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I always get excited when I get to talk to the macro tourist himself, Kevin Muir. He joins me now. Kevin, thanks so much for finding time. And man, I don't even know where to start right now. Maybe I'll come to Canada because I know you've, I mean, you're right about a variety of things, but yeah,
You know, you've just been writing about Canada and we just got the GDP numbers on Friday, you know, which, you know, a little bit below analyst assessments or GDP per capita is going to go down again. But you've been saying, hey, you're bearish on Canada. Oh, yeah. I think Canada is in a lot of trouble. And actually, although the GDP number was OK when you look at the first blush, if you go look at the revisions from last quarter, it was actually really bad. And.
And ultimately, I'm a bear on Canada because I think that we're kind of kidding ourselves in terms of what we expected will happen to our economy because we're looking at America and we're saying, oh, look at American economies doing so well. Everything's great there. We're going to be just like the same. And, you know, our central banker is sitting there and I actually think he's one of the worst central bankers out there because he's completely clueless to the differences between the Canadian and the American economy.
And let me explain to you what those are. First of all, we did way less fiscal stimulus than the Americans. The Americans did 24% of their GDP as fiscal stimulus. We did only 16%.
Even now, when you look at it, we're running a fiscal deficit that's way less than America. America, even though they're at low unemployment, they're still running a 6.5% deficit. And all those things are stimulative for the U.S. economy. So there's no doubt that they're doing better because of that. The next thing that's different about America versus Canada is the fact that our household debt
as a percentage of GDP is way, way higher. We're well over 100%. America is well under like 75%. And then finally, the other thing about it is that when you look at America, they have this wonderful thing called the 30-year mortgage. And the mortgage that everyone locked in, you know, in the post-COVID period was in like 1%, 2%. Just crazy stuff, Mike.
And in Canada, we don't have those. We are typically, we were either rolling them at the front end or we're 5% I mean, sorry, five-year mortgages. So when we raise rates, it's instantly felt much more. And when you combine that with the fact that we have a lot more debt, I think our economy is in a lot more trouble. I've been saying this for a while. I think the Canadian dollar eventually goes to all-time lows.
Which is frightening. I mean, I certainly clearly remember the 62 and a half cent dollar, you know, going back. And I think people still, or not everyone, of course, we've become a little more sophisticated generally. But I mean, the impact on our lives is dramatic. Not just, you know, something simplistic like I can't go to, you
you know, Palm Springs, or you can't go to Florida, if you know what I mean. Like it's those things. But, you know, when you consider how much we import in terms of our manufacturing for the components, you know, natural resources, of course, go through the roof, which hurts again, huge parts of our economy. I just think that's a very serious situation. So I'll push back a little bit there, Mike, because actually I think from on some of our resources, it'll be actually a boom.
I look at things like the oil sands. These companies have long-dated reserve lives of oil. And imagine we get a situation where oil bumps its head up to $100, which is, I think, where it's headed, and the dollar is at all-time lows. These things are going to print money. It's going to be an absolute boom from that. But in terms of us as Canadians, in terms of buying stuff and how we feel, we will definitely feel poorer.
I love the distinction, though, because as an investor, you know, I'm with you. I mean, I've been very keen looking at the devaluation of the Canadian dollar, but the restricted in purchasing power, too. We're getting killed. You know, so I'm with you that that to me makes our natural resources, but especially copper, you know, but oil. I mean, energy. Yeah. And I'm sort of now, Kevin, just so you can laugh at me.
I've become much more interested in natural gas recently. I have not been in it at all. I'm not going to laugh. I think that's a great idea. Okay. So your distinction, though, is a very important one. So we're talking, obviously, to both consumers and investors at the same time. So investors, yeah, you may benefit, but consumers, as you say, we're going to also feel it. For sure. And I think that we're going to struggle in terms of our housing. There's going to be some problems there. I didn't talk about this, but
a lot of the issues that we've gotten in terms of like, why has our economy appeared so strong? Like what's happened that's kind of led us to this point where the bank of Canada has been just as, as, as hawkish as the American one. And I think what it's, what we missed, a lot of people missed is the fact that it was our immigration policy.
