Not all Doom and Gloom out There

When the sun is shining in Vancouver it's hard to even imagine that there is trouble out there.  The reality, however, is that times are a little tougher.  One thing that you may have picked up on, if you have read or listened to any of my past blogs, is that even though times are tougher...it is not as bad, in my opinion, as everyone is saying.  The mainstream media is totally focussed on bringing us daily (even hourly) reports about yet another company or market that is down.  We are bombarded every minute with speculation about just how bad it might get.

We are bombarded every minute with speculation about just how bad it might get.

Well if you ask me, it isn't all that bad now and even if it does get worse, which is tottally possible, I don't think that things will be all that bad when it does.

The first thing that you have to realize is that we are Canadians...not Americans.  Our economy is based on tottally different economics than our Southern Brethern.  Yes we are heavily tied to the Yanks if not shackled and when they sink we also sink.  But (and this is a big but) we are buoyed by a much stronger set of regulations in every aspect that is sinking our largest trading partner and we are fueled by an economy that is strongly based on commodities. 

Our regulations make it a little tougher to deal with financing new projects (especially in hard times like now) and generally make progress a little slower.  When things do go wrong, however, we are insured by a much more soild economic structure.  - Think of the three little pigs...we have a brick house and the Americans have a straw house and here come the wolves.

Think of the three little pigs...we have a brick house and the Americans have a straw house and here come the wolves.

Our commodity based economic structure may currently seem weak but think about it...when push comes to shove you can close down a manufacturing facility and move it anywhere but you cannot move a large deposit of minerals to a country with cheaper labour, you have to extract it where it lies and that is what we have. The lower prices of copper and zinc as well as coal is also temperary.  During the boon years production level were at an all time high in most sectors.  When the economy slowed companies kept up production levels based on faulty speculation fueled by ineffective government intervention.  During this slow period with high production huge stockpiles were created putting significant downward pressure on prices and then the bottom fell out.  Now that production companies have cut production rates taking into account their huge stock piles of inventory...the inventory is dissappearing.  It doesn`t take a genious to figure out what happens when production levels are low and there are no stockpiles to draw from.  That's right...price increases as demand outruns availability. 

It doesn`t take a genious to figure out what happens when production levels are low and there are no stockpiles to draw from

That puts Canada in a very good position and I see this playing out a lot sooner than most expect.  Copper, zinc and coal have already started to climb up in price.

Another factor is going to be inflation.  With the United States printing money at break neck speeds there is no way around a big surge in inflation.  This will put people who had the foresight to invest now in a very good position as things like Real Estate, commodities and established products will be priced at a premium.  Sadly, for those waitiong on the sidelines, I predict that they will be standing on the dock watching there ship quickly sail out of reach as prices will quickly out pace any expected wage increases and interest rates are sure to start rising as the economy swells.

Put this all together and I see a very bright picture for Canada's economy and for those who saw this as an oppertunity to jump in.  But for now the sun is shining...I'll worry about this when it starts to rain again.

 

 

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