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Are stock markets overvalued? Yes and no and maybe…and don’t worry about it

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A long time ago, back in 2008, a co-worker at the company I was then at talked himself out of buying Apple stock because it had risen to $100 a share or so, double what it had been a few years prior. I felt for the guy, he really wrestled with the decision, he’d done his homework, and loved the company. He would hover tormentedly over his keyboard trying to hit the “buy” button, but despite the ever-more theatrical anguish, he couldn’t do it. Too expensive was too expensive and he took a pass.

I was fortunate to move on and lose touch with the guy before Apple’s stock took off to $700/share over the next few years; based on his inner turmoil at not buying at $100 he must have been wailing like an air raid siren at seven times that. Then it got “worse” – Apple stock split 7 for 1, the price was adjusted to $100, and has now risen back up over $300/share. A stock that seemed overvalued in 2008 went on to increase in value 20-fold in the next dozen years. Is Apple stock overvalued now?

Hope you’re not asking me, I haven’t the foggiest idea. By some yardsticks it likely is but it was in 2008 as well. 

Now, that’s a crazy growth stock, one of the world’s biggest success stories, so probably not a great example. But maybe we can glean something from looking at others that seem somewhat predictable for a number of reasons.

We could take airline or hotel stocks, which to my mind should be worth zero, but are not, so my mind is clearly wrong. I don’t see how their value can be ascertained when we don’t know at all what travel patterns will shape up as, and both these industries live or die based on utilization rates.

We could also look at blue-chip companies that are bought mainly for yield; are they overvalued? Well, companies bought for yield often are priced according to interest rate expectations, because that is the competition for yield seekers. We can now see that government bonds yield almost nothing, or less than nothing in some countries, so what is an appropriate yield level for a big stable dividend company?

Years ago, I unwisely did not put any money in big blue-chip stocks because their dividend yield was usually 2-4 percent, and I couldn’t see getting ahead by watching that snail move along (my chosen alternative, to chase growth stocks, was far more interesting, in the sense that a car bouncing down a mountainside is interesting). 

Now, many big blue-chip stocks are yielding 5-7 percent, an enormous gap to both the “risk-free” (haha) yield of government instruments and inflation expectations. So are these stocks undervalued?

That would seem incredibly hard to believe, given how the stock market has risen in the past month or so, in a world that remains incredibly unstable and drowning in debt. Unemployment rates are at levels that were unthinkable 6 months ago, and there is potential widespread devastation amongst small businesses (and larger ones for that matter – Volkswagen reported about a month ago that they were hemorrhaging cash at a rate of $2.2 billion per week).

It can all drive you crazy, but it can help to focus on some friendly realities that exist in the stock market. There are investments that hold up in the very long term. The Motley Fool investor website recently listed 3 Canadian stocks that have paid dividends continuously for over a century: Bank of Montreal, Imperial Oil, and BCE (aka Bell Canada). 

Value shmalue. If you’re investing to help yourself retire one day, pick a handful that have impressive dividend histories, reinvest the dividends, and don’t get too rattled by the news. It might be boring, but far better to be bored and rich than broke and wild-eyed.

For more stories, visit Todayville Calgary.

Terry Etam is a twenty-five-year veteran of Canada’s energy business. He has worked at a number of occupations spanning the finance, accounting, communications, and trading aspects of energy, and has written for several years on his own website Public Energy Number One and the widely-read industry site the BOE Report. In 2019, his first book, The End of Fossil Fuel Insanity, was published. Mr. Etam has been called an industry thought leader and the most influential voice in the oil patch. He lives in Calgary, Alberta.

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While Canada’s population explodes, the federal workforce grows even faster

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From the Fraser Institute

By Ben Eisen and Milagros Palacios

Hiring by the federal government in excess of population growth cost taxpayers $7.5 billion in 2022/23.

The federal workforce has grown more rapidly than the Canadian population starting in 2015/16, imposing significant costs on taxpayers, finds a new study published by the Fraser Institute, an independent, non-partisan Canadian public policy think tank.

Federal government employment has grown significantly faster than the Canadian population starting in 2015/16, and we’re already seeing the consequences,” said Ben Eisen, senior fellow at the Fraser Institute and author of Growing Government Workforce Puts Pressure on Federal Finances, the first in a series of studies on federal reform.

The study finds that between 2015/16 and 2022/23, the latest year of data available, the number of full-time federal workers has increased by 26.1 per cent compared to growth in the overall Canadian population of 9.1 per cent.

“Growth in federal employment has almost tripled the rate of population growth since 2015/16, which is simply unsustainable” commented Eisen.

