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October Market Update - Election Time!

Welcome to winter! The election will be the main attraction for everyone's attention the next few days, hopefully not weeks! The markets will likely price in a positive outcome regardless of who is elected, at least in the short term. The markets may not be happy if the outcome takes a while. Markets don't like uncertainty! Personally I believe we'll be in for a little more volatility until late December and then onward and upward after that. I hope all are staying well.

What a wonderful country:

Trump vs Biden: what it means for the economy (Oct 22) I was able to listen in on a Live Event offered by The Economist. Here are some of the highlights:

  • Trump's Economic Performance - Economy has done very well but was it him? There was a jobs boom underway across the world at that time and the US did about the same, perhaps slightly worse than the rest of the world. His corporate tax cut was obviously a big factor but at what cost i.e. increased deficit and debt. And perhaps not as beneficial an affect as was expected.

  • Bidenomics is...industrial focus, heavy infrastructure including green focus and focus on climate, not as severe as Warren or Sanders. Perhaps a 1-2% affect on GDP. 1st priority Covd Relief Bill of $2 - $3T. Immigration will be a focus. attempt to make America a green manufacturing powerhouse.

  • Energy: America became the world's biggest oil producer during Trump tenure but not really due to him; Coal declined over 20% despite his promise to bring it back; Huge rollback of Obama era restrictions which will actually increase emissions; Oil and gas industry won't be materially changed by either; Biden will support more clean energy, values of these stocks are currently rising; 

  • Debt? Because of historically low interest rates debt is low by historical standards despite record deficits; this applies across the world so governments have been spending freely; as a result the more the stimulus the more the markets will like it; Trump erred here by not supporting a new stimulus package and has since gone back on that as it was negatively received by the markets;

  • Decline in manufacturing more due to automation than globalization; Trump tariffs has hurt working class Americans a lot as the goods they buy have increased in cost; the stimulus package was extraordinarily generous for individuals like these which was a positive with the average poverty rate declining; 

  • Socialism fear of a Biden presidency is way over done despite pressure from others in the party that will push to the left; in fact they believe the democrats will stay with the centre and not get pushed to the fringes;

  • Wages of the lowest are rising, not due to Trump but more state effects; likely an increase to the minimum; economists have been surprised by how much you can increase the minimum wage without hurtig the labour market; the $15 target is in line with the British minimum wage and should not as a result affect unemployment;

  • Tech companies? They are now political targets; deep distrust of social media companies that are limiting free speech and a belief they are supporting Democrats; Biden may not have time to address the anti-trust issues;

  • And publicly available The Economist view on the election

The Trump economy President Trump is not running a re-election campaign based mostly on policy. He has released no agenda for a second term, and the Republican Party did not publish a new platform at its convention. But when Trump tells voters why he deserves to win re-election, he tends to focus on the economy. He created a prosperous economy, he says, and will do so again — better than Joe Biden would — once the coronavirus passes. I want to devote today’s newsletter to explaining the Trump economy, through four key points: 1. The economy was strong before the virus hit. Trump inherited a growing economy, and it kept growing on his watch. It accelerated a bit in his first two years in office, before slowing down again in 2019.

By The New York Times | Source: Federal Reserve Bank of St. Louis 2. Perhaps the best news: Wages were rising, even for lower-income workers. After more than a decade of economic growth, the labor market had become tight enough that employers were increasing pay more quickly than inflation was rising. The trend began under President Barack Obama and continued under Trump.

By The New York Times | Source: U.S. Bureau of Labor Statistics 3. Trump deserves some credit. Josh Barro of New York magazine has argued that Trump’s overall economic record is problematic, partly because his tax cuts were so skewed to the rich — but also that Trump got some big decisions right. Most important, he appointed a Federal Reserve chairman, Jerome Powell, who focused on growth (rather than wrongly thinking inflation was a threat) and kept interest rates low.

4. But Trump also deserves some blame — including for the virus and the recession it caused. Trump’s economic policy geared almost completely toward lifting growth in the short term, while largely ignoring long-term dangers. He increased the deficit, mostly to give wealthy households big tax cuts. He scrapped environment regulations, which increases the likelihood of costly climate destruction. And he hollowed out parts of the government, including its ability to respond to a pandemic. (One year ago yesterday, Biden tweeted: “We are not prepared for a pandemic. Trump has rolled back progress President Obama and I made to strengthen global health security.”) The bottom line: Much of the economy’s performance is beyond the control of a president. Trump had the good luck to take office with a far stronger economy than either of his predecessors — Obama and George W. Bush — enjoyed. Just look at the start of each president’s lines in this chart on job growth:

By The New York Times | Source: Federal Reserve Bank of St. Louis Later, of course, Trump had the bad luck to have a global pandemic arrive during his re-election campaign. He has tried to claim full credit for his good luck and deflect all blame for the bad news. But that’s not the fairest way to evaluate the Trump economy. Ultimately, he deserves solid marks for its performance during his first three years — and much worse marks for his long-term economic legacy. Investor Types Tongue in cheek look at the various investors I've seen over the last 20 years! Let me know which one is you...or if I've missed any!

  • Conservative Cliff - Steady as she goes, no risk necessary!

  • High risk Harry - High risk all the time!

  • Ignore it Isabel - "I don't even ever look at this stuff"

  • Daily Danny (checks it daily) "we made $12.5 yesterday but lost $2.50 the day before."

  • Big Gains Gary - "Come on we need to make more, how do we make more? Can you sell Bitcoin?"

  • Can't make a decision Mike - "Let me think about it"....3 years later...."let me think about it"....5 years into a bull run they have completely missed...."let me think about it."

  • Goldilocks Grace - Gold is the answer to all the world's problems. Period. 

  • Goldilocks Grant - The timing is not right, lets wait a little longer...until it's just right!

I'm a future Navy Seal...naps are the new normal!

Barely five feet tall and hunched over, Anjana Devi, who is in her 80s, bellows instructions at two men as they unload crates of fruits from a mini truck. All around her, hundreds of women — most of whom are over 60 — mirror her actions. Farm-fresh produce surrounds them. The air is full of heady aromas: incense and fermented fish, jasmine buds and pungent spices. India Women's Market  Run only by women. Encouraging Signs for Canadian Banks One of the world’s largest banks is sending an encouraging signal about this country’s economy, as HSBC Bank Canada on Tuesday disclosed that during the third quarter it released $2 million from funds that had been set aside for loans that could go bad. The move prompted one long-time industry analyst to predict shares in Canada’s larger banks could eventually rally “very hard” whenever those lenders follow suit. “This (release of $2 million) is a very important data point, which is that negative provisions are the likely outcome once the Canadian banks begin to reflect their changing/improving economic assumptions in their reserves,” wrote Robert Wessel, managing partner and co-founder of Hamilton ETFs, in an email to BNN Bloomberg. HSBC explained its decision to ease up on provisions as being the result of “forward-looking macro-economic variables improved, partly offset by an increase in impairment charges from non-performing loans in the energy, transportation and construction sectors.” By comparison, in the prior quarter, HSBC had set aside $190 million for potential credit losses as a result of concerns about COVID-19’s impact on the economy. CIBC Video Outlook CIBC Market Outlook Have a wonderful November regardless of how much snow we get or who wins the US Election!


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