Matthew Lekushoff |


The general trend has seen most global markets flat on the year-to-date, with the main exception being Canada. The Canadian market remains in negative territory, sitting 3% lower on the year. That being said, in these last couple of weeks, there has been a slight role reversal with most global markets floating southward and the Canadian market, led by the energy sector, trending upward.

Anecdotally, I'm hearing from several sources that energy stocks are expected to outperform in the future based on their unrealized value. As a reminder from our last letter, this is due to the price of oil rising to more than 10% on the year, while energy stocks are barely positive over the same period. We can expect this divergence to close in the future, as energy prices and producers usually move together. 


Unfortunately for Ontarians, and Canadians in general, recent news on their governments' budgetary deficits is worse than originally thought.  
The  federal parliamentary budgetary officer estimates  Ottawa will have a deficit of $22.1 billion this year and $21.4 billion next year-----  $8 billion higher over two years than originally estimated. The stated reasons for the increase are higher than expected program expenses, child benefits, and debt charges (another way of saying interest rates were higher than expected). Odds are, rates will only be increasing in the future.  
In a scathing report, Ontario's  auditor general recently announced  she believes this year's provincial deficit will be $11.7 billion. This stands in stark contrast to the Wynne government's March 28 forecast of $6.7 billion-----  a 75% increase.
The discrepancy is attributed to the government choosing to include assets in the Ontario Public Service Employees Union and Ontario Teachers' Pension Plan to offset their expenses. This aggressive strategy is one public corporations have used in the past to inflate earnings, often so executives could earn larger bonuses.
For perspective, should next year's Ontario deficit be similar, the increased government debt burden for every Ontarian (federal and provincial) will be about $2,900 - for only two years! 
These are fairly good economic times with historically low unemployment and interest rates. If government spending can't be controlled now, one wonders how bad it will be when the next recession comes.
South of the border, the U.S. government has acted no more responsibly. According to the Congressional Budgetary Office (CBO), the U.S. will see its deficit hit $1 trillion by 2020.  
Should governments continue spending beyond their means, an asset class that stands to benefit is gold-----  long been considered a safe haven. If government fiscal conditions degrade to the point where investors begin questioning their future stability, gold is likely one of the places they will look to ride out the financial storm.


River Out of Eden: A Darwinian View of Life  by Richard Dawkins: One of the best books I've read on evolution. You'll need to read some passages twice, perhaps three or four times, but when the penny drops, it's worth it. If evolution is a topic you'd like to learn about, this a great book to start with.
Canso Market Observer (April) :  Another great quarterly newsletter from Canso, managers of the corporate bond fund we use. This letter's main themes are ones I've been thinking about lately: massive deficits, rising interest rates, weakness in the Canadian real estate market, and major correction in cryptocurrencies.
Dr. Gabor Mate - New Paradigms, Ayahuasca, and Redefining Addiction  Tim Ferriss Podcast: An interesting and wide-ranging conversation between Gabor Mate and Tim Ferriss on the causes, challenges, and treatment of addiction. The conversation was a nice update from Mate's last book,  In the Realm of Hungry Ghosts , which he wrote more than a decade ago, as much has changed in regards to addiction treatment.
How Evolution Works  by Kurgesagt - In a Nutshell: A short but informative video on how evolution works. As an FYI, In a Nutshell (don't ask me how to pronounce Kurzgesagt) is a great resource for introductions to topics you want to learn about.   
Life is NOT a journey by Alan Watts :  In less than four minutes, Alan Watts reminds us not to forget what is important in life.
China's Staggering Demand for Commodities   by Visual Capitalist: Author John Green once said the best way to describe the human race is "hungry". If that is so, there is no country that epitomizes that more, at least when it comes to commodities, than China.


"Nature is not cruel, only pitilessly indifferent. This is one of the hardest lessons for humans to learn. We cannot admit that things might be neither good nor evil, neither cruel nor kind, but simply callous - indifferent to all suffering, lacking all purpose."
 -----  Richard Dawkins, River Out of Eden
"Complaining is not a strategy. You have to work with the world as you find it, not as you would have it be."
 -----  Jeff Bezos

"The Toronto housing bubble resembles a drug epidemic in that it's dangerous, addictive and will destroy your health, bank account and family. The pills dangle before your eyes. Yes you get a wonderful floating high when you score a big profit based on nothing but the passing of time and well-timed flip. But sooner or later you'll encounter a sudden drop in the market and it will do you in."      
 -----  Canso Market Observer April 2018

  • Thousands took back Yonge Street over the weekend in a vigil honouring the lives lost in the tragic Toronto van attack last week. 

Matthew Lekushoff

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