How much will this growth in government cost Canadian taxpayers?

According to the study, if federal hiring had simply kept pace with the rate of Canada’s population growth taxpayers would have saved $7.5 billion.

The reduced spending on federal employees would lower the federal deficit, which is expected to exceed $35.3 billion in 2022/23.

“The growth in the number of federal employees has been a major contributor to the growth in federal government spending and the size of deficits in recent years,” Eisen said.

  • The Canadian federal government workforce has grown more rapidly than the Canadian population starting in 2015/16, imposing significant costs on taxpayers.
  • In fact, between 2015/16 and 2022/23, the latest year of data available, the number of full-time federal government workers has increased by 26.1 per cent, compared to growth in the overall Canadian population of 9.1 per cent.
  • If federal hiring had simply kept pace with the rate of Canada’s population growth taxpayers would have saved $7.5 billion.
  • The reduced spending on federal employees would lower the federal deficit, which is expected to exceed $35.3 billion in 2022/23.

Ben Eisen

Senior Fellow, Fraser Institute

Milagros Palacios

Director, Addington Centre for Measurement, Fraser Institute
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From Smug to Subservient, Justin Trudeau Bows to MAGA Realities at Mar-a-Lago

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The Opposition with Dan Knight

After years of mocking Trump and betting on a woke Washington, Trudeau now finds himself groveling to save Canada’s economy from MAGA’s hardball tactics.

Justin Trudeau has spent years mocking and deriding the MAGA movement, banking on a continuation of woke, progressive leadership in Washington. He bet everything on a Kamala Harris presidency, believing the days of Donald Trump’s America-first agenda were a distant memory. Now, with Trump back in office, Trudeau finds himself groveling at Mar-a-Lago, trying to salvage what’s left of Canada’s crumbling economic future.

This is the same Justin Trudeau who painted MAGA as a dangerous fringe movement, aligning himself with global elites and lecturing Americans on their supposed moral failings. He openly scoffed at Trump’s tariffs, his immigration policies, and his tough-on-China stance. Trudeau’s bet? That a Democrat-controlled America would reward his sycophantic pandering with favorable trade deals and continued subsidies for his progressive fantasies.

But Trudeau’s gamble failed. Trump is back, and Trudeau’s entire house of cards is collapsing. Canada’s economy, propped up by unfair trade advantages and U.S. energy consumption, is suddenly exposed. The 25% tariff threat on Canadian imports has Trudeau scrambling, not with bold leadership, but with empty promises and nervous laughter at Mar-a-Lago.

In a moment of pure irony, Trudeau, who once lectured Trump about values, now finds himself kneeling to kiss the ring. MAGA, what? Gone is the smug defiance, replaced by desperate platitudes about border security and economic cooperation. But let’s be clear: Trudeau isn’t there to protect Canadian interests; he’s there to save face. His government is woefully unprepared for Trump’s hardball tactics, and the Prime Minister’s office knows it.

During a recent dinner at Mar-a-Lago, President-elect Donald Trump reportedly suggested that Canada could become the 51st U.S. state if it couldn’t handle the economic impact of proposed tariffs. This remark came after Prime Minister Justin Trudeau expressed concerns that a 25% tariff on Canadian imports would “kill” Canada’s economy.

Trump’s comment underscores the significant economic interdependence between the two nations. In 2022, trade between the U.S. and Canada exceeded $900 billion, with the U.S. accounting for 63.4% of Canada’s global trade. This deep economic integration means that shifts in U.S. trade policy can have profound effects on Canada’s economy.

Trump’s quip about Canada becoming the “51st state” wasn’t just a joke; it was a power move, a reminder of who holds the cards in this relationship. While Trudeau nervously laughed, the message was clear: Canada needs the U.S. far more than the U.S. needs Canada. Trudeau’s weakness has brought us here. Instead of securing energy independence, he’s strangled Alberta’s oil industry with crippling regulations. Instead of standing up to China, he’s kowtowed to Beijing while relying on U.S. trade to keep his agenda afloat.

And now, Trudeau is at the mercy of a man he spent years mocking. Trump’s tariffs are a direct consequence of Trudeau’s inability to lead. His failure to address illegal immigration and the fentanyl crisis has made Canada not just a bad neighbor, but a liability.

Trudeau’s Liberals have always been more concerned with appearances than action, more focused on virtue signaling than real governance. But now, the bill has come due. And the man holding the ledger is none other than Donald J. Trump.

So here we are: Justin Trudeau, the woke globalist, reduced to pleading for mercy at Mar-a-Lago. His smugness replaced by desperation, his rhetoric exposed as hollow. MAGA what, indeed.

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