No, I'm all for immigrants. I think it's terrific. Canada was founded on immigrants. I'm welcoming of them all. But at the same time, if we allow so many immigrants to our country that it's straining our resources in terms of they have nowhere to stay or it's causing too much – busting at the seams when it comes to healthcare and things like this –
We have this huge boom in our population, and it's made our economy appear stronger than it actually is now.
And I follow very closely the work of Ben Rabideau, who's a real estate guy. And he talked about, he was the one who put me onto this thing about the fact that we had this spike up in immigrants and the different kinds of the different cohorts and stuff like that. And the federal government has indicated that they're going to tamp that down. So we're going to go from importing or bringing in 1.3 million people every year to only 300,000.
And it's going to be better in the long run for us all because hopefully the ones that we bring will be able to actually accommodate them and give them the resources and the expectations that they expect when they come to Canada. But at the same time, that's going to make our GDP and our economy weak in the coming years.
Yeah, I just, I started the show off with saying, I'm not putting words in your mouth at all on this, but man, if they don't, I'm appalled at the vetting. I'm absolutely appalled that we've imported anti-Semitism to this country and they now propose these. And so I, I,
I'm with you. I'm 100%. We need, how can you have a birth rate like Canada's, an aging population and not have immigration? Right. But it's no excuse not to have vetted people coming into the country. But we can leave that because that's a long, big time subject there. Yeah. Let me come to something else that you've been writing at the Macro Tourist
And that is interesting. And again, I'm not getting into Trump's conviction, I guess, on Thursday. You know, I'm with you and you've written this many times, but I'm with you as people just aren't rational. You want to talk Trump or Biden. It gets irrational very, very quickly. Right. And as analysts, I mean, you know, I'm not interested in that. But I will say that, you know, and I know you've written this.
that Trump played fast and loose with his businesses, and he's going to be very generous with the money supply or other policies. I shouldn't have said money supply because that's the central bank, but other policies. And that could really usher in another period of inflation that we should be warned about. A hundred percent. I think that the market is being extremely complacent about the possibility of a Trump victory.
And like, as you mentioned, I don't care what happens. I'm a Canadian. I, you know, I don't have any say in it. So ultimately it's their decision to do what they want. I'm only interested in trying to figure out where I go in terms of my portfolio.
And when I look at this Trump situation, I look at the things he's saying, the things his advisors are saying. I read the Time article where he was interviewed. And a lot of the folks in the market are expecting a Trump 2.0 to look exactly like Trump 1.0.
And I think that's where they're making the mistake. He looks at the, you know, when you read him and listen to what he says, he views his problem with his previous administration was that he listened to too many Wall Street insiders, Washington insiders, and he didn't do what he thought was right.
And so when I look at it, I see him saying they're not him directly, but his advisors talking about immediately firing Jay Powell and replacing the federal reserve and changing that policy. So although you say that they're, they're not in charge of the federal reserve, well,
He might be. He might be going in and changing that thing. And the other thing is, in terms of his foreign exchange policy, he's already indicated that he's going to go and demand that the Chinese and the Japanese revalue their currencies higher. And, you know, I'm not judging whether any of these policies are right or wrong. It doesn't matter if they're right or wrong. He's telling you he's going to do it.
And I think the market has been extremely complacent about it. And I do think that these are extremely inflationary, you know, policies and that will introduce a lot of volatility in terms of the economy and the markets. And we might come, you know, next November time and be shocked at the kind of things that are happening.
Well, and I think if you look historically, anytime there's been more political interference with a central bank, people ask me about hyperinflation. I said, hey, that's the formula there. That's the recipe. And, you know, Stanley Druckenmiller, who said, you know, he put the numbers out, 8% and 10% inflation. Yeah. And he said that you should be open to the possibility that that's what occurs. Mm-hmm.
And I think that when I wrote my piece, I quoted that Stanley Druckenmiller line, and I got so much pushback. And I kept just saying, listen, it's just –
be open to this. We're not saying it's going to happen for sure. You never know anything for sure in the markets or in life, but it's, you need to be open to it. And the fact that the kind of, that that pushback was so great leads me to believe that the market is not ready for that sort of outcome. Yeah. Interesting observation about that side of it. I mean, I would just look, I mean, how can we not see, I look at it as a declining purchasing power of the currencies. You know, we can call it another thing, but it's,
How can you deny the record of that? I mean, my goodness, there's only been one direction when it comes to paper currencies, whether we're loonies or dollars or whatever have you. And that has been. So we're just debating the rate that depreciation of purchasing power comes. That's right. I'm surprised you get pushback like that because history is 100% on your side. Yeah.
you're absolutely right. But I get all sorts of pushback. And the reality is that we've had kind of 40 years of declining interest rates and declining inflation. And ever since COVID, I believe that the world has changed and we've become gone from an era of monetary dominance to fiscal dominance. And that's what brought around this inflation. But I still, everyone just keeps looking for that return of that post GFC 2%, 1% inflation. And that's what they're expecting. Yeah.
