I remain firmly convinced that Canada's economic vulnerability is as high as ever. As noted in an article I wrote for the PBS Newshour titled "Why Canada's Economy is Headed Off the Cliff" (Click HERE), there is a toxic combination of elevated housing prices, extraordinarily high household debt, a booming private mortgage market, and a weak outlook for jobs. The residents of Alberta added to the list of my concerns earlier this month when they took to the polls. By voting the conservative party out of office, they put in power a government that promised higher corporate taxes and a re-evaluation of royalty rates on the natural resource sector. Given that Alberta accounted for somewhere ~90% of all job growth in Canada last year, these political dynamics only exacerbate my concerns.
The most convincing evidence that the Canadian housing boom cannot continue, however, was eagerly presented to me in a taxi ride from Toronto's airport to my hotel. Unsolicited, the driver asked if I were in town to buy real estate. Unable to resist, I said "No, but should I be buying now?" to which I received a long sermon about how he had been making more money in real estate than driving the cab. Eager to demonstrate my gratefulness for such an auspicious cab ride complete with investment tips, I started taking notes. I was glad I did, because he soon came up with the best line I've heard in a long time, one that epitomizes the spirit of hubris, overconfidence, and invincibility capturing most bullish Canadian condo buyers: "I only drive this cab to break the monotony of counting my profits."
While the global economy continues to feel fragile, I sense a rising complacency among the professional investment community. I am particularly struck by the deflationary pressures that seem so regularly dismissed by commentators. As I've stated previously, I firmly believe that the increasing use of robots and automation will only intensify this dynamic. Let's also not forget that in a time of insufficient aggregate demand, productivity gains (i.e. getting more output with fewer inputs) can be very counterproductive. Add on top of this list a slowing China and a struggling Europe... With markets prices as they are, it seems prudent to exercise caution at this stage. Better to miss gains than capture losses.
My last class of the semester was designed to inspire my students to stand up for what they believe. In this short piece, I summarize the class discussion. Ultimately, I wonder if today's youth are too comfortable and therefore unwilling to bear personal risks to make the world a better place. My question for the Class of 2015: "What Do You REALLY Care About?" Click HERE to read my note.
Happy In An Igloo
The study of happiness points to several interesting findings. To increase your odds of professional happiness, it's probably best to be self-employed in an igloo with a collection of equally-happy peers and colleagues nearby. You'll also want to hibernate, as sleep and happiness tend to correlate. Click HERE to read my thoughts.
Anatomy of an #Engaging Presentation
While speaking at an event in Frankfurt last month, I decided to experiment with the use of social media during my presentation. I was able to engage an audience both within and outside of the room as well as to spur additional conversations. The experience was energizing and has changed how I present to large groups. Click HERE for my summary of what transpired.
Gluten Free Bubble to Burst
I'm often asked about bubble dynamics in non-financial assets and I'm usually reluctant to pass judgment....but the Gluten-Free craze seemed too obvious to not address. My comments were picked up and run by the PBS Newshour (click HERE) as well as Fortune (Click HERE) Click HERE for the LinkedIn post.
6373 Gallons Consumed...in 1 day!
Given increasing focus on water scarcity, I took it upon myself to track the amount of water that I consumed in one day. What I found was shocking. My direct and "virtual" consumption of water exceeded 6300 gallons in what I believe was an ordinary day. To ready how I got to this enormous number, click HERE.
Long Live Coal?!
Everyone seems to believe that coal is going away. I'm not convinced. Coal is likely to shrink as a percentage of total global energy consumption, but let's not fool ourselves -- it's not dead. As a cheap, reliable, and efficient fuel for electricity consumption, we should focus on cleaning it up rather than on eliminating it. Click HERE for more.
Egyptian Castles in the Sand...
The Egyptian government recently announced it was going to build a new capital city not far from Cairo at a cost of US $45billion. Hubris? Overconfidence? In this comment, I try to contextualize the phenomenon of modern-day pyramid building by looking to other grand construction projects. Click HERE to read my note.
The Four "Agreements"
I recently contributed the closing chapter to "A Force for Good: How Enlightened Finance Can Restore Faith in Capitalism." The book's contributors include Jack Bogle, Robert Shiller, Charley Ellis, Sheila Bair, and many other Wall Street luminaries. It's a worthwhile read for anyone interested in the future of finance. Click HERE for an excerpt and short video interview I did with the book's editor, John Taft, or click HERE to buy the book on Amazon.com.