuse — too much political correctness or too much social experimentation, that actually limit Canadian’s potential. Despite marijuana’s prevalence this last year, if you were caught with it, you are banned for life from entering the USA. That’s really limiting your life experience. There is also an anti-war movement in Canada wanting Canada to be more like Japan, using its military when attacked and not to attack. And Blacks are still trying to convince the rest of us there’s racism.

As for the more entertaining government matter of investments in arts and culture. Well, Downsizing, a movie that cost $65 million to make, made partly in Toronto’s studio facilities, made back $2 million on its opening weekend. And while Canada has managed to entice half a billion dollars of production from Netflix, Canadians can only see them if they fork over $8 a month, which if you aren’t familiar with Canada, is suppose to be part of basic TV and Supergirl’s not really Canadian stuff, that these types of partnerships are suppose to foster, like Anne of Green Gables and Margaret Atwood movies. Is it illogical? No, because if a Canadian wants to work in Hollywood they can. That’s Canada for you.

All of this is causing confusion, and also, consumer stand-offs in the short term. The short term being a year.