And I'm always shocked. I'm like, you know, do you not read your history book to your point? Like, you know, you're going against history when you're assuming that they're going to take care of your currency.
Well, I'm going to come back and I'm not pushing back in any way on that. I think that's what we should be prepared for. I've made this statement for several years, which is I think the biggest challenge is to protect yourself against the purchasing power. And I mean, when you look at things like you take a dollar today, it buys 54 cents worth of goods in the year 2000. Right. You know, I was looking when they put the capital gains change in, I said, well, you know, if you
Bought a house for 400 grand in 1990 and you sold it for 825,000 today, you're at zero. You didn't.
you know, because you're getting paid back into value dollars. So there was no gain on that. And of course we don't adjust our capital gains for inflation. So yeah, I'm well, good luck to them. I want the people, as you've been telling the macro tourists and I want our people. And that's what I want to discuss is how do we protect ourselves? You know, in the kind of environment we're talking, I mean,
Even, and I appreciate what you're saying. We're certainly not going to return, well, I shouldn't say it so confidently, but I mean, the probability of returning to, you know, 2020 rates, 2021 rates, I put so low, I can't see it.
So I'm not keen on bonds, for example, and people can be, but I'm not keen at all. I think the risk reward isn't there whatsoever. You know, I'm not talking about traders for a sec, Kevin. I'm talking about, you know, investors. But so what do we do? Well, and to your point about bonds, I think it's like, I think that they're going to be, go back to the certificates of confiscation, which is what they were called in the 70s.
And I'm just continually amazed that everyone's talking about how we have this problem with our bond market. And I'm saying the yield curve's inverted. What's known as a term premium, which is the amount extra that the government needs to pay to borrow long, is actually at zero. There is absolutely no problem with the bond market. In fact, the bond market, the problem is that people keep trying to bet that we're going to have lower rates in the future.
So I think the first thing you can do is just avoid that and don't be investing in bonds. Don't fall into the trap of what we've had for the last little while and, you know, go out. And if you are going to buy fixed income, you're probably better off going out and buying a corporate bond that's yielding six, seven, 8% and a lot less duration. Cause if you and I are correct and interest rates don't go back down to one or 2%, you know, in, in five years time, you're still going to be able to get that sort of rate.
In terms of other things that you can do to diversify and figure it out, obviously gold is one of the things that a lot of people will push to. And I am very...
you know, sympathetic to that argument. I actually think gold can go up for other reasons, even like forget about inflation, forget about our, our argument about what happens to the value of the dollar. I think that gold can go up just because of the fact that what happened when Russia invaded Ukraine and the government in the Western world responded by zeroing out the Russian central banks accounts in terms of their bond holdings.
And if I'm sitting there and I'm the Bank of China and I'm sitting there going, okay, I am the biggest holder of U.S. Treasuries out there, I got to diversify. And that just means I got to buy some gold. And I think that for those reasons, you're just going to see a continual bid under gold. And I think one of the things that...
maybe we've spoken about this before, Mike, but I can continue to tell people when those folks start telling you gold's going to go down because the U S dollar is going to go up or gold's going to go down because rates are going to go up. I keep saying that the world has changed. Gold is not trading on those things. If you look at it statistically, it hasn't traded on those, you know, inputs for a couple of years now. And it coincided with when the Ukraine got, when Russia took over Ukraine and,
And I think that that's going to continue. So I think that's a secular bull market that you can just own. Uh,
I love the miners, for example. I think that they're dirt cheap. Nobody owns them. And in terms of other things you can own, you've got to find real assets that you can own. Back to our idea about the energies and you can buy oils, you buy nat gases, and I think you can buy copper, I think is a great story. And then finally, the last thing I would say for people that they should be thinking about tips, which is the Treasury Inflation Protected Securities Act.
And that's basically a bond that pays you inflation. And here in Canada, we were at least smart enough to stop issuing these things because our government has realized that issue. Why would I ever want to issue inflation? That's a crazy thing. In America, they haven't figured it out, but I suspect that eventually they will and that these things will eventually trade at premiums. But in the meantime, back to our kind of argument about everyone keeps thinking that we're going to go back to 1% or 2%.
Given that they think that, they're not paying up for tips because they're thinking that we're going to go back to that, you know, disinflationary period. So tips to me are really cheap. And I think that they're a great alternative.
I come back to the oil for a second. Now, this is one where, you know, Canadian oil stocks would benefit, as you alluded to earlier on, from a lower dollar. That would benefit right now, you know, 73 cent dollar. We're not talking robust here. You know, so if it does, you know, continue the slide and I'm with you, I think,
you look at economic performance, you look at capital investment per worker, there's not a measure that you say, yeah, that Canada is doing great economically. I appreciate that's not a priority for some Canadians. Millions have other priorities like climate change or LGBTQ, whatever it is. I can't find a quality economist who thinks we're in good shape that way.
I'm sort of wondering in that sector and maybe some other resources that you alluded to,
Should I be focusing, though, on Canadian companies to take that advantage where you can be bearish on Canada as a whole, but would you look at the Canadian oil and gas or, for example, the U.S. because you need a safe jurisdiction for both? Yeah. No, I think you can buy Canada. I'm very hopeful about us in the long run. And to be fair, you're right. We haven't – this government hasn't made –
business a priority, no doubt about it. But at the same time, some of the provinces have figured things out. Like you go look at Ontario, for example, we have one of the leading AI divisions around, like the top AI researcher was at the University of Toronto and he's attracts a huge amount of people. And then we, we put into policy this thing where we, we,
grab Americans on H-1B visas. And, you know, unfortunately that makes more immigration. But we've figured things out there. So it's not like we're doing everything wrong. So I don't want to be too negative on Canada. I just think, though, from a perspective of we've allowed all this immigration, we're
Our policy in terms of our interest rate is too high. We focus too much on speculating on real estate. We'll need to rebalance. That rebalance will come with a lower dollar, lower interest rates. And in doing that, I think that you'll set the kind of table for some great returns,
from our resource company. So I have no problems with owning mostly Canadian resource companies. Cause as you say, I think that over the long run, we're going to do great. It's a great jurisdiction and stuff. And, and in fact, when you look at America, they're, they're not, there's no guarantee that they're going to be any friendlier to, to the resource, you know, expansion than we are. Like Biden is being almost as bad as our guy has in terms of allowing for these things to,
So, you know, I'm bullish on Canada over the long run. I just think that the dollar is going to be the outlet that we're going to go. We will have to have we'll have to suffer with a lower loonie for a while. And just to add it to your positive, you know, I think the opportunity uranium I just saw this week where the Biden administration is going to be super keen on uranium. Well, that's where Canada has expertise. And you're talking about Ontario. You know, I think that that's
It's really interesting. I'm not sure if the government wanted to sell that. You know what I mean? Like put it out publicly, I should have said. But it's a huge opportunity that I think we're going to cash in because it seems like every couple of days, because I've been keen on uranium for three years, but every couple of days I'll announce a new one. You know, somebody else is committing to nuclear. So I'm just adding to that positive theme so I don't get too negative for people. Because we did, you know, in terms of we went and we did this –
what was it, the Ford government here in Ontario, we just announced another plant. Like we're the first, you know, North American plant in ages. And even things like the Trans Mountain, you know, is over budget, it's a pain in the ass, sorry, pain in the butt. But the reality is that this is a long-term benefit for us. And it's, you know, one of the few good things that Trudeau has probably done on in terms of the energy basis, but he can't say anything about it because his base will get mad at him.
Right? Like that's the frustrating part about it. I've been, if I was in charge of the government, I would be talking about all the fact that Canadian energy is the greatest energy out there. Mike, it drives me wild. I'm going to go on a little bit of a rant here. But if you think about who we buy energy from as a world, like let's stop and think of it. Saudi Arabia, Russia.
Neither one of those countries, when you look at a human rights basis, are anywhere closer to Canada. So why we don't go out as Canadians and say, listen, you know, don't be buying your energy from these countries. Buy them from us. We share the same values. We, you know...
Let women drive. We don't invade other countries. You know, this is it. We should be championing our energy and you should be trying to sell Canadian energy as an alternative that we a stable, reliable partner. And fine, if you want to go and take the money that we get from that and invest in green energy, I'm all for it.
But it drives me batty that we are not more proud of our energy policy, I mean, our energy industry.
And I think it's going to go down as one of the great opportunities of all time that we've missed along the way. So many cancellations, you know, Enbridge moves out, other people. But, I mean, I think you're absolutely spot on. You know, you're getting more and more reports like the International Energy Agency are saying, you know, our demand is going up. And that was a no-brainer. I mean, I lived in India for over a year. You know, you think they're not going to allow development, energy development.
and economic development and standard of living go hand in hand so what have we had instead big coal jump you know china india but i think the world's now recognizing we're not it's not going away any other time that we've had we've never replaced an energy source it's just you know others have gone up but it didn't go down and i mean i can go on and on too because i've got children i've got grandchildren and i think this is a tremendous uh
mistake to not take an advantage of our natural you know emphasize natural opportunities here well if you go look you you were mentioning that gas is an opportunity to invest and you go look at it like well what is it two-thirds of the power is still powered by coal the reality is that we should be going and we should be replacing all that coal with net gas
And we should be doing that across the board. And it just, it drives me a little nutty that we haven't been more willing to do that.
Let me finish with a couple of things here. One is the level of volatility. And again, Victor Adair and I are always making the claim, are you short-term thinking? Are you long-term? You know, what are your investments? Because, I mean, you can get, for example, a dip in the rates coming up, but that isn't maybe a long-term trend, you know, when you have to position, you know, correctly around that. I just...
Have you remembered – is it just my recency bias that I'm looking and saying, has it ever been this sort of broadly based important to get in the right stuff because it's so dramatic when you're not? Spoken by a guy, Kevin, who doesn't own the video. Well – Sadly. Sadly. Interestingly enough, it's actually – there's something called the dispersion trade that is –
grabbing the world by storm. And what that is, is it's a sophisticated option trade where you go and you buy volatility on individual stocks and you sell them on the index. And if you think about that in terms of when that trade would work, if you have a situation where Nvidia is up a lot, but oils are down a lot, you could get a situation where the volatility that you're long on those two stocks is
And then meanwhile, think about the index. The index is flat because one side is up, one side is down. So it's flat. And this trade is actually being extremely popular in the last year. And there's a real question about whether that trade is actually causing this dispersion or whether it's just the, they're taking advantage of it. Um,
But one of the things that I worry about is it's gotten so large that someday it's going to come unglued. And I think that there's a possibility that we get what's called, if you remember back in, what was it, 18? There was the Volmageddon event where everyone was long this thing called XIV. They were all shorting Vol.
It really feels to me like that there's a possibility that this occurs in this square as well. Every time I kind of go and dig into it, I get really smart folks telling me, oh, no, no, you know what? Those guys that do that, they're so they got PhDs, they got Nobel laureates, and they're too smart to blow up.
And it just reminds me so much of long-term capital. And it really does. And I always say the thing about crisis is that you never see them coming. If people were predicting them, they would never become crisis because, unfortunately, people would already adapt to it. So it's always the thing that nobody expects them to kind of bite you that ends up biting you.
And anyway, so I actually think that this dampening of volatility on the index level and then the big move out in terms of the individual stocks is worrisome. And I'm not sure what to do about it, except that I'm nervous and I'm very worried about the way that this is setting up.
Now, look, that's another reason, by the way, to read The Macro Tourist, because you're on top of these things. So tell us the best way to get info on The Macro Tourist. Oh, if you're interested, just send me an email, kevin at themacrotourist.com, and I'll set you up with a few samples.
And we'll do, by the way, we'll put all that up on our social media and everything. You don't have to memorize it. But Kevin, you do a fabulous job, period. Oh, thank you very much. You know, the global perspective and the broad perspective, digging down into what we should be doing, all of that. I find it extremely valuable. Kevin, thanks for taking the time with us. Oh, my pleasure. Always great chatting with you, Mike.